Table of Contents

Letter from the Team Leader

1.  News in brief

2.  Nine actions for a citizen centric energy transition

3.  What do China’s provincial plans signal for carbon emissions?

4.  The energy security fallout: from fossil fuel fragility to electric independence

5.  Retail electricity tariffs as political choice: explicit trade-offs in high-renewable power systems

6.  How China’s industrial clusters foster growth, competition and sustainability

7.  Featured publication

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Letter from the Team Leader

Dear all,

Welcome to the April 2026 issue of the EU-China Energy Magazine.

As we navigate a complex global landscape, this month’s edition brings together a range of perspectives on how geopolitics and policy are reshaping the energy transition in both Europe and China.

The current geopolitical volatility makes one thing abundantly clear: expediting the shift to clean, sustainable energy is no longer just about the climate: it is a fundamental economic and security necessity. We feature a compelling analysis showing how a shift from fossil fuel dependency to ‘electrotech’ offers a path towards energy independence.

Meanwhile, the EU’s newly published ‘Citizens’ Energy Package’ identifies nine key actions for a citizen-centric energy transition which will help lower energy bills and protect vulnerable consumers from energy poverty. Delivering on this promise, however, requires scrutinising retail electricity tariffs. In the context of Europe's recent price crises, this issue offers an exploration of the inherent trade-offs in retail tariffs, which could be useful risk-allocation instruments at the heart of the energy transition.

On the Chinese side, this edition offers a detailed analysis of how provincial governments are prioritising green development to jumpstart their economies through ‘Zero-Carbon Parks’, green hydrogen industrialisation, and the use of AI to power local industries. In another focus piece, we see how China is leveraging industrial clusters as local platforms to drive both competition and sustainability, and to support system-wide green transformation.

Finally, our regular News and Reports sections will help you grasp the latest international developments, regulatory updates, and technical studies shaping the energy landscape.

We look forward to hearing from you how the EU-China Energy Magazine is supporting your work in this rapidly evolving sector.

Dr Flora Kan

ECECP Team Leader

1.  News in brief

European News

# Policy Initiatives

EU: Industrial Accelerator Act to boost ‘Made in EU’ clean technologies

The European Commission has adopted a proposal for an Industrial Accelerator Act that will boost demand for low-carbon, European-made technologies and strengthen industrial competitiveness. It introduces ‘Made in EU’ and low-carbon criteria for public procurement and support schemes across strategic sectors including steel, cement, aluminium, automotive, and net-zero technologies. It also aims to simplify permitting, support sustainable manufacturing, and ensure foreign investments deliver tangible value in the EU. The Act sets a target to raise manufacturing’s share of EU GDP from 14.3% in 2024 to 20% by 2035, while reinforcing supply chain resilience and economic security.

EU: Citizens’ Energy Package to tackle energy costs and fuel poverty

The European Commission has launched the Citizens’ Energy Package to improve energy affordability, protect consumers, and support participation in the clean energy transition. The initiative, which forms part of the Action Plan for Affordable Energy, aims to reduce bills by addressing key cost components, including electricity taxes and levies, which account for around 25% of household prices. It also seeks to simplify retail markets, promote energy communities, and expand flexible electricity contracts to help consumers manage costs and reduce exposure to price volatility. The package places a strong emphasis on protecting vulnerable households, including safeguards against disconnections. The Commission will support implementation through further guidance and funding measures.

EU: Commission launches ‘AccelerateEU’ to combat fossil fuel crisis

The European Commission has unveiled ‘AccelerateEU’–a toolbox with strategic objectives that include faster deployment of renewables, electrification and grid expansion. It includes short-term and structural measures to protect consumers from high fossil fuel prices and accelerate the shift towards clean energy to strengthen energy independence. The initiative responds to the recent rise in energy import costs by coordinating fuel supply measures, including gas storage and emergency oil stock use. A new Fuel Observatory will monitor EU fuel production, trade, and stock levels to help identify shortages. The Commission will also provide clarity on existing flexibilities within the EU aviation framework. The toolbox includes targeted consumer support, such as energy vouchers and state aid flexibility for affected industries.

EU: Commission proposes Market Stability Reserve reform to strengthen ETS

The European Commission has taken its first concrete step towards modernisation of the EU’s carbon market, with its proposal for amendments to the EU Emissions Trading System’s (ETS) Market Stability Reserve (MSR) to enhance stability and predictability. The reform would halt the current invalidation mechanism, allowing allowances above 400 million to be retained in the reserve as a buffer to address market imbalances, while keeping the climate ambition of the EU intact. The MSR will continue to adjust supply by withdrawing or releasing allowances depending on market conditions. The move is intended to make the ETS more agile amid price volatility and geopolitical uncertainty, while preserving its rules-based design. The proposal will be reviewed by the European Parliament and Council, with a broader ETS review planned for July 2026.

EU: Homeowners to get 24-hour energy switch under new EU rules

The European Commission has adopted a new Implementing Regulation to make it easier for consumers to switch electricity suppliers and access better energy offers. As a secondary legislation linked to the Electricity Directive, these rules mandate that the technical back-office process for switching must be completed within 24 hours by the end of 2026. This shift aims to strengthen consumer choice, support affordable energy, and enhance competition in retail electricity markets, reinforcing the EU’s commitment to a consumer-centred energy transition. The rules will also facilitate access to innovative pricing options and services such as demand response. The regulation follows previous rules on metering and consumption data access, and marks another crucial step towards creation of a fully interoperable and digitalised retail energy market across the EU.

France: New electrification plan to cut fossil fuel dependence

France has announced a national electrification plan aimed at reducing reliance on fossil fuels and strengthening energy sovereignty. The strategy will expand electricity use across all sectors, drawing on France’s nuclear fleet and scaling up domestic renewables. The government intends to almost double annual support for electrification, from EUR 5.5 billion to EUR 10 billion by 2030, targeting housing, transport, industry and digital infrastructure. Detailed measures include a ban on gas boilers in new buildings starting at the end of 2026, and large-scale deployment of heat pumps targeting 1 million units annually by 2030. In the transport sector, electric vehicles are expected to account for two-thirds of new car sales by 2030, with domestic production leaping to 400 000 per year from 2027 and to 1 million units per year by 2030.

Germany: 2026 Climate plan to cut emissions and boost energy security

Germany has approved a EUR 8 billion programme to help meet its 2030 climate targets and reduce reliance on fossil fuel imports. The 67-point plan includes expanding onshore wind capacity by 12 GW, and a EUR 3 billion subsidy scheme to boost electric vehicle uptake and develop charging infrastructure. Additionally, EUR 2.9 billion has been set aside to help industries shift to low-carbon technologies such as electrification processes and carbon capture (CCS), alongside continued funding for building efficiency and heating upgrades. These proposed measures are expected to cut CO2 emissions by over 25 million metric tons by 2030, while reducing natural gas use by 7 bcm ‌and slashing petrol consumption by 4 billion litres .

Italy: Government considers delaying coal phase-out to 2038

Italy is planning to delay its coal phase-out deadline from 2025 to 2038, according to a draft decree that is set to be adopted into law by April 2026. The country had previously committed to ending coal-fired power generation by 2025 under EU climate goals. The revised plan would keep some coal plants on standby beyond the deadline to ensure energy security in case of emergencies, amid concerns over gas supply and price volatility. Italy’s Energy Minister has indicated that the mothballed Brindisi and Civitavecchia plants could be restarted if gas prices exceed EUR 70/MWh. Italy currently has around 4.65 GW of coal capacity, while the country’s per capita emissions have dropped to below the global average.

# Market & Business

EU: Commission unveils strategy to introduce SMRs

The European Commission has presented a strategy to accelerate the development and deployment of Small Modular Reactors (SMRs) and Advanced Modular Reactors (AMRs) in Europe. The first SMR projects would come online by the early 2030s, supporting decarbonisation, energy security, and industrial competitiveness of the EU. SMRs are expected to complement renewables and provide low-carbon solutions for power, heating, industry, and hydrogen production, and stable power supply for emerging big energy users such as data centres. EU SMR capacity could reach 17-53 GW by 2050, according to projections in the Nuclear Illustrative Programme (PINC). The European Industrial Alliance on SMRs will play a key role in driving implementation.

EU: Raw Materials Mechanism launched to connect buyers and suppliers

The European Commission has launched the first call under the Raw Materials Mechanism, a platform enabling buyers of critical raw materials to aggregate demand and connect with suppliers, financial institutions, and storage providers. Building on the EU Energy Platform, the initiative aims to diversify supply sources. It will also help companies, particularly smaller firms, form new partnerships beyond existing networks. The voluntary, the market-based tool will not interfere in commercial negotiations. Registration is open until the end of April.

EU: Energy imports decline in value despite mixed fuel trends in 2025

Statistics from Eurostat show that in 2025, the EU imported EUR 336.7 billion worth of energy products, totalling 723.3 million tonnes, marking a decline of 11.1% in value and 0.6% in volume compared with 2024. Energy imports have fallen steadily since 2022, with value down 51.4% and volumes dropping 14.9%. Petroleum imports decreased both in value (-17.8%) and volume (-6.1%), while LNG imports saw strong growth (+35.2% in value; +24.4% in volume). Imports of gaseous natural gas rose slightly in value (+3.4%) but declined in volume (-5.3%). The United States and Norway remained key suppliers, with the US leading in LNG (56%) and Norway dominating pipeline gas imports (52.1%).

Europe: EV sales surge as Iran war sparks fuel price spike

Electric vehicle sales in mainland Europe soared by 51% in March 2026, driven by a sharp rise in petrol and diesel costs resulting from the ongoing conflict in Iran. According to data from New AutoMotive and E-Mobility Europe, 224 000 new EVs were registered in March alone, contributing to a 33.5% year-on-year increase for the first quarter. The surge was most pronounced in Norway, where EVs accounted for 98% of new car sales, followed by Denmark and Finland. In major markets like Germany, France, and Italy, uptake rose by over 40% as consumers prioritised energy security and lower operating costs amidst global oil price volatility.

EU: New European Resilience Alliance for Clean Hydrogen

The European Resilience Alliance for Clean Hydrogen & Derivatives (ERA) has been launched at the European Parliament, bringing together policymakers and industry leaders to strengthen Europe’s hydrogen economy. The CEO-led initiative unites major companies across the clean hydrogen value chain to boost industrial competitiveness, enhance energy resilience, and support strategic autonomy. Founding members include Enagás, Fluxys, Fortum, Gasgrid Finland, Moeve, Nordion Energi, OGE, RWE Generation, SEFE, Stegra and Thyssenkrupp, in cooperation with Hydrogen Europe. ERA will focus on two priorities: advocating for supportive policy frameworks, and coordinating across the value chain to address bottlenecks and advance cost-competitive hydrogen projects.

