on Markets, Policy, Investment, and Future Pathways
by Eric Martinot
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Renewable Energy Information on Markets, Policy, Investment, and Future Pathways by Eric Martinot |
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New Worldwatch Report (Nov. 2007): Powering China's Development: The Role of Renewable Energy, Eric Martinot and Li Junfeng, Worldwatch Special Report (Washington, DC: 2007). A comprehensive and in-depth description of the current situation and analysis of future prospects for all renewables technologies, including policies, market trends, industry development, and future targets and scenarios. Includes introduction to the general energy and environment situation in China. Available for purchase in PDF ($10) or hardcopy ($20). (Executive summary given on linked page.) There is also a free Chinese translation available. An English summary version appears in Renewable Energy World January/February 2008.
New Policy Document: Medium and Long-Term Development Plan for Renewable Energy in China (unofficial draft translation). The Chinese government in September 2007 finalized its long-term plan and targets for renewables to 2020. This plan has been under development for the past few years. Most targets are the same as have been previously announced, but the overall share of renewable energy in 2020 was revised slightly downward to 15%, from the previously discussed target of 16%.
New Report: Report on the Development of the Photovoltaic Industry in China (2006-2007), Zhao YW, Wang SC, Wang WJ, Li XD, Liu ZM, Qiu DM, Song S, and G. Ramsay. Comprehensive market and industry report by the China/World Bank/GEF Renewable Energy Development Project (REDP).
New Report: China Solar PV Report 2007. Comprehensive market report by the China Renewable Energy Industries Association, Greenpeace China, the European PV Industry Association, and WWF.
New Report: China Wind Power Report 2007. Comprehensive market report by the China Renewable Energy Industries Association, Greenpeace, and the Global Wind Energy Council.
New Website: China Renewable Energy Information by Frank Haugwitz. Contains a large collection of documents and links on policy, technologies, international projects and programs, energy security, and CDM.
New Website: China Renewable and Alternative Energy News. From the University of Alberta's newly created China Institute. Contains daily news articles from the international and China press. [Note: the news section is currently password protected, apparently just temporarily as site restructuring occurs.]
In February 2005, China passed a groundbreaking law to promote renewable energy. (See "Government to promote renewable energy sources" from China Business Weekly March 17, 2005.) Implementation of the law started January 1, 2006. The law provides a feed-in tariff for some technologies and establishes grid feed-in requirements and standard procedures. It establishes cost-sharing mechanisms so the incremental cost will be shared among utility consumers. It also creates new financing mechanisms and supports rural uses of renewable energy. The law also provides for a long-term development plan, R&D, geographic resource surveys, technology standards, and building codes for integrating solar hot water into new construction.
Full Text of China Renewable Energy Law (in English and Chinese)
Implementing Guidelines (Jan 2006) -- Pricing and Cost-Sharing (non-authorized English translation)
Implementing Guidelines (Jan 2006) -- Management (non-authorized English translation)
Great Wall World Renewable Energy Forum , October 24-26, 2006, Beijing (GWREF). This forum produced an extensive collection of papers on technologies, policy, and finance. A CD-ROM of papers has been produced by the conference organizers. Some selected presentations and papers on the current market and policy situation in China:
World Biofuels Symposium China 2006, September 13-15, Beijing. The conference presentations are only available via password, but one good presentation outlining the Chinese situtation is posted here without password: Yuan ZH, "Biofuels Industry in China: Current Situation and Future."
BEIJING INTERNATIONAL RENEWABLE ENERGY CONFERENCE (BIREC) 2005
The Beijing International Renewable Energy Conference (BIREC 2005) took place November 7-8, 2005. The conference brought together policy makers, NGOs, companies, and many others to discuss the current status of renewable energy worldwide, prospects for international cooperation (especially so-called "South-South" cooperation), and efforts to monitor progress with existing international commitments and programs.
