China Races to Net Zero-Carbon Future - Rural Clean Energy Revolution

Chinese official commitment to achieve carbon neutral before 2060 has triggered a new wave of excitement and inspirational endeavor to solve the puzzle. Rural China offers an unprecedented market opportunity to not only help achieve carbon neutrality goal but more importantly create new growth strategy and jobs in a new economic model and clean energy landscape.

Thanks to Chinese government's continued efforts to accelerate rural development and lift hundreds of millions rural population out of poverty, about 98% Chinese rural areas have access to electricity. This is achieved over last four decades when the country started to reform and open up. Today, there remain about 2.73 million people in rural China who are covered in the rural electrification scheme. While more rural population are secured with access to electricity, the challenge is majority electricity from the grids are coal-based. therefore, two tasks emerge in order to achieve and contribute to carbon neutrality goal in rural China. One is to ensure the final 2-3% people's energy demand is met with renewable energy at affordable cost, and the other is reduce reliance on grid electricity while supply back to grid with clean electricity when feasible.

Today, with the proven and affordable renewable energies, such as solar, wind, and bio-gasification, as well as smart meters and micro grids, and also with the existing energy infrastructure, especially grid connectivity at village level, rural households, more than ever, are given an unprecedented opportunity to become electricity Prosumer. They consume electricity and energy while in the meantime, by installing renewable energy facilities at roof-tops and in their peripheries, they also become electricity producer. Such clean electricity can be sold back to the grids, reducing rural household energy bill and earning income.

Such a trend requires knowledge, expertise, business skills, as well as finance. This creates jobs, as well as incubates entrepreneurship in rural China, such as energy service companies, that are needed to help design, develop, install, M&O, and other services. Jobs become good payment jobs.

Finance is crucial. Besides public finance, such schemes do not necessarily require government subsidies since they have good business prospect. Government shall provide clear and strong policy incentives and certainties for the market to invest in such projects. Besides, China is rolling out a nation-wide carbon trading schemes and pricing carbon is being mainstreamed. Rural households and farmers shall be paid for their carbon reduction contribution besides earning from selling clean electricity back to grids. A great sustainable and financail case for financial institutions to jump on.

So, what is the story?

The narrative shall go like this. Now China has committed to achieve carbon neutral before 2060. It sets a strongest policy goal and pathway of the world most populous nation towards a net zero carbon by mid-century. Rural population, now still at 580 million, is rapidly being urbanized, supported by much improved infrastructure, including access to energy, can be an important part of the clean energy revolution, not only to reduce emissions, but more importantly to become clean energy "prosumer" and turn the "passive" emissions reduction scenario into an income generation source.

The four-decade endeavor by the government in China has laid down the best infrastructure – grid connection – for rural households to be able to best play such a role, though policy details need to be worked out in more details and in design. In the meantime, energy service companies could become one of the best entrepreneurship incubation and business growth opportunities in rural China in the coming decade. Job creation, good-pay job creation, is right up on the political agenda in China too.

Government policies, over the decades, have been geared towards poverty eradication and continued poverty alleviation, which has created large financial capital pool as well as expertise from other regions and business community to support such an endeavour. Effectiveness of those endeavours and also use of the resources are often challenged, partly due to corruption too. But if designed well and implemented effectively, rural China net carbon-zero energy revolution could be turned into a major vehicle to continue to improve rural population's living standard and wellbeing, after being lifted out of exteme poverty (USD 1.90 per capita per day).

Green finance has become a mainstreamed policy goal. China is already the world largest green bond issuers and attracting more capital to be invested in clean energy and ecological protection. Rural clean energy projects, often in the format of distributed model and small in scale on individual project, shall be pooled in package to scale and also designed to meet bank loaning criteria. Besides, there are specialized banks for rural China development too. What's required now is how to design together investable projects. Of course, this is another case what requires expertise.

If designed effecdtively, net zero-carbon energy rural China projects have their markeable and investable cases that don't require government subsidies. But to get there requires some further work, or even collective wisdom and efforts. Such conclusions can be advocated to both government and business community, including the banking sector, to moblize their actions.