From Policy to Practice: China’s Path to Transforming Industrial Electricity Use Toward Clean Energy

China's clean energy ambitions will transform its industrial sector.‍‍‍‍

Image source:iStockphoto/Petmal

Jörgen Sandström

Global Head of Industrial Systems Transformation at the World Economic Forum

Zhu Hong

Accenture Global Vice President and Chairman of Greater China

China's industrial carbon emissions are projected to peak by 2030. After reaching this peak, the decarbonization of industry must accelerate, with emissions reduced to 200 million tons by 2060, in order to achieve China's carbon neutrality goal.
Expanding off-site green power procurement and developing on-site clean energy are two key levers for decarbonizing China’s industrial sector. Policymakers and the market can work together to explore ways to deepen green electricity market mechanisms and broaden the application of industrial energy storage systems.
The World Economic Forum’s “Consumer-Side Modern Energy Transition” initiative, in collaboration with knowledge partner Accenture, aims to accelerate the clean energy transformation in industry. Recently, the initiative released the white paper titled "China’s Industrial Clean Power: Policy-Led Transformation of Industrial Energy," which examines and outlines 10 key measures designed to pave the way for a faster shift toward a cleaner future in the industrial sector.

A New Chapter in China's Industrial Energy Transformation

As global concern over climate change continues to rise, the transition to clean energy has become a top priority for countries worldwide. China, as the world’s second-largest economy, is implementing a series of measures to drive its industrial sector toward sustainable development. The industrial sector—including energy-intensive industries like chemicals, steel, and cement, as well as non-energy-intensive sectors such as machinery, mining, and textiles—remains a critical pillar of economic growth. Currently, China’s industrial sector accounts for one-third of the country’s total carbon emissions, and this trend is expected to persist, peaking by 2030. To achieve its ambitious carbon neutrality goal, China must accelerate decarbonization efforts in its industrial sector after 2030, ultimately reducing carbon emissions to just 200 million tons by 2060—representing a 95% reduction from the 2020 baseline.

In recent years, the Chinese government has made significant strides in promoting a green transformation within the industrial sector. The government has provided clear guidance and robust support to companies operating in this field. These policies have not only laid the foundation for sustainable, eco-friendly industrial development but have also inspired businesses to actively explore and adopt clean energy solutions.

Liu Wenqiang, Secretary and Vice President of the China Academy of Information and Communications Technology, pointed out: "China's green industrial development is driven primarily by the goals of peaking carbon emissions and achieving carbon neutrality, with the promotion of a new type of industrialization serving as a key strategic lever. The gradual improvement of policy mechanisms for green industrial growth has led to significant achievements across multiple fronts, including upgrading industrial structures, decarbonizing energy consumption, promoting circular resource utilization, and fostering greener supply chains for industrial products and equipment. Meanwhile, energy efficiency in China’s industrial sector continues to rise—since 2012, energy consumption per unit of industrial value added among enterprises above designated size has cumulatively dropped by more than 36%. Additionally, the structure of industrial energy use has been steadily optimized, with companies in the industrial and telecommunications sectors emerging as the main buyers in green electricity trading markets."

By continuously refining policies and strengthening implementation, China is steadily establishing a policy environment that supports the clean energy transition in industry, laying a solid foundation for achieving its carbon peak and carbon neutrality goals.

Key initiatives for the clean energy transition

In advancing the process of peaking industrial carbon emissions, the transition to clean electricity is a critical component of China's green industrial development. By scaling up the consumption of green power and driving upgrades in industrial energy storage, we can significantly reduce carbon emissions, optimize the energy mix, and ultimately achieve sustainable growth.

Expand the scale of green electricity consumption

Expanding the scale of green electricity consumption is a key measure for achieving low-carbon development in the industrial sector. By procuring green electricity off-site, companies can reduce energy costs while simultaneously cutting carbon emissions. Specific initiatives include:

1. Jointly promote green certificates and green electricity trading to comprehensively enhance the level of green power consumption:ThroughCollaboratively optimize the green certificate and green electricity trading markets, increase the share of green power consumption, and boost the vitality of the green electricity market.

2. Establish a mechanism to link electricity, carbon, and certificate markets, boosting market trading enthusiasm and activity levels:By establishing a coordinated mechanism linking electricity, carbon emissions, and green certificate markets, we can stimulate market participants' willingness to trade and foster the commercialization of green electricity.

3. Establish a nationally coordinated institution to streamline and eliminate inter-provincial trade barriers:By establishing a nationwide coordinating body, we can streamline and remove barriers to inter-provincial electricity trading, thereby fostering optimal allocation of power resources across the country.

4. Establish a rational electricity transmission pricing mechanism to promote the optimal allocation and trading of power resources across provinces and regions:By establishing a transparent and rational transmission pricing mechanism, we can promote the optimal allocation of electricity resources across provinces and regions, enabling the efficient operation of the power market.

5. Enhance the flexibility of long-term power purchase agreements and explore innovative PPA models:By innovating power-purchase agreement models, we offer flexible electricity options to meet businesses' diverse green energy needs.