Sweden: Government backs nuclear expansion plan

The Swedish government has proposed acquiring a 60% stake in project company Videberg Kraft to support new nuclear development at the Ringhals site, as part of its strategy to expand nuclear capacity and meet rising electricity demand. The project could deliver around 1.5 GW through either small modular reactors or multiple units, with a final technology decision expected in 2026. The state plans an initial investment of SEK 1.8 billion (EUR 166.5 million), with potential construction support of up to SEK 34.3 billion (EUR 3.17 billion). The move aims to de-risk nuclear investments and attract private capital, amid broader plans to build the equivalent of ten large reactors by 2045.

Poland: Gaz-System to be certified as EU’s first hydrogen network operator

The European Commission has backed the certification of Gaz-System - Poland’s gas transmission operator - as an independent hydrogen transmission operator, a key step allowing it to plan, finance and develop hydrogen networks. The assessment confirms compliance with EU unbundling rules, ensuring independence from energy producers and suppliers. The Commission also noted that certification can proceed despite the current lack of hydrogen infrastructure, enabling early-stage planning and investment. Gaz-System is the first operator in the EU to undergo this process, setting a precedent for hydrogen market development. The next step involves submitting a ten-year network plan and securing final approval from Poland’s energy regulator.

# Technology & Innovation

Germany: Researchers develop molecular solar battery for on-demand hydrogen production

Researchers from Ulm University and Friedrich Schiller University Jena have developed a molecular solar battery that stores solar energy chemically and releases it as hydrogen on demand, even in darkness. Published in Nature Communications, the system uses a water-soluble redox-active copolymer that stores solar-generated electrons with over 80% charging efficiency for several days. Hydrogen is then produced by adding an acid and a hydrogen catalyst, achieving around 72% conversion efficiency. Unlike conventional systems, solar energy generation and hydrogen production are decoupled, enabling flexible, on-demand output. The process is reversible and repeatable through simple pH adjustment. The approach could support scalable hydrogen storage for industrial uses such as steelmaking and synthetic fuels.

Spain: Off-grid solar hydrogen project to demonstrate new electrolysis technology

Israeli startup H2Pro and renewable developer Doral Hydrogen have signed an agreement to build an off-grid solar-to-hydrogen project in Extremadura, Spain. The facility will use H2Pro’s Decoupled Water Electrolysis (DWE) technology, designed to operate directly on intermittent renewable power without requiring grid electricity or large-scale battery storage. The project will start with a 5 MW electrolyser and 10 MWp solar capacity, with plans to scale up to a 50 MW hydrogen facility powered by 80 MWp of solar. Produced hydrogen will initially be blended into existing gas pipelines operated by Enagás, with potential future integration into Europe’s planned hydrogen backbone. The project aims to demonstrate lower-cost, flexible green hydrogen production.

Europe: New partnership to extract hydrogen from disused oil wells in Europe

German-headquartered Path2 Hydrogen has entered a strategic partnership with Estonia-based MP Industries (MPI) to explore extracting, liquefying, and storing hydrogen from disused oil wells across Europe. The collaboration utilises ProtonH2 technology – acquired by Path2 in 2025 – to stimulate hydrogen generation in depleted reservoirs, with Path2’s subsidiary, GenH2, providing the necessary liquefaction and storage systems. The partnership reflects growing industry interest in geological (white) hydrogen as a low-cost, low-carbon option. While the technology could unlock new hydrogen supply, its commercial viability remains unproven.

# Projects & Investments

EU: Clean Energy Investment Strategy to mobilise private capital

The European Commission has adopted a Clean Energy Investment Strategy to scale up financing for the energy transition, which requires EUR 660 billion annually to 2030, rising to EUR 695 billion in 2031-2040. The strategy aims to mobilise private capital by using public funding to de-risk projects and lower financing costs. The European Investment Bank (EIB) plans to provide over EUR 75 billion in support over the next three years. Key measures include improving access to capital for grid operators, supporting bank lending, expanding funding for innovative technologies and energy efficiency, and establishing an Energy Transition Investment Council. The initiative seeks to accelerate investment in clean energy, grids, and infrastructure to support EU competitiveness and decarbonisation.

Denmark: Thor offshore wind farm deploys turbines with low carbon steel and recyclable blades

RWE has installed an offshore wind turbine featuring a reduced carbon steel tower and recyclable blades at the 1.1 GW Thor wind farm in the Danish North Sea, which has begun delivering initial power to the grid. The project will be equipped with 72 turbines (up to 15 MW each) by end-2026. Around half of the turbines will use Siemens Gamesa’s low-carbon ‘GreenerTower’ steel, while 40 turbines will feature 120 recyclable blades, which use a specialised resin allowing for material recovery at end-of-life. RWE has already introduced these blades at the Kaskasi wind farm in Germany and the Sofia wind farm in the UK. Full commercial operation for Thor wind farm is scheduled for 2027, marking a major step toward fully circular offshore wind energy.

Netherlands: Offshore wind tender expanded to 2 GW

The Dutch government has expanded its upcoming offshore wind tender to 2 GW, adding the 1 GW IJmuiden Ver Gamma-B site alongside the previously planned Gamma-A project. Both sites will now be awarded under a temporary subsidy scheme to de-risk investments ahead of the planned Contracts for Difference (CfD) mechanism from 2027. Subsidy decisions and permits are expected in Q1 2027, with operations likely starting from 2032. The maximum subsidy for Gamma-B is set at EUR 0.103/kWh, slightly below Gamma-A due to higher wind yields. Final tender rules are due in Q2 2026, with a consultation planned for Gamma-B. Both projects will connect to a shared offshore grid operated by TenneT.

Germany: Volkswagen launches vehicle-to-grid offering

Volkswagen has announced a fully integrated vehicle-to-grid (V2G) offering for private customers in Germany, with registration opening in June and rollout planned for Q4 2026 under its Elli brand. The package combines an electric vehicle, app, dynamic tariff, smart meter, bidirectional wallbox, and installation. Customers will be able to use their EVs as an additional source of income by making battery capacity available to the grid, with potential earnings and savings estimated at between EUR 700 and EUR 900 per year. Around one million VW vehicles in Europe are already V2G-ready via the MEB platform. The service aims to lower charging costs and will be gradually expanded to other European markets, supporting wider adoption of flexible, grid-integrated electric mobility.

China News

# Policy Initiatives

New guideline to boost energy conservation and decarbonisation

China has issued new guidelines to promote energy efficiency and carbon reduction across the economy, embedding these priorities throughout economic and social development. The policy aims to curb excessive energy demand growth while improving overall energy productivity. It focuses on two main areas: integrating efficiency with industrial upgrades through tighter control of high-energy projects, phasing out outdated capacity, and promoting green technologies and zero-carbon industrial parks; aligning efficiency with the energy transition, including stricter limits on fossil fuel use, controlled coal power expansion; and faster deployment of renewables and energy storage. The policy sets out detailed measures across five key sectors including industry, buildings, transport, digital infrastructure, and public institutions to support China’s green transition.

Five ministries issue Green Design Guidelines for industrial products

China’s Ministry of Industry and Information Technology, together with four other government bodies, has released the Green Design Guidelines for Industrial Products. The framework promotes sustainable design principles to reduce resource use and environmental impact at the product design stage. It sets out 11 key qualities, including durability, energy and material efficiency, recyclability and zero-carbon design, and links them to practical applications across 15 key industries, offering 126 specific solutions. The guidelines are intended to prompt engineers and designers to adopt greener development approaches. Public authorities will also promote AI-enabled green design, develop standards, expand training, and strengthen international cooperation to increase green product supply and support greener consumption.

New plan to advance high-quality development of energy-efficient equipment

China has issued a new implementation plan to promote the high-quality development of energy-efficient equipment between 2026 and 2028. The plan targets six key equipment sectors, including energy-efficient motors, transformers, industrial heat pumps, industrial heating and cooling equipment, water electrolysis equipment for hydrogen production, and ICT equipment. The strategy is designed to drive energy saving across key industrial sectors by prioritising systemic optimisation and the R&D and deployment of advanced technologies. By leveraging green design, large-scale equipment upgrades, and AI-enabled manufacturing, the aim is to accelerate the intelligent and sustainable transformation of China’s industrial base while expanding the market supply of low-carbon, high-efficiency equipment.

NEA advances regional hydrogen pilot programmes

China’s National Energy Administration has held a meeting to review progress on regional hydrogen pilot programmes and sketch out the next steps to support the sector’s development. The pilots are seen as a key tool to address bottlenecks and promote high-quality growth of the hydrogen industry. The NEA is calling for stronger technological innovation, including the demonstration of advanced technologies and first-of-a-kind equipment, alongside faster institutional reforms such as hydrogen trading and green certification mechanisms. It also stresses the need for enhanced policy support, improved resource coordination and closer collaboration across pilot regions. While early progress has been steady, these pilots are intended to provide practical experience to support diversified development pathways and improve governance of the hydrogen sector.

Nationwide campaign to improve power supply quality

China has launched a nationwide initiative to improve electricity supply, focusing on reducing the impact of voltage dips on sensitive industries. The plan calls for full monitoring coverage of key enterprises and stronger coordination across regulators, grid operators and users. Grid companies are required to enhance network resilience and fault response, while industrial users are encouraged to install protective equipment such as UPS and voltage recovery devices. The initiative also promotes data sharing, new technical standards and calls for pilots of high-quality power supply industrial parks. The measures should be fully implemented by the end of 2028.

New plan sets shipping decarbonisation targets for 2030

China’s Ministry of Transport has issued new guidelines to accelerate the green and low-carbon transition of the shipping sector. The plan sets a target to reduce carbon intensity of international shipping by at least 15% by 2030 compared with 2025 levels. It proposes a national emissions monitoring and reporting system, vessel energy efficiency ratings, and stronger carbon management rules. The policy also supports the phase-out of inefficient ships and wider adoption of cleaner fuels, including LNG, hydrogen, ammonia, methanol and batteries, to increase the use of low-carbon energy in shipping.

