Investment Estimation in the Energy and Power Sector towards Carbon Neutrality Target: A Case Study of China

Abstract

The transition towards low-carbon energy and power has been extensively studied by research institutions and scholars. However, the investment demand during the transition process has received insufficient attention. To address this gap, an energy investment estimation method is proposed in this paper, which takes the unit construction costs and potential development of major technology in the energy and power sector as input. The proposed estimation method can comprehensively assess the investment demand for various energy sources in different years, including coal, oil, natural gas, biomass, power, and hydrogen energy. Specifically, we applied this method to estimate the investment demand of China’s energy and power sector from 2020 to 2060 at five year intervals. The results indicate that China’s cumulative energy investment demand over this period is approximately 127 trillion CNY, with the power sector accounting for the largest proportion at 92.35%, or approximately 117 trillion CNY. The calculated cumulative investment demand is consistent with the findings of several influential research institutions, providing validation for the proposed method.

1. Introduction

After signing the Paris Agreement, 137 countries pledged to reach carbon neutrality. Developed countries generally set 2050 as the target year, with a few opting for an earlier time frame such as 2045, 2040, or even 2035 [1]. Princeton University proposed five pathways for reaching net-zero emissions by 2050: high electrification, low electrification, high biomass, renewable limited, and 100% renewable [2]. Climact presented more than ten scenarios for the European Union to reach net-zero emissions by 2050, including the shared efforts scenario, technology scenario, and demand-focus scenario, etc. [3]. The Department for Business, Energy & Industrial Strategy set a goal for the UK’s energy system to reach net-zero emissions by 2050. By 2050, clean energy generation is expected to be four times higher than current levels; the power generation structure will be dominated by renewable energy, nuclear energy, gas power and carbon capture, utilization, and storage (CCUS), supplemented by hydrogen power and international power purchases [4]. However, the investment demands of the energy and power sector to achieve carbon neutrality or net-zero emissions have not been explicitly calculated [5].

At the Climate Ambition Summit in September 2020, China announced its goal to achieve carbon neutrality by 2060. As the world’s largest energy consumer and carbon emitter, accounting for over a quarter of global carbon dioxide emissions with nearly 90% originating from energy-related activities, many research institutions and scholars have studied the low-carbon transition pathway for China’s energy and power sector. These studies include “Research on China’s Carbon Emission Pathway Under 1.5 °C Target” [6], “China’s Energy and Electric Development Plan in 2030 and Its Prospect in 2060” [7], “Comprehensive Report of China’s Carbon Neutrality” [8], “China’s Carbon Emission Pathway Under the Carbon Neutrality Target” [9], etc. [10,11,12,13]. The above studies provide insight into the low-carbon transition pathways for China’s energy and power sector under different scenarios, but do not further quantify the investment demand for the transition. The financial aspect is a crucial concern in global climate governance, and the scale of finance has always been the core of international negotiation and cooperation on climate change. Therefore, it is essential to quantify the investment demand of China’s energy and power sector during the low-carbon transition. On the one hand, financial policies can be made in advance to guarantee low-carbon growth. On the other hand, it can serve as a reference for energy investors.

Goldman Sachs (GS) estimated that China will have $16 trillion in investment opportunities in infrastructure towards the carbon neutrality target by 2060 [14]. The Global Energy Interconnection Development and Cooperation Organization (GEIDCO) put forward that the cumulative investment in China’s energy and power sector will be about 122 trillion CNY between 2020 and 2060, accounting for 1.2% of its GDP [15]. The Boston Consulting Group (BCG) stated that 90 to 100 trillion CNY, equivalent to 2% of the cumulative GDP, will be needed to achieve the 1.5 °C target by 2050 [16]. The International Energy Agency (IEA) proposed that under the Announced Pledges Scenario (APS), energy-related investments will reach $640 billion in 2030, and $900 billion in 2060 [17]. Although the above studies provide the value of the investment demand, they do not provide the calculation basis.

