For many years, distributed energy—often celebrated as a promising solution—has entered a new era of transformation and opportunity. The landscape is changing rapidly, driven by multiple factors that are shaping the future of China's distributed energy development. According to a report titled *China’s Distributed Energy Outlook* released by the International Energy Agency (IEA) and the China Energy Network on the 30th, these factors have the potential to accelerate the adoption of modern distributed energy systems if supported by the right policies, market structures, and regulatory frameworks.
One of the most significant drivers identified in the report is the ongoing economic restructuring in China. As the country shifts towards a more service-oriented economy, the demand for large-scale centralized energy from heavy industries is declining. This shift aligns well with the decentralized nature of distributed energy, making it more relevant and applicable in today’s evolving economic environment.
Compared to traditional coal-based centralized systems, modern distributed energy solutions offer greater flexibility in integrating renewable and clean fossil energy sources. They can significantly reduce greenhouse gas emissions, improve air quality, and support the transition toward stricter environmental standards and low-carbon development goals.
Moreover, the rapid advancement of digital technologies is reshaping how distributed energy systems operate. With the widespread use of smart sensors, control devices, and emerging loads like electric vehicles and big data, energy systems are becoming more responsive and efficient. These innovations enable better data-driven decision-making, allowing for more tailored energy solutions that meet user needs more effectively. Integrating IT technologies with smart devices also opens up new service opportunities, enhancing the appeal of distributed energy systems among consumers.
The report highlights that new business models are emerging globally and in China, creating fresh opportunities for growth in the distributed energy sector. “Distributed energy offers high efficiency, low environmental impact, strong economic returns, and reliable power supply,†said Zhu Ming, Director of the Renewable Energy Division at the National Energy Administration. He emphasized that a service-oriented, integrated approach to distributed energy could enhance grid integration of renewables, improve system performance, and drive sustainable energy consumption patterns.
However, despite its potential, the development of distributed energy in China has faced challenges over the years. Issues such as economic constraints, technological barriers, and unclear regulatory roles have led to setbacks. For example, clean energy often lacks cost competitiveness compared to coal, and distributed projects struggle to gain fair returns from selling electricity to the grid. Additionally, ambiguous responsibilities between grid operators and project developers have hindered progress.
Looking at specific examples, the report notes that as of 2015, China had only about 121 distributed natural gas projects with a total capacity of around 1.4 million kilowatts—far below the national targets. This highlights the need for stronger policy support and clearer implementation strategies.
In response, the Chinese government has taken steps to promote distributed energy during the "13th Five-Year Plan" period. In 2017, the National Energy Administration issued guidelines to accelerate the development of decentralized wind power, while the National Development and Reform Commission introduced policies to boost the use of distributed natural gas.
Zhu Ming mentioned that the government is exploring direct market mechanisms for distributed electricity generation, aiming to create new models for its growth. It is expected that China’s distributed energy sector will enter a new phase of development in the coming years.
According to the "13th Five-Year Plan," by 2020, China aims to increase natural gas power generation capacity to over 110 million kilowatts, with 15 million kilowatts coming from distributed sources. Solar power is also projected to reach over 110 million kilowatts, including 60 million kilowatts from distributed photovoltaics. Compared to current levels, there is still substantial room for growth in this sector.
Feng Liwen, Director of the Distributed Energy Committee at the China Energy Research Institute, stated that developing distributed energy is essential for addressing key energy challenges in the new era. He believes that in the future, distributed energy may not only become a vital part of China’s energy mix but also expand into international markets, following the trend of the "Belt and Road" initiative.
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