China Member Committee

CTRITICAL UNCERTAINTIES

Survey findings indicate that Peace and Stability, along with International Cooperation and Trade, are the two fastest-evolving and most critical uncertainties. While uncertainty arising from Supply Chain Disruptions is less prominent than the aforementioned factors, they are profoundly reshaping the landscape of the global power industry. For China, geopolitical shifts act as both a channel for risk transmission and a window of structural opportunities.

• Peace and Stability Risks

The geopolitical vulnerabilities inherent in the traditional fossil fuel-dominated energy system not only exacerbate supply uncertainty and price volatility but also highlight, across multiple dimensions including energy security, economic stability, and sustainable development, the irreplaceable strategic value of non-fossil energy sources.

Driven by geopolitical pressures and the carbon peaking and carbon neutrality goals[1], China is accelerating the structural transformation of its energy and power systems. By building an integrated power system that incorporates generation, grid, load, and storage with multi-energy complementarity - with renewable energy accounting for over 60 percent of China's total installed power generation capacity and more than 438 gigawatts of new wind and solar capacity added in 20252 - China aims to diversify its energy mix. This approach reduces dependence on imported energy while enhancing the flexibility and resilience of the energy system. Despite renewable energy still faces practical challenges in the short term - intermittency and volatility, inadequate energy storage capacity, extended grid integration and upgrading cycles - it has become a necessity for ensuring China’s energy security and maintaining stable economic performance in the long run.

• Global Cooperation & Trade

The intensification of geopolitical rivalry and the growing fragmentation of trade rules are hampering cooperation and coordinated development in the global energy sector.

• Standards and regulations: rising trade protectionism within regulatory frameworks has restricted the cross-border exchange of green technologies, slowing progress in the global low-carbon transition.
• Trade and investment: geopolitical conflicts have driven up the costs of cross-border energy trade and collaboration, generating considerable uncertainty in project approval, financing, compliance, and revenue.

To promote an orderly, equitable, and inclusive global energy transition, China is fostering mutually beneficial partnerships by deepening international collaboration on green technology innovation, clean energy development, energy infrastructure upgrading, and power interconnection with neighbouring countries. Actively engaging in global energy governance, proposing and implementing low-carbon initiatives.

• Supply Chain

Trade frictions have prompted companies to re-evaluate their supply chain strategies, accelerating the shift toward localization and diversification in power equipment manufacturing.

Geopolitics causes price fluctuations in critical materials such as rare earths, lithium, cobalt, and nickel, impacting cost structures and profit margins of upstream and downstream enterprises and restricting the steady development of the new energy industry. Escalating geopolitical tensions impose severe challenges to international engineering projects: disrupted shipping routes, blocked raw material supply chains, volatile energy prices and insurance costs have placed substantial pressure on project implementation.

Against this backdrop, China is building a more resilient, efficient and self-reliant energy industrial and supply chains. Through bilateral, multilateral technical collaboration, joint statements, and third-market cooperation, it deepens synergies in green production capacity to mitigate external impacts, guarantee the security and stability of industrial and supply chains, and support global energy transition and sustainable development.

ACTION PRIORITIES

The 2026 map shows that Power Grid characterized by low uncertainty but high impact. In 2025, large-scale power outages occurred across multiple regions globally, affecting both developed economies and emerging markets. These incidents exposed the vulnerability of traditional power systems under the combined pressures - peak electricity demand, extreme weather, and security risks. As a result, strengthening power system resilience has become a consensus in China’s energy policies and a key investment priority worldwide.

• The New Power System & Smart Grid Upgrades

Historically, power system development focused on installed capacity expansion and the enhancement of power supply capacity, with inadequate attention to risk prevention, resistance and emergency response, leading to deficiencies in system redundancy and reserve capacity. As renewable energy penetration continues to rise, the unpredictability and complexity of power systems have increased significantly, imposing higher requirements on grid flexibility and stability.

To address these challenges, China has launched a series of policies to accelerate the development of a new-type power system platform integrating main grids, distribution networks, and smart microgrids for coordinated operation. On the one hand, upgrades to the UHV main grid structures are in progress to enhance cross-regional transmission capacity. Transmission corridors have been built under the “West-to-East Power Transmission” and “North-to-South Power Supply” projects delivered during the 14th Five-Year Plan (2021-2025), which enable efficient interconnection between clean energy bases in western regions and load centers in the east. On the other hand, policies support the coordinated development of large-scale wind and solar bases in desert areas, the Gobi and other arid areas, along with distributed energy resources. Smart microgrids promote local consumption and surplus power feed-in, thus improving the utilization rate of renewable energy.

Meanwhile, digital upgrades to distribution networks and flexible interconnection technologies have improved the grid’s capacity to accommodate distributed energy resources.

• Big Data & Artificial Intelligence

AI is a key enabler of the new power system transformation, applied to simulation analysis, planning & design, dispatch & operations, stability & control, and electricity trading.

Guided by the national energy security strategy and its initiatives for digital and intelligent transformation, China’s power grid systems have widely integrated AI and big data technologies, achieving notable results in dispatching, load forecasting, renewable energy integration, and equipment maintenance. Pilot projects include the AI + GUANGMING Large Model developed by SGCC and MegaWatt - Yudian developed by CSG.

However, smart grids are complex systems integrating physical networks, information and operational technologies, maintaining close interconnections with critical infrastructures. Potential risks such as data security vulnerabilities and cyber threats require heightened vigilance throughout the planning, construction, and upgrading phases.

