In the past several years, China has become the leading country in renewable energy generation and investment. In 2015 alone, China spent more than 100 billion dollars on clean energy and installed 19.81 gigawatts of wind and 10.60 gigawatts of solar energy. It is projected that by 2020, China will have installed 100 GW of solar and 200 GW of wind energy.

From a climate change perspective, this growth in China's renewables market comes at a crucial time. Currently, China consumes almost as much coal as every other country in the world combined. Research indicated that by 2020, China will account for 32% of global emissions, which are largely a result of high electricity consumption (which itself is forecast to grow 250% from 2010 to 2030).

While China has approximately one third of global wind energy capacity, the U.S. has only 17%. However, China uses less wind-powered electricity than does the US. How so? This issue that the government has been battling for the past several years is a result of curtailment. Curtailment means that although the power grids are capable of producing wind and solar powered energy, they opt out of doing so and instead supply coal powered energy (for a combination of technical and economic reasons). Therefore, although China leads in terms of renewable energy capacity, it lags behind in production (which is what is key).

In 2015, China's wind curtailment rates reached 15% (an increase of 8% from 2014) and solar curtailment rates rose to 11% in the first three quarters of the same year. Under the pact that China struck with the U.S. prior to the Paris climate change conference, China pledged to obtain 20% of its power from non-fossil fuels by 2030. China is both technologically and economically able to rely on more than 60% of its total energy needs by 2050. However, the current rate of curtailment poses a great impediment to the climate goals set by the government.

In just 5 years, from 2011 to 2015, wind curtailment cost China's energy sector almost 51 billion RMB; that is enough money to buy 200,000 new electric vehicles. Although curtailment is usually attributed to technical challenges such as the grid inflexibility and poor cross-province transmission. However, the primary causes for curtailment stem from political and economic agendas. These include excessive quota allocation for coal power plants and lack of spot-market, both of which incentivize coal-power consumption. Although China's Renewable Energy Law prohibits curtailment, it still persists partly because no penalty or policy implementations are enforced. Under the current system, renewable power plants pose a threat to coal plants because they cut into the coal plants' operational hours and therefore revenue. As a result, many local governments do not prioritize renewable sources since they would lose revenue.

To combat this, China must develop a more flexible pricing mechanism and deregulate its electric power market in order to make renewable energy competitive and profitable. Since economic incentives tend to be more powerful than policy implementations at yielding results, the government must set a fixed price plan for coal plants. This would encourage them to spread out the quota, allowing generators to compete on the basis of lowest marginal cost, thus making renewable sources competitive and profitable.

Currently, the on-grid tariff set for renewable energy is higher than the power price of coal plants, making them uncompetitive. However, a spot market (especially one with short time intervals) would enable wind and solar plants to bid into the intra-day market at their cost of production (which is generally zero). For instance, in the United States, the power system always dispatches renewable energy with priority over other sources because of the comparatively low marginal costs and extremely liquid spot power market.

Since China's approach to the power sector is in part meant to compensate generators, when renewable energy takes over, there is visible resistance. By developing a market that rewards efficiency through decoupling of coal generators and energy prices, China will be able to reach its clean energy goals in no time. In order to move towards high renewable energy penetration, the government needs to continue closely monitoring the effectiveness and implementation of such policies, and alter them accordingly. If such changes do occur, China could be on its way to obtain nearly 60% of its energy consumption from renewable sources by 2050.