Green Power Direct Connection: Obstacles and Pathways for Policy Implementation

In May 2025, the National Development and Reform Commission and the National Energy Administration jointly issued the "Notice on Orderly Promoting the Development of Green Power Direct Connection" (Document No. 650 [2025] of the Development and Reform Energy), which for the first time established a national-level institutional framework for the "green power direct connection" model. The introduction of this policy not only marks a major breakthrough in China's new energy consumption mechanism but also provides an "exclusive channel" for export enterprises to cope with the EU carbon tariff and stimulate the vitality of the green power consumption market.

On August 14, at the 14th "Power Low-Carbon Supply Security Seminar" jointly held by the Natural Resources Defense Council (NRDC) and the China Energy Policy Research Institute of Xiamen University, experts from State Power Investment Corporation, East China Electric Power Design Institute, State Grid Jibei Economic Research Institute, Peking University, and other institutions conducted in-depth discussions on topics such as cost sharing, pricing mechanisms, and source-load matching of green power direct connection, further revealing the practical value and development bottlenecks of this new power industry model.

Breaking Consumption Barriers, Promoting Exports

The core logic of green power direct connection is to directly connect new energy projects such as wind and photovoltaic power with users through dedicated lines, achieving "point-to-point" supply and physical traceability of green electricity. From the policy background, its promotion is both driven by external pressure and internal demand. The EU began implementing green power direct connection as early as 2019 and linked green power usage with product exports through the "New Battery Law" and the "Carbon Border Adjustment Mechanism (CBAM)." Apple requires its core suppliers to use 100% renewable energy by 2030, and multinational companies like Tesla and BMW have similar green supply chain requirements, putting pressure on China's export-oriented enterprises with the risk of "losing markets without green power."

Within the current domestic policy system, green certificates are the only proof of the environmental attributes of renewable energy electricity in China and the sole credential for recognizing renewable energy power production and consumption. However, green certificates have not yet gained sufficient international recognition. Therefore, some enterprises face the need for "internationally recognized green power." "The issuance of Document No. 650 is precisely to solve this dilemma," said Pei Shanpeng, Director of the Strategic Research Institute at the State Power Investment Corporation Economic Research Institute.

Internally, China's new energy installed capacity has surpassed coal power, but the traditional "large power source, large grid" dispatch model is difficult to adapt to the volatility of distributed new energy. Shandong has repeatedly experienced negative electricity prices caused by large photovoltaic output at noon and large wind power output late at night. New energy-rich areas like Alxa have even fallen into the dilemma of "difficulty in selling electricity." Green power direct connection opens new revenue paths for new energy through "local consumption" and "turning electricity sales into green sales."

Controversies and Adaptation

However, the implementation of green power direct connection faces immediate controversies over the fairness of cost sharing and pricing mechanisms. Document No. 650 clearly requires projects to pay transmission and distribution fees, system operation costs, policy cross-subsidies, government funds, and surcharges as stipulated, with no unauthorized reductions or exemptions allowed locally. In practice, the division of costs between "self-consumption" and "surplus electricity fed into the grid" has become a focal point.

Pei Shanpeng proposed two pricing approaches: one is to pay all fees in full to ensure costs are not transferred, which would raise green power prices; the other is to reduce some fees in regions rich in hydropower in the southwest and new energy in the northwest by referencing the practices of self-owned power plants. Yunnan has already launched pilot projects in this regard.

Xie Yinzhe, Director of the Smart Energy Department at East China Electric Power Design Institute of China Power Engineering Consulting Group, emphasized that cross-subsidies and government funds are social obligations. If exemptions are granted for self-consumption, the related costs will be transferred to other consumers, which is unfair. Regarding transmission and distribution fees, grid-connected projects require the grid to provide backup and should pay basic electricity fees based on maximum demand, while the electricity price for self-consumption can be negotiated and reduced by provinces according to industrial affordability.

Chen Lei, Assistant Researcher at the Energy Research Institute of Peking University, proposed a more detailed classification from the perspective of off-grid and grid-connected projects: off-grid projects are completely independent of the public grid and do not need to bear grid service fees; grid-connected projects, even if the annual self-consumption ratio reaches 70%-80%, still rely on the public grid when wind and solar output is insufficient, thus must pay system operation fees based on 100% of maximum grid service demand. If the project is equipped with energy storage to reduce maximum grid demand, fees can be correspondingly reduced.

Behind these differences lies the essential balance of interests. The grid needs to recover infrastructure investments, users want to control costs, local governments must balance industrial development and policy compliance, and provincial energy authorities have yet to issue unified detailed rules. This has led to significant local practice differences, such as Jiangsu building dedicated lines by the grid, Inner Mongolia allowing new energy entities to build and then repurchase, and Henan limiting source-load distance to 20 kilometers. Eastern regions even face the practical problem of "no construction space for dedicated lines over 10 kilometers."

The high requirements for source-load matching and the complexity of technical adaptation are another major challenge for promoting green power direct connection. Policies clearly state that the annual self-consumption of new energy must account for no less than 60% of total available generation, with the proportion of total user electricity consumption reaching 30% by 2025 and no less than 35% by 2030, meaning projects must achieve a high proportion of local consumption.

