Combining PV, heat pumps, and EVs offers benefits for rural energy transition in China and Germany

Research on perspectives from two villages

Energy transition in rural areas, source: shutterstock

The rural energy transition often receives less attention than the low-carbon transition in urban or industrial sectors, despite the enormous potential of rural areas for decentral renewable energy generation and potentials to achieve high rates of self-sufficiency. The report Pursuing a low-carbon rural energy transition in China and Germany shares the findings on this topic from two research teams of the Wuppertal University and Wuppertal Institute in Germany, and the China Academy of the Sciences Institute of Applied Ecology in China. This report analyses case studies of two rural villages and towns—Dongqiaotou in Shandong province, China, and Schwaig in Bavaria, Germany. The report found that combining solar energy, heat pumps, and smart charging of electric vehicles can enable rural communities to become more self-sufficient in their energy supply, with benefits for energy supply resilience and lower network costs.

The research is carried out under the framework of the Sino-German Energy Transition Project under commission of the German Federal Ministry for Economic Affairs and Climate Action (BMWK), implemented by GIZ.

The energy transition discussion in China often focuses mainly on the energy industry or on urban areas. Given China’s rapid urbanization, and the high proportion of energy consumed in cities and the industrial sector, it is easy to overlook the country’s vast rural areas, even though they are home to over 509 million people, accounting for 36% of the total population. Achieving the energy transition in rural areas is an important part of realising China’s national strategies and targets of peaking of carbon emissions before 2030 and achieving carbon neutrality by 2060.

As for Germany, which has set a climate neutrality goal for 2045, the country can only achieve its climate goals with a large amount of renewable energy. Germany’s climate targets also imply electrifying the transport and heating sectors, which still rely on fossil fuels. Electrification of heating and mobility will further increase electricity demand, underlining the importance of distributed renewables for reducing the need for imported energy and network upgrades.

Distributed wind and solar are at the forefront of the German low-carbon energy transition, often owned directly by individuals or small communities. Rural areas in China and Germany often have more local renewable energy resources and more space for deploying renewable energy generation technologies than urban areas. Hence, they have a potential for achieving a high degree of self-sufficiency from their local renewable energy resources. But the German rural energy transition is also a work in progress. Rural areas have ample room to adopt electric transportation and efficient heating and cooling.

In general, rural areas often have various structural weaknesses compared to urban areas, reflected in lower incomes and fewer job opportunities. For example, per capita incomes in Bavaria’s rural areas in 2019 were 9.3% lower than those in urban areas. In China, the urban-rural differences in income are more pronounced than in Germany.

This study sought to understand and compare the different clean energy futures of German and Chinese towns and villages, both by quantifying today’s energy production and consumption, and by analysing future energy scenarios. We examine the village of Schwaig in Bavaria, located near the Munich airport, and Dongqiaotou in Shandong province. Both are agricultural towns, but the German community has a far higher per-capita income than the Chinese village, as well as more distributed energy installed. Dongqiaotou relies heavily on coal, electricity, and oil, but has installed solar water heating on most houses. The town has minimal PV, with just around 5% of households having PV installed.

Both villages, despite their different development states, are part of their respective countries’ energy transitions and will undergo changes in this decade. This study aims to contribute to understanding the possible direction of these changes and the villages’ potentials to make an ambitious contribution in their respective contexts.

Modeling rural household energy in 2030

Both research teams used of survey data collected in the villages. The researchers gathered data on the two villages’ energy generation, consumption and energy-related behaviours of households. These results were partly supplemented and validated with publicly available statistical data. To develop models for self-sufficiency potentials and possible future development pathways, both research teams developed different scenarios about the speed and ambition of the energy transition up to the year 2030. Scenarios included assumptions on solar PV expansion and penetration of heat pumps and electric vehicles. The researchers generated load profiles for households, which enabled estimation of the energy generation and consumption patterns in typical summer and winter weeks, showing how much energy demand renewable sources can satisfy in the different scenarios.

Findings from modelling and analysis

Distributed energy and self-sufficiency are attractive in both Germany and China: In rural areas of Germany, adoption of distributed solar, electric vehicles, and heat pumps is likely to continue, giving the region high potential for energy self-sufficiency. Similarly, we find that Dongqiaotou has the potential to increase its self-sufficiency with EVs and PV, even as its energy consumption rises more rapidly due to rising incomes.