# Market & Business

Yangtze River Delta updates rules for cross-provincial power trading

China has introduced new rules for the Yangtze River Delta cross-provincial medium- and long-term electricity market, covering Shanghai, Jiangsu, Zhejiang, Anhui and Fujian. The rules apply to registered market participants engaging in cross-provincial electricity trading across multi-year to monthly timeframes. The retail market will continue to follow national regulations. Trading products include electricity, green power and contract-based transactions, conducted through bilateral negotiation and centralised trading. The rules also introduce interruptible trading, allowing contracts to be temporarily curtailed during supply stress or extreme events, to enhance interprovincial resource balancing and system security.

New batch of green factories and industrial parks announced

China’s MIIT has officially released its 2025 list of Green Factories and Green Industrial Parks, marking a significant expansion of the country’s sustainable manufacturing network. The list includes 2 038 national-level green factories and 128 green industrial parks, selected for their excellence in low-carbon energy use, clean production, and resource efficiency. Local authorities have been urged to strengthen coordination, promote the replication of best practices, and make better use of green finance policies to support the development of green factories. The updated lists can be accessed through the Industrial Energy Saving and Green Development Management Platform.

China offers open source translations of 2 613 national standards

China has launched an online platform hosting foreign-language versions of national standards, making 2 613 official translations publicly available. The standards include key energy and green sectors, such as new energy, equipment manufacturing and smart technologies, with English, French, German and Portuguese among 11 available languages. Several standards relate to low-carbon and energy applications, including the ‘new three’ industries (solar PV, batteries and electric vehicles), as well as oil and gas. By improving international access, the initiative aims to support international industrial production and engineering projects, as well as scientific and technological exchanges, while also facilitating trade, reducing technical barriers and promoting cooperation.

National platform launched to track the life-cycle of EV batteries

China has launched a national information platform to track traction batteries used in new energy vehicles, aiming to support the industry’s green and circular development. The system assigns digital identity codes to individual batteries and integrates data across production, vehicle manufacturing, swapping services, maintenance and recycling. The platform enables full life-cycle tracking of batteries, improving transparency across the supply chain. It will also support real-time supervision and risk monitoring, in a bid to curb illegal dismantling and to promote more standardised and digitalised battery recycling and reuse.

Major nuclear players form carbon methodology consortium

China has established a joint nuclear carbon asset consortium involving four major state-owned nuclear companies to develop methodologies for recognising nuclear energy’s carbon reduction value under the voluntary carbon market. The initiative is intended to integrate nuclear energy into China’s green policy and carbon trading framework, supporting emerging technologies such as advanced reactors, small modular reactors, and nuclear heat and steam supply. The consortium will coordinate technical standards, promote domestic and international methodological alignment, and support the monetisation of nuclear-related emissions reductions to advance China’s dual carbon goals.

# Technology & Innovation

CATL unveils quick-charging next-gen EV batteries with 1 000 km range

CATL has debuted breakthrough battery technologies to sharpen its global lead. Its latest Qilin battery offers a 1 000-km range with a lighter, high-energy-density design. Meanwhile, the upgraded Shenxing (LFP) battery tackles charging anxiety: from 10%, it can reach a charge of 98% in under seven minutes, outpacing rival BYD’s Blade battery. CATL also confirmed sodium-ion battery mass delivery for Q4 and plans to build 100 000 charging and swapping stations by 2028. Currently controlling 42.1% of the global market, CATL’s innovations signal a faster transition toward resource-resilient and ultra-efficient electric mobility.

AI model launched to improve global carbon accounting system

China’s Shanghai Advanced Research Institute has unveiled an AI-powered carbon accounting model designed to track emissions across production, consumption and natural sources. The ‘ScienceOne-Yuheng Carbon Accounting Large Model builds on IPCC methodologies but expands them to address gaps in traditional production-based accounting, which can overlook consumption and trade-related emissions. The model integrates large-scale datasets, machine learning algorithms and high-performance computing to enable faster and more detailed carbon calculations, reducing processing time from weeks to minutes. It is intended to improve transparency and consistency in emissions tracking, particularly across global supply chains, and support more balanced assessments of climate responsibilities in international trade and green industrial cooperation.

Green method to recycle spent batteries’ lithium

Chinese researchers have developed a new low-energy lithium battery recycling method that uses only CO2 and water to extract lithium from spent batteries, with over 95% efficiency. The process, published in Nature Communications, avoids high-temperature smelting and chemical-intensive hydrometallurgical techniques by converting lithium into lithium bicarbonate, which is then refined into high-purity lithium carbonate. Other metals such as nickel and cobalt are retained in solid form and converted into useful catalysts, while the method also enables CO2 utilisation, offering a potentially cleaner pathway for critical mineral recovery and supporting circular economy goals.

First offshore CCUS project launched in Hainan

China’s National Offshore Oil Corporation (CNOOC) has started construction of the country’s first offshore carbon capture, utilisation and storage (CCUS) project at the Dongfang 1-1 gas field in Hainan. The project will capture CO2 generated during natural gas production, compress it and reinject it into subsurface reservoirs, with expected storage capacity of over 1 million tonnes per year. By integrating carbon injection with gas production, the project aims to reduce emissions at source while supporting enhanced gas recovery. The project marks an early example of planned large-scale offshore CCUS deployment in China’s oil and gas sector.

# Projects & Investments

Power grid investment surges in Q1 2026

China’s power grid investment surged in the first quarter, with the State Grid and Southern Power Grid investing a combined CNY 167.45 billion (EUR 20.91 billion). This reflects a year-on-year growth of 37% and 49.5%, respectively. This robust start sets the tone for the upcoming 15th Five-Year Plan. During this period, the State Grid plans a monumental CNY 4-trillion (EUR 499.56 billion) investment, while Southern Power Grid is aiming for nearly CNY 1 trillion (EUR 124.89 billion). These commitments will push China’s annual grid spending to roughly CNY 1 trillion. Future investments will prioritise ultra-high voltage lines, smart distribution networks, and advanced energy storage to build a modernised, integrated power system.

Massive rare earth reserves discovered in Sichuan

China has unearthed an additional 9.67 million metric tons of rare earth oxides in Sichuan province, further solidifying its dominance in the global market. Found at the Maoniuping deposit, this discovery raises the site’s total reserves to 11.46 million tons, making it the world’s second-largest active source of light rare earths. Geologists also discovered huge deposits of fluorite and barite alongside the rare earths, both critical for the high-tech and energy sectors. This find significantly enhances China's strategic reserves, securing supply chain resilience and providing enough light rare earths to meet decades of future demand.

Launch of first large-scale natural gas-hydrogen blending project

China’s first large-scale natural gas-hydrogen blending project, serving 100 000 households, has come onstream in Weifang, Shandong province. The project consists of a 30 000 cubic meter natural gas hydrogen blending facility, with blending ratios adjustable up to 10%. Leveraging the city’s existing urban natural gas pipeline infrastructure, the project enables stable transmission and distribution of blended gas for residential and commercial use, without requiring any modifications to existing consumer appliances. The project marks a strategic transition from small-scale demonstrations to commercial use, and represents the final link in the chain that will bring hydrogen energy to urban communities.

China’s deepest offshore wind farm reaches full operational capacity

China’s deepest offshore wind project is now fully operational, marking progress in developing large-scale wind farms in deep and distant waters. Located around 70 km off the Shandong Peninsula in depths of over 50 metres, the 504 MW project comprises 42 turbines of 12 MW each. The project features several advanced technical applications, including four-pile jacket foundations suited to deep-sea conditions and advanced cable-laying techniques combining drones and magnetic tracking to improve accuracy and efficiency. As near-shore resources become constrained, China is accelerating offshore wind deployment in deeper waters to tap higher generation efficiency.

China’s first private capital-backed nuclear plant connects to grid

China’s first nuclear power project featuring private investment has successfully connected the first of six generation units to the grid in Zhejiang province. Development of the CGN San’ao project marks a significant milestone due to the inclusion of private capital, with an investment arm of Geely Technology Group holding a 2% stake in the initial phase, and private investment expanding to 10% in the second phase. The facility uses China's domestically developed third-generation Hualong One reactors. Once completed, the plant will generate over 54 TWh per year, capable of powering 5 million households, and reducing CO2 emissions by roughly 50 million tonnes each year.

2.  Nine actions for a citizen centric energy transition

On 10 March 2026, the European Commission issued the Citizens Energy Package, a major initiative designed to ensure that every European citizen—not just a privileged minority—benefits from the continent’s accelerating clean energy transition. The package forms part of the EU’s broader Action Plan for Affordable Energy and responds to the uncomfortable reality that millions of Europeans still struggle with rising bills, volatile energy markets, and insufficient protections. According to the Commission, almost one in ten citizens cannot adequately heat their homes, and more than 30 million report difficulties paying their utility bills on time, illustrating the urgency of reforming how energy markets operate and how consumers are supported.

The Commission argues that Europe must build an energy system that is not only greener and more secure but also more equitable. Electrification, greater integration of renewables, and modern digital tools create opportunities for citizens to save money and participate more actively in the energy system, but only if proper frameworks are in place.

The Citizens Energy Package provides these frameworks through nine concrete actions, each addressing a different barrier standing between citizens and a fair, affordable, future-proof energy system.

The nine actions are then divided into three pillars: (I) lowering energy bills for households (actions 1 to 4); (II) protecting and empowering consumers (actions 5 to 7); (III) tackling energy poverty and vulnerability (actions 8 and 9). Despite expectations that the Citizens Energy Package would explicitly address gender inequality in the energy transition, it does not propose actions to do so; instead, it incorporates fundamental measures to enhance the protection of average and vulnerable consumers.

It is worth noting that several of the actions proposed by the European Commission in the Citizens Energy Package have been supported by the FSR' Study on the relevance of consumer rights and protections in the context of innovative energy-related services', published alongside the Citizens Energy Package.

Action 1: reducing the share of electricity taxes and levies

Action 1 addresses the need to reduce the share of electricity taxes and levies in consumer energy bills. According to the Commission, these charges make up about 25% of the price paid by households and 15% of the price paid by businesses. Member States therefore have the ability—and responsibility—to lower national energy taxes and levies, including removing costs that have no connection to energy, such as public broadcasting fees that in some countries are added to electricity bills. Reducing or eliminating these unrelated charges lowers electricity bills for everyone and is particularly beneficial for vulnerable households.

Action 2: reducing the network cost for local consumers

Action 2 focuses on reducing the network cost for local consumers. Network tariffs are a major component of what households and businesses pay, which account for between one quarter and one third of the final electricity price. EU legislation requires that network operators pass on costs that are cost-reflective, transparent, tied to the need for grid security and flexibility, and based on actual expenses incurred. In addition, the Commission published guidance on network tariffs in 2025 to help authorities consider targeted incentives in grid tariffs to promote flexible local consumption.