Chinese and international news media covered the conference. Two of the major Chinese-language papers had front-page articles. The English-language China Daily ran the story Renewable energy gets huge outlay on November 8, and then published the full Beijing Declaration and the conference-opening Letter from Chinese President on Novmeber 10. AFP ran the story China to spend 180 billion dollars to boost renewable energy use on November 7. Reuters published the article Global energy meet agrees roadmap on renewables on November 8, following an article on the Renewables 2005 Global Status Report released just prior to the conference Renewable energy investment at record high: report.
During the conference, China announced a target of 15% of total primary energy from renewables by 2020. This target includes large hydropower, and thus represents an increase from today's existing 7%. (See section on China renewable energy targets below.)
The conference produced the Beijing Declaration. This 3-page document talks about the benefits of renewable energy, including the diversification of risk given fossil-fuel price uncertainties. It emphasizes increased research and development, financing, technology transfer, technical assistance, and international cooperation to enhance policies, markets, technology development, access to finance, entrepreneurship, and integration of renewables with energy efficiency and other clean fuels options. And it refers to further actions to promote renewables and assess global progress, including upcoming meetings of the UN Commission on Sustainable Development.
The BIREC conference followed the Bonn Renewables 2004 Conference , which was the largest renewable energy conference ever held. Attended by over 3000 participants from 150 countries and hundreds of non-governmental and intergovernmental organizations, the conference led to formal commitments by countries and organizations to renewable energy targets, programs, and initiatives. These are encapsulated in the major outcome of the conference, the Action Programme. The Action Programme contains about 200 individual commitments/activities declared by participants. The meeting also produced a short Political Declaration and a Recommeneded Policies document. For a day-by-day report of the meeting and a final summary, see the International Institute for Sustainable Development's Renewables 2004 Bulletin.
FEATURED RESEARCH (IN ENGLISH) ON CURRENT SITUATION AND FUTURE PROSPECTS
Proceedings of the China Renewable Energy Development Strategy Workshop, October 2005, Beijing, organized by Tsinghua University's Institute of Nuclear and New Energy Technology and the Tsinghua-BP Clean Energy Research and Education Center. A collection of papers on current status and future prospects of small hydro, wind, solar PV, solar hot water, biomass power, biofuels, and biogas, plus summary. Text in both English and Chinese.
The future is now: accelerating wind development in China, Jean Ku, Debra Lew, Shi Pengfei, and William Wallace. Renewable Energy World July-August 2005.
OTHER WEB REFERENCES AND DOCUMENTS
China page of National Renewable Energy Laboratory (NREL). Published nine 2-page "fact sheets" in 2004 that provide good summary information on a range of topics, plus publications and other material.
China E-News page of Battelle Pacific Northwest National Laboratory (PNNL) has information on energy, environment, and economy in China, including the article Energizing China's Wind Power Sector.
China Energy Studies Group of Lawrence Berkeley National Laboratory (LBNL). Extensive energy statistics and studies of energy efficiency in buildings and industry, including the China Energy Databook and policy studies.
Center for Resource Solutions. Policy studies on renewable energy, including international comparisons, many targeted to China's ongoing policy development.
Energy Foundation Beijing. Policy studies and ongoing programs to support renewable energy in China.
From quantity to quality: how China's solar thermal industry will need to face up to market challenges, Li Hua, Renewable Energy World January-February 2005.
China's solar thermal industry, Li Hua, Renewable Energy World 5(4): 99-107 (July-August 2002).
China "Brightness" and "Township Electrification" programs, Ma Shenghong, presentation at Renewables 2004 conference, Bonn, Germany, June 2004.
China Renewable Energy Overview (China World Bank/GEF Renewable Energy Development Project, Beijing, 2005).
Renewable Energy Development in China: The Potential and the Challenges, Zhang Zhengmin, Wang Qingyi, Zhuang Xing, Jan Hamrin, Seth Baruch (Center for Resource Solutions, san Francisco, and Energy Foundation, Beijing, undated, circa 2000).
