Energy is a fundamental pillar of economic and social development, as well as a key sector in achieving China’s carbon peaking and carbon neutrality goals. As the global energy mix undergoes accelerated transformation, green and low-carbon development is expanding beyond the replacement of conventional energy sources to encompass the entire energy value chain, including production, transmission, consumption and management. Against this backdrop, ESG principles are becoming increasingly integrated into the development of the power industry, providing a new management perspective for optimising resource allocation, improving operational efficiency and promoting sustainable development across the energy sector.

1. The Green and Low-Carbon Energy Transition: A Key Direction for High-Quality Development

The 15th Five-Year Plan period (2026–2030) is a critical stage for China in achieving its carbon peaking target. The Action Plan for Carbon Peaking during the 15th Five-Year Plan Period, issued by the State Council, identifies the green and low-carbon energy transition as a key priority. It calls for further progress in the green and low-carbon transformation of industries, while better balancing energy security with economic and social development.

According to the targets set out in the Action Plan, by 2030, China's carbon dioxide emissions per unit of GDP are expected to decrease by 17% compared with 2025, while non-fossil energy is expected to account for 25% of total energy consumption, ensuring that the country's carbon peaking target is achieved as scheduled.

To achieve these objectives, the Action Plan sets out five areas of priority: accelerating the optimisation of the energy mix; promoting the green and low-carbon transformation of industries; deepening the transition in key sectors; strengthening supporting measures; and mobilising collective efforts from all stakeholders. It also identifies several key initiatives, including interprovincial power exchange and mutual support, cleaner alternatives to coal consumption, energy-saving and carbon-reduction upgrades in key industries, low-carbon and zero-carbon heating and cooling, and green lighting.

This demonstrates that the green and low-carbon energy transition is not simply a matter of adjusting the structure of energy production. Rather, it is a systematic undertaking involving power infrastructure, industrial technologies, market mechanisms and management systems.

（Source: State Grid Corporation of China）

2. Developing a New-Type Power System to Support the Energy Transition

With the continued expansion of installed wind and solar power capacity, the structure of electricity generation and the operating patterns of power systems are undergoing profound changes. The variable and intermittent nature of renewable energy generation places higher demands on grid flexibility, electricity resource allocation, and the safe and stable operation of power systems.

The development of a new-type power system requires coordinated planning across multiple elements, including power generation, electricity grids, demand and energy storage, in order to improve the overall integration, flexibility and coordination of the system.

On the one hand, investment in and upgrades to grid infrastructure need to be accelerated to strengthen cross-regional electricity transmission and mutual support, enabling clean energy to be allocated more efficiently across wider geographical areas. On the other hand, integrated development of power sources, grids, loads and energy storage is essential. Through energy storage, flexible adjustment resources and intelligent dispatch, the power system can improve its capacity to accommodate renewable energy and move away from the traditional model of generation following demand towards coordinated interaction between power sources, grids, loads and storage.

Furthermore, coordinated planning across electricity, computing power, communications and water supply infrastructure is becoming increasingly important. As artificial intelligence and the digital economy continue to develop, the energy demand of computing infrastructure is growing. Promoting coordination between computing power, electricity and carbon management, together with the integration of energy flows and information flows, will become an important means of improving the efficiency of energy resource allocation.

3. Three Core Dimensions of ESG in the Power Industry

The three ESG dimensions – Environmental, Social and Governance – are closely connected with the operations and transformation of the power industry.

• Environmental: Promoting Clean Energy and Efficient Resource Utilisation
  The environmental dimension focuses on issues such as carbon emissions, energy efficiency, pollutant emissions, land and water resource utilisation, and ecological protection. For power companies, this involves not only improving the development and utilisation of clean energy sources such as wind and solar power, but also promoting the clean and efficient use of conventional energy and reducing energy consumption in equipment and production processes.
  In corporate electricity management, market mechanisms such as green electricity trading and green electricity certificates provide users with ways to identify and demonstrate their consumption of renewable electricity. Companies can also establish greenhouse gas accounting systems to identify emissions across Scope 1, Scope 2 and Scope 3, thereby clarifying their priorities for emissions reduction.
• Social: Ensuring Workplace Safety and Promoting Supply Chain Collaboration
  The power industry plays a vital role in people's livelihoods and the wider economy. Ensuring a safe and reliable electricity supply is therefore one of its key social responsibilities. Occupational health and safety, construction safety, equipment reliability, customer service and supply chain responsibility are all important aspects of ESG management for power companies.
  From engineering, construction and equipment manufacturing to on-site installation, operation and maintenance, companies need to safeguard the occupational health and safety of employees and contractors, strengthen quality management and risk control, and encourage supply chain partners to improve their own responsible business practices.
• Governance: Strengthening Management Standards and Information Transparency
  The power industry involves multiple stages, stakeholders and complex supply chains. Sound governance mechanisms help companies improve operational transparency and strengthen their ability to manage risks. Companies need to establish clear ESG responsibilities and improve internal controls, business ethics, regulatory compliance and data management. Through standardised sustainability reporting, they can also communicate their sustainability performance to investors, customers and other stakeholders.
  For manufacturers and suppliers of power equipment, product quality, technical standards, procurement management, production process control and after-sales services are also essential components of corporate governance and responsible business management.

4. From Energy Transition to Industrial Collaboration: New Opportunities Created by ESG

The green and low-carbon energy transition is driving changes throughout the power industry value chain. The large-scale integration of renewable energy requires more adaptable grid equipment and regulation technologies. Grid upgrades and modernisation place higher demands on equipment safety, reliability and operational efficiency. Meanwhile, digital and intelligent technologies are creating new opportunities for more sophisticated energy system management.

At the same time, developments in green finance, sustainability disclosure and ESG assessments of supply chains mean that companies' capabilities in green technologies, product quality and standardised management may increasingly influence their opportunities for market cooperation and business development.

ESG should therefore not be viewed merely as a framework for external corporate reporting and assessment. It should also serve as an important approach to promoting technological progress, management optimisation and collaboration across the power industry value chain.

Looking ahead, as the development of China's new energy system and new-type power system continues, DKNC is committed to continuously strengthening its capabilities in environmental performance, safety responsibility and sound corporate governance. Through technological innovation and management improvements, DKNC aims to contribute to the green and low-carbon transition of the energy sector.

Sources: National Development and Reform Commission, National Energy Administration, People’s Daily