When citizens produce energy for their own consumption—through Energy Communities or share schemes—they reduce pressure on local grids and help avoid expensive infrastructure expansions. The Commission highlights that including flexibility rewards in network tariffs would encourage such local production and consumption. These rewards would lower the energy bills of citizens and communities who generate and share electricity, while also benefiting all network users by reducing the need for new grid investments.

Action 3: boosting the use of clean and energy-efficiency technologies

Action 3 addresses the challenge of boosting the use of clean and energy-efficiency technologies. Although clean and efficient technologies have strong potential to reduce household energy bills, many families struggle to adopt them due to high upfront costs. According to the Commission, heating remains the dominant use of energy in EU homes, representing 62.5% of final residential energy consumption, followed by 15.1% for water heating. These two uses alone account for most household energy costs, meaning that improving heating and hot water systems offers some of the greatest opportunities for savings.

Recognising these gaps, the Commission calls on Member States, industry, and service providers to move beyond grant-only policies and expand financing options that make clean technologies more accessible through a European Energy Efficiency Financing Coalition. Examples include combining social leasing with mechanisms to cover upfront capital costs, offering ‘heat as a service’ models where consumers pay for warmth rather than buying equipment, or creating flexible tariffs tailored to heat-pump use and long-term maintenance needs.

Action 4: ensure that consumers can easily obtain the cheapest available energy offer

Action 4 aims to ensure that consumers can easily obtain the cheapest available energy offer and switch suppliers without obstacles. Although EU legislation already gives citizens the right to change energy providers, consumers still lose an estimated EUR 152 per year on average simply because they do not switch. One of the main reasons is insufficient transparency: comparison tools are not always reliable, and some intermediary switching platforms operate with unclear business models, reducing trust and accountability.

To address this, the Commission calls on Member States to require that suppliers provide annual ‘best tariff advice’ based on each customer’s actual energy use. Suppliers should also introduce early-warning notifications when a customer’s consumption begins to exceed the level assumed in their contract or when a cheaper offer becomes available. These measures mirror practices in other consumer markets and enable households to react quickly, for example, by switching from flexible to fixed-price contracts to avoid unexpected costs. Also, the Commission plans to adopt technical rules to ensure that all back-office switching operations across the EU can be completed within 24 hours.

Action 5: empowering citizens to produce and share their own renewable energy

Action 5 focuses on empowering citizens to produce their own renewable energy and share it with their neighbours and communities, significantly increasing local autonomy, reducing dependence on external suppliers, and improving long-term energy affordability. Under EU law, citizens have the right to form energy communities that jointly invest in and manage renewable energy projects such as rooftop solar panels, wind turbines, biogas or biomethane production, and even district heating systems. While more than 8,000 energy communities already operate across Europe, the Commission stresses that their potential remains vastly underused, particularly in rural areas where opportunities for renewable generation and local waste management are substantial. Energy sharing also creates broader social benefits. It allows groups that cannot produce renewable energy themselves—such as tenants, low-income households, or people without suitable roof space—to benefit directly from local clean-energy projects.

To support implementation, the Commission will provide guidance to Member States on how to scale up self-production and energy sharing, including best-practice examples. It will also adopt an implementing regulation on data interoperability in 2027 to ensure that energy-sharing processes are user-friendly and fully automated. Finally, between 2026 and 2027, the Commission will publish step-by-step guides to help households, SMEs, farmers, and public authorities set up and manage their own community energy projects.

Action 6: enabling consumers to lower their energy bills through flexible contracts

Action 6 focuses on enabling consumers to lower their energy bills by taking advantage of flexible retail electricity contracts, which reward households for shifting their electricity use to times when prices are lower. According to the Commission, consumers using such contracts can achieve bill reductions of up to 40%, particularly when they shift heating demand to low-price periods. This consumer-level flexibility also benefits the wider energy system, reducing the need for additional electricity generation and lowering network costs. At the EU level, the total potential system savings from greater demand flexibility are estimated at EUR 2.7 billion annually by 2030.

To unlock these benefits, flexible retail contracts must be widely available, and consumers must have access to transparent pricing, reliable information, and targeted advice to help them select the contracts best suited to their needs. Technical tools are equally important. To achieve this, the Commission will issue guidance on how flexible retail contracts should remunerate consumers. It will also improve access to the data required for flexibility through an Implementing Regulation on interoperability requirements in 2027 and promote the potential of flexibility and efficiency through relevant projects under the new Partnerships for Better Homes, beginning in 2026.

Action 7: rebuilding consumer trust in the energy market

Action 7 focuses on rebuilding consumer trust in the energy market, which has been weakened by aggressive telemarketing, confusing offers, and the general difficulty many citizens face when navigating energy services. These barriers prevent consumers from benefiting from cheaper or more innovative offers and fuel scepticism toward the retail energy market.

To improve the quality of energy services, the Commission will work with consumer associations, energy suppliers, and regulators to develop a new code of service for energy suppliers. This code represents the first step in countering unfair marketing practices. It will allow suppliers to voluntarily commit to higher standards than those already required by EU law. These commitments include efficient handling of customer complaints, protections for vulnerable consumers—such as those in rural areas—through longer notice periods before disconnection, tailored payment plans, minimum guaranteed supply, and the provision of best-tariff advice and early-warning systems. The Commission also recognises that AI and digitalisation introduce both opportunities and risks. While they may enhance efficiency and reduce energy bills, they can also create new vulnerabilities for consumers. As a result, the Commission will assess whether existing rules are adequate for a market increasingly shaped by digital tools.

Another source of mistrust arises when energy suppliers fail financially. In such cases, customers may lose advance payments and may be forced into less favourable emergency contracts. To prevent this, the Commission will issue guidance to national regulators on ensuring that suppliers maintain sound risk management and hedging strategies, helping stabilise the retail market and protect consumers from the fallout from supplier insolvencies.

Action 8: joining forces to reduce energy poverty

Action 8 confronts one of the most urgent social challenges in the EU’s energy transition: the need to join forces to reduce energy poverty. In 2024, around 42 million Europeans, representing 9.2% of the EU population, were unable to adequately heat their homes. This situation affects families and vulnerable groups disproportionately and is considered by the Commission to be both serious and unacceptable. EU law already requires Member States to identify vulnerable consumers, address energy poverty, and implement concrete protection measures. However, the Commission’s assessment of updated national energy and climate plans shows that these obligations are being implemented unevenly across the Union. This inconsistency stems not only from diverse national approaches but also from the inherent challenge of identifying vulnerable households, understanding the different dimensions of their vulnerability, and designing interventions that match their needs.

To help Member States reinforce their national strategies and strengthen their response to energy poverty, the Commission will issue additional guidance and share good, replicable practices. These materials will highlight successful national and local approaches that reduce energy poverty while maintaining incentives for efficiency. For example, best practices will address split incentives, where landlords do not invest in renovations because tenants pay energy bills, as well as digital outreach tools and cross-sectoral approaches that protect citizens from extreme heat. The Commission will also help Member States develop their national building renovation plans by the end of 2026, in line with the Energy Performance of Buildings Directive (EU) 2024/1275. These plans will identify the worst-performing buildings—often home to the most vulnerable households—and design tailored renovation policies that reduce energy bills and improve comfort throughout the year. They will also address accessibility needs for older people and persons with disabilities.

Action 9: safeguarding vulnerable and energy-poor households

Action 9 focuses on safeguarding vulnerable and energy-poor households from the severe consequences of being disconnected from their electricity or gas supply. For many citizens, especially those already struggling with energy poverty, the inability to pay energy bills is an increasingly pressing concern. In 2024, around 31 million Europeans were late on their utility bills, highlighting the widespread scale of this challenge and the risk it poses to citizens’ well-being, including their physical and mental health.

To prevent disconnections before they occur, the Commission will work closely with Member States, national regulatory authorities, energy suppliers, consumer organisations, and other stakeholders to establish national early-warning systems. These systems are designed to identify when households begin to struggle with energy payments, allowing suppliers to intervene early and offer support before financial difficulties worsen. Early action could include payment plans, energy-efficiency advice, connection to social services, or other forms of tailored assistance.

By Lucila de Almeida, Associate Part-time Professor

Republished with permission from Florence School of Regulation

3.  What do China’s provincial plans signal for carbon emissions?

Plans for 2026 indicate they will continue to pull industrial levers to bring about the green transition, but with a primary focus on economic growth.

China’s new Government Work Report, presented by Premier Li Qiang on 5 March, includes a ‘green development’ aim for the year ahead:

‘Guided by our goals of achieving peak carbon emissions and carbon neutrality, we will make coordinated efforts to cut carbon emissions, reduce pollution, pursue green development, and boost economic growth, while strengthening our green development drivers.’

The previous month, the 31 provincial-level governments had published their plans for 2026. Dialogue Earth reviewed the energy and technology sections of these plans and discussed them with experts.

With over half of the provinces expecting reduced GDP growth and revenue, encouraging economic growth and demand is seen as a key task. Overall, there is a focus on integrating into existing industries the roll-out of energy storage, hydrogen power, wind and solar power, and AI and robotics.

Energy storage, hydrogen power and nuclear power grab attention

Until early 2025, rapid expansion in energy storage had relied on rules requiring storage to be part of new wind and solar projects. When that requirement was removed, storage became dependent on market forces. That did not lead to a significant fall-off in energy storage expansion and the sector is still growing, as Dialogue Earth has reported.

This is borne out by the provincial plans. Of the 31 provincial governments, 19 are planning battery-based energy storage projects. If pumped hydro storage is included, 25 of the plans include energy storage projects.

However, of the 19 with battery storage plans, only Inner Mongolia, Shanxi, Shanghai and Heilongjiang have set quantified installation targets, with the others focused more on associated manufacturing and technology. Of these, Guizhou, Hunan, Anhui and Sichuan mention development of electric vehicle batteries, along with robotics and energy storage.

Jiangxi is to develop solid-state battery technology, while Liaoning is to focus on boosting its manufacturing of green hydrogen and ammonia, which can store renewable energy in chemical form for later use.

Anders Hove, a senior research fellow at the Oxford Institute for Energy Studies, told Dialogue Earth that ‘energy storage is now driven by the market rather than targets or regulations... Currently, spot market liquidity is weak and mechanisms encouraging the use of energy storage are lacking. Nevertheless, the energy storage market has performed well since the changes early last year.’

