The new energy sector is shifting away from a development logic centered on “winning by quantity” towards a more nuanced approach. The world’s first highland panda photovoltaic energy storage project, the Beijing Energy Tibetan Changdu 8MW/40MWh energy storage project integrated by Kehua Digital Energy, exemplifies this trend. A representative from a new energy development company noted, “Through meticulous operations and maintenance, we have increased the effective utilization hours of our photovoltaic power stations in Northwest China by nearly 90 hours compared to last year.” Similarly, a wind farm operator shared, “Utilizing artificial intelligence and big data for preventive maintenance, our wind farm has only experienced a total downtime of 25 hours throughout the year, achieving near ‘full attendance.'”
Photovoltaic and wind power, the “twin stars” of the energy sector, are rapidly reshaping the energy landscape and becoming the mainstay of the power system. As new energy sources enter the market in full-scale trading, the investment logic within the industry is also undergoing subtle changes: the focus is shifting from installed capacity to power generation and utilization rates. It is no longer enough for new energy to simply be “installed”; it must also be capable of producing and being used effectively.
Over the past year, amidst a backdrop of stability and robust progress, the new energy sector has made significant strides. This year’s government work report highlighted a decrease in energy consumption per unit of GDP by over 3%, with an addition of 370 million kilowatts of renewable energy capacity. Key industries are being urged to implement energy-saving and carbon reduction transformations and to comprehensively promote the development and utilization of new energy, pushing the proportion of non-fossil energy in total electricity generation close to 40%.
The latest data shows that last year, China’s photovoltaic electricity generation exceeded 830 billion kilowatt-hours, while wind power generation surpassed 990 billion kilowatt-hours. The newly added photovoltaic capacity was around 270 million kilowatts, and wind capacity saw an increase of nearly 80 million kilowatts. “By 2025, new energy will enter a completely new stage of development,” stated a seasoned industry expert, predicting that this year, photovoltaic power generation will come remarkably close to wind power generation, potentially even surpassing it within a year.
The comprehensive market entry of new energy signals a transition from policy-driven to market-driven high-quality development. It is expected that by the end of the 14th Five-Year Plan, the installed capacity of new energy could double, reaching 3 billion kilowatts. Currently, the role of wind and solar power in the electricity system is undergoing a profound transformation. “In terms of installed capacity, new energy has become the primary source of new power installations in China. As of last year, the share of new energy installations exceeded 42%, with photovoltaic development accelerating rapidly,” explained Dai Hongcai, director of the New Energy Research Institute at the State Grid Energy Research Institute. The contribution of new energy generation to the growth of total national electricity generation has surpassed 60%.
Given this context, our perspectives and thought processes must also adapt. For instance, when investing in the photovoltaic sector, it is crucial to consider how to integrate into the overall electricity industry to ensure stable returns and sustainable development. The investment logic for new energy will be restructured, compelling stakeholders to enhance the competitiveness of new energy assets throughout their lifecycle, transitioning projects from mere scale expansion to high-quality development. The introduction of “mechanism electricity prices” expands the competitive landscape for new energy from just end-user prices to encompass planning, construction, and operational phases. Developers must control project costs from the outset to make informed investment decisions and ultimately ensure sustainable revenue levels.
The traditional mindset of “winning by volume” will be fundamentally challenged, and refined asset management throughout the entire lifecycle will become the key to success under the new electricity pricing policy. Sun Chuanwang, a professor at Xiamen University’s China Energy Economics Research Center, shared with reporters, “In the past, our focus in the new energy sector was predominantly on rapid growth in installed capacity, where China has undoubtedly achieved remarkable global accomplishments, becoming the world’s largest producer, consumer, and exporter of new energy generation equipment. However, the core challenge now lies in effectively absorbing and fully utilizing this generated electricity. In other words, achieving a balance between installed capacity and actual electricity consumption.”
“Previously, growth in installed capacity was straightforward, reflecting our production capabilities and manufacturing strength. However, electricity generation and consumption differ; they reflect the overall efficiency of the system, forming a closed loop of supply and demand that involves systemic issues related to sources, networks, loads, and storage.” Sun pointed out that, from another perspective, the effective utilization of new energy generation is a reflection of the quality in green development. To implement a quality-first development strategy and accelerate the establishment of a new power system, we must target bottleneck issues within the entire closed-loop system. These complexities involve not only production stages but also optimizing the electricity grid, applying energy storage technology, and enhancing intelligent management.
