QUICK & PULSE

Researcher Zheng Ying explains the guarantees that power in China has been produced from clean sources

China is adding record amounts of wind and solar power to its grid, but once electricity flows into the system, it’s impossible to tell where it came from. Whether it’s from a coal plant or a solar farm, every unit of electricity looks the same. This makes it difficult for businesses and consumers to prove they are using clean energy.

To solve this, China introduced Green Electricity Certificates (GECs) which track and verify renewable electricity generation. Each GEC represents one megawatt-hour (MWh) of clean power. Generators can sell GECs to consumers who want to prove the electricity they have bought is renewably generated.

First trialled in 2017, GECs took off in 2024 thanks to strong policy support, improved issuance and trading rules, and a new system responsible for their issuance, registration and lifecycle management. By the end of 2024, a total of 4.955 billion GECs had been issued, more than doubling the 2.319 billion reported in September that year, according to the National Energy Administration.

A 2023 government policy document made the significance of GECs clear: “GECs are China’s only way to show electricity produced or consumed has come from a renewable source.”

But how do these certificates actually work? Who buys them, and why? And what challenges does the GEC market face?

Dialogue Earth put these questions to Zheng Ying, a special researcher at the China Carbon Neutrality Forum, where she focuses on energy and carbon policy research. Zheng Ying is a prominent voice in China’s clean energy space, who founded CEEE (Carbon Emission, Energy, and Electricity), a WeChat channel that analyses green energy development and the low-carbon transition.

Dialogue Earth: What’s the difference between trading green electricity and trading GECs?

Zheng Ying: With green electricity trading, a supplier and a consumer sign a contract for a certain amount of power over a certain period of time.

The consumer may also want proof, in the form of GECs, that the power they have bought has been renewably generated. The power and the certificate are handed over to the consumer at the same time. There’s a bundling – the consumer signs a contract for both the electricity and the certificate.

Those deals are limited to one physical grid. Trading can only take place if the power can physically be delivered to the consumer. China has the State Grid, which covers 27 province-level divisions, the China Southern Power Grid, which covers five province-level divisions, and the (west) Inner Mongolia Power Group, which is an independent division. In reality, trades normally happen within one province, due to local interests and the costs of long-distance transmission. However, market demand for inter-provincial trading is growing. Recently, the first cross-grid green electricity trade between State Grid and China Southern Power Grid was completed, with BASF, Covestro and Tencent participating.

But certificates can also be unbundled from the actual power and traded separately. In this respect, the GEC market is like overseas approaches such as the EU’s Guarantees of Origin system. Consumers purchase a certificate for the environmental attributes of the electricity it represents – such as where and when the power was generated and that zero emissions were involved – but no actual electricity is delivered. That unbundling means GECs can be traded on all provincial and cross-provincial markets, free of the trading rules that apply to electricity markets.

How can a company buy GECs?

It’s not a complicated process but it varies a bit depending on the quantities and the method used. Currently, China has three GEC trading platforms: a national one, and regional platforms in Beijing and Guangzhou.

For small purchases, companies can simply browse the platforms online and buy GECs advertised for sale, much like online shopping. The site will show you information about the certificates, such as where the power comes from, how many GECs are available, the cost. The buyer chooses what they need.

Bigger purchases are usually negotiated directly, offline, which can lead to cheaper prices. A company contacts an electricity supplier or generator and discusses terms, and once agreement is reached, the formal deal needs to be registered on the official marketplace. Some companies opt to sign longer contracts to ensure their supply of GECs and reduce future transaction costs.

How do China’s GECs compare to the International Renewable Energy Certificate (I-REC), and why did I-REC announce in September 2024 it was pulling out of the Chinese market?

There aren’t any substantial differences between the GEC and the I-REC. Both aim to certify the attributes of renewable energy – where, when and how much was generated. But in practice there are some variations, due to market backgrounds and system design.

The I-REC is managed by a Dutch non-profit and is mainly used in countries and regions that don’t have their own certificate systems. Some developing nations without the capability to set up their own certificate use I-REC to help create a market. China’s GECs, meanwhile, are government-led, managed throughout their lifecycle by the National Energy Administration, designed to help meet energy transition and green development goals, and meet the needs of China’s market.

Worth noting is that energy attribute certificates such as these are often talked about alongside carbon trading, as if they are equivalent to China’s voluntary carbon market – known as the Certified Emission Reduction scheme – or the UN’s Clean Development Mechanism.

Or they are talked about as if they can be traded like carbon credits such as the Verified Carbon Standard.