Energy in China: Transportation, Electric Power, and Fuel Markets, Report APEC#204-RE-01.2 (Asia Pacific Energy Research Center, Tokyo, 2004). [send to email jt@apec.org for a copy]
"World Bank energy projects in China: Influences on environmental protection," Eric Martinot, Energy Policy 29(8): 581-594 (2001). Provides a general framework of 15 strategies for reducing environmental impacts of energy in China (looking at energy/environment linkages), and then evaluates World Bank energy projects from 1982-2000 within this framework, analyzing the extent to which projects have contributed to environmental technology and policy. Copyright 2001 Elsevier Science Ltd.
Wind Power Industry Development in China (China World Bank/GEF CRESP project, Beijing, 2005).
Chinese PV Industry Development Report (GEF/World Bank China Renewable Energy Development Project, Beijing, 2004).
Overview of renewable energy in China 2005, Li Junfeng and Shi Lishan, eds. (China Renewable Energy Industries Association, Beijing, 2005).
Research report on development of China¡¯s solar hot water industry, Luo Zhentao and Shi Lishan (China UNDP/GEF Renewable Energy Capacity Building Project, Beijing, 2004, in Chinese).
PV industry report (China World Bank/GEF REDP Project, Beijing, 2004).
Small Hydro Power: China's Practice, Tong Jiandong (China WaterPower Press, Beijing, 2004).
Renewable energy for rural sustainability: lessons from China, Aiming Zhou and John Byrne. Bulletin of Science, Technology & Society 22(2):123-131 (2002). Rural energy needs, resources, options, economics, and policies.
The econoimcs of sustainable energy for rural development: a study of renewable energy in rural China, John Byrne, Bo Shen, and William Wallace. Energy Policy 26(1): 45-54 (1998).
CHINESE ORGANIZATIONS, PROJECTS, AND WEB SITES [ENGLISH VERSIONS]
China Renewable Energy Industries Association
China New Energy Chamber of Commerce
China UNDP/GEF Renewable Energy Commercialization Project
China World Bank/GEF Renewable Energy Scale-Up Project (CRESP)
China World Bank/GEF Renewable Energy Development Project (REDP)
Energy Foundation China Renewable Energy Programs
China Energy Research Institute, National Development and Reform Commission
EU-China Energy and Environment Program (A number of good links some background info.)
GTZ Renewable Energy Projects in China
Jiangsu Province Renewable Energy Association
Nanjing University Eco-Materials and Renewable Energy Research Center
| 2006 actual | 2010 target | 2020 target | |
| Hydro power | 130 GW | 190 GW | 300 GW |
| Wind power | 2.6 GW | 5 GW | 30 GW |
| Biomass power | 2 GW | 5 GW | 30 GW |
| Solar PV | 0.08 GW | 0.3 GW | 1.8 GW |
| Solar hot water | 100 million m2 | 150 million m2- | 300 million m2 |
| Ethanol | 1 million tons | 2 million tons | 10 million tons |
| Biodiesel | 0.05 million tons | 0.2 million tons- | 2 million tons |
| Biomass pellets | ~ 0 | 1 million tons | 50 million tons |
| Biogas and biomass gassification | 8 billion m3/year | 19 billion m3/year | 44 billion m3/year |
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Share of total primary energy (including large hydropower) | 8% | 10% | 15% |
For comparison, China's total electric power capacity was 620 GW in 2006.
Solar PV
A total of 70 MW solar PV was existing as of end-2005, about 45% of this in rural (off-grid) areas. Communications and industry account for 37%, and consumer products 14%. Grid-connected PV is still marginal, about 3 MW total. The domestic PV market grew relatively slowly in 2005, with about 5 MW added, compared with 10 MW added in 2004. Virtually all domestic solar PV production was exported.
There are varying accounts of solar PV production capacity, but the discrepancies may be partly attributed to differences between annual 2005 production and production capacity existing by year-end, given that production capacity is a moving target, more than doubling or tripling in a single year. Cell production capacity stood at a reported 300 MW by end-2005, up from 65 MW in 2004. (Some reported that cell production capacity was as high as 400 MW by end-2005.) There was 150-200 MW of cells produced during 2005, about 9-12% of global solar PV production of 1700 MW in 2005.
