China's Shifting Landscape: Prioritizing Efficiency in Renewable Energy Investments
- China | 21 December 2019

As the cost of solar and wind power continues to decrease, renewable energy is becoming a more attractive investment option worldwide. China, recognized as the largest investor in renewable energy, is now redirecting its focus to prioritize efficiency, market-driven approaches, and subsidy-free initiatives. Despite its significant contributions to global renewable energy investment, China still heavily relies on coal-based power generation. However, the country is taking steps towards a more sustainable future, evident in its ambitious Belt and Road Initiative and the increasing investment in renewable energy beyond its borders. While China faces challenges in transitioning from coal, signs indicate a shift towards better and more strategic investments in renewable energy.
China’s Belt and Road Initiative, an extensive project initiated by President Xi Jinping six years ago, aims to establish a trade route connecting China with European markets, similar to the ancient Silk Road. As part of this initiative, China has been providing financial support for renewable energy projects along the Belt and Road route, resulting in a significant increase in wind and solar power generation capacity. Since 2014, more than 12.6 GW of wind and solar power capacity has received financial assistance, transforming previously underdeveloped regions into renewable energy hubs. This investment has been instrumental in Southeast Asia, where a substantial majority of the renewable energy projects are located.
Despite the progress in renewable energy, China’s power generation still heavily relies on coal, accounting for approximately 60% of the country’s energy consumption. Furthermore, China is investing in new coal power generation capacity to meet the goals of the Belt and Road Initiative. This mixed approach reflects the challenges China faces in transitioning away from coal while simultaneously supporting renewable energy projects.
Recognizing the decreasing costs and improved competitiveness of solar and wind power, the Chinese government has begun phasing out subsidies for renewable energy projects. In 2018, the government announced that onshore wind power would no longer be eligible for subsidies. To receive approval, new renewable energy projects must now sell electricity at a price equal to or lower than coal-based power. These policy changes have resulted in a decline in solar energy investment, with a significant drop of about 56% in the second half of 2018. Despite this, China still witnessed a 12% year-on-year growth in renewable power generation capacity. The shift towards market-driven investment highlights China’s emphasis on better and more efficient use of renewable energy resources.
One of the key issues China faces in maximizing renewable energy utilization is the limited capacity of its grid infrastructure. Although efforts have been made to reduce wasted solar power due to grid limitations, certain regions, such as Tibet and Xinjiang, still experience high wastage rates. To address this challenge, the Chinese government dispatched inspectors to evaluate grid capacities across all regions and propose improvements for better integration of renewable energy production into the grid.
China remains committed to renewable energy investments despite the shift towards market competitiveness. Earlier this year, the government announced plans to develop 20.8 gigawatts of new solar and wind projects. However, the focus now lies on ensuring these projects contribute effectively to the grid and align with market conditions. The government’s emphasis on better, rather than more, renewable energy investments demonstrates a commitment to efficiency and sustainable development.
China’s renewable energy landscape is undergoing a transformation, driven by the declining costs of solar and wind power. While coal still dominates the country’s energy mix, China is taking steps to prioritize efficiency, market competitiveness, and subsidy-free investments in renewable energy. The Belt and Road Initiative has played a crucial role in expanding renewable energy infrastructure, signaling China’s commitment to sustainable development beyond its borders. By addressing grid capacity and wastage challenges, China aims to optimize the utilization of renewable energy resources. With strategic investments and a market-driven approach, China is positioning itself for a more sustainable and greener future.