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China Plans to Invest $800 Billion in Creaking Electricity Grid to Accelerate the Green Transition


China Plans to Invest $800 Billion in Creaking Electricity Grid to Accelerate the Green Transition

Climate Insider Brief:

  • Beijing plans to invest $800 billion over the next six years to upgrade its electricity grid, addressing rising demand and supporting the transition from coal to renewable energy.
  • China’s existing grid struggles to integrate renewable energy efficiently, leading to suspensions of solar projects and the need for battery storage in several provinces, amidst increasing electricity demand driven by data centres and electric vehicles.
  • Despite leading in green energy investments and grid expansion, China remains heavily reliant on coal, with recent approvals for new coal plants potentially hindering its carbon emission reduction goals and global climate change efforts.

As reported by Semafor, Beijing has announced an $800 billion investment in its electricity grid over the next six years. This ambitious plan aims to modernize the country’s aging infrastructure and support its transition from coal to renewable energy.

The initiative is critical for China’s electricity grid, which has been grappling with rising demand. According to the Financial Times, demand was up 7.4% year-on-year in the first four months of 2024. Despite being the world leader in green energy, the country’s grid has struggled to keep pace with its rapid growth in renewable energy installations. In 2022, nearly half of the world’s total clean energy investment came from China, as reported by E&E News.

However, the outdated grid has become a bottleneck for further progress. At least 12 of China’s 34 provinces have required solar operators to use battery storage, and over 100 municipalities have suspended solar projects. These suspensions are a result of the grid’s inability to manage the fluctuations inherent in solar power generation effectively. With rising electricity demand driven by data centers and electric vehicles, an expert highlighted to the Financial Times the need for a more advanced grid to meet these challenges and ensure China can achieve its carbon emission goals of peaking by 2030 and reaching carbon neutrality by 2060.

China has been a global leader in green energy transition, with substantial investments leading to significant grid expansion. In the past decade, China accounted for more than a third of the world’s total grid expansion. In 2022, its investment in electricity surpassed that of all other countries combined, according to Energy Monitor. However, China remains the largest emitter of greenhouse gases and aims for net-zero emissions by 2060, ten years later than the United Nations’ target. While China will lead in absolute emission reductions, Energy Monitor noted that the US and EU are reducing emissions at a faster rate in relative terms.

Despite substantial investments in renewables, China’s reliance on coal continues to pose challenges. The Christian Science Monitor pointed out a “tug of war” between expanding renewable energy sources and growing overall power demand. Rystad Energy noted that China accounts for roughly a third of global power demand in 2024, with requirements surpassing any other country. Furthermore, E&E News reported that China approved four times as many coal plants in 2022 and 2023 as it did in the previous five years. This continued reliance on coal could undermine global efforts to mitigate climate change driven by fossil fuel consumption.

As Beijing embarks on this $800 billion investment plan, the future of China’s energy trajectory remains complex. Balancing the expansion of renewable energy with the growing demand and reducing reliance on coal will be critical in determining whether China can meet its ambitious climate goals while continuing to lead the global green energy transition.

SOURCE: Semafor

Featured Image: Credit: The Wire China