China’s power industry expects to be pumping electricity from up to a terawatt of renewables in just five years, Recharge has learned, as it prepares for steep new targets that will play a key role in meeting the nation’s newly-announced plan to become carbon-neutral by 2060.

A key policymaking think-tank advising the Chinese government and state-owned power giant State Grid are among those sanctioning increases in combined wind and solar renewable capacity of 400GW or more under China’s upcoming 14th Five Year Plan (FYP), which will cover the period 2021-25 and is billed by one analyst as potentially “the most important document in global energy market history”.

The next FYP for renewables – and likely new goals for energy storage and green hydrogen – will play a key role in China’s plans for 2060 carbon-neutrality, the subject of a surprise announcement by President Xi Jinping at the UN General Assembly this week.

Although light on detail, the pledge was hailed as a potential game-changer by a nation that’s responsible for 28% of global emissions.

Aggressive targets

The policymaking process for the 2021-25 FYP began in April, with at least another six months likely before the final plan and associated targets emerge.

The process includes key advisory bodies and China’s largest power sector players, which were laying the ground for massive wind and solar additions even before Xi’s announcement.

Du Zhongming, the head of China Electric Power Planning & Engineering Institute (EPPEI), told a recent policymaking roundtable for the electricity sector’s FYP that installed wind and solar capacity by the end of 2025 should “exceed 800GW”, Recharge understands from industry sources.

EPPEI is well known in China for its links with the government’s National Energy Administration (NEA) as the key policymaking think-tank that feeds into the FYP.

China would add about 400GW of non-hydro renewables, almost double its current wind and solar capacity in just five years, under Du's advisory target.

China had 414GW of installed renewables by the end of 2019, which grew to about 460GW by the middle of this year.

In five years renewables will surpass hydropower to be China's second-largest electricity source, representing 29% of the nation's total electricity capacity and contributing 16% of its power generation, Du said.

EPPEI’s goal, however, is far from the most aggressive suggestion for the next plan.

State Grid, China’s key power utility that’s also involved in policy planning, proposed in its 14th FYP advisory report to Beijing that China reaches 1,100GW of cumulative capacity in five years, of which some 540GW would be wind and 560GW solar.

Financial analysts are also flagging huge rises in renewables capacity to investors.

In a research note, Industrial Bank predicted that China's total renewable capacity by the end of 2025 would range from 860GW to up to 1,200GW.

That would mean the market adding an annual average of up to 45GW of wind and 115GW of solar to the system – inevitably raising new questions about the ability of China’s network to accommodate massive new quantities of renewable power, which has previously led to widespread curtailment of output from wind and solar plants.

For offshore wind, in a recent speech officials of China Renewable Energy Engineering Institute (CREEI) – another key policymaking body – suggested that the likely 14th FYP deployment target would be 20GW.

While the exact trajectory set by Beijing remains undecided, under any of these scenarios China – already the largest wind and solar market – will continue to lead global renewable investment.

Renewables’ expansion would help the country to aggressively lower coal's share in the total energy mix to under 50% by 2025, from 59.5% last year, Du of EPPEI said.

Road to 2060

Xi’s 2060 carbon-neutral pledge, which also reinforced its aim for peak emissions before 2030, is set to “present a strong downside to coal-powered generation growth, which will likely be one of the first sectors that the government will work on to achieve these emission targets,” said analysts from Fitch Solutions, reacting to the policy announcement.

However, “it remains unclear how China intends to truly define ‘carbon neutrality’, and the specific steps that the market will take in order to achieve these goals at present,” Fitch said in a note.

Most notably, we believe that China will look to accelerate the implementation of its nationwide Emissions Trading Scheme (ETS), after it has been mooted for several years

Wood Mackenzie Asia Pacific vice chair Gavin Thompson said: “China’s definition of ‘carbon neutrality’ is not well defined from the short announcement. Further, no roadmap was offered as to how this will be achieved. 2060 is a long time out and immediate, concrete steps have yet to be announced.

“But China’s upcoming 14th five-year plan has the potential to be the most important document in global energy market history. Increased investment in wind, solar, electric vehicle and battery storage technology deployment will almost certainly feature, and we can expect support for green hydrogen and carbon capture technology.”