China’s solar and windfarms would no longer be guaranteed sales at a fixed price linked to coal benchmarks, under a new policy released by the central government.
The policy asks local governments to shift new wind and solar projects to a more market-based pricing system by the end of 2025.
Said local governments will determine the details of the proposed “sustainable new-energy pricing mechanism” (新能源可持续发展价格结算机制).
In broad terms, however, the idea is that new wind and solar schemes would be paid a fixed price determined at auction in a system that resembles the UK’s “contract for difference” mechanism.
The move is part of wider efforts to shift the operation of China’s giant electricity system towards more market-based signals, rather than administratively set prices.
It also reflects a growing need to manage the integration of renewables into the system, with record wind and solar capacity added last year creating “conflict” with coal power.
While existing projects would continue to be paid under the old system, new wind and solar schemes will face a more uncertain business outlook, analysts tell Carbon Brief.
However, they say that, in the long run and with the right implementation strategies, the new mechanism could make renewables more innovative and even more cost-effective for power consumers, compared to coal.
More ‘market-oriented’
From 2026, China has announced that the price of electricity generated from solar and wind schemes will be determined according to competitive auctions.
This will replace the existing fixed rates solar and wind received for their power, which was pegged to benchmarks for coal-fired power, with the new mechanism likely making prices for renewables much cheaper than coal.
The new system resembles the two-way “contract for difference” (CfD) mechanism used in the UK and elsewhere. Under this type of mechanism, power generators are paid a fixed “strike price” for each unit of electricity they produce.
If market prices for power fall below this level, generators receive the difference as a top-up payment, but they must pay back the difference if prices rise above it instead.
This setup would allow developers to have “reasonable and stable expectations” for revenue, which will support a “healthy” industry and China’s energy transition, representatives of the National Development and Reform Commission (NDRC), China’s top economic planning body, and National Energy Agency (NEA) say in an official Q&A on the policy.
Despite some reporting to the contrary, the move does not constitute a rollback of subsidies for renewables, as grid operators have paid the same price for coal-fired power and wind and solar power since 2021.
Bringing prices up to date
The change to the rules has been attributed to the sharp reduction in the cost of building new solar and windfarms, prompting questions around whether renewable generators should be paid the same amount as infrastructure-heavy coal plants.
“The coal-fired grid benchmark rate was last updated in 2017 and actually has no relationship to the generation cost of renewables,” David Fishman, senior manager at the energy consultancy Lantau Group, tells Carbon Brief, adding the price was effectively “arbitrary”.
The NDRC and NEA Q&A argues that renewable energy schemes operating on a fixed tariff “cannot fully reflect market supply and demand” and do not “fairly [distribute] responsibility for power system flexibility”.
Fishman adds that the timing of the announcement may have been linked to the situation China experienced late last year, which saw unusually high curtailment of renewable energy at a time when analysts expected low-carbon power to cover new demand growth.
An analysis written in summer 2024 by Shi Jingli, a researcher from the NDRC-affiliated Energy Research Institute (ERI), argued that the UK’s CfD system “significantly reduced renewable energy tariffs and the government’s overall expenditure on renewable energy projects”, which also indicates that cost may be a driving factor behind the change.
Other changes
The new rules will only apply to projects developed from June 2025 onwards. They will apply to all sources of wind and solar power, from huge clean-energy “bases” to distributed generators such as solar rooftops.
In order to facilitate the increasingly market-based operation of the electricity system, the new notice encourages local governments to “improve spot market trading rules” and “accelerate” voluntary participation in day-ahead trading.
It also encourages the increased use of multi-year power purchase agreements (PPAs) and other forms of medium- and long-term contracts, among both renewable projects developed before the June 2025 cut-off date (called stock, 存量) and new schemes (called incremental, 增量).
Meanwhile, energy storage requirements for new wind and solar projects have been revoked, in a move that economic news outlet Jiemian says “will have a huge impact on the energy storage industry”.
The policy also notes that local authorities could consider implementing similar systems for biomass, geothermal and other power generators.
No pain, no gain
The exact impact that this will have on renewable developers will depend on the implementing rules adopted by local governments, according to Lauri Myllyvirta, lead analyst at Centre for Research on Energy and Clean Air (CREA).
In the short-term, these companies will be hit by the loss of the guaranteed demand and the need to adapt to the low prices and fierce competition of the new system, Fishman says.