Furthermore, The Institute of Climate Change and Sustainable Development of Tsinghua University (ICCSD) categorized energy investment into two types: energy supply investment and energy demand investment. The energy supply investment is calculated by the China Energy Infrastructure Investment Model, while the energy demand investment in the industrial, building, and transportation sectors is calculated separately. The accumulative investment demand from 2020 to 2050 is estimated to be 7.051 billion CNY, 9.969 billion CNY, 12.724 billion CNY, and 17.438 billion CNY, respectively, under policy scenario, enhanced policy scenario, 2 °C target scenario, and 1.5 °C target scenario [18]. Zhou et al. employed the state-of-the-art global integrated assessment model (MESSAGEix-GLOBIOM) to calculate China’s annual average energy investment from 2016 to 2050 under different scenarios. The results show that the investment demand under the continuation of current trends (CPol) scenario and recent energy and climate policy pledges (NDC) scenario is similar, approximately 358 billion US$2015/yr. The investment is projected to increase by 23% (440 billion US$2015/yr) under the 2 °C target scenario and 59% (569 billion US$2015/yr) under the 1.5 °C target scenario compared with the CPol scenario [19].

However, the above studies have limitations in calculating energy investment demand. They either provide only the accumulative investment demand or the investment demand for a specific year (2030 or 2060), lacking detailed information on the investment demand of China’s energy and power sector during the low-carbon transition. To address this gap, this paper proposes a comprehensive investment estimation method for the energy and power sector including coal, oil, natural gas, biomass, power, and hydrogen energy, which can provide a detailed analysis of the investment demand in different years towards the carbon neutrality target. The investment demand of China’s energy and power sector from 2020 to 2060 is estimated at a time interval of five years.

The rest of the manuscript is organized as follows. Section 2 presents a methodology for estimating investment demand in the energy and power sector. Section 3 predicts China’s unit construction costs of major technologies in the energy and power sector from 2020 to 2060. Section 4 provides China’s potential developments of major technologies. Section 5 calculates China’s investment demand in the energy and power sector towards the carbon neutrality target. Section 6 discusses the impact of unit construction costs on investment demand in the power sector, and the investment prospects for different power generation technologies. Section 7 concludes this paper.

2. Calculation Method of Investment Demand in the Energy and Power Sector

The calculation scope for the investment demand in the energy and power sector is listed in

Table 1. Calculation scope of investment demand in the energy and power sector.

	Related Technologies/Management Projects	Calculation Caliber
Coal	Coal mine construction	Construction investment
Oil	Crude oil extraction	Construction investment
Natural gas	Gas reservoir extraction	Construction investment
Biomass	Biofuel production	Construction investment
Power sector	Power source (coal, coal + carbon capture and storage (CCS), gas, gas + CCS, nuclear, hydropower, wind (onshore and offshore), solar (centralized and distributed), biomass, biomass + CCS)	Construction investment
	Energy storage (pumped storage and battery storage)	Construction investment
	Power grid (intra-provincial grid and inter-provincial grid)	Construction investment
Hydrogen energy	Gray hydrogen production, transportation, storage, etc.	Construction investment
	Blue hydrogen production, transportation, storage, etc.	Construction investment
	Green hydrogen production, transportation, storage, etc.	Construction investment

. The calculation scope includes the construction investment of coal mines, extraction investment of crude oil, extraction investment of gas reservoirs, equipment investment of biofuel production, construction investment in the power sector (including the investment of power sources, energy storage, and power grids), and construction investment of hydrogen energy production, transportation, and storage, etc.

2.1. Investment of Coal

The primary component of coal investment is the construction investment of coal mines, including the acquisition, construction, and installation of fixed assets such as building and structure construction, machinery and equipment installation, and a series of other related work. The calculation method is shown in Equation (1).

$$I_{coal}={\displaystyle \sum _{n=1}^N{i}_{coal}^n\ast p_{coal}^n}$$

(1)

where, $I_{coal}$ is the investment of coal in N years, CNY; $i_{coal}^n$ is the unit construction investment of coal mine in nth year, CNY/ton of standard coal equivalent (tce); $p_{coal}^n$ is the newly increased capacity of coal in nth year, tce.

