China and the UK in green energy power play

Bitong Energy brings together the United Kingdom’s Octopus Energy and Chinese-based PCG Power to support the “green transformation” of China’s power market.

Dialogue Earth talked to experts to find out how this could advance China’s low-carbon development – and what benefits it may bring to the UK. 

In late January, British Prime Minister Keir Starmer’s trip to Beijing brought good news for the energy industry – the establishment of Bitong to sell clean energy primarily in south China’s Guangdong province. 

Foreign firms have long operated in the country’s power sector, from equipment suppliers such as Sweden’s ABB to utilities like France’s EDF. 

But participation in market trading is a different proposition. 

The significance of the Octopus move, according to Zhu Linxiao, a policy advisor at UK-based think-tank E3G, lies in its “reverse direction.” Rather than energy expertise being exported from a country that dominates the field globally, China will import it.

World leader

China accounted for 92% of the world’s solar module manufacturing and 82% of wind turbines as of 2024. In 2025, its clean-tech exports surged by 20% to US$222 billion. 

But the deal behind Bitong is “more about software than hardware,” according to Chris Aylett, environment research fellow from UK think-tank Chatham House.

“Octopus is now the biggest player in UK energy. They’re pioneering new technologies to manage energy systems,” Aylett said. 

“Despite China’s now well-recognised status as a world leader in clean tech, there is still demand in China for foreign, and specifically British, expertise and innovation in energy systems and decarbonisation,” he pointed out. 

Zhu also acknowledged that “on the software side,” China still has “gaps compared with the West.” He highlighted Bitong’s rare business model – “Western software plus Chinese hardware operating together” – as a first of its kind.

The equal partnership creates the real “excitement,” according to Gao Hongchao, the principal investigator for China’s National Science and Technology Major Project, who provided consultancy for the cooperation. 

“Overseas capital markets usually value software assets higher than those in the Chinese market, but at least three Chinese companies have similar or even more advanced technical capabilities,” Gao said. “China’s software markets are still in the cultivation stage,” adding:

Octopus offers fresh direction and hope for greater Sino-foreign investment and cooperation.

On the UK side, the economic benefits are straightforward. A statement by Octopus revealed that half of the profits from China will return home.

More important, Aylett said this will be “technological learning gained from exposure to the intricacies of the rapidly changing Chinese energy system.

This should hopefully translate into more powerful tools to efficiently manage the UK’s energy system.

Averting risk

Bitong plans to trade up to 140 terawatt-hours of renewable power per year by 2030 in the Guangdong spot electricity market, “where energy is bought and sold in real time for a smarter, more efficient grid.” China had only seven spot markets in 2022.

The number has recently increased to 29 in trials, with plans to introduce more.

Most electricity trading is still based on fixed medium- to long-term agreements or MLTs. As detailed in an earlier Dialogue Earth article, while MLTs “theoretically have the advantage of stabilising electricity prices and averting risk,” they lack “flexibility for adjustments.”

Zhu said rigid MLTs in China have held back the growth of technologies, such as virtual power plants or VPPs, which can distribute and dispatch energy resources for grids and markets.

“They offer a “very cost-efficient and innovative solution to fix many shortcomings in the power market, [but they need] a highly liberalised power trading market, which China does not have right now,” Zhu said. 

Octopus has an advanced VPP platform, Kraken, which has been exported globally.

Yet, in email exchanges, Octopus confirmed that while Kraken “could in principle be used in China,” they “do not have any plans to do so at the moment.”

Declining to share details, the company described the tech provided for Bitong as “proprietary trading technology, solely focused on improving their trading capabilities.” 

“In any case, bringing in foreign capital and foreign technology” is “definitely a good thing. This is the first step toward competition [in China’s rigid market],” Zhu said.

Gao, who oversees major VPP projects in China, stressed the country has about 15 gigawatts of such flexible capacity. “If we just talk about technology, we have more advantages and cheaper costs,” he said. 

China’s goal, announced last year, is to increase the “VPP-regulated capacity” to more than 50 gigawatts by 2030. Yet, Gao explained that the data regulatory and market environment is China’s main obstacle. 

Data is the “fuel” for running VPPs, he said, because more data yields more precise electricity price predictions and higher VPP revenues. 

Real impact

He added that limited data disclosure in electricity markets and obstacles to dispatching VPPs are “curbing profitability and dampening Chinese firms’ motivation to reinvest in platform upgrades.” 

Since Bitong is no exception in this data environment, Gao questioned whether Kraken’s advantages could be fully demonstrated if used in China.

The “real impact,” he said, is that Octopus “draws open the curtain” for foreign firms entering China’s electricity market. 

“Foreign companies like Octopus Energy have developed strong business models and proven practices from relatively more flexible markets. These can be adapted domestically, providing real momentum to building China’s retail electricity market,” Gao added.

Aylett said that, from a broader perspective, “increasing the efficiency of China’s energy system, and maximising its renewable potential,” can “massively bring down emissions. It will also slow climate change – benefitting not only China and the UK, but the whole world.”

Over recent decades, UK-China cooperation has evolved from state megaprojects to smaller private-sector deals, said Zhu.

In 2015, state-owned China General Nuclear committed to funding the Hinkley Point C nuclear power station in south-west England, and partnering on the Bradwell B station in east England, during President Xi Jinping’s UK visit.

Bradwell B has stalled over national security concerns and Hinkley has been delayed. A recent proposal from China’s Mingyang Smart Energy to set up an offshore wind factory in Ardersier port, north-east Scotland, still awaits UK clearance on safety and security concerns.

“Britain has national investment screening [and China is also] cautious about letting Western companies participate in critical infrastructure, or power market trade tied to national livelihoods,” Zhu pointed out.

Octopus’s joint venture puts itself in a “stronger position,” Aylett, said but added:

It will be interesting to see if other UK energy-technology companies follow Octopus into the Chinese market.

Clean energy

To scale impact, Octopus and other foreign firms may still need to partner with state-owned enterprises, Gao confirmed, noting only about a third of China’s electricity investments are “purely private.”

“We have been conducting electricity market reforms since 2015. With so much clean energy now available in China, a freer market to match supply and demand is certainly welcome, and Octopus’s arrival boosted investment confidence,” he said.

Aylett is convinced that Bitong and Mingyang “bode well for UK-China energy cooperation, especially following the resumption last year of the bilateral energy dialogue.” He added:

I would hope the new commercial ventures can support the ongoing technical and policy work under the government dialogues. Of course, we’ll need to wait and see how successful, and resilient to political tensions, these ventures ultimately prove to be.

Song Wanyuan is a freelance reporter. She is the former China section editor at Carbon Brief and a former journalist at BBC News.

This edited article was originally published on Dialogue Earth under the Creative Commons BY NC ND licence. Read the original here. 

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of China Factor.