Summary: This year, the most important thing: there are now more and more visions of how the energy transition will come about, and these are no longer minority academic views or curiosities. Companies and provinces must issue their own plans. Carbon neutrality is not just a single announcement, or a series of uncoordinated actions, nor is it a perfectly interlocking single plan that all can agree is perfect. Rather, it will be a process featuring high uncertainty, cumulative advancement, path dependence, and interdependence with developments outside of China. Most of all, it will require greater societal acceptance of the concept of energy transition—and that is the biggest change of 2020. While those outside of China have debated the semantics of whether 1.5 degrees is impossible or virtually impossible, in China many have gone from viewing carbon neutrality as improbable to viewing it as very hard but possible.

Introduction: pandemic has small impact on China’s energy transition in 2020

Notwithstanding the COVID pandemic slowdown in 1Q 2020, China’s electricity and energy demand grew steadily in 2020, though electricity demand growth slipped from 4.5% to 3.1%. Although coal still accounts for over 50% of primary energy consumption and remains the main source for electricity generation, electricity generated by renewable energy increased substantially. In part reflecting the removal of feed-in-tariff subsidies for onshore wind, wind capacity installation increased at a faster rate than in 2019.

Primary energy supply: Consumption of energy reached 4.98 billion tons of standard coal equivalent, up by 2.2% compared to 2019. Among the total primary energy consumption in 2019, 57.7% came from coal, 18.9% was oil, 8.1% was natural gas, and 14.3% was renewables.

Electricity: Despite the pandemic, the growth rate of electricity consumption remained positive. Electricity consumption grew 3.1% in 2020, down from 4.5% in 2019. Electricity consumption growth in primary industry (mining and other extraction-related activities) surpassed all other sectors at 10%, due to interrupted growth in secondary (mainly manufacturing) and tertiary (mainly services) sectors, which faced various restrictions due to the pandemic, particularly in the first half of 2020.

Coal:

• Coal consumption grew just 0.6% but remained below its peak.
• Coal power output grew strongly (1250 TWh), outpacing any other fuel source.

Oil:

• Domestic oil production grew 1.6%. NEA’s 2021 annual work plan calls for maintaining investment in exploration and production to ensure energy security.
• Domestic consumption grew 3%, a ten-year low, in part due to lower driving during the pandemic in 1H 2020. Gasoline consumption fell by 7% and diesel by over 3%.
• EV sales rebounded from a slight dip in 2019, and the EV share of sales should rise through 2025.

Methane gas:

• Gas demand continues to rise, and domestic production has increased.
• China has undertaken gradual efforts to switch heating from coal to gas, shifting an earlier fuel-switching program to focus more on ensuring gas is economically sustainable.
• Gas imports flattened, and rising China-U.S. tensions left promises of big LNG imports high and dry.
• The new Power of Siberia pipeline opened a new path for gas imports from Russia.
• Policymakers focused on efforts to develop a comprehensive national pipeline network as an element of energy security.

Renewable additions accelerated, and output continues to grow rapidly

• Both solar output and solar additions grew rapidly in percentage terms, and cumulative residential solar capacity doubled.
• Wind and hydro output also posted strong growth, and curtailment of renewable energy continued to decline.
• China is gradually shifting its policy focus from large, central plants to distributed energy, agricultural energy, building-integrated energy, offshore wind, and floating PV.

China continues to make steady progress on market reform, benefiting renewables

• Wind and solar curtailment fell dramatically, resulting from greater incentives to integrate renewable energy as well as increased power trading.
• Provinces are developing spot markets, using several models.
• Quotas for renewable consumption are replacing subsidies for renewables. 

EV sales rose in 2020

• New-energy vehicles (NEV) sales rose by 13% in 2020; sales increased significantly in the second half of the year.
• The government reduced the 2025 NEV sales target to 20%, under the new dual credit policy, which regulates vehicle efficiency and new-energy vehicles.