Perhaps the most interesting focus is hydrogen power. Projects related to the gas feature in 21 of the provincial plans, with a shift from pilot projects to industrialisation.

For example, Jilin, Inner Mongolia, Yunnan, Liaoning and Ningxia all talk about ‘green hydrogen’ – made using renewable power and synthesised into green ammonia and ethanol for use as fuel.

Jilin is preparing to advance five large ‘integrated green-hydrogen-based energy projects’, that can generate renewable power and use it to manufacture hydrogen fuel. While Ningxia is working on a ‘hydrogen and ammonia valley’ project combining production, distribution, use and storage.

In some cases, the hydrogen sector is working across provincial borders. In 2025, Inner Mongolia and Liaoning completed a long-distance hydrogen pipeline. This year they are planning parallel hydrogen, ammonia and methanol pipelines from Chifeng to Jinzhou, to support Liaoning’s construction of a storage, distribution and refuelling facility for green shipping fuels. Also last year, a ‘hydrogen corridor’ was created linking Chongqing, Guizhou and Guangxi.

China’s nuclear power sector grew rapidly last year and it features in the new annual plans of coastal provinces Guangdong, Shandong, Liaoning, Fujian, Zhejiang, Guangxi and Hainan. Each has multiple nuclear power plants under construction, due for expansion, or in the planning.

While the inland provinces of Anhui and Sichuan aren’t building nuclear power plants, their technology plans do include research into nuclear fusion. Anhui is due to complete the infrastructure for an experimental nuclear fusion reactor this year.

Solar and wind still important

China’s solar power manufacturing sector experienced cut-throat competition in 2024 and 2025. For 2026, 14 provinces have specific plans for solar projects but there is now more of a focus on making use of the power generated and on manufacturing, rather than building big solar farms.

Only Xinjiang, Inner Mongolia, Ningxia, Gansu and Qinghai now mention large solar farms. These are all in the less densely populated north-west of China, which has rich wind and solar resources. Most of the projects are carried over from the last five-year plan period (2021-2025), rather than being new additions. Inner Mongolia, though, is preparing to build six major solar farms and hoping to plan for another three.

Others are emphasising complementarity rather than simple expansion. Sichuan, Shanxi, Fujian, Shandong and Guizhou all stress the construction of large solar and wind farms but with a focus on integration with hydropower, wind power and coal power, reducing curtailment and creating a new electricity system. Shanxi, a major coal-mining province, stresses the combined development of coal power, renewables and energy storage, along with green industrial zones and encouraging the take-up of green electricity.

Yunnan, Anhui, Zhejiang and Liaoning, which could be regarded as the ‘industrial’ group, all plan to develop their solar manufacturing industries and exports. Yunnan aims to use its cheap hydro, wind and solar power to drive silicon refining and manufacturing. Liaoning, meanwhile, plans to use solar to drive development of green hydrogen and ammonia industries.

The story is similar with wind. Thirteen provinces have explicit plans for wind projects, only some of which also have solar plans. These can be divided into three types: wind power farms, consumption of wind power, and manufacturing.

There is, however, still a trend towards big wind farms, especially offshore. Big offshore projects are included in the palns of Shanghai, Zhejiang, Fujian, Guangdong, Shandong and Liaoning. In Zhejiang, private investment is being encouraged, with a required minimum 10% stake.

Hu Min, chair and joint founder of the China Institute for Global Decarbonization Progress, says that ending unhealthy competition within the renewables sector requires technological innovation and high-quality growth. She says China still does not have enough wind and solar power for carbon neutrality, and consumption and curtailment issues still need to be addressed.

‘Zero-carbon parks’ to bloom

‘Zero-carbon parks’ and industrial zones are planned or already being built in 28 provinces. The idea is that production from businesses within the parks and zones will produce ‘near zero’ carbon emissions and, where possible, none. Guidelines require 90% of consumed power to come from clean sources and 80% of solid waste to be recycled.

Of China’s industrial businesses, 80% are located within an industrial zone, according to the Ministry of Industry and Information Technology. Data from early 2025 shows there are over 2,500 provincial or national-level industrial zones nationwide.

Tsinghua University’s Li Xiaofeng has written that those provincial and national industrial zones contribute more than half of all industrial value – but also account for 31% of carbon emissions. In 2025 and again this year, ‘zero-carbon zones’ was somewhat of a buzzword.

In December last year, the government published a list of 52 pilot zero-carbon zones. According to Yicai.com, these will be completed between 2027 and 2030. Once up and running, carbon intensity of energy used will apparently be only one-tenth of today’s average for industrial zones. While at least 50% of the electricity used must come from ‘captive’ green sources, meaning generated exclusively for use by the zone, according to a spokesperson for the National Development and Reform Commission.

However, there are few details on these zones in the provincial plans, just some numerical targets: Shandong says it will have 20 provincial or national zero-carbon zones by the end of the year; Zhejiang aims for 20 provincial zero-carbon zones and 150 green factories. More common are statements of intent. Guangdong, for example, says it will ‘promote the construction of national zero-carbon zones.’

Electricity supply remains a challenge. Nan Cunhui, director of the Chint group, which makes electrical appliances, says there are no mechanisms in place for setting power prices for zero-carbon zones. The captive power they use is supplied directly to the zone rather than via the grid. It usually comes from power plants close by, but sometimes travels across a provincial border, making pricing complicated.

Powering AI and robotics

AI, robotics, and the associated ‘smart economy’ were the real star of this year’s provincial work reports. Dialogue Earth found 30 provinces mentioned AI, 20 robotics, and 17 ‘embodied AI’ – that is, robots with AI capabilities.

Many provinces have detailed plans for these, linked to economic benefits and existing local industries. For example, Guangxi is developing AI models for the nonferrous metals and sugar industries, and is considering exporting robots to Southeast Asia countries, which it neighbours. It is also to build a training ground for embodied AI, with a target of producing 5,000 humanoid robots this year. Shanxi, meanwhile, is looking to use AI in its coal-mining industry.

All this will require a lot of electricity. According to Pangoal, a Chinese policy think-tank, data centre power consumption will continue to see big increases during the 15th Five Year Plan period (2026-2030). It estimates a maximum consumption of 600 terawatt-hours, or 5-6% of all national generation, in 2030. China is already responding, for example by requiring data centres powering AI to use green electricity for at least 80% of their consumption. Some provinces, such as Shandong, are using AI technology to optimise their power grids.

Anders Hove says China’s data centres may need to make more use of renewable energy, but a lack of grid flexibility is the key issue. ‘Currently, guidance is that monthly and annual contracts should dominate nascent power markets and transmission scheduling, which leads to inflexibility, and AI and smart grids can’t change that.’

Other issues

The most important task for the next five years is hitting the 2030 peak carbon goal. The provincial plans only give an indication of what’s happening with carbon emissions – specific policies at the industry and province level will come later.

Hu Min thinks provincial governments may already have been given specific emission cap targets by Beijing. But he thinks these won’t be made public because the State Council had earlier said the focus of the next five years will be on carbon intensity (emissions per unit of GDP). It will therefore be necessary to look at provincial emissions-reduction and energy-saving plans, and how those are implemented, she says.

Anders Hove thinks changes in market signals are more worthy of attention: ‘Just looking at government plans may not give enough insight into the future developments in the sector, especially when these are driven by the market, technology cost improvement (renewables, batteries, EVs), or when the government at local or central levels make ad hoc adjustments’.

By Cui Qiwen

This article was originally published on Dialogue Earth under the Creative Commons BY NC ND licence.

4.  The energy security fallout: from fossil fuel fragility to electric independence

The fragility of global fossil fuel supply underscores why scaling renewables and electrification is essential for lasting energy security.

Today’s fossil insecurities

The closure of the Strait of Hormuz has shut down the world’s most important fossil fuel trade route. The fallout reveals just how deep the world’s fossil dependency runs.

The world’s most vulnerable chokepoint

The Strait of Hormuz is narrow, shallow, and carries a fifth of the world’s oil and LNG. The wider Gulf region, within range of cheap drones, makes up 29% of global oil output and 17% of gas. It is also a major route for trade in fertilisers, aluminium, sulphur, and ammonia. There is no other bottleneck in the global commodity system where so much passes through so little.

Where the 2022 crisis was about Europe and gas, this one is about Asia and oil. 80% of the oil and 90% of the LNG that transits Hormuz is bound for Asian markets. That is roughly 40% of Asian oil demand and over a quarter of Asian LNG imports. Japan, South Korea, India and Thailand all depend on it as their main source of supply.

Yet fossil fuel dependency stretches beyond the countries most dependent on the Strait of Hormuz. The exposure is global, and the import bill is large.

Fossil dependency is widespread and expensive

Three-quarters of the world’s population live in net fossil fuel importing countries, according to Ember’s analysis. Fifty countries import over half their primary energy as fossil fuels. Spain, Italy and Germany, for example, import over two-thirds of their energy. Japan and Korea over 80%, India 37% and China a quarter. When trade routes are under threat, these countries are exposed.

LNG exposure has been rising. About 60% of the world’s population live in LNG net importing countries. In at least nine countries, LNG imports make up over 10% of total energy supply. Taiwan is the most exposed at 24%, followed by Japan at 20% and South Korea at 17%. In several countries, exposure rose after the Ukraine crisis, compounding the impact of Hormuz today.

At the global level, the Gulf’s LNG matters less than its oil. Gulf LNG makes up less than 1% of world primary energy; whereas Gulf oil provides 9%. Analysis of IEA data by Ember shows that 79% of the global population live in oil-importing countries. In 2023, 62 countries imported 99% or more of their oil and 89 countries imported more than 80% of their oil, including Spain (99%), Japan (99%), Germany (96%), Türkiye (92%) and India (87%).

The dependency comes at a high price. Net importers spent USD 1.7 trillion on fossil fuel imports in 2024. Two-fifths of the global population (92 countries) leak over 3% of GDP abroad in net fossil fuel imports. And as prices rise, so does the bill. For every USD 10 per barrel increase in the oil price, global net import costs rise by about USD 160 billion a year. For every USD 1 per million British thermal unit (MMBtu) increase in the LNG gas price, global net import costs rise by about USD 20 billion per year.

The impact of rising prices

The first-order impact of a supply disruption is higher prices. These ripple through the wider economy, hit importers and exporters alike, and fall hardest on the poorest.

The price shock is already spreading across the fossil fuel economy. Taking Europe as an example, with jet fuel – much of which is imported directly from the Middle East – prices are up 70% since the war began. Gasoline is up 30%, in line with crude. Wholesale gas is up 61%. Heating oil, which hits rural households fastest, has risen even more. Ethylene, a basic input for plastics and chemicals, is up 20%. Urea, used for fertilisers, is up 27%.