2.2. Investment of Oil

The primary component of oil investment is the investment in crude oil extraction, which encompasses geological exploration, oil recovery, and refining processes. The calculation method is shown in Equation (2).

$$I_{oil}={\displaystyle \sum _{n=1}^N{i}_{oil}^n\ast p_{oil}^n}$$

(2)

where, $I_{oil}$ is the investment of oil in N years, CNY; $i_{oil}^n$ is the unit extraction investment of crude oil in nth year, CNY/tce; $p_{oil}^n$ is the newly increased capacity of oil in nth year, tce.

2.3. Investment of Natural Gas

The primary component of natural gas investment is the extraction investment in gas reservoirs, excluding the natural gas stored in the same layer as crude oil. The calculation method is shown in Equation (3).

$$I_{gas}={\displaystyle \sum _{n=1}^N{i}_{gas}^n\ast p_{gas}^n}$$

(3)

where, $I_{gas}$ is the investment of natural gas in N years, CNY; $i_{gas}^n$ is the unit extraction investment of gas reservoir in nth year, CNY/tce; $p_{gas}^n$ is the newly increased capacity of natural gas in nth year, tce.

2.4. Investment of Biomass

The primary component of biomass investment is the equipment investment in biofuel production, encompassing the procurement of transesterification kettles, transesterification towers, refining kettles, centrifugal separators, distillation units, exhaust gas treatment systems, etc. The calculation method is shown in Equation (4).

$$I_{bio}={\displaystyle \sum _{n=1}^N{i}_{bio}^n\ast p_{bio}^n}$$

(4)

where, $I_{bio}$ is the biomass investment in N years, CNY; $i_{bio}^n$ is the unit equipment investment of biofuel production in nth year, CNY/tce; $p_{bio}^n$ is the newly increased capacity of biofuel in nth year, tce.

2.5. Investment in the Power Sector

Investment in the power sector encompasses the construction investment in power sources, energy storage, and power grids. The specific components are enumerated in Table 1, and the calculation method is shown in Equation (5).

$$\begin{array}{l}{I}_{elec}=I_{power}+I_{stored}+I_{grid}\\ I_{power}={\displaystyle \sum _{m=1}^M{\displaystyle \sum _{n=1}^N{i}_{powe{r}_m}^n\ast e_{powe{r}_m}^n}}\\ e_{powe{r}_m}^n=E_{powe{r}_m}^n-E_{powe{r}_m}^{n-g}+{\displaystyle \sum \left(E_{powe{r}_m}^{n-\left(power\_lif{e}_m+g\right)\ast j_{power}}-E_{powe{r}_m}^{n-\left(power\_lif{e}_m+g\right)\ast j_{power}-g}\right)}\\ I_{stored}={\displaystyle \sum _{m=1}^M{\displaystyle \sum _{n=1}^N{i}_{store{d}_m}^n\ast e_{store{d}_m}^n}}\\ e_{store{d}_m}^n=E_{store{d}_m}^n-E_{store{d}_m}^{n-g}+{\displaystyle \sum \left(E_{store{d}_m}^{n-\left(power\_lif{e}_m+g\right)\ast j_{stored}}-E_{store{d}_m}^{n-\left(power\_lif{e}_m+g\right)\ast j_{stored}-g}\right)}\\ I_{grid}=I_{gri{d}_{inner}}+I_{gri{d}_{outer}}=I_{power}+\gamma \ast T{C}_{outer}\end{array}$$

(5)

where, $I_{elec}$ is the power sector investment in N years, CNY; $I_{power}$, $I_{stored}$, $I_{grid}$ are the investment of power source, energy storage and power grid in N years, respectively, CNY; $I_{powe{r}_m}$ is the investment of mth power source in N years, CNY; $i_{powe{r}_m}^n$ is the unit investment of mth power source in nth year, CNY/kW; $e_{powe{r}_m}^n$ is the newly installed capacity of mth power source in nth year, kW; $E_{powe{r}_m}^n$ is the total installed capacity of mth power source in nth year, kW; g is the calculated time interval, years; $power\_lif{e}_m$ is the lifetime of mth power source, years; $j_{power}$ is a set of positive integers, the maximum value is achieved when $E_{powe{r}_m}^{n-\left(power\_lif{e}_m+g\right)\ast j_{power}-g}$ is equal to zero; $I_{store{d}_m}$ is the investment of mth energy storage in N years; $i_{store{d}_m}^n$ is the unit investment of mth energy storage in nth year, CNY/kW; $e_{store{d}_m}^n$ is the newly installed capacity of mth energy storage in nth year, kW; $E_{store{d}_m}^n$ is the total installed capacity of mth energy storage in nth year, kW; $stored\_lif{e}_m$ is the lifetime of mth energy storage, years; $j_{stored}$ is a set of positive integers, the maximum value is achieved when $E_{store{d}_m}^{n-\left(power\_lif{e}_m+g\right)\ast j_{stored}-g}$ is equal to zero; $I_{gri{d}_{inner}}$, $I_{gri{d}_{outer}}$ are the investment of intra-regional grid and inter-regional grid in N years, respectively, CNY; $\gamma$ is the coefficient of inter-provincial power grid construction, CNY/kWh; $T{C}_{outer}$ is the trans-provincial transmission capacity, kWh.

