China's new Energy Law

published on 25 November 2024 | reading time approx. 5 minutes

On 8 November 2024, the National People's Congress approved the new Energy Law of the People's Republic of China, which will come into force on 1 January 2025. It is an important milestone in China's energy transition goals: maximum CO2 emissions by 2030 and CO2 neutrality by 2060.

The timing of its entry into force appears to have been strategically chosen. It comes just days before the inauguration of the new US president, Donald Trump. The latter announced his withdrawal from the Paris Agreement immediately after his re-election. It can be assumed that China wants to present itself as a more reliable partner on climate change, especially to Europe, in contrast to the US. The Energy Law is a good example of this.

China's energy transition offers relevant business opportunities for European companies in particular, which we would like to discuss in more detail.

The new law aims to promote the development and use of renewable energy, thereby increasing the share of non-fossil energy in energy consumption. As a comprehensive and overarching law, it complements existing legislation in this area, such as the Electricity Law, the Renewable Energy Law and the Energy Conservation Law. It deals with a variety of aspects, of which the following are particularly noteworthy in the field of renewable energy:

Prioritising renewable energy »
Accelerated expansion of renewable energies »
Power grid optimisation »
Sales promotion »
Significant opportunities for European companies, especially from Germany, Austria, and Switzerland (DACH region) »
Outlook »

Prioritising renewable energy

A key point of the Energy Law is the introduction of a minimum share of renewable energy in energy consumption and its prioritization over fossil fuels. The aim of the Energy Law is to effectively promote the development and installation of renewable energy. At the same time, the Energy Law provides incentives for energy saving and environmentally friendly energy use. The transition to non-fossil energy is to be managed in an organized manner. At the same time, regulations for the rational, clean and efficient use of fossil fuels are introduced to ensure a reliable and stable energy supply.

Accelerated expansion of renewable energies

The Law provides for the further and accelerated development of renewable energy and the promotion of related research and development. These include:

Hydroelectric power

Wind power
Solar energy
Biomass
Geothermal energy
Ocean energy
Hydrogen

In particular, the expansion of wind and photovoltaic systems will be accelerated and decentralized energy generation will be given the same importance as centralized energy supply.

Power grid optimisation

The Law provides for the further expansion and optimization of the electricity grid. In particular, it aims to reduce the curtailment of renewable energy in the event of oversupply and to improve the grid's ability to feed in, distribute and regulate renewable energy.

Sales promotion

To promote the use of renewable energy, China will introduce a green power certification system. The aim is to encourage public institutions and consumers to use renewable and low-carbon energy. In particular, public institutions will be encouraged to prioritize the use of renewable electricity. In addition, an energy management system will be introduced to encourage energy consumers to adjust their consumption based on tiered and peak pricing. The aim is to promote energy savings and increase energy efficiency.

Significant opportunities for European companies, especially from Germany, Austria, and Switzerland (DACH region)

The Law describes state support for "all types of economic entities" wishing to invest in the development and use of energy, the construction of energy infrastructure and the development of the energy market. Network operators are obliged to ensure fair access to the market for all market participants.

State support measures are to be used primarily in the following areas:

High quality development of energy resources exploration
Design and construction
Production of equipment
Project financing
Energy transmission and trade
Creation and improvement of relevant information services
Improving the entire chain of upstream and downstream services in the energy sector

The areas of support are specified in the Law. In order to promote research and development in the energy sector, state measures are to be established or expanded primarily in the following areas:

Research, development, demonstration, promotion, application and industrialization of basic, key and advanced technologies, equipment and related new materials in the fields of exploration and development of energy resources
Clean and efficient use of fossil energy resources
The development and use of renewable energy resources
Safe use of nuclear energy
Development and use of hydrogen
Energy storage, energy conservation, etc.

The promotion of technologies, research in the energy sector and the improvement of the general framework are also the subject of funding. Examples include:

Improving investment conditions in the energy sector and the procurement system
Establishment of innovation platforms for energy science and technology
Supporting the development of key energy science and technology infrastructure and public service platforms for research and development, testing, inspection, certification and other public services
Promote the development and application of advanced information technology in the energy field, and promote the digital and intelligent development of energy production and supply, as well as the synergistic conversion and integration of various energy sources
Promote the training of professionals in the field of energy science and technology

This can be legally challenging if critical infrastructure is involved in such projects. If a cross-border data transfer involves personal data from critical infrastructure, a mandatory official security assessment is required in China. Such an assessment is also required if what China considers to be “important data” from a critical infrastructure is transferred abroad. The term “important data” refers to data that could, in certain cases, endanger national security, the operation of the economy, social stability, public health and/or public safety.

Co-operation, including joint research projects, may then give rise to complex legal issues, depending on how they are organized on a case-by-case basis.

Outlook

Co-operation, including joint research projects, may then give rise to complex legal issues, depending on how they are organized on a case-by-case basis.