Domestic production offers little by way of shelter. Oil prices are set globally, so a crisis like the closure of the Strait of Hormuz hits producers and importers alike. In Texas, one of the world’s largest oil-exporting regions, gasoline prices rose by over 25% since the war started. That is larger than the price rises seen so far in oil-importing countries like the UK and France. Building up more domestic production does not insulate an economy from a global price shock.

High prices hit the poorest hardest. Low-income households in the US can spend as much as 20% of their disposable income on energy. Poorer economies like Namibia, Thailand, and the DRC spend over 7% of GDP on fossil imports. When supply tightens, the rich bid up prices to get the energy they need – and in doing so price out the poor.

The 2022 crisis showed exactly this. Europe’s LNG net imports rose by nearly 60% as the continent scrambled to replace Russian gas. Bangladesh, Pakistan and India, meanwhile, saw their LNG imports fall by 13–17%. They did not cut back by choice. They were outbid.

Volatility is structural, not episodic

This is the second major fossil fuel crisis in four years. The question is whether this is a run of bad luck, or whether we are in a new world where such crises are structurally more likely.

The underlying shifts point to the latter. Most notably the change in US incentives. In the early 2010s, the United States was the world’s largest petroleum importer. Now it is a net exporter as we noted in Energy security in an insecure world. That changes its incentives. The pax Americana – the US-led security framework that underwrote a global economy built on the constant, just-in-time arrival of fossil fuels – appears to be waning. The architecture that kept fossil fuels flowing reliably for seven decades is starting to show cracks.

This alone would be cause for concern. But it coincides with a broader deterioration. Global armed conflicts are on the rise. Tariff levels and trade uncertainty are now at their highest in decades. Oil volatility indices have risen to levels that, outside 2022, have not been seen this millennium. As the world gets less stable, the risk of such dependency becomes less tolerable. The fossil fuel system, reliant on continuous trade through a handful of chokepoints, is becoming more fragile, not less.

The new electrotech alternative

In the past, there were few alternatives to fossil fuel dependency. Now there is electrotech – EVs, solar, wind, batteries, and heat pumps. Countries can affordably slash imported fuels across the whole economy. For many, this is already cushioning the blow.

Every country can be energy independent with electrotech

The technology to slash fossil fuel import dependency already exists. Proven technologies can electrify over three-quarters of the global economy. And every country in the world has enough wind and solar potential to power that demand with home-grown energy.

Three levers do the bulk of the work. Solar and wind replace imported fossil-fuelled power generation. Electric vehicles replace imported oil in road transport. Heat pumps replace imported gas and oil in heating. If all three were scaled to replace imported fossil fuels in their respective sectors, importers could reduce their bill by around 70%.

The superlever today is EVs. They are price-competitive with combustion cars and readily available. Replacing imported oil used in road transport with EVs would reduce importers’ bills by over a third – around USD 600 billion per year. The second-largest lever is renewables, able to reduce importers’ bills by a fifth.

Sceptics argue electrotech merely exchanges one dependency for another – Saudi oil out, Chinese solar panels in. But this is to confuse renting and owning. A solar panel, once installed, produces power for three decades with no fuel cost, no price increase or supply risk. An EV, once bought, runs on domestic electricity, which can largely come from local wind and solar. Fossil fuels require continuous imports. Every barrel, every cargo, every pipeline flow must be repeated, indefinitely.

Electrotech is already at the scale and price to cushion fossil shocks

In the world of electrotech, four years is a long time. Since the 2022 energy crisis, electrotech has become cheaper, better, and more readily available. It is already at a scale to cushion part of the Hormuz shock.

Solar panels have halved in price since 2022. Annual solar installations have nearly tripled in four years. Battery prices have fallen by 36%. Annual deployment of grid batteries is seven times higher. The total cost of dispatchable solar – panel plus battery – is now just USD 76/MWh for countries that import tariff-free. EVs are increasingly at sticker price parity with combustion cars, and EV sales have doubled since 2022.

Electrotech is now operating at a scale that can ameliorate a major crisis like Hormuz:

●  The growth in global solar generation in 2025 alone could displace gas-fired electricity equal to all LNG exported through the Strait of Hormuz that year. In 2025, 82 million tonnes of LNG went through the strait; used in gas power plants, that could generate about 600 TWh of electricity. The IEA calculated that global solar generation rose by more than 600 TWh in 2025.

●  Based on global EV sales, we calculate that electric vehicles displaced 1.7 million barrels per day of oil worldwide in 2025 – up from 1.3 million barrels in 2024 – not yet approaching the 20 million barrels per day of all oil demand that passes through the Strait of Hormuz, but still nearly as much as Iran’s 2.4 million barrels per day of exports.

Across many countries, rapid EV deployment is already slowing the growth of oil demand. Without this wave of electrification, petrol demand today would be significantly higher — particularly in fast-growing Asian economies where mobility demand continues to expand.

Ember analysis shows that 39 countries now have an EV sales share of more than 10%, up from four in 2019. Across regions, multiple emerging markets are surpassing advanced economies in their EV sales share. Viet Nam (38%) and Uruguay (27%) had a higher share of EV sales than the EU average in 2025 (26%). Thailand (21%), India (4%), Mexico (6%) and Brazil (9%) now have a higher EV sales share than Japan (3%). And Indonesia’s EV sales share reached 15% in 2025, overtaking the US (10%) for the first time. China reached over 50% EV sales share for the first time in 2025.

The current crisis adds further momentum. Higher and more volatile fuel prices strengthen the economic case for EV adoption, motivating faster uptake and reinforcing their role in curbing future oil demand growth.

The savings from electric vehicles are already being banked. With oil at USD 80 per barrel, China saves over USD 28 billion a year in avoided oil imports through its current fleet of EVs alone; Europe about USD 8 billion per year and India USD 0.6 billion per year.

Wind and solar go further still. Across net coal-and-gas importers in 2024, the import bill reductions run into the tens of billions: roughly USD 60 billion for China, around USD 9 billion each for Germany and Brazil, and USD 5-7 billion in Spain, the UK and Japan.

3 The lasting consequences

Beyond the immediate shock, this crisis will reshape energy markets in three ways.

This is Asia’s Ukraine moment

Russia’s invasion of Ukraine that began in 2022 galvanised Europe into action to reduce its dependency on Russian fossil fuels. Four years later, the US-Israel war with Iran will inspire Asia to reduce its dependency on imported oil and gas. The numbers are similar: in 2021 Europe imported around a third of its gas demand from Russia; in 2025 Asia imported 40% of its oil demand through the Strait of Hormuz.

But Asia enters this moment with an advantage that Europe did not have. Solar, wind, batteries and EVs are much cheaper and more readily available than they were in 2022, making the switch far more affordable. And where fossil fuel imports leak money out of the economy indefinitely, building up domestic electrotech manufacturing keeps that spending at home. Countries like India and Viet Nam are already showing the way. For Asia, this is not just a crisis to weather but an opportunity to convert fossil dependency into economic strength.

The prospects for LNG demand growth in Asia are over

As we noted last year in our Electrotech Revolution report, there is a battle between gas and solar for the future of electricity generation in Asia. At a stroke, this war has dramatically weakened the case for LNG.

The bull case for LNG was that it would be Asia’s transition fuel: cleaner than coal, available at scale, and secure. That thesis is now much weaker. Countries will be carefully considering the security of building long-term import infrastructure around a commodity that can see dramatic price spikes and supply risks.

Meanwhile, the alternative is already cheaper. Thanks to the collapse in solar and battery prices, Asia can now buy dispatchable solar at less than USD 80/MWh, with no fuel cost and no price risk, versus LNG at prices set by the next geopolitical crisis. Existing long-term LNG contracts become a liability, not an asset.

Peak oil demand is coming forward

For years, the International Energy Agency has been bringing forward its view of when oil demand will peak. A decade ago, it saw no peak before 2050 at all. Then it forecasted the late 2030s, and then 2030. Its latest forecast put it at 2029, at around 106 million barrels per day (mbpd), not much above 2025 levels of 104 mbpd. Even China, the largest growth market for oil over the past decade, saw demand fall in 2025 as electric vehicles displaced consumption.

This crisis is accelerating that trajectory. It is both curbing oil demand directly and sharpening the incentive to move away from oil altogether. The IEA has already cut its 2026 oil demand growth forecast to just 0.6 mbpd, and that is unlikely to be the last revision. As so often, a crisis can bring a peak sharply forward. We may well be at that peak now, in 2026. For a while, demand may simply bounce along that level. But if the closure of the Strait of Hormuz is prolonged, the plateau may turn quickly into structural decline.

Conclusion

At some point the Strait of Hormuz will reopen. Prices will ease. The crisis will fade from the headlines. But the structural logic will not change, and the next disruption will not be long in coming. Every year of continued fossil fuel import dependency is another year of exposure to a system that has shown, repeatedly, that it cannot be relied upon. The technology to end that dependency exists. The only question is how many more crises it takes. The countries with the foresight to invest in electrotech now will be better able to weather the next storm.

By Daan Walter, Principal of Ember

Sam Butler-Sloss, Manager of Ember

Dave Jones, Chief Analyst of Ember

Republished from Ember under CC BY 4.0 licence.

5.  Retail electricity tariffs as political choice: explicit trade-offs in high-renewable power systems

Designing retail electricity tariffs has become increasingly contentious as power systems decarbonize and wholesale price volatility rises. Regulators are often tasked with delivering affordability, price stability, efficient short-term market signals, and substantial investment incentives simultaneously. This article argues that these objectives are fundamentally incompatible: no retail tariff design can achieve all four at once. Retail tariffs should therefore be understood not as a technical optimization problem with a single solution, but as a political and regulatory choice over explicit trade-offs and risk allocation. We advance two propositions. First, Europe’s recent electricity price crisis was amplified not by wholesale market failure, but by insufficient retail hedging that transmitted wholesale risk inefficiently to households and governments. Second, retail tariffs should be designed normatively as portfolios of spot and forward prices, with volatility management treated as price insurance rather than a market distortion. Drawing on European and Spanish evidence, the paper shows that hidden trade-offs and weak retail hedging invite crisis-driven intervention, while explicitly designed tariff portfolios can improve affordability, stabilize expectations, and strengthen the political economy of the energy transition.