2.6. Investment of Hydrogen Energy

The primary components of hydrogen energy investment are constructing hydrogen energy production, transportation, storage, etc. Due to an expected future increase in hydrogen energy production and the significant variability in the cost of different hydrogen productions, the investments of gray, blue, and green hydrogen energy are calculated separately. The calculated method is shown in Equation (6).

$$\begin{array}{ll}\hfill I_{hyd}& =I_{hy{d}_{grey}}+I_{hy{d}_{blue}}+I_{hy{d}_{green}}\\ & ={\displaystyle \sum _{n=1}^N{i}_{hy{d}_{grey}}^n\ast p_{hy{d}_{grey}}^n}+{\displaystyle \sum _{n=1}^N{i}_{hy{d}_{blue}}^n\ast p_{hy{d}_{blue}}^n}+{\displaystyle \sum _{n=1}^N{i}_{hy{d}_{green}}^n\ast p_{hy{d}_{green}}^n}\end{array}$$

(6)

where, $I_{hyd}$, $I_{hy{d}_{grey}}$, $I_{hy{d}_{blue}}$ and $I_{hy{d}_{green}}$ are investment of hydrogen energy, gray hydrogen energy, blue hydrogen energy and green hydrogen energy in N years, respectively, CNY; $i_{hy{d}_{grey}}^n$, $i_{hy{d}_{blue}}^n$, $i_{hy{d}_{green}}^n$ are the unit investment of gray, blue and green hydrogen energy in nth year, respectively, CNY/tce; $p_{hy{d}_{grey}}^n$, $p_{hy{d}_{blue}}^n$, $p_{hy{d}_{green}}^n$ are the newly increased capacity of gray, blue and green hydrogen energy in nth year, respectively, tce.

3. China’s Unit Construction Costs of Major Technologies in the Energy and Power Sector

The unit construction costs of major technologies in the energy and power sector have been estimated based on a synthesis of existing studies and investment data in ongoing or approved coal, oil, and natural gas projects [20,21,22,23,24]. Considering that fossil energy will be phased out under the carbon neutral target, the unit construction costs of coal, oil, and natural gas are assumed to remain constant at 1895 CNY/tce [25], 7871 CNY/tce [26], and 5047 CNY/tce [27], respectively. The unit construction cost of biofuel is set to decrease over time from 2793 CNY/tce in 2020 to 2275 CNY/tce in 2060 [28,29,30]. The unit construction costs of major technologies in the power sector [18,31] are listed in

Table 2. The unit construction costs of major technologies in the power sector (unit: million CNY/MW).