• Energy Storage & Flexibility

Energy storage is a critical solution to addressing renewable energy integration challenges and maintaining power system stability. Unlike pumped hydro energy storage, emerging energy storage technologies are not constrained by geographical conditions. They feature fast response, flexible deployment, diverse technology pathways, and scalable implementation. As such, energy storage has become an indispensable pillar for building new power systems and achieving the Dual Carbon Goals.

A series of supportive policies covering capacity leasing, electricity spot markets, ancillary services, and capacity compensation have been implemented to promote the sustainable development of the energy storage sector. Looking ahead, China will continue to promote the deep integration of energy storage with green hydrogen, computing-power synergy, direct green power connections, and zero-carbon industrial parks.

BLIND SPOTS

The growing electricity consumption on the demand side and the accelerated shift from fossil fuels to non-fossil energy on the supply side impose higher requirements on secure and reliable power supply. The security characteristics of large power grids are becoming more complex, requiring coordinated management of supply-demand balance, system stability, and accommodation capacity.

The rapid growth of new load types, such as AI computing centers and fast-charging infrastructure for new energy vehicles, has substantially reshaped load profiles. Such loads are highly sensitive to voltage sags and frequency variations, bringing new uncertainties to power system planning and operation.

BRIGHT SPOTS

• Preliminary Establishment of a Unified National Electricity Market

China has initially established a “1+6” regulatory framework for the unified national electricity market in 2025. Centered on the Basic Rules for the Operation of the Electricity Market, this framework is complemented by fundamental rules governing medium- and long-term trading, spot markets, and ancillary services, and is underpinned by basic provisions concerning market registration, information disclosure, metering and settlement. This regulatory framework has resolved the fragmentation of market rules and regional divergences, unifying operational standards across the national electricity market.

Meanwhile, a regular cross-regional electricity trading mechanism has been largely put in place in the same year, with the spot market operating on a continuous basis nationwide. The Southern Regional Electricity Market has shifted to full continuous operation, and breakthroughs have been made in regional coordination mechanisms. These efforts have greatly improved the optimal allocation of energy resources and consolidated the institutional foundation of the electricity market.

• Significant Progress in End-Use Electrification

Electrification is a key lever for the global energy transition and for China’s Dual Carbon Goals. China has consistently optimized electrification pathways in key sectors on the demand side, promoting electricity substitution for fossil fuel-fired equipment in energy-intensive industries. This shift has replaced fossil fuel use with electricity in energy consumption for production processes.

It implements a dual-control regime for the quantity and intensity of carbon emissions, establishes green and low-carbon energy consumption mechanisms, and specifies energy conservation and carbon reduction obligations for key industries - including power, steel, non-ferrous metals, building materials, petrochemicals, chemicals, and machinery. It also promotes electrification in the industrial, construction, transportation, agricultural, and rural sectors, thereby boosting end-use electrification development on the demand side.

• Hydrogen and Nuclear Energy

During the 14th Five-Year Plan period (2021-2025), China’s hydrogen and nuclear energy industries achieved breakthroughs in policy, technology, and application.

Hydrogen energy has become cost-competitive and entered a stage of commercial development. Accelerated progress in offshore hydrogen production, hydrogen pipelines, and ten-thousand-ton green hydrogen-ammonia-methanol integrated projects - coupled with improved standardization systems and service platforms - has enabled China to build the world’s largest hydrogen energy system. In the nuclear power sector, the mature application of the Linglong One small modular reactor (SMR) and the completion of the Shidaowan HTR-PM have validated the technical feasibility of commercial deployment of the SMRs.

Both hydrogen and nuclear energy have been incorporated into the 15th Five-Year Plan (2026-2030) as key emerging economic growth drivers. Their coordinated development will provide reliable clean baseload power and flexible peak-shaving capacity, enhance grid flexibility, support a diversified, clean, safe and efficient modern energy system, and upgrade the low-carbon energy transition to a new level.

ENERGY TRILLEMMA TRADE-OFFS

Today, energy issues have gone far beyond simple supply-demand dynamics to a comprehensive challenge integrating supply security, industrial competitiveness, and system resilience. China’s energy development in 2025 demonstrates that existing policies are steadily balancing overall performance in the Energy Trilemma: security, equity, and sustainability.

With the Energy Law taking formal effect in 2025, a unified legal framework has been established for China’s energy security, green transition, and market operations.

• Energy Security: Under the guidance of this Law, China is advancing multi-energy complementarity among hydropower, wind, solar, hydrogen and natural gas, promoting the safe, reliable and orderly substitution of fossil energy with non-fossil energy, strengthening system resilience, and mitigating risks arising from geopolitical conflicts and market volatility.
• Energy Equity: It enhances market oversight, covering the entire industrial chain of the energy sector - from production and distribution to consumption and storage. It aims to reduce natural monopolies and foster a more stable and equitable market environment.
• Environmental sustainability: It introduces dual-control mechanisms for carbon emissions, which involve reducing pollutants and carbon emissions across the industry chain through advanced technologies. The law also sets a mandatory minimum threshold for the proportion of renewable energy in total energy consumption, aiming to accelerate its wide adoption through incentives such as green electricity certificates. 

FROM INSIGHT TO CONNECTION

China’s perspective highlights a broader coordination question for the global energy transition:

How can countries promote a fair and orderly mechanism for cross-border exchange of green technologies - one that accelerates innovation diffusion while also addressing concerns around access, competitiveness, and balanced development?

This question may resonate with peers navigating the opportunities and tensions of clean technology trade, industrial strategy, and international cooperation, and can serve as a focal point for shared learning across regions.

1 Also known as Dual Carbon Goals. In 2020, China set the dual carbon goals of peaking carbon dioxide emissions before 2030 and achieving carbon neutrality before 2060.
2 National Energy Administration (NEA) website.

Acknowledgements

Ruby Xu,

China Electricity Council