Retail electricity prices sit at the intersection of energy, social, and political policy. They shape household affordability, public acceptance of decarbonization, and investment incentives in generation, grids, and flexibility. When retail prices become politically unsustainable, governments intervene, often abruptly, altering market outcomes ex-post.

In liberalized electricity markets, retail tariffs consist of several components: energy costs, network charges, taxes, and policy levies. Among these, the energy cost component is the most volatile and the most closely linked to wholesale markets. Its design is therefore central to reconciling economic efficiency, social equity, and climate alignment.[1]

Recent electricity price crises have revealed a central tension in retail tariff design. Regulators are expected to deliver on affordability, price stability, efficient short-term price signals, and credible long-term investment incentives all at the same time. This paper advances a simple yet consequential proposition: these objectives cannot be achieved simultaneously. Retail tariff design, therefore, inevitably involves political choice.

As renewable power increasingly penetrates the generation side, wholesale electricity prices are becoming more volatile and weather-dependent. Importantly, recent European energy crisis experience, linked to the war in Ukraine, that reached its peak between February 2022 and early 2024 shows that wholesale markets largely continued to deliver energy security even under extreme stress. The political crisis emerged instead at the retail level, where tariff structures transmitted wholesale price risk directly to households and, ultimately, to public budgets. Treating retail tariff design as a purely technical exercise obscures its political-economy dimension.

Retail tariffs as portfolios and risk-allocation instruments

Retail electricity tariffs can be understood as portfolios of prices drawn from different segments of the electricity market, including spot prices, forward and futures contracts of varying maturities, and long-term instruments, such as power-purchase agreements and contracts for difference (CfDs).

By adjusting portfolio weights, regulators explicitly choose how risk is allocated between consumers, retailers, producers, and governments. Greater reliance on spot prices preserves short-term market signals but exposes consumers to volatility. Greater reliance on forward prices stabilizes bills, but embeds risk premiums. Choosing more forward exposure is economically equivalent to purchasing insurance against price volatility, with an associated premium.

Minimizing price volatility favours greater reliance on forward prices. Maximizing affordability favours the lowest expected-price instruments. Preserving hourly price profiles favours spot prices. Promoting forward contracting favours tariff structures that reward retailers’ hedging. In practice, regulators often seek tariffs that are both affordable and stable. This situation is a bi-objective portfolio problem, with one linear objective (minimize the tariff price) and one quadratic objective (minimize the variance). Figure 1 shows the Pareto Frontier describing the trade-off between minimizing the portfolio’s weighted-average price and minimizing its variance, subject to a leverage constraint[2].

Moving left along the frontier reduces variance but increases the average price, while moving right lowers the average price at the cost of much higher volatility. The equally-weighted portfolio lies in the low-variance region, reflecting strong diversification but relatively limited exposure to low-price assets. The chosen portfolio (star) sits far to the right, indicating that achieving substantially lower average prices requires accepting a significant increase in portfolio variance, even with leverage capped. Overall, the figure illustrates that in this illustrative setting, pushing the portfolio toward cheaper assets quickly becomes risky, making the trade-off between price minimization and stability both sharp and economically impactful.

This portfolio view should not be seen as an analytical convenience, but as a normative policy lens. Volatility management through forward exposure is not anti-market behaviour; it is a transparent and market-consistent allocation of risk. Retail tariffs are therefore best understood as risk-allocation instruments at the heart of the political economy of the energy transition.

Hidden trade-offs and the amplification of crises

When regulators attempt to deliver affordability, stability, efficient signals, and investment incentives simultaneously, trade-offs are often embedded implicitly in tariff formulas. These hidden trade-offs become politically salient only during periods of stress.

If tariffs are heavily exposed to spot prices, wholesale shocks translate rapidly into bill shocks. Political pressure then constrains price pass-through, forcing governments to intervene with subsidies, price caps, or revenue clawbacks. These interventions are frequently interpreted as evidence of wholesale market failure, even when wholesale markets continue to clear and deliver energy.

The core failure lies instead in retail hedging. Insufficient forward coverage at the retail level transmits risk inefficiently to households and governments, amplifying shocks and triggering crisis-driven policy responses that undermine long-term investment incentives.

Evidence from Spain and forward markets

Spain provides a clear illustration of this mechanism. The reforms begun in 2014 fully indexed the regulated household tariff to hourly wholesale prices, maximizing exposure to spot volatility. Subsequent reforms introduced partial references to forward prices, reducing volatility but raising average prices. Recent analysis[3] shows that these reforms only partially address the underlying trade-offs between volatility, affordability, and market signals.

Crucially, following these reforms, evidence from Spain’s electricity derivatives market shows a decline in open interest in monthly, quarterly, and annual futures contracts. While this correlation does not establish causality, it is consistent with the view that retail tariff design did not strengthen incentives for forward contracting. The result was limited retail hedging and continued exposure of households and public finances to wholesale shocks.

This experience supports the proposition that Europe’s price crisis was amplified by weak retail hedging rather than wholesale market malfunction.

Long-term contracts and investment incentives

Long-term contracts, such as power purchase agreements and CfDs, play a central role in financing renewable energy investment. Their relevance for retail tariff design lies not in direct pass-through, but in shaping the feasible set of tariff portfolios consistent with cost recovery.

Tariffs that incorporate forward-looking components aligned with long-term generation costs can stabilize expectations while preserving market-based investment incentives. Again, the central issue is transparent risk allocation rather than the suppression of price signals.

Forward contracting and the political economy of price crises

Europe’s recent electricity price crisis from 2021 to 2023 showed that the continent-wide wholesale market was sufficiently resilient to maintain energy security. On the other hand, retail market performance was mixed, and it was the subject of costly, often controversial fiscal interventions. Specifically, the crisis exposed two structural weaknesses. First, the limited degree to which retail consumers are hedged against wholesale price shocks. Second, many suppliers that entered fixed-price contracts without adequate forward market hedges suffered massive losses, or went bankrupt when wholesale prices soared. When prices surged, governments were forced to intervene with subsidies, price caps, and revenue clawbacks. These measures protected consumers in the short term, but introduced policy uncertainty and risked undermining long-term investment incentives[4]. In practice, consumer exposure and retailer hedging are closely linked, as political pressure limits price pass-through and encourages retailers to absorb wholesale risk.

Figure 2 illustrates how limited retail hedging can amplify wholesale price shocks and trigger government intervention. When tariffs are closely linked to spot prices and forward coverage is weak, price spikes translate rapidly into bill shocks and retailer stress, prompting emergency policy responses that may undermine long-term investment incentives.

A key factor highlighted by the crisis was the lack of contracting between generators and retailers for more than a year. Furthermore, most customers are reluctant to contract for energy for longer than a few months due to uncertainty about their energy demand and the price of energy. Moreover, consumers know that the government closely monitors and sometimes intervenes in energy prices, thereby creating expectations of implicit insurance through future political intervention.

Better-designed retail tariffs could reduce the need for such interventions. As commercial retailers offer retail tariffs, they should be required to set minimum forward hedging requirements, similar in spirit to prudential or liquidity requirements in financial markets. Consumers need to bear some responsibility for their choice of supplier. An important point is to set the consumer penalty on early contract termination on market-friendly terms, to avoid undermining the market for long-term contracts. In summary, contractual terms should balance consumer protection and retailers’ incentives.

Overall, if consumers are partially hedged through forward-linked tariffs, governments can support vulnerable households during price spikes without resorting to emergency measures that distort markets. In this sense, retail tariff design is not merely a consumer protection tool but a stabilizing instrument for the political economy of the energy transition.

Affordability, volatility, and insurance premiums

Lower volatility does not imply lower bills. Forward-based tariffs embed insurance premia that raise average prices. Spot-based tariffs may appear cheaper on average, but they impose unacceptable risks on households.

Seen through a portfolio lens, this trade-off is unavoidable and should be made explicit. Consumers effectively choose how much price insurance they purchase through the tariff structure, while regulators define the feasible menu of choices.

From the producer’s perspective, it is unclear that market-based remuneration remains sufficient to recover costs on average, even in volatile systems.[5] The challenge is therefore not only cost recovery per se, but how risk is distributed between producers, retailers, consumers, and governments. Retail tariffs are a key mechanism for allocating this risk transparently. The 2021-23 crisis has revealed the potential future importance of locking in price insurance for consumers or specific consumer groups, such as small consumers, and one possible avenue under discussion is the use of two-way CfDs.[6] This strategy will help dampen future weather- or geopolitically-induced price rises in electricity and reduce the need for government intervention.

Policy implications

Europe’s recent electricity price crisis illustrates that crisis-driven intervention is often the outcome of poor retail tariff design rather than wholesale market failure. When tariffs transmit excessive risk to households, governments are forced to intervene ex-post, undermining credibility and investment incentives.

Better-designed tariffs, explicitly structured as portfolios of spot and forward prices with adequate retail hedging, can substantially reduce the need for such intervention. Retail tariff design is therefore not a technical detail, but a core instrument of risk allocation and political stability in the energy transition.

Making these choices explicit is not a weakness of regulation. It is a prerequisite for durable markets, credible investment signals, and public acceptance of decarbonization.

By Juan Ignacio Peña, Professor of Financial Economics at UC3M

This article was originally published on Oxford Energy Forum,

and is republished with permission from the Oxford Institute for Energy Studies (OIES).

6.  How China’s industrial clusters foster growth, competition and sustainability

China's industrial clusters are where economic growth and environmental responsibility converge. By concentrating on energy-intensive production, infrastructure and employment, China's industrial clusters account for a significant share of the country's GDP, jobs and emissions, while remaining central to regional competitiveness and innovation.

For economies navigating the dual challenge of decarbonizing industry and sustaining growth, industrial clusters can be a practical entry point and, in some cases, a critical opportunity. By enabling organizations within the same cluster to coordinate energy systems and governance levels, they can serve as platforms for more efficient, system-wide transformation that extends beyond decarbonization to include productivity, resilience and long-term competitiveness.

Across economies, industrial clusters face a set of shared transition challenges. Their high and concentrated energy demand makes them major sources of emissions and these long-lived, capital-intensive assets lock in carbon-intensive production pathways for decades. At the same time, industrial clusters enable multiple organizations to share basic infrastructure, making coordination of energy systems, data sharing and investment decisions inherently complex.

These structural features often result in system-level inefficiencies and they explain why there is growing international interest in China's cluster-level approaches that also encompass energy and industrial transformation.

Why are China’s industrial clusters so successful?