	2020	2025	2030	2035	2040	2045	2050	2055	2060
Coal	4.20	4.12	4.03	3.95	3.87	3.81	3.73	3.66	3.59
Coal + CCS	6.60	6.49	6.37	6.19	6.01	5.82	5.63	5.44	5.25
Natural gas	2.30	2.23	2.14	2.09	2.06	2.03	2.00	1.96	1.93
Natural gas + CCS	3.80	3.62	3.37	3.22	3.09	2.98	2.85	2.73	2.61
Nuclear	15.00	14.77	14.37	13.90	13.42	12.94	12.44	11.94	11.43
Hydropower	14.00	14.21	14.43	14.64	14.86	15.09	15.32	15.54	15.77
Wind (onshore)	7.10	6.73	6.06	5.59	5.30	5.00	4.70	4.40	4.09
Wind (offshore)	14.00	12.33	10.37	9.20	8.52	8.08	7.66	7.24	6.81
Solar (centralized)	5.50	4.87	3.82	3.31	3.16	3.01	2.86	2.70	2.55
Solar (distributed)	5.50	4.83	3.72	3.16	2.97	2.78	2.59	2.40	2.21
Biomass	8.70	8.65	8.53	8.38	8.23	8.07	7.91	7.74	7.57
Biomass + CCS	10.00	9.94	9.80	9.64	9.46	9.28	9.09	8.90	8.71
Pumped storage	6.55	6.69	6.98	7.26	7.45	7.55	7.64	7.74	7.83
Battery storage	3.20	2.61	2.44	2.31	2.18	2.10	1.94	1.82	1.69

, and the unit construction cost of each hydrogen production technology [32,33] is shown in

Table 3. The unit construction cost of each hydrogen production technology (unit: ten thousand CNY/tce).

	2020	2025	2030	2035	2040	2045	2050	2055	2060
Grey hydrogen	3.25	3.25	3.25	3.25	3.25	3.25	3.25	3.25	3.25
Blue hydrogen	3.73	2.49	2.11	2.05	1.99	1.93	1.86	1.80	1.74
Green hydrogen	6.96	4.64	3.15	2.65	2.15	1.82	1.66	1.62	1.61

.

As depicted in Table 2, the unit construction costs of new energy and battery storage are expected to experience a substantial reduction in the medium to long term.

The current unit installation cost of offshore wind power generation is nearly twice that of onshore wind power, but the reduction in the unit installation cost of offshore wind power is anticipated to be more rapid compared with that of onshore wind power between 2020 and 2060. By 2060, the unit installation cost of offshore wind power is projected to be approximately 1.67 times greater than that of onshore wind power. In comparison with the current scenario, the unit installation cost of onshore wind power is expected to decrease by approximately 42.4% by 2060 (from 7.10 million CNY/MW to 4.09 million CNY/MW), with the quickest decrease occurring between 2025 and 2030, during which the unit installation cost is expected to decrease by around 0.67 million CNY/MW. The unit installation cost of offshore wind power is expected to decrease by approximately 51.4% by 2060 (from 14.00 million CNY/MW to 6.81 million CNY/MW), with the fastest decrease also occurring between 2025 and 2030, during which the unit installation cost is expected to decrease by approximately 1.96 million CNY/MW.

As for solar power generation, the unit installation cost of centralized and distributed solar power is essentially the same, at 5.50 million CNY/MW. The rate of decline in unit installation cost for distributed solar power is anticipated to be slightly faster than that of centralized solar power between 2020 and 2060. By 2060, the unit installation cost for centralized solar power is projected to be approximately 1.15 times higher than that of distributed solar power. In comparison with the present, the unit installation cost for centralized solar power is expected to decrease by approximately 53.6% by 2060 (from 5.50 million CNY/MW to 2.55 million CNY/MW). Meanwhile, the unit installation cost for distributed solar power is expected to decrease by approximately 59.2% by 2060 (from 5.50 million CNY/MW to 2.21 million CNY/MW).

Regarding battery storage, the unit installation cost is expected to decrease by 47.2% compared with the current cost by 2060 (from 3.2 million CNY/MW to 1.69 million CNY/MW). The fastest decrease in unit installation cost is projected between 2020 and 2025, with a decrease of about 0.59 million CNY/MW over the five years.

As illustrated in Table 3, the unit construction cost for blue and green hydrogen production is rapidly declining. The rate of decrease for green hydrogen production is faster than that of blue hydrogen. By 2060, the unit construction cost for blue hydrogen production will decrease by 53.4% compared with the current cost (from 3.73 ten thousand CNY/tce to 1.74 ten thousand CNY/tce); while the unit construction cost for green hydrogen production will decrease by 76.9% (from 6.96 ten thousand CNY/tce to 1.61 ten thousand CNY/tce), which only account for 23.1% of the current cost. By 2060, the unit construction cost for blue and green hydrogen production will be similar and significantly lower than that for gray hydrogen production.

