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Smart cooling solutions: Exploring the role of demand-side management in China

Smart cooling solutions: Exploring the role of demand-side management in China

Although China is no stranger to hot summers, last year’s unprecedented heat wave was something it didn’t see coming. Over two months, more than 900 million people in 17 provinces were affected by the relentlessly high temperatures.

As they turned to their air conditioners (ACs) to escape the heat, they found little relief thanks to power outages as demand outstripped supply. This is despite China having the world’s largest installed power capacity, with both coal and renewables.

The long-lasting heat wave created the perfect storm where a surge in cooling demand – which can account for as much as 50% of China’s electricity consumption in peak times – coincided perfectly with a drought-induced shortage of hydropower generation and limited solar energy due to residential cooling demand peaking in the evening.

To reduce electricity demand, factories were forced to close and subways, airports, and hospitals had to shut off their electricity for hours if not days. Residential water supplies were also affected. It’s estimated that the outages cost China’s economy $10 billion and resulted in a 0.5% decline in GDP. This was at a time when the country was still struggling with ongoing Covid-19 restrictions.

Many Chinese cities turned to their coal-fired power plants to boost electricity supply during periods of peak demand. Similarly, many businesses across the country, forced to shut off their electricity supplies during these periods, turned to diesel generators to keep operations going.

As China – and many other parts of the world – works towards net-zero emissions, reliance on fossil fuels to meet peak demand for cooling is a counter-productive and unsustainable long-term strategy.

Managing cooling demand

To date, most of China’s efforts to mitigate this problem have focused on supply-side interventions, such as expanding renewable energy generation and adopting the world’s most stringent efficiency standards for room ACs. However, last summer’s blackouts suggest that China could also benefit from balancing the equation from the other side.

Demand-side management (DSM) involves working with consumers and incentivizing reduced energy use. This approach is typically used during times of high demand but can also help reduce overall energy consumption.

In China, researchers, utility companies, and local governments have supported DSM with the aim of improving energy security.

The Chinese government has already developed DSM plans that would cover 3–5% of the country’s electricity consumption, mostly from industry and cooling in public sector buildings. However, little has been done so far to engage the largest source of China’s cooling demand – the residential sector, where hundreds of millions of ACs could be turned down or off for a short period during peak demand without necessarily reducing residents’ comfort levels.

In addition to helping prevent future power outages, better demand-side management could reduce greenhouse gas emissions, support the clean energy transition, and avoid high utility bills and investments. In fact, reducing demand through consumer engagement could secure savings of $40 billion over ten years in China. The widespread adoption of DSM initiatives could also boost citizen engagement in climate issues.

Despite the significant potential of DSM, there is still much work to do to make it a viable and successful strategy in China.

Huzhou DSM pilot

The Clean Cooling Collaborative has partnered with Energy Foundation China (EF China) to develop a scalable model for energy-efficient, climate-friendly cooling and innovative DSM business models. To test out the concept of demand-side management for cooling in China, EF China is collaborating with Zhejiang University of Technology (ZUT) for a pilot project in Huzhou, in the eastern province of Zhejiang. 

Due to the region’s hot and humid summers, and high level of AC ownership, the local grid has always struggled to meet the surge in demand for AC at peak times, even with substantial solar and wind power generation capacity.

“In Zhejiang, cooling can account for almost 40% of electricity peak demand in summer,” explains Dr. Jiaqian Chen from State Grid Zhejiang Electric Power Company, Ltd. “If cooling DSM was adopted by just one in five users, we could achieve up to 8% grid flexibility, i.e., the whole electricity peak load can be reduced by 8%.”

The pilot, a first of its kind in China, started with about 300 volunteer households across the city. Participants were given a Wi-Fi-enabled plug-in for their AC that allows them to change appliance settings remotely via a smartphone app.

The app enables users to actively monitor the electricity consumption of their AC and adjust its temperature or turn it off to see real-time energy savings. Users can see how much energy they’ve saved and the associated emissions reductions. 

Depending on how the program is developed, the app could enable enhanced interaction with utility companies and integration with the municipal government’s Carbon Talent Platform, which is hosted by Alipay – one of China’s most popular mobile finance and social apps.

Platform users could get “green credits” by participating in the DSM program and exchange them for gifts or a discounted electricity rate. The incentive mechanism is designed to help attract more participants. Currently, AC users will be able to take part in the program without sacrificing indoor comfort by actively controlling their AC use based on their real-time needs, grid instructions, electricity prices, and updated credit award policies.

Over the coming year, there are plans to expand the pilot project to tens of thousands of Huzhou residents. The aim is to make the energy and emissions reductions more meaningful from the city’s perspective and mobilize more support from the municipal government and utility companies. 

A rough estimate suggests that if Huzhou’s 3 million residents participated in the program, it could save nearly 1 million tons of CO₂ emissions, about 300 kg per person per year. That is roughly 4% of China’s per capita emissions.

“With the market for internet-connected ACs growing quickly, we are working with our partners to promote energy and COemission reductions through citizens’ behavior,” says Tan Zheng, Industry Program Officer at EF China. “According to the State Grid Zhejiang Electric Power Company, the province can reduce its AC load by up to 7.3 million kW and 2.9 million kW, respectively, if AC temperatures are set at regulated temperatures of 26° C [78.8° F] in summer and 20° C [68° F] in winter.”

What next?

While this pilot could offer valuable science-based experiments and insights into the potential of demand-side management in China, more research is needed to better understand the climate, social, and economic effects of DSM measures. This will help shed light on how to successfully engage more cooling consumers in the residential sector. 

With ongoing reforms to China’s energy market, a demand-based electricity pricing structure – rather than its current fixed price for residential users – could also help motivate participation in demand-side management programs.

This is a new work area for many stakeholders in China, including funding and implementing partners, policymakers, and utility companies. While there is much to learn, we expect to gain more valuable insights from our partnership with EF China in the coming years.

We will continue to work closely with local partners to help them reduce emissions from one of China’s largest sources without compromising the quality of life of its 1.4 billion residents.

Published July 17, 2023

Tao Wang

China Strategist, Clean Cooling Collaborative