The Small Energy Association follows the international experience of energy development. Special attention is paid to China, one of the world's industry leaders. The Association has prepared an exclusive material: an interview with Dr. Yang Lei, Vice President of the Institute of Energy Research at Peking University, former adviser to the International Energy Agency and an employee of the National Energy Administration of the People's Republic of China.

The Small Energy Association has been cooperating with the Institute of Energy of Peking University for several years in expert work. Representatives of the Institute are members of the International Expert Council of the Small Energy — Great Achievements Award, which reflects the deepening cooperation between Russian and Chinese experts in the field of distributed generation.

A month ago, the National Energy Administration published the latest statistics on China's electric power industry. According to the data, by the end of April 2025, the installed capacity of solar power plants in the country reached 990 GW (more than 40% of the global total), and wind energy - 540 GW (over 45% of the global figure). China also produces more than 80% of all solar modules and 75% of lithium batteries in the world. In addition, China has seen rapid growth in solar and wind power, as well as an expanding industrial base for the production of photovoltaic modules, lithium batteries and electric vehicles.

However, such rapid development was accompanied by difficulties: excess capacity, price wars, and the need for regulatory reform. The Chinese publication Caijing talked with Dr. Yang Lei, Vice President of the Institute of Energy Studies at Peking University, a former adviser to the International Energy Agency and an ex-employee of the National Energy Administration of the People's Republic of China, about what allowed China to achieve such results and what challenges the energy industry faces in the future.

According to Yang Lei, China's success is due to a combination of four key factors: market confidence and support for private companies; investments in technology and innovation; developed entrepreneurship, as well as consistent government policies focused on market reforms.

Yang Lei also stressed that China, despite its successes, must continue to study international experience, not lock itself in and solve systemic problems: improving market pricing, modernizing distribution networks, stimulating domestic demand for renewable energy.

He noted the need for reforms in the gas and electric infrastructure, the development of flexible investment mechanisms, as well as the use of the potential of electric vehicles as distributed energy storage.

Special attention was paid to the international context — the deterrent influence of the United States, the importance of climate cooperation with the EU, and the lessons of energy independence from the example of Russia.

From an interview with Dr. Yang Lei, Vice President of the Institute of Energy Research at Peking University.

Four growth factors of China's new energy industry.

First of all, you need to trust the market. In the wind power, photovoltaic, and electric vehicle industries, most of the leading enterprises are private, and the major innovators in the industry are also private enterprises.

The second point is politics. Starting with Law No. 5 of 2002 and Law No. 9 of 2015, and ending with the phased reform of the distribution network and the construction of the spot electricity market, the Chinese government has always insisted on promoting market-oriented reforms in the energy sector. However, the process of market formation is slow, and there is a discrepancy between the plans and expectations of the reforms. The creation of a National Oil and Gas Pipeline Company is also an important measure for the formation of the natural gas market, which is developing faster than the electric power market. Currently, there is a basic consensus in the industry, namely: the development of the electric power industry should be based on market relations with an emphasis on the development of new energy. Also, in particular, at the third plenary session of the 18th CPC Central Committee, they confirmed that the market should play a crucial role.

The third point is to believe in technology. The driving force behind China's energy revolution is technology. We have always said that science and technology are China's main productive force. It is necessary to attach greater importance to innovation and scientific and technical research and development. Supporting new energy through a special industrial policy is very important.

Thus, support for the development of photovoltaics and the electric vehicle industry has accelerated the pace of industrial development. This has attracted a lot of international attention, which is understandable. However, it would be rather one-sided to say that China has achieved this success only thanks to its policy of supporting industry.

Why are Chinese photovoltaic products cheap? Because there is a huge industrial chain of polysilicon production. This is the advantage of China's industrial base and the choice of an international division of labor. Production costs are relatively high in many countries. For example, it may be more than twice as expensive to produce the same photovoltaic component in the United States than in China. China has great advantages. It can invest and directly export technology.

Over-thinking about the end result is counterproductive.

We shouldn't be arrogant. One of the beautiful traditions of Chinese culture is modesty, which is always a virtue. And we still have a lot to learn. For example, our market mechanism and business model are still very imperfect, and we lack many original technologies. "Our new energy industry is now number one in the world, and there is no need to learn from international experience" — this thought should not exist. If we want to develop sustainably, we must continue to learn. No successful entrepreneur would dare to say that he can become a world leader behind closed doors, and no country can become a powerful country behind closed doors.

Our generation lives in a peaceful era, and we don't realize the value of a peaceful life. But Russia is giving us a wonderful experience: if a country doesn't have problems with food and energy security, it won't have problems with survival.

What important things haven't been done yet?

We say we believe in the market, but does the energy market really play a crucial role in resource allocation? For example, the price of natural gas. The international community does not accept Chinese prices because we do not have a perfect enough market for pricing. Prices in China change based on government pricing. We are the largest importer of natural gas, and long-term contracts are not concluded in accordance with our price index, which also shows the problem of China's insufficient soft power.