4. China’s Potential Developments of Major Technologies in the Energy and Power Sector

The installation of various technologies in the power sector are calculated using the Energy Power Planning Model based on the prediction results of load [18], as depicted in Figure 1. The proportion of renewable energy installations is 43.2%, 50.8%, 56.9%, 64.0%, 72.1%, 79.9%, 85.6%, 88.5%, and 90.0%, respectively, from 2020 to 2060, with intervals of five years. The proportion of renewable energy installations is projected to surpass that of non-renewable energy by 2025.

Furthermore, the primary energy demand from 2020 to 2060 is predicted as shown in Figure 2. The total primary energy demand is projected to reach a peak of 6.28 billion tce in 2035 before decreasing to approximately 5.46 billion tce in 2060.

With regard to hydrogen energy production, total production is expected to increase over time, reaching 2.51 hundred million tce in 2060. The proportion of hydrogen from biomass and electricity is rising and is expected to surpass gray and blue hydrogen in 2045. The specific production of different technologies is shown in Figure 3.

5. China’s Investment Demand in the Energy and Power Sector

The proposed method was applied to estimate China’s energy and power sector investment based on unit construction costs and potential developments of major technologies. The results are presented in

Table 4. Investment demand in the energy and power sector under carbon neutral target (unit: trillion CNY).

		2020–2025	2025–2030	2030–2035	2035–2040	2040–2045	2045–2050	2050–2055	2055–2060	Sum
Coal		0.19	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.19
Oil		0.38	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.38
Natural gas		0.73	0.39	0.15	0.00	0.00	0.00	0.00	0.00	1.26
Biomass		0.10	0.01	0.05	0.06	0.07	0.05	0.06	0.07	0.48
Power	Source	5.25	5.25	7.29	7.67	8.89	7.23	6.88	5.42	53.89
	Storage	0.00	0.11	0.59	0.70	0.76	0.86	0.53	0.50	4.05
	Grid	5.50	5.62	7.83	8.34	9.67	8.06	7.72	6.28	59.01
	Sum	10.75	10.97	15.71	16.71	19.33	16.15	15.12	12.20	116.95
Hydrogen Energy	Grey	1.22	0.06	0.00	0.00	0.00	0.00	0.00	0.00	1.29
	Blue	0.00	0.31	0.42	0.44	0.11	0.00	0.00	0.01	1.28
	Green	0.00	0.53	0.59	0.96	0.95	0.91	0.80	0.05	4.79
	Sum	1.22	0.91	1.01	1.40	1.06	0.91	0.80	0.06	7.37
Sum		13.37	12.28	16.92	18.16	20.45	17.11	15.99	12.33	126.63

and Figure 4, Figure 5 and Figure 6.

The estimated cumulative investment demand in China’s energy and power sector towards carbon neutrality target is about 127 trillion CNY between 2020 and 2060. The demand exhibits an upward trend until 2045, reaching its peak value of 20.45 trillion CNY between 2040 and 2045, before exhibiting a downward trend until 2060. This calculated demand is in line with the projections of several reputable research institutions, such as GS, GEIDCO, and BCG. GS estimates that China will have 112 trillion CNY (rate of USD to RMB set as 7) investment opportunities in infrastructure by 2060. GEIDCO puts forward that the cumulative investment in China’s energy and power sector will be about 122 trillion CNY from 2020 to 2060. BCG provides that 90 to 100 trillion CNY will be required by 2050.

The cumulative investment demand of coal, oil, and natural gas is relatively low, at 0.19 trillion CNY, 0.38 trillion CNY, and 1.26 trillion CNY, respectively. Specifically, the investment demand of coal and oil only occurs in the period from 2020 to 2025. Following the decline in coal and oil capacity after 2025, there is no further need for new investment. The investment demand for natural gas is observed between 2020 and 2035, displaying a decreasing trend.

As depicted in Figure 5, the power sector constitutes the majority of the energy investment demand, accounting for 92.3% with a total of approximately 117 trillion CNY. The investment demand in the power sector exhibits a pattern of reaching its maximum value of 19.33 trillion CNY from 2040 to 2045, followed by a gradual decline. This can be attributed to two factors. (1) The newly increased installation of power sources and energy storage are projected to exhibit a peak between 2040 and 2045 before experiencing a gradual decline and (2) A consistent decrease in the unit construction costs of new energy and battery storage.

