Decentralizing China’s Energy Future

Abstract China’s shift towards decentralized electricity systems is driven by market reforms and renewable energy expansion but remains slow and fragmented. This chapter explores the legal and regulatory challenges shaping decentralization, focusing on renewable distributed energy resources (DERs) in China, notably solar photovoltaic (PV) which accounts for the majority of renewable DERs in the country. The chapter first clarifies decentralization and reviews how China’s 2015 electricity market reforms and initiatives like the Solar Energy for Poverty Alleviation Program (SEPAP) have laid the groundwork but face regulatory and operational constraints. It also examines experiments with direct transactions between distributed generators and nearby users since 2017 (‘selling electricity over the fence’) and identifies key gaps, including insufficient integration of sustainability and system flexibility in DER policies and limited regulatory support for local market participation. Drawing on EU’s regulatory development, the chapter proposes regulatory and policy approaches to address these challenges.