Module production capacity stood at a reported 400 MW by end-2005, up from 100 MW in 2004. (Some reported that module production capacity was as high as 500 MW by end-2005.) There was about 250 MW of modules produced during 2005, about 15% of global solar PV production of 1700 MW in 2005.
Chinese solar PV companies are becoming very ambitious in their investment and expansion plans. In December 2005, Suntech Power started operating a new solar production facility of capacity 150 MW. Suntech planned to increase production capacity to 240 MW by mid-2006. Chinese Electrical Equipment Group (CEEG) plans to invest in new production capacity of 600 MW by 2008 and 1500 MW by 2010. Tianwei Yingli New Energy Resource Co. plans to invest 3 billion RMB in new production capacity of 500 MW by 2008. Total investment by these three companies -- Suntech, CEEG, and Tianwei Yingli, might exceed 10 billion RMB ($1.3 billion) by the 2008-2010 timeframe. Other companies are entering the picture, such as Jiangxi LDK Solar Hi-Tech, a wafer manufacturer with a currently installed capacity of about 100 MW, but with plans to increase that capacity to 1000 MW by 2010. Considering all companies and announced plans, some industry observers believe solar PV production capacity in China will reach more than 2000 MW by 2010. Other observers are even more optimistic: one estimate was for cell production capacity to reach more than 1400 GW by the end of 2006 (up from 300 MW in 2005), with more than 15 major manufacturers expected to be producing cells by the end of 2006. Current reported PV investment plans, in MW of production capacity (Wang Sicheng, GWREF2006 presentation, October 2006):
Planned additions to PV production capacity:
| Company | Capacity |
| Suntech | 500 MW |
| Baoding Tianwei-Yingli | 500 MW |
| Nanjing PV Tech | 600 MW |
| Ningbo | 100 MW |
| Trina Solar | 100 MW |
| Xian Jiayang | 100 MW |
| Jiangsu Linyang | 100 MW |
| Total | 2000 MW |
Wind Power
Wind power capacity existing went from 770 MW in 2004 to 1270 MW in 2005, an increase of 500 MW in 2005. There is one primary domestic manufacturer, Goldwind, which had a market share of 26.4% in 2005. Gamesa, GE Wind, and Vestas were the principal foreign manufacturers in China, with market shares of 35.7%, 18.5%, and 14.6% respectively. Two other Chinese manufacturers had small market shares: Windey (1.4%) and Dong Fang Steam Turbine Works (1.2%). A few turbines were reported produced by two other Chinese manufacturers in 2005: Harbin Hafei Winwind and the Wind Energy Research Institute of the Shenyang University of Technology.
"Big players" such as GE, Suzlon, Gamesa, Acciona, and Shanghai Electrical Equipment are bringing new competencies to the wind market, including technology, finance, marketing, and production scale, at a time when these competencies are what are needed for the market to continue to grow. All the foreign manufacturers were establishing new production facilities in China during 2005, all as 100% subsidiaries, with the exception of Acciona, which established a 50/50 joint venture.
Several other domestic Chinese companies are trying to enter the wind industry. In 2004, five large electrical, aerospace, and power generation equipment companies started to develop wind turbine technology (*). Four signed technology transfer contracts with foreign companies to get MW-scale production licenses and all had planned to produce their first prototype turbines in 2005. These five companies are Dongfang (Eastern) Turbine Factory, Dalian Heavy Machinery Manufacturing, Baoding Huiyang Aviation Airscrew Factory, Harbin Power Plant Equipment Group Corporation, and Shanghai Electric Equipment Manufacturing. Shanghai Electrical Equipment might be considered the equivalent of ABB or GE in China. Dongfang Turbine Factory is one of the largest producers of steam turbines in China, with a staff of 7000. Dongfang started producing turbines in 2005. Harbin Power Plant Equipment Corp. is one of the biggest producers of electrical generators in China. Harbin finished a prototype 1.2-MW turbine and completed testing in early 2006, with production due to start later in 2006. Harbin claims that the turbine was developed independently and is entirely their own intellectual property -- the first such case by a domestic manufacturer.