In terms of the investment demand by component, the cumulative investment in power sources, energy storage, and power grids is estimated to be 53.89 trillion CNY, 4.05 trillion CNY, and 59.01 trillion CNY, respectively. Notably, the investment in power sources and power grids is expected to show an upward trend before 2045, while energy storage is predicted to exhibit an upward trend prior to 2050.

As depicted in Figure 6, the cumulative investment demand of hydrogen energy is about 7.37 trillion CNY, accounting for 5.81% of the total energy investment. (1) The investment demand of hydrogen energy is expected to decrease from 2040 to 2060, with the minimum being reached in the period between 2055 and 2060. This can be attributed to the fact that the newly increased hydrogen energy production exhibits a peak-to-valley trend, reaching its maximum between 2035 and 2040 before gradually declining and reaching its minimum value between 2055 and 2060. Additionally, the unit construction cost of blue and green hydrogen energy production decreases annually. (2) The investment of gray hydrogen only occurs from 2020 to 2030, with a significant proportion being invested between 2020 and 2025. Meanwhile, blue and green hydrogen investment begins in 2025, with the highest demand observed between 2035 and 2040.

6. Discussion

6.1. Impact of Unit Construction Costs on Investment Demand in the Power Sector

According to the calculation results in Section 5, investment in the power sector accounts for the largest proportion of investment in the energy sector under the carbon neutrality target, as such, this section focuses on analyzing the impact of unit construction costs on investment demand in the power sector. Three scenarios are set as follows: (1) The benchmark scenario, with a cost variation rate of 1.0. The unit construction cost of each technology in the power sector is listed in Table 2. (2) Low-cost variation rate scenario, with a cost variation rate of 0.8 representing 80% of the variation rate of the benchmark scenario. (3) High-cost variation rate scenario, with a cost variation rate of 1.2 representing 120% of the variation rate of the benchmark scenario.

The investment demands of the power sector under the three scenarios were calculated, and the results are shown in

Table 5. Impact of unit construction costs on investment demand in the power sector (unit: trillion CNY).

Cost Variation Rate		2020–2025	2025–2030	2030–2035	2035–2040	2040–2045	2045–2050	2050–2055	2055–2060	Sum
0.8	Source	5.29	5.41	7.71	8.26	9.61	7.96	7.67	6.08	57.98
	Storage	0.00	0.11	0.61	0.73	0.79	0.91	0.56	0.56	4.28
	Grid	5.53	5.77	8.24	8.93	10.38	8.79	8.52	6.94	63.10
	Sum	10.81	11.29	16.57	17.92	20.78	17.65	16.75	13.58	125.36
1.0	Source	5.25	5.25	7.29	7.67	8.89	7.23	6.88	5.42	53.89
	Storage	0.00	0.11	0.59	0.70	0.76	0.86	0.53	0.50	4.05
	Grid	5.50	5.62	7.83	8.34	9.67	8.06	7.72	6.28	59.01
	Sum	10.75	10.97	15.71	16.71	19.33	16.15	15.12	12.20	116.95
1.2	Source	5.22	5.10	6.89	7.11	8.24	6.57	6.16	4.85	50.14
	Storage	0.00	0.10	0.58	0.68	0.73	0.81	0.49	0.46	3.85
	Grid	5.46	5.46	7.43	7.78	9.01	7.40	7.01	5.70	55.26
	Sum	10.68	10.66	14.90	15.58	17.98	14.79	13.67	11.00	109.25

and Figure 7. It was found that the unit construction costs of power sources and energy storage directly impact investment demand in the power sector. In the low-cost variation rate scenario, the power sector would need to increase its investment by 84.1 billion CNY (with increases in power source, energy storage, and power grid investments of 40.9 billion CNY, 2.2 billion CNY, and 40.9 billion CNY) in order to achieve the carbon neutrality target. Conversely, in the high-cost variation rate scenario, the power sector can decrease its investment by 77.0 billion CNY (with decreases in power source, energy storage, and power grid investments of 37.5 billion CNY, 2.1 billion CNY, and 37.5 billion CNY).

