For many years, distributed energy—often celebrated as a promising solution—has been entering a new era marked by significant changes and opportunities. According to the IEA and China Energy Network's report titled "China's Distributed Energy Outlook," released on the 30th, several factors are reshaping the future of China's distributed energy sector. These elements have the potential to accelerate the adoption of modern distributed energy systems, provided they are supported by suitable policies, market mechanisms, and regulatory frameworks.
One of the key drivers identified in the report is China’s ongoing economic restructuring. As the country shifts towards a more service-oriented economy, the demand for large-scale centralized energy from heavy industries is declining. This transition supports the growth of distributed energy, which aligns better with decentralized economic activities and urban development patterns.
Additionally, compared to traditional coal-based energy systems, modern distributed energy solutions can better integrate renewable and clean fossil resources, significantly reducing greenhouse gas emissions and air pollution. They also align with new environmental standards and the global push toward low-carbon development.
With the rapid advancement of technology, digital sensors and smart control systems are becoming more prevalent, while emerging loads like big data and electric vehicles are transforming how distributed energy systems operate. For instance, precise energy consumption data allows for improved project design, better customer satisfaction, and the integration of intelligent devices such as electric vehicles or thermal storage systems. These innovations are making distributed energy more appealing and efficient for end-users.
The report highlights that new business models are emerging both domestically and globally, creating fresh opportunities for investment and innovation in the distributed energy sector. With high efficiency, minimal environmental impact, strong economic returns, and reliable power supply, distributed energy is seen as a crucial path for future energy development. It plays a vital role in the transformation of the power system, especially through service-oriented and integrated energy supply methods.
However, despite its potential, the development of distributed energy in China has faced challenges over the years. Issues such as economic viability, technological barriers, and unclear regulatory roles have hindered progress. For example, clean energy often lacks cost advantages over coal, and distributed projects struggle to gain fair returns from selling electricity to the grid. These problems have slowed down the expansion of the sector.
Looking at specific examples, such as distributed natural gas, the report shows that as of 2015, there were only about 121 projects with a total capacity of around 1.4 million kilowatts—far below national targets. To address these issues, the government has increased support during the "Thirteenth Five-Year Plan" period. In 2017, the National Energy Administration issued guidelines to promote decentralized wind power, while the National Development and Reform Commission introduced policies to boost the use of distributed natural gas.
Zhu Ming, Director of the Renewable Energy Division at the National Energy Administration, mentioned that the government is exploring direct market mechanisms for distributed electricity generation, aiming to create new development models. This suggests that China’s distributed energy sector is poised for significant growth in the coming years.
According to the "13th Five-Year Plan" for energy development, by 2020, natural gas power generation capacity is expected to exceed 110 million kilowatts, with 15 million kilowatts coming from distributed sources. Solar power capacity is also projected to reach over 110 million kilowatts, including 60 million kilowatts from distributed photovoltaics. Compared to current levels, there is still considerable room for growth in the sector.
Feng Liwen, Director of the Distributed Energy Committee at the China Energy Research Institute, emphasized that developing distributed energy is essential for addressing major energy challenges in the new era. He believes that in the future, distributed energy could not only thrive domestically but also expand into international markets, following the "Belt and Road" initiative.
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