Why China Needs to Expand Its Energy Storage Capacity
New Energy World

The following is an excerpt from an op-ed by ASPI Senior Program Officers Betty Wang and Taylah Bland originally published in New Energy World.
The Chinese energy transition is driven by a combination of policy support, technological advancements and economic incentives aimed at reducing the nation’s carbon footprint and enhancing energy security. As of early 2024, non-fossil fuel energy, including renewables like wind, solar and hydro, constitutes close to 55% of the total installed power generation capacity in China. This shift marks a substantial increase in renewable energy capacity, which now stands at 1.1bn kW. In contrast, coal-fired power plants have seen their capacity share decrease to 39.3%. However, despite this impressive growth in capacity, non-fossil energy still accounts for around 30% of power generation, according to Ember analysts.
Overcapacity is now a significant challenge in China’s power sector. This problem arises when the total installed power generation capacity exceeds the actual demand for electricity, leading to inefficiencies and economic losses. Over the past decade, China has dramatically expanded its power generation infrastructure to meet projected economic growth and energy demands. However, this expansion has often outpaced actual consumption, resulting in substantial idle capacity.
It is important to note that overcapacity is a nuanced term. The point here is that it’s not just that there is overcapacity but rather that the capacity between different types of energy needs to be better managed. It is necessary to distinguish between overcapacity for baseload fossil fuels – which is very costly – and overcapacity for renewables, which is largely inevitable due to their low-capacity factor.
Several factors contribute to this overcapacity. The central and local governments’ push for economic growth has led to the construction of numerous power plants, often without adequate demand forecasting. The rapid build-out of renewable energy sources has also created challenges in integrating these intermittent power supplies into the grid, further complicating capacity management.
While there is ample capacity overall, the distribution and reliability of energy supplies can be inconsistent, leading to real energy security concerns. There is a need to balance overall capacity with effective, reliable distribution and storage to ensure consistent energy availability where and when it is needed.