China Huaneng is focusing on market demands and continuously expanding the scale of its green power supply. In 2023, its green electricity output accounted for 15% of the national total, placing it at the forefront among power generation companies. Wen Shugang, Chairman of China Huaneng Group Co., Ltd., emphasized: "Promoting green electricity consumption has become a global consensus in addressing climate change—and it’s also a key strategy for industrial enterprises aiming to achieve carbon neutrality. China Huaneng is stepping up efforts to drive high-quality development of the new energy industry, providing robust support for industrial firms undergoing transformation, and contributing powerful, eco-friendly energy to economic and social growth."

Driving the upgrade of industrial energy storage

Upgrading industrial energy storage technologies is another key factor driving the transition to clean electricity. Energy storage solutions can effectively address the intermittency issues associated with on-site renewable energy generation, enhancing the reliability and stability of power systems. Specific initiatives include:

1. "National Unified Planning" coordinates the management of industrial energy storage projects both under construction and in the pipeline:By implementing nationwide unified planning, we can rationally organize the construction and operation of industrial energy storage projects, thereby avoiding redundant investments and preventing resource waste.

2. Encourage innovative business models, develop supporting policies, and safeguard the rights and interests of all stakeholders involved in energy storage projects:By providing policy support and fostering innovative business models, we will safeguard the interests of all parties involved in energy storage projects and promote the healthy development of the energy storage industry.

3. Accelerate the integration of energy storage into the spot market and deepen the profitability models for energy storage within this market:By leveraging spot market mechanisms, we can explore diversified revenue models for energy storage facilities and enhance the economic viability of storage projects.

4. Expand energy storage's ancillary service capabilities and increase the variety of ancillary services in which energy storage can participate:Encourage the application of energy storage technologies in ancillary services such as grid frequency regulation and peak shaving, thereby enhancing the utilization rate and economic benefits of energy storage facilities.

5. Exploring the "behind-the-meter power sales" model involving energy storage:By exploring the innovative "electricity sales through walls" model, we aim to facilitate direct transactions between energy storage projects and electricity consumers, thereby reducing power costs and enhancing energy efficiency.

BASF's first energy storage facility in China began operations at the end of 2022. Located in the BASF Shanghai Pudong Science & Technology Innovation Park (Pudong Site), the facility comprises four battery-based energy storage systems along with a dedicated AC/DC conversion system. These systems not only help stabilize grid operations and ensure reliable power supply to the site but also optimize the energy mix by storing renewable energy, enabling "peak-shaving and valley-filling" strategies for electricity management. This approach enhances overall energy utilization efficiency. Dr. Bo Yang, Senior Vice President of BASF and Head of Operations & Site Management for Greater China, emphasized: "Energy storage technology plays a crucial role in building a sustainable green energy system. The newly operational energy storage facility at the Pudong Site will further unlock the potential of renewable energy sources, driving BASF’s commitment to sustainable production while supporting our customers’ green transformation and helping China achieve its dual carbon goals."

World Economic Forum's "Consumer-Side Modern Energy Transition" Initiative

The World Economic Forum is collaborating with Accenture on the "Consumer-Side Modern Energy Transition" initiative. This initiative aims to explore sustainable energy consumption pathways for modern industry by leveraging innovative energy procurement, electrification, efficiency improvements, and transparent processes.

Under this initiative, the World Economic Forum and Accenture jointly researched and explored the aforementioned 10 policy options, aiming to promote off-site green power procurement and on-site clean energy development.

Collaboration between the public and private sectors is key to driving policy development and implementation. These policy options not only effectively promote China’s industrial sector toward a sustainable transformation but also set a benchmark for sustainable practices across global industries.

Through the "Consumer-Side Modern Energy Transition" initiative, a networked ecosystem has been established, bringing together businesses, government agencies, and multilateral organizations. This initiative lays a solid foundation for achieving carbon neutrality and offers a China-inspired solution to the global energy transition.

Global Collaboration and Opportunities

In the transition toward cleaner energy use in industrial cleaning, policy plays a critical role. From procuring green electricity to promoting industrial energy-storage technologies, as well as enhancing carbon-emission trading systems and supporting the development of innovative technologies, each policy option provides a clear pathway for reducing carbon emissions and advancing sustainable development.

Addressing the challenges of global climate change requires the collective effort and collaboration of the international community. During the World Economic Forum’s Annual Meeting of the New Champions, this initiative brought together leaders from across regions and industries to jointly explore the critical topic of industrial energy transformation. China’s expertise and innovations in transitioning to clean electricity for industrial use must be shared and discussed alongside cutting-edge global practices. By fostering the exchange of technology, knowledge, and best practices, stakeholders worldwide can work together to drive systemic change, ultimately advancing sustainable development goals that align with shared global interests.

Transforming policies into practice requires not only the sharing of expertise and technology but, more importantly, a deepening of collaborative mechanisms. Businesses clustered by geography—particularly within industrial clusters—stand to benefit from even greater opportunities for synergistic development. By aligning their needs, scaling up projects, coordinating investments, and jointly managing risks, companies can strengthen collective collaboration. This collaborative approach helps mitigate the risks associated with clean-energy project implementation while accelerating the large-scale adoption of clean electricity across China’s industrial sector.

The above content solely represents the author's personal views. This article is translated from the World Economic Forum’s Agenda blog, and the Chinese version is for reference purposes only.Feel free to share this in your WeChat Moments—please leave a comment below if you’d like to republish.

Editor: Wang Can

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