Many projects initially slated for completion later in 2025 may be rushed through in order to be eligible to stay on the current system, resulting in a spike in added capacity in the second quarter of the year followed by a dip in the third quarter, he tells Carbon Brief.
Companies will also need to pivot to have stronger marketing and sales capabilities, says Wang Jihong, senior counsel at law firm Zhong Lun, as the policy encourages greater uptake of renewable energy through PPAs. In an article published by Lexology she advises companies to focus on “high-efficiency” and “large-capacity” technologies.
This may have an impact on China’s growing distributed solar and wind sectors.
Distributed projects are much more likely to be run by smaller companies who may not have the resources to adapt to the new mechanism, according to Fishman, which could cause opportunities for distributed energy to “dry up”.
At the same time, the new policy may also force renewable energy power companies to innovate – both in terms of technology, and of business models and management practices, says Dr Muyi Yang, senior energy analyst for Asia at the thinktank Ember.
Yang tells Carbon Brief:
“[The new regulations] will help shift the clean energy sector from ‘subsidy-dependency’ to being ‘innovation-driven’ and contributing to innovation-based growth – what is often referred to in China as ‘new quality productive forces’.”
Stronger in the long-term?
The new pricing system may nevertheless give wind and solar the advantage in the long-term. Reform of the power market has long been seen as crucial to increasing uptake of renewables.
The new prices are expected to be much lower than the tariff for coal power. Myllyvirta writes that wind and solar, as the “most affordable” sources of power, should be able to “hold their own in competition if the rules are set right”.
The cost of developing solar and wind power has halved over the past ten years, an expert tells 21st Century Business Herald.
Yang tells Carbon Brief that the pressure of being subjected to the market could make low-carbon energy “more competitive” and “help reduce inefficient investment”, which will be a “critical factor for the long-term transition of China’s energy sector”.
But local governments would need to take steps to maintain investor confidence in the face of low prices, Fishman says. For example, significantly raising provincial renewable consumption targets could provide a strong demand signal, showing wind and solar developers that there is still a “way to make money” through increased volume.
If the government “gets the numbers just a little bit wrong”, he says, the amount of new wind and solar being added to the grid “will drop off a cliff”.
At the same time, coal-fired power plants are continuing to receive policy and financial support, in the form of guaranteed demand from long-term contracts and compensation to keep excess capacity online.
China has ramped up construction of new coal plants, with almost 100 gigawatts of new capacity expected to come online in the next few years, according to recent research by CREA and Global Energy Monitor.
If they are not exposed to competition in the same way that wind and solar farms will be, Myllyvirta argues, then renewables may be “crowded out from the power market by inflexible coal plants”.
Fishman is more sanguine about the future role of coal, however. He tells Carbon Brief that the new policy may give coal plants “a little bit of a boost” in the short-term, but that China’s carbon peaking goal sets a hard deadline for reducing their role in the power system and means they will face “diminishing returns”.
He adds that the real competition for coal plants are other coal plants, as only the “newest, the most efficient [and] the super-critical” plants will have a future as China moves towards carbon neutrality.
The post Explainer: How China’s renewable pricing reforms will affect its climate goals appeared first on Carbon Brief.
Explainer: How China’s renewable pricing reforms will affect its climate goals
Drought and heatwaves occurring together – known as “compound” events – have “surged” across the world since the early 2000s, a new study shows.
Compound drought and heat events (CDHEs) can have devastating effects, creating the ideal conditions for intense wildfires, such as Australia’s “Black Summer” of 2019-20 where bushfires burned 24m hectares and killed 33 people.
The research, published in Science Advances, finds that the increase in CDHEs is predominantly being driven by events that start with a heatwave.
The global area affected by such “heatwave-led” compound events has more than doubled between 1980-2001 and 2002-23, the study says.
The rapid increase in these events over the last 23 years cannot be explained solely by global warming, the authors note.
Since the late 1990s, feedbacks between the land and the atmosphere have become stronger, making heatwaves more likely to trigger drought conditions, they explain.
One of the study authors tells Carbon Brief that societies must pay greater attention to compound events, which can “cause severe impacts on ecosystems, agriculture and society”.
Compound events
CDHEs are extreme weather events where drought and heatwave conditions occur simultaneously – or shortly after each other – in the same region.
These events are often triggered by large-scale weather patterns, such as “blocking” highs, which can produce “prolonged” hot and dry conditions, according to the study.
Prof Sang-Wook Yeh is one of the study authors and a professor at the Ewha Womans University in South Korea. He tells Carbon Brief:
“When heatwaves and droughts occur together, the two hazards reinforce each other through land-atmosphere interactions. This amplifies surface heating and soil moisture deficits, making compound events more intense and damaging than single hazards.”