Therefore, we need to accelerate the pace of development of market-oriented pricing. Developed countries started energy market reforms relatively early, and we can learn a lot from them in terms of innovations in business models. Many of their policy tools are relatively neutral, meaning they use different methods to design the market to optimize resource allocation. I have done a lot of research on natural gas market reforms and I know that the international community has also made many mistakes in this process. Some of these mistakes have led to high social costs. I hope that there will be no more such mistakes in the future. We can cross the river, feeling other people's stones, and not pay the price of mistakes again.

We also have a lot to learn in the field of basic innovation. The biggest challenge of our current scientific research system is how to encourage real creativity and original innovation, rather than focusing only on articles and projects. We have established many KPIs that actually take us even further away from real scientific research.

From the point of view of economic common sense, the market is the best tool for optimizing resource allocation. But why is it so difficult in the energy sector? Energy has some features, and its biggest feature is the limitation of infrastructure.

For example, if a wind and solar power plant is built, I want to sell electricity, but without power lines and networks, I won't be able to sell it. If you want to develop a natural gas field, you need a pipeline to sell natural gas after it is extracted. At that time, I was involved in the preparation of the West—East gas pipeline. Everyone was very pessimistic and conservative because they had never used natural gas.

The gas industry usually has take-or-pay contracts, which means that even if you don't need natural gas at the moment, you still have to pay. Electricity is a more expeditious commodity. It must be used immediately after its generation, which happens instantly, and this places higher demands on the infrastructure. Therefore, the energy industry needs a complete set of facilities and regulations to support the development of the energy market.

China actually started reforming the energy market more than 20 years ago. For example, after the separation of power plants and power grids, active construction of power plants began. Now we are thinking about how to allow the market to contribute to the better development of new energy. I think there is a consensus on this issue, but for its implementation it is necessary to coordinate the government's policy in the field of regulation of the electric power industry.

One of the issues that needs to be addressed is cross—subsidization. This is a problem that has been bothering us for a long time. The price of electricity for the population is relatively cheap. Is it possible to raise it a little? It may also remain low, but it is necessary to clearly indicate where the money for subsidies is coming from. This is the only way we can properly develop the market. We clearly need to answer the question of which is primary — the market or social guarantees.

We have solved the problem of electricity generation, and now we face an acute problem of using electricity. The photovoltaic market is very sluggish right now. Why can't the domestic market scale up its usage? Just like when Europe and the United States imposed double anti—dumping on us, our orders plummeted - which was even worse than it is now. At that time, we relied on the domestic market to get out of the crisis. Now we need to start again, but we have a larger domestic market that needs to be developed.

Our market environment is much better than before. The construction of additional distribution networks and spot electricity markets in recent years has contributed to the emergence of an increasing number of market participants. If you go to the countryside, you will see that many farmers and entrepreneurs are engaged in new energy. The technical threshold has dropped rapidly, and many are engaged in new energy.

In the past, when wind and photovoltaic accounted for 5% of the electricity in the grid, the grid claimed it couldn't handle it. But now this figure has reached 20%. Weren't the roads built for horse-drawn carriages? But later, when cars appeared, the roads had to be repaired, traffic lights installed and made wider. Now we need to transform the energy infrastructure, including electricity grids, gas pipelines, and heating networks. There is also the possibility of multi-purpose use of pipelines.

For example, in the past pipelines were used to transport natural gas, but can they now transport hydrogen? The transformation of the electricity grid, the construction and improvement of the distribution network are the main priorities. Many renewable energy sources must be consumed locally, and if the grid fails, we need to build a distributed smart grid.

The construction of distribution networks also includes investment mechanisms. Can it be built only by central enterprises? Or could there be more diversified investments? How should the investment mechanism be improved in the future? These are all practical issues, and these things are actually being done. If only a few central enterprises invest, the distribution network problem will be difficult to solve because the scale of investment is too large. But in retrospect, many intractable problems in the era of the planned economy were solved after the power of the market was brought into play.

I feel that this new round of reforms will yield a new result. Some virtual power plants and aggregators may find space for development in the market. Energy storage companies also need to know when the market should store electricity and when to discharge it. In the future, the scale of electric vehicles will get bigger and bigger — and will be much larger than the current energy storage system.

An electric car is a mobile battery. In the future, when the scale of electric vehicles reaches hundreds of millions, it will be able to store billions of kilowatt-hours of electricity and send electricity back to the grid. If we calculate this based on a slow charging capacity of 10 kilowatts, 100 million cars can do this, which means 1 billion kilowatts of peak smoothing and backup power.

Our total installed electricity generation capacity is just over 3 billion kilowatts. How to use this potential? We're still learning. Of course, what we are talking about here is very ideal conditions. The numbers may not be fully realized, but the trend is true.

In the process of the great rebirth of the Chinese nation, new energy will play an important supporting role.

Prepared by the Small Energy Association based on the materials of the Caijing publication (China) Read the full interview on the Association's website.

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