The state of energy innovation in China

China’s energy market is opening up, because of the reform of the electricity market, driven by the government in since 2015. Up until then, the market was dominated by two major state-owned energy companies. Now, new energy focused start-ups are coming up at a high pace and China has pledged to invest $360 billion in renewable energy by 2020.

Wherever there is room in the market and investment money is floating around, surely a new ecosystem of conferences, hubs and the like will follow soon. One nice example was last week’s first edition of the Utility Week in China.

Here are our insights on energy innovation in China taken from China’s first Utility week

Reform of the Chinese electricity market is in progress – and start-ups are the way to go

To provide cheap and reliable energy, the Chinese government can do two things: either improve the physical infrastructure or, alternatively, develop more efficient energy markets through utilizing smart energy, storage and trading technologies. The first one has been the preferred strategy for a long time, however, reforms are happening towards an efficient energy market.

Currently, the two state owned grids provide both wholesale & retail electricity and take care of transmission of energy. The wholesale market will be liberalised by allowing non-state owned companies to enter the market, and the market will determine the wholesale and retail tariffs. Meanwhile, the government attempts to bring competition to the retail market. This is already being piloted at the moment in Guangdong Province and Chongqing Municipality. Limitations to real-time balancing of production and consumption will be waived, amongst others by enabling an interprovince electricity exchange.

Figure: Roadmap of retail electricity market reform. Source: IOP Conference Series

In Europe, we’ve seen a major move of smart start-ups that have come up with innovative solutions for peak-demand for example. Utility companies in their turn are collaborating with these start-ups to bring new propositions to the market. China has just started to take this path as well.

China is decentralizing energy – and has some cool start-ups to show for

All over the world, the energy industry is moving from a centralized to a decentralized market, China is no exception. At Utility Week, we’ve scouted some interesting start-ups that are fighting for their spot in this decentralized market:

  • Energo Labs, a Shanghai based start-up, promoting a decentralized and autonomous ecosystem (DAE) through using Blockchain technology and IOT. In this DAE system, community members can engage in peer-to-peer energy trading, machine-to-machine energy trading and vehicle-to-microgrid trading. Imagine your residential battery negotiating the optimal time to charge your electric vehicle directly with the car itself, while you’re having dinner? Doesn’t get much easier than that!
  • Meinergy is another Shanghai based example.  The company aims to create an energy internet network, which includes both home energy management system and grid asset management. Their software can be dubbed as a ‘utility-in-a-box’ solution, providing all components for operation and management of electricity selling companies. Founded in 2016 as a subsidiary of Tellhow, they are cooperating with Tencent Cloud to provide operating solutions for integrated energy companies. Meinergy smartly takes innovation from their offices in Berlin, and tailor this to the Chinese context, what’s not to like?

European start-ups are not shy to enter China

With China’s energy market opening up, overseas companies are taking this opportunity to monetize in China as well. At the China Utility Week we talked to both Tiko and Be-on Energy.

  • Tiko Energy Solutions AG, a Swiss-based company, offers Virtual Power Plant (VPP) and smart home energy management solutions. VPPs are a relatively new concept in China, whereas in Europe the concept has gained significant traction with fast-growing companies like Actility and Next Kraftwerke. The challenge in China however, is to convince the grid operating companies to allow VPP technology, instead of improving the grid infrastructure further.
  • BeON Energy, a Portuguese micro-inverter start-up is already manufacturing their product in China. Residential solar energy generation has not been a hot topic in China so far, and the bulk of solar energy is still being generated by commercial scale plants. This is caused by the low energy price and the domination of apartment buildings in cities. However, with BeON, solar energy can be easily generated from balconies instead of roofs, making it well-positioned to enter China.

We are curious to see what happens next and are following China’s energy market and start-up developments closely.

Want to know more about opportunities in China? Feel free to shoot us an e-mail at nienke@ventureiq.cn.