China is the world’s largest manufacturing economy and energy consumer. More than 80% of its industrial enterprises operate within various types of clusters and development zones, accounting for over half of its national industrial output. This concentration makes China's industrial clusters a major source of emissions, but also a powerful lever for change.

China has placed industrial clusters at the centre of its industrial and green transition efforts, positioning them as piloting ecosystems of different integrated solutions: from accelerating clean power and technology development, to informing policy and market mechanisms.

Accelerating electrification and clean power

Electrification in China has expanded across key industrial processes, including its steel, petrochemical, non-ferrous metals and building materials sectors. According to International Energy Agency data, the share of electricity in China’s industrial final energy consumption increased from 25.5% in 2013 to 35.3% in 2023, exceeding the global average of 30.0%.

At the cluster level, some coal-fired units are being upgraded or replaced with gas-fired or electric systems. Distributed renewable generation is deployed on rooftops, façades and available land, complemented by integrated source–grid–load–storage models, direct green power procurement and smart microgrids. Participation in green electricity and green certificate markets provides additional supply options for clean energy sourcing.

Some clusters are experimenting with very high shares of clean energy by combining on-site renewables, storage and market-based procurement. These experiences offer practical insights into how reliability requirements can be met while reducing carbon intensity. This combination of on-site generation, grid integration and market procurement offers a replicable model for other industrial economies.

Using policy signals to guide transformation

Rather than prescribing specific technologies, national policy frameworks increasingly act as signals steering investment towards advanced and lower-carbon activities. China’s Industrial Structure Adjustment Guidance Catalogue separates industrial sectors into encouraged, restricted and phased-out sectors. This influences cluster planning, project approval and access to finance. This classification reflects the principle of guiding social resources towards high-quality development, while limiting high-consumption, high-emission and low-value activities.

Local governments use these principles in ways that reflect regional resource endowments and industrial bases, supporting structural upgrading while managing transition risks. This approach allows experimentation and differentiation across clusters, rather than a one-size-fits-all pathway.

Strengthening market mechanisms

Market-based instruments are playing a growing role in shaping decisions within industrial clusters. China’s national carbon emissions trading market, initially covering the power sector, has expanded to include steel, cement and aluminium, enabling emissions reductions where marginal abatement costs are lowest. More than 60% of China’s CO₂ emissions are now covered by the national emissions trading system, bringing them into market-based carbon trading.

Green electricity markets are also scaling rapidly. In parts of southern China, annual trading volumes of green power and certificates have reached over 450 billion kilowatt-hours, with aluminium, steel, chemicals, electronics manufacturing and data centres among the largest consumers. These mechanisms embed environmental performance into core business decisions, rather than treating it solely as a compliance obligation.

Energy performance contracting and energy management services further support efficiency upgrades by allowing professional providers to invest in, retrofit and operate cluster-level energy systems. This reduces upfront costs for enterprises while sharing efficiency gains.

Scaling technology and digital solutions

China has invested heavily in green and low-carbon innovation. In 2024, green and low-carbon patent publications by Chinese applicants reached around 120,000, an increase of 18.9% year-on-year, accounting for nearly half of global growth in this area. By the end of 2024, valid green patents exceeded 280,000, reflecting sustained investment momentum.

Large-scale equipment upgrades are underway across key sectors, including electric boilers, kilns and furnaces, as well as high-efficiency motors, pumps, compressors and transformers. In 2024, over 20 million pieces of equipment were upgraded, delivering energy savings equivalent to approximately 25 million tonnes of standard coal.

Digital platforms increasingly support these efforts. Analysis of tens of thousands of emissions reports enables more granular carbon management, while smart-energy management systems provide real-time monitoring and optimization across cluster infrastructures.

China’s industrial clusters provide lessons for system-level transition

China’s experience with industrial clusters highlights how system-level transition depends less on isolated technologies and more on coordination across organizations, infrastructures and governance levels. Within clusters, shared energy systems, digital platforms and circular solutions can lower costs and risks, enabling progress on decarbonization, alongside competitiveness, jobs and regional development.

Equally critical is multi-level governance. Clear alignment between national policy direction, local implementation and enterprise action helps reduce uncertainty and accelerate adoption at scale. As China enters the next phase of its industrial transition, deepening coordination within and across clusters will be central to sustaining momentum.

As part of this effort, the World Economic Forum is working in China via the Transitioning Industrial Clusters initiative to support more clusters in joining international knowledge-sharing communities, helping to connect Chinese practices with global peers. While rooted in China’s specific context, these cluster-level insights offer valuable reference points for other economies pursuing system-level industrial transition.

By Chen Weirong, General Manager (President),

Energy Development Research Institute, China Southern Power Grid

Zhan Shen, Project Fellow, Transitioning Industrial Clusters, World Economic Forum

Republished from World Economic Forum under the CC BY 4.0 Licence.

7.  Featured publication

Key Questions on Energy and AI

The rapid development of artificial intelligence (AI) is raising new questions about its implications for the energy sector, particularly given that the associated data centres will require large amounts of electricity. At the same time, AI has the potential to transform how energy systems are planned and operated. This report from the International Energy Agency (IEA) addresses these dual dynamics by providing new global and regional modelling, supported by extensive consultations with governments, regulators, industry, and experts. It presents projections of future electricity demand for the AI industry over the next decade and considers how this demand will be met. The analysis also explores the broader implications of AI adoption for energy security, emissions, innovation, and affordability, offering a comprehensive evidence base to support policymaking in this emerging area.

+ More

Specification and Design Criteria for Local Flexibility Markets

Local Flexibility Markets (LFMs) serve as the primary market for transmission and distribution system operators to procure local services such as congestion management and voltage control from distributed energy resources. By facilitating market-based procurement at the distribution level, LFMs allow for more efficient network operation and higher integration of renewable energy. This study, prepared by Belgium’s VITO for the European Commission, provides a comprehensive framework to assist Member States in designing and implementing effective LFMs, with the aim of maximising system benefits while placing consumers at the centre of market planning. Drawing on a review of 37 LFM initiatives across Europe, the analysis evaluates approaches to product design, market coordination, and governance, and assesses alternative market models, including the roles and responsibilities of different actors. It identifies key factors that will deliver efficient, market-based procurement of flexibility at the local level, while ensuring effective interaction with wholesale electricity markets. The study also examines the balance of harmonisation of products and market structures, noting that while greater harmonisation can improve market access and liquidity, it must be balanced against the need to reflect local system conditions.

+ More

Cost Recovery in the Electricity Sector – Principles and Practices

Electricity prices play a central role in shaping industrial competitiveness, consumer costs, and incentives for electrification, making the reduction of overall system costs a key policy objective. This Power System Blueprint Deep Dive by the Regulatory Assistance Project (RAP) focuses on the often overlooked ‘back-end’ of policy design, examining how cost recovery mechanisms can help lower electricity costs. The analysis reviews practices across Europe for key policy instruments, including capacity remuneration mechanisms, non-fossil fuel support schemes, renewable energy support, and energy efficiency programmes. It also outlines core principles to guide cost recovery design: efficient price formation, cost responsibility based on beneficiary- and polluter-pays approaches, minimising economic distortion, and ensuring equity and consumer protection. Drawing on these principles, the report provides recommendations to improve the design of cost recovery mechanisms for selected electricity policies.

+ More

Building an EU Industrial Ecosystem of Circularity Applications for Battery Packs

As the EV market expands, circularity solutions such as recycling and second-life applications are becoming increasingly important for reducing its environmental impact and securing access to critical materials in used electric vehicle batteries. This report from the Centre for European Policy Studies (CEPS) examines the state of play of battery circularity in the European Union, drawing on insights from the four-year BATRAW project and a review of current practices. The analysis reveals that both recycling and second-life use of EV batteries remain at an early stage of development in the EU, despite some emerging positive trends and a strong regulatory framework anchored in the 2023 EU Batteries Regulation. It highlights key challenges that are hampering development of viable circular supply chains and a domestic recycling market. To support further progress, the report identifies three main enabling conditions: effective implementation of the EU policy framework, strengthened financial support to scale up circularity applications, and greater harmonisation of standards relating to battery reuse and recycling. The report offers a roadmap for transitioning from regulatory ambition to a functional, large-scale industrial ecosystem for battery circularity.

+ More

The Landscape of Chinese Renewable Energy Investment Overseas (2022 to 2025)

China’s overseas energy investments have undergone a strategic shift toward renewable energy, driven by high-level policy commitments and its global leadership in solar, wind, and hydropower technologies. This transition is playing a vital role in addressing climate change and energy poverty across the Global South. However, tracking these developments is often hindered by fragmented data and complex corporate structures. To address this gap, the International Institute of Green Finance (IIGF) has developed the Chinese Overseas Renewable Energy Investment database, which has identified over 500 projects across Belt and Road Initiative (BRI) countries between October 2022 and June 2025. This report provides a comprehensive statistical analysis of the dataset, focusing on geographic distribution, technological composition, and evolving business models. By mapping the roles of contractors, investors, and lenders, the study offers critical insights into how China’s green investments are shaping the energy landscape of the Global South and provides a transparent basis for assessing their long-term impact.

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[1] Borenstein, S. and J. Bushnell (2022). ‘Headwinds and tailwinds: implications of inefficient retail energy pricing for energy substitution’. Environmental and Energy Policy and the Economy, 3, 37–70. https://doi.org/10.1086/718082.

[2] The portfolio elements are spot and futures electricity prices in the Spanish Market. The Pareto Frontier is computed with MATLAB with quadratic programming and a leverage cap.

[3] Peña. J. I., Rodríguez, R., and S. Mayoral. S., (2025). ‘The energy policy pricing dilemma: Affordability, volatility, and market signals in electricity tariffs’, Energy Reports, 14, 1680-1707. https://doi.org/10.1016/j.egyr.2025.08.006.

[4] Pollitt, M. G. N-H. M. von der Fehr, B. Willems, C., Banet, C., Le Coq, C., Kong Chyong (2024). ‘Recommendations for a future-proof electricity market design in Europe in light of the 2021-23 energy crisis’, Energy Policy, 188, 114051, https://doi.org/10.1016/j.enpol.2024.114051.

[5] Peña, J.I., Rodríguez, R., and Mayoral, S. (2022) ‘Cannibalization, Depredation, and Market Remuneration of Power Plants’, Energy Policy, 167, 113086. https://doi.org/10.1016/j.enpol.2022.113086.

[6] Fabra, N., (2023). ‘Reforming European electricity markets: Lessons from the energy crisis’. Energy Economics, 126, 106963, https://doi.org/10.1016/j.eneco.2023.106963.

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