In the era of climate change and sustainable development, the main task of China’s power sector is not to expand production, but to promote the transition to a low-carbon energy system. On the generation side, the power sector needs to reduce the share of thermal power, especially coal power, and increase that of nonfossil energy sources; on the demand side, the power sector needs to support electrification of residential and transportation sectors to achieve deep decarbonization and air quality goals. This will significantly increase the uncertainties on both the generation and consumption ends, since nonfossil energy sources, such as photovoltaics and wind power, are highly unpredictable, and large-scale electrification of heating and transportation can increase the volatility of power demand. Therefore, the future power system requires a high degree of technological and operational flexibility to cope with uncertain supply and demand. Our analysis suggests that market-oriented reforms in electricity dispatch and pricing are critical to provide the right incentives to electricity generators and consumers, as well as to promote the adoption of new technologies to facilitate China’s transition to low-carbon energy.

Increasing the scale of renewable integration is a key component of China’s decarbonization strategy. While the immediate challenge is to reduce renewable curtailment and increase its penetration, mitigating climate change in the long term will require a transition from an electricity system dominated by coal to one that consists primarily of renewables. This chapter summarizes the current governance structure and policies for renewable energy development and integration in China. It identifies two key considerations for China to transition towards large-scale penetration of renewables: geographic mismatch between renewable resources and demand centers, and concerns associated with integrating high penetration of intermittent renewable energy resources. Responding to these considerations, this chapter discusses four foundational elements that China needs to put in place in the near term to plan for the longer-term transition: flexible conventional generators, an appropriately large and more integrated transmission network, storage technology development, and demand-side flexibility/responsiveness.

Rapid economic growth in China has predominantly relied on coal-fired electricity and coal use in industry, generating an increasing range of economic, environmental, and health costs. While many policies aim to restrict – and reverse – coal’s growth, the transition from coal to low-carbon alternatives is neither automatic nor just around the corner. Entrenched technological systems, political interests, and historical factors serve to maintain coal’s dominance. For China to prepare for deep decarbonization by mid-century, it must proactively convert coal from a barrier to a bridge – productively repurposing and valuing coal assets for flexible operation, addressing the difficult coal-based district heating infrastructure in the north – develop alternative fuels and feedstocks for industry and households, and mitigate the immense socioeconomic consequences of this transition on governments, firms, and workers.