Hunan Xiangdian Electrical Engineering Co. commissioned a 1.3MW turbine in Liaoning in 2005, and could be ready to begin manufacturing. This company also finished a 1.5 MW prototype. Hunan Xiangdian was one of two major Chinese electrical equipment manufacturers that was being supported by the government to develop wind turbine technology.
By late 2006 there were an estimated 30 manufacturers of wind turbines in China, either producing a product or getting ready to produce a product, including 24 domestic firms and 6 foreign firms. So the number of market participants in 2006 is expected to greatly exceed the number from 2005.
In 2003, China began a policy of competitively-bid wind ¡°concessions.¡± Five projects were awarded after two rounds of bidding in 2003 and 2004. The total capacity of the five projects is 550-850 MW, depending on bid options exercised. Bidding continued in 2005 with 3 projects of total capacity of 650 MW, and is continuing in 2006 with 3 projects of 1000 MW. Altogether, total capacity from the four rounds of bidding from 2003-2006 could total up to 2450 MW. The bid evaluation criteria were changed in 2005; notably, the bid evaluation weighting assigned to price was reduced from 40% to 30%. The preferential tariffs awarded during the process of concession bidding apply to the first 3 billion kWh of electricity production, which for a 100 MW facility could be 12-15 years. After that (concession lifetimes are 25 years), local grid tariffs (non-concessional) would apply.
Awarded power prices for the concessions were in the range of 0.46 to 0.60 RMB/kWh in 2005, and 0.42 to 0.50 RMB/kWh in 2006.
Concession awards require that wind turbines be produced domestically, with a minimum "domestic content" of 70%. Also recently, Chinese customs rulings have started to favor domestic production of wind turbines, with 3% import duty for individual parts, 8% for assembled components, and 17% for entire pre-assembled turbines.
To increase the attractiveness of wind energy projects in China, the VAT for wind generation equipment has been lowered from 17% to 8.5% and income tax for wind projects from 33% to 15%.
Hydro Power
Hydro capacity increased to 116 GW in 2005, up from 105 GW in 2004 (generating 330 TWh in 2004). These figures include about 38 GW of small hydro in 2005 and about 34 GW of small hydro in 2004 (generating 98 TWh in 2004). Hydro represented about 23% of China's total power capacity of 510 GW in 2005. Small hydro has grown from 25 GW in 2000.
Biomass Power
Biomass power generation capacity is small in China, about 2000 MW in 2005, down from 2300 MW in 2004, partly because of the high costs and difficulties of transporting biomass feedstocks to central locations, and the need for better combustion technology. The main feedstocks are deteriorated (rotted) grain.
Solar Hot Water
Solar hot water sales continue to boom. The estimation of the total sales volume in 2005 is 15 million m2 about 70% below a price of RMB 1500. The glass vacuum tube solar water heater was the most common type in the Chinese market, with a market share of 88% in 2003 and an average growth rate of 56% since 1999. Ten brands of solar water heaters had annual sale volumes of over 100 million RMB, including Anhui Liguang, Lianyungang Taiyangyu Company, Nantong Sangxia Company, Guangdong Jiaputong Company, Yunnan Tongle Company and Shandong Sangle Company. But the market is still high diverse, as those top-ten brands had a combined market share of only 20%. There are more than 5000 manufacturers throughout the country. Some famous household appliance enterprises from outside the sector have also recently entered the solar hot water market, including Haier, Ocma, and Huati.
The cost of Chinese solar hot water heaters appears to be an order of magnitude cheaper than European counterparts. In 2002, 70% of all solar hot water heaters were sold at prices below RMB 1500 ($180), which given typical sizes of 2m2, comes to $100/m2. These systems comprise typically 2 m2 of vacuum tube collectors, a 180-liter storage tank, and an open circulation system, suitable for warmer regions. The most expensive, top-quality systems, at sizes from 4-6m2 with forced circulation and electrical backup, cost $300/m2. In 2001, 976 million m2 of building area was constructed nationwide. Even assuming that just 2% of this area could be fitted with solar hot water, the annual opportunity for SHW installations is 40 million m2, almost half of the solar hot water existing worldwide today.
