21: Clean Energy R&D

In recent years, the Chinese government has spent $4–6 billion annually on clean energy research and development (R&D). The Ministry of Science and Technology (MOST), which leads much of the Chinese government’s work on clean energy R&D, identifies its clean energy priorities as low-carbon power, system integration and optimization, new energy vehicles, nuclear power, energy efficiency and carbon capture, utilization and storage (CCUS).¹

This chapter describes Chinese government spending on clean energy R&D.

Background

Since the Reform and Opening-Up period in the late 1970s, the Chinese government has invested in technology innovation as a core element of its economic development strategy. In the Chinese system, R&D priorities are listed in planning documents issued by central government agencies and implemented mostly by universities, government research institutions and state-owned enterprises. Government funding for demonstration projects, pilot projects and subsidies are loosely coordinated based on technology trends and changing economic priorities.

Energy has held a prominent place in China’s research and development priorities for many years. Energy technology was listed fourth in the 1986 National High-Tech R&D Program (known as the 863 Program) and second in the 1997 National Basic Research Program (known as the 973 Program). The 2006 Medium-to-Long-term Program for Science and Technology Development (2006–2020) placed energy first among over two dozen fields of technology development. The 2006 Program called for increasing overall R&D spending from 1.3% to 2.5% of GDP and listed industrial energy efficiency, fossil fuel technology (including coal-to-gas and coal-to-liquids), renewable energy and ultra-high voltage power grids as priorities for energy sector R&D.^2/sup>

The Chinese government also addresses clean energy R&D in its five-year planning processes. The 11th Five-Year Plan highlighted R&D on high-powered wind turbines, ultra-high voltage transmission and energy efficiency. The 12th and 13th Five-Year Plans included targets for wind, solar and nuclear power as well as smart grid technologies.

The International Energy Agency (IEA) estimates that overall energy R&D spending by the Chinese government in 2021 was $8.3 billion—26% of world energy R&D spending. Much of this funding went to conventional energy technologies. China is the world’s largest funder of fossil fuel energy R&D by far. The World Intellectual Property Office (WIPO) ranked China third in the number of energy patents in 2019.³

China’s innovation policies have led to stronger results in some areas than others. Chinese patents—including in the energy sector—tend to be dominated by design- and use-related patents, more than basic technology innovations.⁴ Solar PV and battery manufacturing stand out as areas in which Chinese innovators have especially strong capabilities, as measured by patent citations.⁵

Chinese innovation capabilities have grown significantly in recent years. According to one IEA study, China was responsible for 8% of the world’s low-carbon energy intellectual patent families in 2010–2019, with increasing patenting activities over the course of the decade.⁶ Another IEA study found that energy patenting in China has doubled every five years since 2000, with low-carbon energy patents growing rapidly, especially in batteries, electric vehicles and solar.⁷

Chinese businesses invest in R&D, including for clean energy. The private sector has played an especially important role in solar photovoltaic and battery innovations. Clean energy venture capital grew 43% annually in China between 2016 and 2021, with especially strong growth in venture capital funding for deals related to electric vehicles.⁸ Some data suggest that innovation spending by state-owned enterprises is relatively less efficient at generating innovations than the private sector.⁹

The Chinese government has investment funds, known as guidance funds, to support private sector innovation, aimed primarily at early- and mid-stage companies rather than startups. Funding has gone to firms working in fields including oil and gas, nuclear equipment and renewable energy.¹⁰

Demonstration projects are a major element of China’s innovation system. Several Chinese ministries directly manage and promote demonstrations in various fields. The National Development and Reform Commission oversees the Zhangjiakou Renewable Energy Pilot Zone, which incorporates wind, solar, energy storage and hydrogen technologies. The National Energy Administration supports energy storage demonstration projects and hybrid renewables-storage demonstrations through preferential policies. The Ministry of Science and Technology’s National Guiding Fund for the Conversion of Scientific and Technological Achievements funds various demonstration projects aimed at commercializing clean energy technology. The Ministry of Housing and Urban-Rural Development (MOHURD) funds demonstrations in building efficiency, materials and distributed energy. Provincial and local officials also have a major role in launching demonstration projects. Shandong is currently undertaking major hydrogen demonstration projects including hydrogen from wind and solar, hydrogen fueling for trucks and buses, and hydrogen for rural heating. Guangdong province has undertaken a national-level demonstration on fuel cell vehicle technology.¹¹

Policies

The Chinese government’s investment in clean energy R&D increased significantly during the 13th Five-Year Plan, almost doubling from 2015 to 2019.¹² Priorities included solar power, wind power and energy storage.

