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This paper surveys the future of distributed energy in China for the coming period 2020–25, based on the past and current market and policy situation, potential, challenges, and evolving and emerging use cases (i.e., technology applications and business models) for distributed energy. The study provides investors, strategy advisers, policymakers, and foundations with a concise background and perspective relevant to decisions and strategies for promoting distributed energy in China in the coming years.

Executive Summary

  • Distributed energy is one of the cornerstones of China’s energy transition. Yet distributed energy is still drastically underdeveloped relative to its potential in China.
  • In China, over the past 15 years, policies for distributed energy have greatly evolved and expanded. During the period 2020–25, current policy supports will be phased out, and distributed energy will gravitate toward market-oriented and competitive models. New policies will indirectly support distributed energy, remove barriers, and provide a favorable environment for distributed energy to continue to grow.
  • A variety of market drivers have emerged in recent years, beyond cost-subsidy policies. Very specific distributed energy “use cases” are benefiting from these market drivers.
  • Use cases for distributed energy will continue to grow for integrated microgrids, energy storage, electric vehicle charging infrastructure, and larger volumes of small-scale projects for industrial and commercial end users.
  • In supporting the acceleration and scale-up of distributed energy, a variety of recommended actions are available to government agencies, industry, project developers and financiers, foundations and other public funders, and research institutions.

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