Transport Biofuels
Ethanol production was 800,000 tonnes in 2005, about 1 million liters. As of 2005, there were four provinces, Heilongjiang, Jilin,Liaoning, and Henan, which required ethanol to be mixed with gasoline in a 10% ratio (E10). An additional four provinces -- Hebei, Anhui, Hubei, Shandong and Jiangsu -- required E10 blending in major cities only.
Rural (Off-Grid) Renewables
Reportedly, in 2006, there remained only an estimated 4-5 million unelectrified households in rural areas of China, representing about 15 million people. (These numbers are significantly lower than estimates of just a few years ago, which were 7 million households and 28 million people.) Following past programs, the Chinese government in 2006 was planning further village electrification programs through 2015 that would be designed to achieve full rural electrification of these remaining populations.
There are now an estimated 600,000 to 650,000 solar home systems installed in rural areas. The China REDP project had installed 350,000 systems by 2005. The Township Electrification program added 15 MW of PV-wind hybrid systems. So 10 MW of SHS, assuming 25W systems, is 400,000 systems. Checking the numbers: China had 150,000 SHS as of 2000 (Martinot et al 2002). Li et al (2005) say there is 30 MW of PV in off-grid applications . 2002=83,000 SHS installed, 2003=75,000 installed, 2004=130,000 systems installed (+ non -REDP). Assuming 50,000 in 2001, then 2004 existing = 478,000. More than 120,000 were added in 2005. By end-2003, 410,000 cumulative in six Western provinces, says REDP report. So the total would be 540,000 by end-2004 and 660,000 by end-2005.
More than 350,000 solar home systems have been sold for cash in rural areas of China since 2002 under the World Bank/GEF Renewable Energy Development Project. Total sales in 2004 was 130,000 systems and 120,000 in 2005. Typical system size is 20 Wp. 25 dealers are certified to participate in the project and another 25 dealers have applied. A typical 20 Wp system sells for around 850-1000 RMB ($100-125).
China has had major projects for rural electrification in recent years. The Township Electrification program electrified about 1.3 million people (300,000 households) in less than two years, from 2002-2004, including 990 townships. About 900,000 people in 270 townships were served with small hydro and the remaining 350,000 people in 720 townships were served with PV and PV-wind hybrid systems (typical sizes 30-150 kW). Total investment for the Township Electrification program was 4.7 billion RMB ($600 million), divided into two phases of roughly equal investment. Most of the installations were either small hydro (290 MW), or hybrid village-scale solar PV systems (15.4 MW).
Under the "Brightness Program," pilot projects during 2001-2004 installed 5500 household wind/PV systems in Inner Mongolia, 10,000 SHS and 3 village-scale PV systems in Gansu, 6 village-scale PV systems in Tibet (6 kW), 11,000 SHS in Tibet, and 30 x 5kW village-scale PV. So total perhaps 30,000 SHS and 40 village-scale PV systems from the Brightness program. Other provinces in the program included Xinjiang and Qinghai.
Household-scale biogas for rural home lighting and cooking is a wide-spread application in China. About 17 million households have household-scale biogas digesters. Total biogas production was 8 billion m3 in 2005, including about 1500 industrial scale biogas installations. A typical household-scale digester, sized 6-8 m3, produces 300 m3 of biogas per year and costs 1500-2000 RMB ($200-250), depending on the province. Because digesters are a simple technology, there is no need for advanced expertise, and they can be supplied by local small companies. Farmers, after receiving training, can build the digesters themselves. A new government program, started in 2002, provides 1 billion RMB annually as subsidies to farmers who build their own digester. The subsidy is 800 RMB per digester. Some estimate that more than 1 million biogas digesters are being produced each year.
There are about 200,000 stand-alone small wind turbines serving rural households, primarily in Inner Mongolia, with total capacity of about 35 MW (an average of 170 watts each).
Page updated August 10, 2008
Photo credits C. Babcock, W. Gretz and
DOE/NREL Photo Information Exchange