Access to Renewable Power in China: Implications for Business

08 December 2023 / Report

As more and more companies set carbon emission reduction targets, their demand for clean power is surging. But inadequate access is a key concern, with many companies finding it difficult to procure sufficient green electricity in China to meet demand. What are the reasons for this, and what can companies realistically do to overcome this challenge?

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End-user access to renewable energy remains very limited, despite the dramatic progress in China’s renewable capacity buildup. Wind and solar power currently account for only 12.1 percent of total electricity production. For companies operating in China, understanding the technological and institutional barriers involved is critical to developing a realistic view of how quickly access to renewables will improve via the grid, and, in the absence of such access, what alternative routes can and should be explored.
Green electricity demand is likely to outstrip supply for many years to come. In the near-term, companies will have to proactively and strategically exploit all viable alternative routes to access renewables. These include installation of on-site solar or wind power systems, Power Purchase Agreements (PPA) with local power generators, directly investing in renewable power projects, and procuring green electricity or certificates via trading markets.
From a strategic, longer-term viewpoint, it is not a question of If supply will increase, but rather When and How, and what to do in facing the many uncertainties surrounding the green energy transition. Scenario analysis can be a very useful tool to understand which barriers can/will feasibly be removed in the short and mid-term; recognizing those that will persist longer term; and assessing what different scenarios will mean in terms of setting or adjusting realistic long-term climate targets.
It is also critical that companies reassess and ensure all decarbonization strategies have been fully exploited, especially doubling down on abatement measures such as increasing energy efficiency and reducing energy/electricity consumption. In the absence of alternatives, a carefully crafted carbon offsetting strategy may also have to come into play as a bridge solution.
For MNCs with a global climate strategy, local realities will likely necessitate a different approach in China than for other markets, especially if global decarbonization targets rely heavily on access to renewable energy. Proactive and transparent communication between headquarters and China operations is essential to convey on-the-ground realties, ensure alignment, and define realistic targets.