Analysis: Policymakers Fret Over How to Manage ‘Standalone’ Grids Plugged Into Renewables

Standalone power grids powered by renewable energy sources such as wind and solar are set to transform China’s power landscape. These networks offer companies reduced energy costs and efficient usage of the country’s growing renewable energy capacity. Yet, integrating these into the existing system presents challenges, such as maintaining power stability and fair cost distribution among firms still reliant on the national grid [para. 1][para. 3][para. 4].

A significant advantage of these standalone grids is the potential cost savings by circumventing the national grid’s high transmission fees and elevated industrial electricity prices. For energy-intensive industries, like chemical production, the use of renewable power also serves as a demonstration of their environmental responsibility. An example is the Envision Group’s project in Chifeng, Inner Mongolia, which combines wind and solar energy to produce ammonia and hydrogen at significantly lower costs — 0.2 yuan per kilowatt-hour, nearly 60% cheaper compared to the public grid rates [para. 5][para. 6][para. 7]. Local governments, like Chifeng’s, see these models as solutions to utilize surplus renewable energy effectively, addressing the geographic mismatch between energy-rich western regions and demand-heavy eastern regions [para. 8][para. 9].

China’s renewable energy capacity has expanded dramatically, doubling in size over three years to a total of 1,410 gigawatts in 2024. This capacity growth, including an 18% rise in wind power and a 45.2% increase in solar, has allowed China to exceed its 2030 renewable energy targets by six years [para. 10]. Adjustments in national rules, like those by the National Energy Administration, and investments in ultra-high-voltage transmission lines aim to manage energy inefficiencies, though these solutions are costly [para. 11][para. 12].

Envision’s Chifeng project demonstrates significant production cost reductions by coupling wind and solar power with chemical production [para. 13]. However, the widespread move to such standalone grids could destabilize the national grid system, which relies on a unified purchase and sales model to ensure energy security across China. This centralized system enables regions with energy surplus to support those with deficits, a model threatened by the potential withdrawal of large-scale industrial users to independent grids [para. 15][para. 16][para. 17].

The national power system charges industrial users higher rates to subsidize residential and agricultural usage. A significant shift to standalone grids by industrial plants could leave smaller industrial consumers to shoulder increased costs, raising fairness concerns [para. 18][para. 19]. Despite these benefits, standalone grids still rely on the national grid for backup, as shown by Envision’s dependence on the grid during low wind or sunshine periods. Pilot projects exploring integrated models for renewable energy generation and grid backup reveal that green power covers only 5% to 50% of energy needs, with the national grid supplying the rest [para. 20][para. 21][para. 22].

The primary grid continues to manage the fluctuating demands of these projects while receiving reduced compensation, compounding the financial burden on remaining grid users [para. 23]. To address these issues, there is a need for transparent mechanisms to allocate backup costs and ensure industrial users are fairly compensated. Although some provinces are exploring grid backup fees in green electricity policies, these challenges have slowed the rollout of standalone grid projects [para. 24][para. 25].