CDHEs can begin with either a heatwave or a drought.
The sequence of these extremes is important, the study says, as they have different drivers and impacts.
For example, in a CDHE where the heatwave was the precursor, increased direct sunshine causes more moisture loss from soils and plants, leading to a drought.
Conversely, in an event where the drought was the precursor, the lack of soil moisture means that less of the sun’s energy goes into evaporation and more goes into warming the Earth’s surface. This produces favourable conditions for heatwaves.
The study shows that the majority of CDHEs globally start out as a drought.
In recent years, there has been increasing focus on these events due to the devastating impact they have on agriculture, ecosystems and public health.
In Russia in the summer of 2010, a compound drought-heatwave event – and the associated wildfires – caused the death of nearly 55,000 people, the study notes.
The record-breaking Pacific north-west “heat dome” in 2021 triggered extreme drought conditions that caused “significant declines” in wheat yields, as well as in barley, canola and fruit production in British Columbia and Alberta, Canada, says the study.
Increasing events
To assess how CDHEs are changing, the researchers use daily reanalysis data to identify droughts and heatwaves events. (Reanalysis data combines past observations with climate models to create a historical climate record.) Then, using an algorithm, they analyse how these events overlap in both time and space.
The study covers the period from 1980 to 2023 and the world’s land surface, excluding polar regions where CDHEs are rare.
The research finds that the area of land affected by CDHEs has “increased substantially” since the early 2000s.
Heatwave-led events have been the main contributor to this increase, the study says, with their spatial extent rising 110% between 1980-2001 and 2002-23, compared to a 59% increase for drought-led events.
The map below shows the global distribution of CDHEs over 1980-2023. The charts show the percentage of the land surface affected by a heatwave-led CDHE (red) or a drought-led CDHE (yellow) in a given year (left) and relative increase in each CDHE type (right).
The study finds that CDHEs have occurred most frequently in northern South America, the southern US, eastern Europe, central Africa and south Asia.
Threshold passed
The authors explain that the increase in heatwave-led CDHEs is related to rising global temperatures, but that this does not tell the whole story.
In the earlier 22-year period of 1980-2001, the study finds that the spatial extent of heatwave-led CDHEs rises by 1.6% per 1C of global temperature rise. For the more-recent period of 2022-23, this increases “nearly eightfold” to 13.1%.
The change suggests that the rapid increase in the heatwave-led CDHEs occurred after the global average temperature “surpasse[d] a certain temperature threshold”, the paper says.
This threshold is an absolute global average temperature of 14.3C, the authors estimate (based on an 11-year average), which the world passed around the year 2000.
Investigating the recent surge in heatwave-leading CDHEs further, the researchers find a “regime shift” in land-atmosphere dynamics “toward a persistently intensified state after the late 1990s”.
In other words, the way that drier soils drive higher surface temperatures, and vice versa, is becoming stronger, resulting in more heatwave-led compound events.
Daily data
The research has some advantages over other previous studies, Yeh says. For instance, the new work uses daily estimations of CDHEs, compared to monthly data used in past research. This is “important for capturing the detailed occurrence” of these events, says Yeh.
He adds that another advantage of their study is that it distinguishes the sequence of droughts and heatwaves, which allows them to “better understand the differences” in the characteristics of CDHEs.
Dr Meryem Tanarhte is a climate scientist at the University Hassan II in Morocco, and Dr Ruth Cerezo Mota is a climatologist and a researcher at the National Autonomous University of Mexico. Both scientists, who were not involved in the study, agree that the daily estimations give a clearer picture of how CDHEs are changing.
Cerezo-Mota adds that another major contribution of the study is its global focus. She tells Carbon Brief that in some regions, such as Mexico and Africa, there is a lack of studies on CDHEs:
“Not because the events do not occur, but perhaps because [these regions] do not have all the data or the expertise to do so.”
However, she notes that the reanalysis data used by the study does have limitations with how it represents rainfall in some parts of the world.
Compound impacts
The study notes that if CDHEs continue to intensify – particularly events where heatwaves are the precursors – they could drive declining crop productivity, increased wildfire frequency and severe public health crises.
These impacts could be “much more rapid and severe as global warming continues”, Yeh tells Carbon Brief.
