The Political Economy for Low-carbon Energy Transition in China: Towards a New Policy Paradigm?

ABSTRACT

China has become the leading country to develop wind and solar energy industries. By presenting the institutional arrangement and interest constellations of China’s regulatory system of renewable energy sectors, this paper argues that the reasons for China’s swift expansion of wind and solar energy investment go beyond the notion of a state-led model. It also reveals that due to a series of internal power struggles and external shocks, the current regulatory system is undergoing significant restructuring. A new policy paradigm is emerging that is largely different from the previous decades of policy orientation that centred on capacity expansion and instrumental interests for renewable energy development. The new paradigm would face tremendous challenges from existing institutions and vested interests, and it requires new set of ideologies that can help renewable energy sector to truly competing with the energy incumbents in order to bring about meaningful low-carbon energy transition in China.

KEYWORDS:

• Renewable energy
• political economy
• energy governance
• China
• developmental state

Acknowledgements

The authors would like to thank Hubert Schmitz and Stephen Spratt, and three anonymous reviewers for their valuable comments on the earlier versions of this paper, and Alice Webb and Charlotte Huggett for their excellent research assistance.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Dr. Wei Shen is a political economist who has worked for development of finance agencies in China for over ten years. His research interests include: the political economy of China’s low-carbon transformation and climate change policies; China’s role in global climate finance and climate governance; and South–South cooperation on climate change issues. He is particularly interested in the role of business and private actors in the process of low-carbon transformation in the emergent markets.

Dr. Lei Xie is a visiting research scholar of Chinese Academy of Sciences, Beijing. She received her PhD from Wageningen University, the Netherlands. Dr. Xie has developed research interest in China’s environmental politics, social environmental movement and international environmental disputes. Her recent publication is China's International Transboundary Rivers: Politics, Security and Diplomacy of Shared Water Resources, co-authored with Shaofeng Jia, by Routledge.

Notes

1 China’s total grid-connected wind energy capacity increased by over 10-folds (from 743 MW to 114.6 GW) between 2005 and 2015, and its solar energy market also jumped from 0.82 to 28.05 GW between 2010 and 2014 (China National Renewable Energy Center 2015). The fast expansion often requires the regulators to adjust (expand) the planning targets several times within one year, which is rare in the history of energy governance.

2 For example, the target in 2016 for annual wind and solar capacity instalment is 30.82 GW and 18.1 GW, respectively.

3 Like many policy documents that use installed capacity to illustrate the achievements of sectoral development, many companies’ reports also use this indicator to represent the success of their operation in the market.

4 Curtailment is the involuntary reduction in the output of a generator from what it could otherwise produce energy. In China, the curtailment on wind and solar parks is often due to the limit of the interconnection and transmission capacity of the grid.

5 By 2015, only 1.01 GW offshore wind capacity farms were installed compared to 130 GW onshore wind farms, while distributed solar system reached 6.06 GW compared to 37.12 GW large-scale solar parks (NEA 2016a).

6 By 2015, wind energy surpassed nuclear to become the third largest energy source for electricity supply and acquired its official status of primary energy source together with thermal and hydro power (NEA 2016b)

7 Interview No. 8, on December 2014.

8 Local officers are not allowed to approve any new investments if it is not previously included in the annual central plan. Localities with severe grid connection problems are also not allowed to develop new projects.

9 China is currently the largest constructor of nuclear reactors in the world, with total capacities under construction of 28.5 GW in 2015. Most of these projects will be completed around 2020, achieving 60 GW generation capacity by then.

10 MIIT’s Yunnan branch, State Grid Corporation’s Xinjiang branch, and Gansu province’s Development and Reform Commissions are among the local regulators to issue these protectionist policies, which can be accessed from http://www.gsdrc.gov.cn/attachment/www/month-1511/20151109-115009-1005.doc (in Chinese), http://www.chinapv.org.cn/uploadfile/2016/0223/20160223123507887.pdf (in Chinese), and http://www.cwea.org.cn/upload/201512.pdf (in Chinese).

11 It is estimated that this SEPAP would require additional 10 GW capacity to be installed in rural areas, covering 2 million poor households across the country, as a significant part of China’s political campaign to eliminate poverty by 2020.

Additional information

Funding

The authors would like to thank The ESRC STEPS Centre (Social, Technological and Environmental Pathways to Sustainability) [grant number ES/I021620/1] for their support to complete this study.