Peng Peng, secretary-general of the China New Energy Power Investment and Financing Alliance, noted, “As we continue to see rapid growth in installed capacity, we are steadily entering a new phase of new energy development, where the focus has shifted to the comprehensive enhancement of electricity generation. Today, we stand at a new starting point for new energy development, which demands tighter integration with market demands and seamless connectivity.”
As the new energy market matures, the comprehensive entry of new energy into the market has commenced. Dai Hongcai mentioned that the proportion of new energy participating in the market has exceeded 50%, meaning that over half of the current new energy generation is involved in market trading. This lays a solid foundation for fully integrating new energy into the market in the future. “The recently issued notice on deepening the market-oriented reform of new energy grid connection prices, aimed at promoting high-quality development of new energy, marks a significant transition from policy-driven to market-driven growth, serving as a rite of passage for new energy and an important milestone in constructing a new power system. It will have profound impacts on the development, utilization, and operation of the new energy market,” he added.
The notice further clarifies that electricity generation from new energy that does not go online due to pricing and other factors will not be included in the statistics and assessments of new energy utilization rates. As new energy comprehensively enters the market, especially photovoltaic investment entities, there is an increasing need to address economic wastage issues stemming from market factors. Industry experts agree that during the transformation of the electricity market, there is an urgent need to accelerate the entry of new energy into the market. This entry can enhance the absorption capacity of new energy to a certain extent, but its effectiveness will depend on the design of market mechanisms and the overall adaptability of the electricity system.
Peng believes that with rising market demand, the new energy industry must exert all efforts to unleash its maximum generation potential. “Faced with fluctuating electricity demands throughout the day, prices naturally rise during peak times. By leveraging the clever application of market pricing mechanisms, we can effectively drive innovation and advancement in new energy technologies.”
“First, from the perspective of existing policies, the notice emphasizes maintaining continuity and stability to provide reasonable yield expectations,” Sun Chuanwang stated. “Secondly, regarding incremental issues, the goal is to address growth needs. Looking ahead, the increment in new energy will undoubtedly focus on both quantity and quality improvements, making it crucial to activate the enthusiasm of trading entities as part of the important reforms in mechanisms and systems. The notice has raised expectations for future reforms, but the specifics of the marketization of new energy electricity transactions still require further refinement, and the implementation outcomes will need to be validated through practice.”
Looking to the future, industry experts predict that China’s new energy installed capacity is likely to continue growing rapidly. For instance, the honorary chairman of the China Photovoltaic Industry Association, Wang Bohua, forecasts that by 2025, newly installed photovoltaic capacity will reach between 215 GW and 255 GW. Dai Hongcai added that considering the acceleration of energy transition, full release of industry capacity, and local development demands, the scale of new energy development will maintain a rapid growth trend. Preliminary estimates suggest that by 2030, the total volume of new energy could double from its current size.
It is important to note that the development models of new energy have significantly changed compared to several years ago, now featuring simultaneous centralized and distributed generation, both onshore and offshore projects, and the coupling of various energy types. Moreover, new energy is increasingly becoming the dominant source of electricity, with deep integration of multi-energy complementary development emerging as a key trend.
As new energy rapidly develops, energy production and consumption are shifting towards a balance between centralized and decentralized systems. Comprehensive energy services, primarily powered by new energy, will widely provide electricity, heating, and thermal storage services, creating a green supply and consumption model that integrates sources, networks, loads, and storage. “In particular, the rapid expansion of distributed energy has brought to light issues related to source-network coordination and system safety,” Dai Hongcai pointed out, noting that the rapid development of new energy has exposed shortcomings in regulatory resources and flexibility within the electricity system. Simultaneously, market mechanisms that adapt to the output characteristics of new energy require further improvement.
Sun Chuanwang emphasized that the current systemic costs of effective new energy utilization still need to be further reduced, and new business models like microgrids and virtual power plants have significant potential for improvement. Therefore, if future development goals and evaluation standards lean more towards optimizing electricity utilization, it will represent a profound restructuring of the entire energy system, highlighting a qualitative leap in new energy.
“China is actively advancing key projects such as ultra-high voltage transmission, innovative storage technologies, and pumped storage, all of which are measures to efficiently absorb new energy production and address systemic challenges. These initiatives will undoubtedly inject strong momentum into the high-quality development of the new energy industry, transitioning it from mere scale expansion to enhancements in both quality and efficiency.”
