In Depth: China Takes on Green Energy Gridlock With Direct Connections

The article discusses China’s emerging “green power direct connection” model, using the 500-megawatt wind farm operated by Swan Electric Power in Sanmenxia, Henan, as a case study. Unlike most traditional wind farms that channel electricity into the national grid, this facility delivers power directly to end users via a dedicated transmission line, bypassing the state-run utility grid. This approach is being closely watched as a solution to China’s challenge of integrating rapidly expanding renewable energy capacity into its existing grid infrastructure. The imbalance has resulted in substantial waste due to the grid’s inability to absorb all the energy produced, particularly from wind and solar projects[para. 1][para. 2][para. 3][para. 4].

By 2025, China’s installed wind and solar capacity surpassed 1,700 gigawatts (GW), which is a tenfold increase from a decade earlier. The government targets 3,600 GW of renewable capacity by 2035. Total power capacity stood at 3,719 GW in 2025. Despite this growth, grid limitations led to significant energy curtailment: 5.8% for wind and 5% for solar nationwide in the first nine months of 2025. In resource-rich but demand-poor western regions, some projects faced curtailment rates up to 40%, turning potentially profitable investments into losses. The green power direct connection allows surplus energy to be used directly by industrial customers, avoiding waste and providing a more reliable, lower-cost supply[para. 7][para. 8][para. 9].

Adoption of this model accelerated after formal policy support emerged from the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) in May 2025. It permits wind, solar, and biomass sources to directly deliver electricity to single industrial users via dedicated lines. At least twelve provinces have followed with detailed implementation policies. By early 2026, five provinces announced pilot projects totaling over 7 GW in installed capacity. For factories, this can translate into large savings: a subsidiary of China Baowu Steel Group, for example, saved nearly 4 million yuan on green power in less than a year, cutting its electricity bill by 8–10%. Traceable direct green supply can also help manufacturers fulfill minimum renewable usage quotas—ranging from 25% to 80%—without buying additional green electricity certificates, and offers exporters a tool to satisfy stringent foreign climate regulations such as the European Union’s Carbon Border Adjustment Mechanism[para. 15][para. 17][para. 18][para. 19][para. 20][para. 21][para. 22][para. 23].

The model’s international relevance is increasing. The EU’s carbon tariffs, which took effect fully in January 2026, require importers of certain goods to pay according to embedded carbon emissions. However, Chinese green electricity certificates are not currently recognized by EU authorities, making traceable direct supply more attractive for exporters. Leading companies such as Envision Group and CATL are developing large-scale projects to power production entirely with internally generated renewable energy, partly to meet EU regulatory requirements for low-carbon products[para. 25][para. 26][para. 27][para. 28].

Still, financial challenges remain. Projects must consume at least 60% of generated green power, and new tariff structures linked to local average load factors could make economics unfavorable for many users, especially when factory demand is cyclical or the local economic context is weak. Meeting the necessary efficiency benchmarks is proving difficult, with some projects facing possible cost increases rather than savings. This has led to hesitancy among major industrial players considering adoption of the direct connection model[para. 33][para. 34][para. 35][para. 36][para. 37][para. 38][para. 39][para. 40][para. 41][para. 42].