Tanarhte notes that these events can be forecasted up to 10 days ahead in many regions. Furthermore, she says, the strongest impacts can be prevented “through preparedness and adaptation”, including through “water management for agriculture, heatwave mitigation measures and wildfire mitigation”.
The study recommends reassessing current risk management strategies for these compound events. It also suggests incorporating the sequences of drought and heatwaves into compound event analysis frameworks “to enhance climate risk management”.
Cerezo-Mota says that it is clear that the world needs to be prepared for the increased occurrence of these events. She tells Carbon Brief:
“These [risk assessments and strategies] need to be carried out at the local level to understand the complexities of each region.”
The post Heatwaves driving recent ‘surge’ in compound drought and heat extremes appeared first on Carbon Brief.
Heatwaves driving recent ‘surge’ in compound drought and heat extremes
Greenhouse Gases
DeBriefed 6 March 2026: Iran energy crisis | China climate plan | Bristol’s ‘pioneering’ wind turbine
Welcome to Carbon Brief’s DeBriefed.
An essential guide to the week’s key developments relating to climate change.
This week
Energy crisis
ENERGY SPIKE: US-Israeli attacks on Iran and subsequent counterattacks across the Middle East have sent energy prices “soaring”, according to Reuters. The newswire reported that the region “accounts for just under a third of global oil production and almost a fifth of gas”. The Guardian noted that shipping traffic through the strait of Hormuz, which normally ferries 20% of the world’s oil, “all but ground to a halt”. The Financial Times reported that attacks by Iran on Middle East energy facilities – notably in Qatar – triggered the “biggest rise in gas prices since Russia’s full-scale invasion of Ukraine”.
‘RISK’ AND ‘BENEFITS’: Bloomberg reported on increases in diesel prices in Europe and the US, speculating that rising fuel costs could be “a risk for president Donald Trump”. US gas producers are “poised to benefit from the big disruption in global supply”, according to CNBC. Indian government sources told the Economic Times that Russia is prepared to “fulfil India’s energy demands”. China Daily quoted experts who said “China’s energy security remains fundamentally unshaken”, thanks to “emergency stockpiles and a wide array of import channels”.
‘ESSENTIAL’ RENEWABLES: Energy analysts said governments should cut their fossil-fuel reliance by investing in renewables, “rather than just seeking non-Gulf oil and gas suppliers”, reported Climate Home News. This message was echoed by UK business secretary Peter Kyle, who said “doubling down on renewables” was “essential” amid “regional instability”, according to the Daily Telegraph.
China’s climate plan
PEAK COAL?: China has set out its next “five-year plan” at the annual “two sessions” meeting of the National People’s Congress, including its climate strategy out to 2030, according to the Hong Kong-based South China Morning Post. The plan called for China to cut its carbon emissions per unit of gross domestic product (GDP) by 17% from 2026 to 2030, which “may allow for continued increase in emissions given the rate of GDP growth”, reported Reuters. The newswire added that the plan also had targets to reach peak coal in the next five years and replace 30m tonnes per year of coal with renewables.
ACTIVE YET PRUDENT: Bloomberg described the new plan as “cautious”, stating that it “frustrat[es] hopes for tighter policy that would drive the nation to peak carbon emissions well before president Xi Jinping’s 2030 deadline”. Carbon Brief has just published an in-depth analysis of the plan. China Daily reported that the strategy “highlights measures to promote the climate targets of peaking carbon dioxide emissions before 2030”, which China said it would work towards “actively yet prudently”.
Around the world
- EU RULES: The European Commission has proposed new “made in Europe” rules to support domestic low-carbon industries, “against fierce competition from China”, reported Agence France-Presse. Carbon Brief examined what it means for climate efforts.
- RECORD HEAT: The US National Oceanic and Atmospheric Administration has said there is a 50-60% chance that the El Niño weather pattern could return this year, amplifying the effect of global warming and potentially driving temperatures to “record highs”, according to Euronews.
- FLAGSHIP FUND: The African Development Bank’s “flagship clean energy fund” plans to more than double its financing to $2.5bn for African renewables over the next two years, reported the Associated Press.
- NO WITHDRAWAL: Vanuatu has defied US efforts to force the Pacific-island nation to drop a UN draft resolution calling on the world to implement a landmark International Court of Justice (ICJ) ruling on climate, according to the Guardian.
98
The number of nations that submitted their national reports on tackling nature loss to the UN on time – just half of the 196 countries that are part of the UN biodiversity treaty – according to analysis by Carbon Brief.
Latest climate research
- Sea levels are already “much higher th