China Speeds Up Renewable Energy Development

Yang Jianxiang
Friday, December 1, 2006

Statistics show that in 2005, a total of US$38 billion was invested in renewable energy development worldwide. China topped the list with a commitment of US$6 billion, excluding spending on large hydropower projects.

China has good reason to speed up its renewable development, as the country is fairly poor in many energy resources in per capita terms. China's proven reserves of petroleum, natural gas and coal could last 15, 30, and 80 years, compared with world averages of 45, 61, and 230 years.

At a Sino-European economic summit held in September in Germany, Chinese Premier Wen Jiabao assured the world that China would rely mainly on domestic supplies to meet energy needs. The government's energy policy would aim to integrate development and conservation, giving priority to the latter.  

China is currently weak on energy efficiency. The eight industries which account for 75% of the country's industrial energy use recorded an average energy consumption 40% higher than the world's advanced standard. Energy-efficient housing in China is just a tiny fraction of urban residential construction. And the energy intensity for heating was two to three times higher than developed countries under similar climates.

China has vowed to cut down on energy consumption per unit of GDP by 20% by the end of 2010. Judging by recent performance, some observers voiced skepticism that the goal could be achieved. But the government has been taking tougher measures.

The new path would have to include energy from renewable resources, which China has in abundance. Exploitation of wind, solar, and biomass energies has just started. China's 61 wind-power plants claimed a total generating capacity of 1.26 million kW in 2005. The 1,500 or so biogas projects resulted in a combined annual capacity of 1.5 billion cubic meters. In addition, 70,000 kW of solar facilities were operational nationwide in 2005.

Compared with China's total capacity of 508 million kW for all forms of energy, however, the overall share of renewables remains small. This means enormous room for development.

In April, Premier Wen Jiabao urged all relevant government departments to take effective measures to accelerate the development of renewable energy, so as to "raise the share of quality, clean energies in the total energy mix." Renewable energy is expected to account for 16% of China's total energy supply by 2020, more than double what it was in 2005.

China's renewable energy development is guaranteed under the nation's first Renewable Energy Law, which came into force on January 1. In February, the government issued a set of rules to implement the law. In addition, officials have decided to raise the rate for electricity consumption by a small fraction that will go toward the development of renewable energy. And in early October, the Ministry of Finance released details of a new fund dedicated to the development of renewable energy sources, which will use grants and interest subsidies to give government support to renewables' development in three main areas: oil alternatives, construction, and power generation.

In general, local government officials are enthusiastic about promoting renewable energy projects. Their motives vary from securing a lucrative source of government tax revenues, building up a "green" government image, to adding a "bright spot" to their work performance records. Factors such as the embrace of new energy technologies now bear considerable weight in an official's promotion.

Jiangsu Province in eastern China is particularly active in the renewable energy game. The prosperous region appears determined to take the lead in wind power exploitation. In less than five years, it plans to boost its wind capacity from virtually zero to 1,500 megawatts. The region is also an important base for the solar industry, where more than 180 companies are involved in the development, manufacturing, and servicing of solar heating appliances.

Shanghai announced earlier this year a plan to build up 100 MW of offshore wind energy capacity. The metropolis hopes to raise it share of renewables  to 5% by 2010. The capital city of Beijing has vowed to lift renewables' share from the present 1% to 4% by 2010.

Companies across China – whether state-owned or private, domestic or foreign-funded – are eager to embrace renewable energy projects. Many believe the sector will soon be a gold mine.

Earlier this year, Longyuan Electric Power, the biggest wind player in China, announced a plan to raise its wind-power generating capacity from an existing 416 MW to 3,000 MW by 2010, and to 7,000 MW by 2020. Other major energy developers like Huaneng, Guodian, and the Three Gorges Corporation have set up subsidiary companies dedicated to new or renewable energy development.

Foreign companies have been active as well. The world's leading wind equipment suppliers – Vestas, GE Energy, Gamesa, and Suzlon – have set up wholly owned manufacturing facilities in China. And seven foreign development banks, including the International Finance Corporation, Germany's DEG, and France's Proparco, have invested in China's renewable energy projects.

The 30,000 MW wind-power goal for 2020 represents a market of US$26.6 billion, and the country's combined renewables targets amount to $100 billion. The coming years are likely to witness rapid development of these energy sources, and the targets might even be reached ahead of schedule, industry analysts say.

Barriers Remain
Yet several major barriers are preventing more rapid development of renewable energy in China. One is the weakness the country has shown in independent technology development. To date, most of the renewables equipment being used – whether for wind power, biomass, or solar – has been imported, resulting in higher production and consumption costs. A recent government study designates energy as the top area needing urgent R&D support, and lists a host of government-supported plans covering key fields of study, cutting-edge technologies, and basic research.

China is one of the 48 countries in the world that have enacted laws for renewable energy development. But industries have given only a cautious welcome to the country's laws and accompanying rules of implementation. For many, the wording is too general to be practical. And some measures remain controversial. For instance, new regulations for wind power decree that the grid feed-in tariffs be decided through a tendering process. The measure has been criticized by industry players, who fear the practice will result in price cuts and thus deny companies a reasonable profit.

Human resources are another problem. According to experts, China aims to engage hundreds of thousands of people in its wind power industry by 2020. The number of specialized workers alone would be in the tens of thousands. But China currently has a very meager supply of such experts. Only one of the country's more than 1,000 institutions of higher learning provides a four-year program dedicated to wind energy. The situation for other renewables is not much better. Solving this problem will require the joint efforts of many government departments and social institutions, experts say.

While the shortage of conventional energy resources is the main driver behind China's push for renewable energy, the country is also making the transition out of environmental concern. The nation's coal-dominated energy system has caused severe pollution in many regions, which has compelled the government to turn to cleaner energy resources.

Jianxiang Yang is a journalist on energy with China Features. This article was coordinated through the Global Environmental Institute (GEI) in Beijing.