Pei Shanpeng suggested that industry selection should prioritize fields such as electrolytic aluminum and energy storage batteries, which have both "rigid demand for green power" and "flexible loads" — electrolytic aluminum can adjust production according to wind and solar output, and energy storage battery companies can flexibly arrange capacity. Both have low storage demand, significantly improving project economics. In contrast, large data centers require full load operation due to expensive equipment, and the cold chain industry lacks export-driven demand, making them less suitable for large-scale direct connection.

At the technical level, energy storage is not a mandatory policy requirement but is often indispensable from economic and safety perspectives. Xie Yinzhe pointed out that after Jiangsu adjusted time-of-use electricity prices, the electricity price during midday photovoltaic generation periods approaches zero. Without energy storage to shift green power to peak price periods, project revenues are difficult to cover costs. Chen Lei emphasized that the core value of energy storage lies in "peak regulation" and "safety support." In high green power scenarios, energy storage can smooth volatility and ensure supply stability. Peking University's zero-carbon airport practice in Ordos confirms this: through underground seasonal heat storage (storing wind and solar energy as heat in summer for winter heating) combined with short-term electrochemical storage and CO2 integrated heating and cooling units, the airport achieves over 80% green power supply, solving seasonal fluctuations and reducing overall energy costs.

Additionally, the exploration of zero-carbon mines offers new ideas — using photovoltaic + energy storage + battery swapping heavy trucks, treating heavy trucks as mobile energy storage units, driven by electricity prices for charging and discharging. This reduces dependence on fossil fuels and enhances system flexibility. However, these technical solutions still face high cost pressures, mainly due to the high proportion of energy storage investment leading to low internal rates of return and long investment payback periods.

Expanding New Fields

The participation threshold for small and medium-sized enterprises (SMEs) and the linkage potential with rural industries are issues that cannot be ignored in the large-scale development of green power direct connection. Currently, green power direct connections are mostly concentrated in large user "point-to-point" projects. Although many export-oriented SMEs in the Jiangsu and Zhejiang regions have a strong demand for green power, they find it difficult to participate due to their small scale and the high cost of building dedicated lines individually.

At the seminar, experts mentioned that an innovative practice in a park in Jiangsu provided a direction to solve this problem: the park unified the internal enterprises' metering points to the park level, purchasing green power from the power supply company as a single user, and then distributing it to enterprises through the internal distribution network. This "aggregation model" significantly reduces the transaction costs for SMEs participating in green power trading.

Future policies need to break through from "point-to-point" to "one-to-many," which is not only an inevitable deepening of power system reform but also a necessary demand to ensure the survival of SMEs. If these enterprises cannot enter the EU market due to the lack of green power, it will trigger a chain of industrial risks.

In the rural sector, Lin Boqiang, Director of the China Energy Policy Research Institute at Xiamen University, emphasized that the linkage between green power and rural industries concerns not only local consumption of new energy but also new rural construction. However, significant challenges exist: low rural load density and low electricity prices make it difficult to realize green power premiums. The case of surplus distributed photovoltaics in rural Dezhou, Shandong, without corresponding loads, highlights this issue. Nevertheless, the practice in Shuanglong Village, Xixia, Henan, still shows potential: local models such as "photovoltaics + mushroom drying" and "photovoltaics + scenic area V2G" have improved photovoltaic utilization and injected green momentum into agricultural production and rural tourism. To activate the rural market, policy design needs to be tilted: on one hand, reduce or exempt certain government funds and additional fees to lower project costs; on the other hand, cultivate stable loads by integrating rural characteristic industries (such as agricultural product processing and rural tourism) to achieve coordinated development of green power and industry.

In the long run, the development prospects of green power direct connection are beyond doubt—it is not only a key tool for China to respond to global green competition and solve new energy consumption difficulties but also an important entry point to promote the power system's transformation towards "source-grid-load-storage coordination." However, to achieve the leap from "policy pilot" to "large-scale promotion," three core obstacles must be overcome: first, provincial energy authorities need to accelerate the issuance of detailed rules, clarifying the main body of dedicated line construction, pricing mechanisms, and exit paths (such as conditions for power projects to transition to market-based grid connection) to avoid "policy paralysis"; second, a cost-sharing standard with balanced rights and responsibilities must be established, dividing supply guarantee responsibilities and costs according to the actual service volume of the grid, preventing unreasonable cost shifting, while exploring discount mechanisms for self-configured energy storage to balance safety and economy; third, technological innovation and cost reduction must be promoted, focusing on breakthroughs in long-duration energy storage, microgrid stability control, and source-load joint optimization technologies to reduce project investment pressure.

The "physical path" for green power direct connection has been clarified by policy, but the "institutional channel" to open this path still requires multi-party collaboration. As local detailed rules are gradually implemented, technology costs continue to decline, and interest balance mechanisms improve, green power direct connection will inevitably move from localized pilots to widespread promotion, not only supporting the high-quality development of new energy in China but also enabling China to gain initiative in the global energy transition competition.