6.2. Which Power Generation Technology Is More Suitable for Investment towards Carbon Neutral Target?

In light of the significant investment required to reach the goal of carbon neutrality, the main stakeholders, policymakers, and energy investors are focused on exploring ways to minimize investment costs. With this consideration, this section aims to analyze the investment prospects for various power generation technologies based on the calculation results above.

(1)

Investment analysis of fossil fuel based power generation

In order to achieve the goal of carbon neutrality, the proportion of fossil fuel based power generation is projected to experience a gradual decline. By 2060, coal and natural gas power generation is expected to be largely phased out, with only a limited number of facilities equipped with CCS technology remaining in operation. Given this outlook, investing heavily in these forms of power generation is not advised, especially after 2030. As CCS technology develops, investment in coal + CCS and natural gas + CCS may be considered cautiously after 2035.

(2)

Investment analysis of wind power and solar power generation

Wind power and solar power are poised to emerge as the primary components of the future power system under the carbon neutrality target, with their installation capacity expected to surpass 80% by 2060. The investment prospects for these two technologies are highly favorable, offering broad opportunities for investors.

• Wind power generation vs. solar power generation. From a business model perspective, solar power generation has consumer-oriented attributes, a more diverse range of application scenarios, and lower installation environment requirements compared with wind power generation. From a technological barrier perspective, solar power generation is based on semiconductor technology and progress can be made in multiple stages. In comparison, wind power generation mainly strives to reduce costs through the large-scale deployment of power plants. The investment prospects for solar power generation are slightly higher than for wind power generation.
• Onshore vs. offshore wind power generation. In comparison with offshore wind power, onshore wind power has lower technical requirements and operating costs. However, offshore wind power offers several advantages: higher power generation efficiency, non-consumption of land resources, suitability for large-scale development, proximity to coastal power demand centers, etc. These factors make the investment prospects for offshore wind power generation more promising in the long term, particularly with technological advancements and progress towards carbon neutralization.
• Centralized vs. distributed solar power generation. The investment prospects for distributed solar power are more favorable for medium and small investors due to its attributes of local utilization, minimal requirements for extensive land areas and new power grid lines, being consumer-oriented, etc.

7. Conclusions

An energy investment estimation method is proposed in this paper which takes unit construction costs and potential developments of major technologies in the energy and power sector as inputs. The proposed estimation method can comprehensively assess the investment demand for energy sources in different years, including coal, oil, natural gas, biomass, power, and hydrogen energy. The investment demand of China’s energy and power sector from 2020 to 2060 is estimated at intervals of five years. The main conclusions are summarized as follows:

(1)

The cumulative energy investment demand is estimated to be approximately 127 trillion CNY from 2020 to 2060, with the highest demand at 20.45 trillion CNY in 2040–2045. Investment in the energy and power sector towards carbon neutral target can create ten million new job opportunities and stimulate economic growth for China.

(2)

The cumulative investment demand in the power sector accounts for the largest share, totaling approximately 117 trillion CNY (92.35% of the total energy investment). The investment is mainly concentrated in renewable energy and power grids. The investment demand in the power sector is expected to reach its peak value of 19.33 trillion CNY between 2040 and 2045.

(3)

The cumulative investment demand for coal, oil, and natural gas is very low, only accounting for 1.45% of the total energy investment. In addition, there will be no investment demand for coal and oil after 2025 or natural gas after 2035. The cumulative demand for biomass is about 0.48 trillion CNY, showing little variation from 2030 to 2060.

(4)

The cumulative investment demand for hydrogen energy is estimated at 7.37 trillion CNY, representing 5.82% of the total energy investment. Specifically, the investment demand for grey hydrogen is confined to 2020 to 2030, while the investment demand for blue and green hydrogen will commence in 2025 and peak between 2035 and 2040.

(5)

The investment demand in the power sector is closely related with unit construction costs. Targeted investments in power generation technologies are essential to the carbon neutral target. Investment in fossil fuel based power generation without CCS technology is not recommended, especially after 2030. In contrast, the investment outlook for wind power and solar power generation is highly favorable, with the latter slightly surpassing the former in terms of investment potential.