• The 13th Five-Year Plan for Solar Development listed several solar technology targets, including increasing crystalline silicon PV cell conversion efficiency to 23 per cent and developing thin-film technology.¹³
• In 2016, NDRC set strategic development targets for wind power. NDRC highlighted four areas for innovation: large-scale wind equipment, offshore system construction, wind farm cluster operation based on big data and cloud computation, and recycling of waste equipment.¹⁴
• The National Energy Administration established targets for energy storage, emphasizing development of storage with renewable energy, reductions in the cost of storage and improvements in safety and security.¹⁵
• For nuclear energy, China has demonstration projects for gas-cooled reactors and fast neutron reactors. The first experimental gas-cooled reactor was built near Beijing with Russian technology in 2000, and a commercial-scale gas-cooled reactor in Shandong province connected to the grid in 2021.¹⁶

The Made in China 2025 initiative, first announced in 2015, targets several clean energy areas. It calls for China to dominate manufacturing of energy-saving and new energy vehicles as well as maintain an 80% share of renewable energy equipment production. These priorities influence R&D investments across the energy sector.¹⁷

In 2016, China’s Energy Supply and Consumption Revolution Strategy listed four priority areas for technology development: energy efficiency (including waste heat and steam, building energy and new energy vehicles), clean energy (including renewables, nuclear, and efficient coal and oil), smart energy (including high voltage grids) and R&D. R&D priorities specifically mentioned include hydrogen, rare earths, superconductors, solid-state transformers and fast nuclear reactors.¹⁸

In October 2020, the State Council outlined several new energy vehicle technologies as key areas for innovation in the next 15 years. These include battery technology, smart network technology and charging infrastructure improvement.¹⁹

China’s 14th Five-Year Plan for Energy Technology Innovation (2021) notes that China’s energy technology innovation system still faces challenges: certain equipment, software and materials still rely on foreign countries; China has developed relatively few of the key energy transition technologies, and mechanisms for technology innovation need improvement. The Plan targets five broad energy fields for innovation:

• renewable energy (including wind, solar, biomass, geothermal, hydro and renewable hydrogen);
• technologies to support a modern electricity system, including two-way interaction between generation and customers, as well as energy storage;
• nuclear technology, including advanced reactor designs, modular reactors and high-temperature gas-cooled reactors;
• fossil energy, including unconventional oil and gas, advanced gas turbines, more efficient mining and the “green, intelligent, and efficient” development and utilization of coal (including ultra-supercritical boilers, carbon capture and storage, and coal-to-liquids);
• digital energy technologies, including in particular those related to the power grid (such as ultra-high voltage lines) and conventional energy.²⁰

Clean energy is one of the first areas for competitive funding under the 14th Five-Year Plan.²¹

In addition, the various sectoral five-year plans contain several specific priorities for innovation. The 14th Five-Year Plan for a Modern Energy System lists the following innovation priorities for R&D and demonstrations: deep offshore wind, high-efficiency PV cells, building-integrated photovoltaics (BIPV), advanced biomass fuels, geothermal energy, battery energy storage, large-scale variable-speed pumped storage and seawater storage, large-scale development and utilization of ocean energy, environmental protection technology and advanced nuclear energy technology. The 14th Five-Year Plan for Hydrogen calls for research and development in proton exchange membrane (PEM) fuel cells, as well as improved hydrogen storage and transportation technologies and the application of renewable hydrogen in fields outside of transportation.²²

Relationship to Climate Goals

Energy innovation will play an important role in fighting climate change and meeting the goals of the Paris Agreement.²³ Innovation will be especially important in some hard-to-abate sectors, including heavy industry, where China’s role in the global economy is strong. More than 22 nations, including China, have joined Mission Innovation—“a global initiative to catalyze action and investment in research, development and demonstration to make clean energy affordable, attractive and accessible to all this decade.”²⁴ As the world’s leader in clean energy deployment, the second largest economy and largest heat-trapping gas emitter, China’s investments in clean energy R&D could have significant implications for climate change in the years and decades ahead.