In Germany, heat pumps and insulation could help reduce impact of solar variability: Adoption of distributed clean energy also will make daily electricity supply and loads more volatile-given that PV could account for up to a fourth of local energy production and far exceed the total household monthly load in summer. Heat pumps and well-insulated German houses have high potential for smoothing household net loads. While heat pump adoption in Schwaig is presently low, 62% of homes could have heat pumps installed by 2035. EV adoption and timed charging could play a role, but it is far smaller given that the EV load is expected to be just 4-5% of total energy consumption, compared to 16-17% for heating and cooling. From this follows that it is important to create the technical and regulatory preconditions for flexible operation of heat pumps, which also may include storage, to make the best use of periods with solar power abundance. Germany’s solar production profile is also more seasonal than that of China’s Shandong province, implying a relatively greater need for seasonal balancing or seasonal energy storage technologies in the German rural case.

In China’s rural areas, distributed energy technology adoption is more uncertain, but has high potential: In China, bioenergy will continue to play a larger role in boosting the village’s renewable energy uptake. While there is uncertainty about adoption of distributed PV, heat pumps, or EVs, the scenarios and estimates in this study suggest that by 2030 these technologies are likely to have a significantly larger presence, particularly PV. Shandong’s solar production profile is less seasonal than Germany’s, meaning combining solar with storage should be relatively more attractive—whether provided via batteries or electric vehicles with vehicle-to-home or vehicle-to-grid technology. Heat pumps are already economical for those homes that require both cooling and heating, which includes Shandong province. Under the existing development model, in 2020 the village had a 16.8% energy self-sufficiency rate, representing the ratio of energy generated to energy consumed over one year. Under an optimistic development scenario, the energy self-sufficiency rates could reach 80.70% in 2025 and 126.16% in 2030.

Looking ahead – future development potentials and policy recommendations

The research in Schwaig and Dongqiaotou has shown that despite differences in economic development level and different stages of the energy transition in China and Germany, villages and rural areas in both countries have the potential to play significant roles in their countries’ energy transitions.

While self-sufficiency rates in the villages can reach quite high values, ultimately complete energy autarky is prevented by the fact that a large surplus of PV power can occur during the day but cannot meet demand at night. The misalignment of solar power abundance during the day and power demand before sunrise and after sunset could to some extent be compensated with storage, such as for hot water produced by heat pumps during the day, or battery storage for electricity. However, at current battery energy storage prices, capturing all the surplus power production would be uneconomical, even if technically feasible.

Rather than aiming for full self-sufficiency or island grid operation, a more balanced approach would target a combination of steadily increasing local renewable energy output, gradually upgrading local grids, and incentivizing smoothing peak loads via smart adoption of heat pumps and EV smart charging. Such an approach offers several advantages. Villages can drastically cut their dependence on power and fuel imports, and can benefit from lower power prices at night for the demand they cannot meet with their own resources. This frees up household means previously tied up in energy spending for other purposes such as education, investment, or domestic consumption, that are beneficial for rural development and standard of living.

In Germany, operators should adjust grids to a growing infeed from many distributed installations and strengthen their ability to feed power into higher-voltage grids. This also includes digitalisation of infrastructure, so that grid companies can manage an increasingly decentralised and variable power system flexibly and rapidly. Incentives for owners of distributed PV should promote self-consumption or feed-in during times of peak load—and encourage grid-friendly operation of such systems.

Incentive structures should promote storage by reducing or fully eliminating any costs for storing surplus power and enable owners of storage to sell balancing power as ancillary service in times of high-power demand. Vehicle-to-grid could play a certain role to carry over surplus power into times without or with low PV power generation, ideally reducing costs for the grid. However, vehicle-to-grid requires a range of technical conditions both in cars and in charging infrastructure and will need a clear and supportive legal and market framework to work in a grid-friendly way. Pilot projects and political initiatives could promote this.

In China, it is important to expand and adjust distribution grids to enable more feed-in of distributed renewable energy. Grid operators should coordinate their planning with communities and jointly determine the expected additional renewable energy capacity in the planning timeframe. On the one hand, grid expansion must keep pace at acceptable cost; on the other hand, grid capacity bottlenecks should not impede further distributed renewable energy expansion.

Electrification of heating via heat pumps is an important part of the rural energy transition and is particularly attractive when combined with self-produced solar power and a degree of heat storage to provide heating at night. Due to the higher up-front costs of heat pumps, financial support and tighter building efficiency standards will likely be necessary to promote the technology. In rural areas, villagers could all but eliminate local need for energy imports if they adopt electric vehicles for two, three, four-wheelers), particularly if they charge vehicles during daytime when plenty of solar power is available.

Click here for further research results under the framework of the Sino-German Energy Transition project.