On China’s Green Energy Development Strategy

C An Interview with Ren Dongming, Deputy Director of the Center for Renewable Energy

Development of the Energy Research Institute, National Development and Reform Commission

In its Medium- and Long-Term Development Plan for Renewable Energy, drawn up in 2007, China set itself a goal: increase the percentage of renewable energy in its energy consumption to 10 percent by the year 2010, and then 15 percent by 2020. Four percent of that would be in the form of power generated from wind, solar, biomass and other renewable energy sources.

In 2008 hydropower generation alone made up 16 percent of the total amount of the nation’s energy usage, and one percent came from new energies. When hydropower alone surpasses the target for all other forms of renewable energy, 12 years ahead of schedule, how does that impact China’s new energy sector and our perspective on it?

With this question in mind, China Today interviewed Ren Dongming, deputy director of the Center for Renewable Energy Development of the Energy Research Institute, National Development and Reform Commission.

Q: The current development of renewable energy in China does not seem to conform with projections made in the 2007 Energy Plan. What’s your opinion on this disparity?

A: In China we include in the category of renewable energy power generated from hydro, wind, solar, biomass, geothermal and ocean tidal energies. Today the majority of China’s power needs are supplied through coal and hydropower.

In the 2007 Plan China anticipated having 15 percent of its energy consumption met with renewable resources by 2020. These were further broken down as, 30 million kW from wind, 30 million kW from biomass and 1.8 million kW from solar photovoltaic (SPV).

But China was cautious in making that forecast. Take the mature and resource-rich hydropower sector as an example. China built its first hydropower station in Yunnan Province in 1914, and now runs over 230 large and medium-sized stations that produce power from water at a lower cost than coal. In areas with the necessary water resources and sound hydropower generation facilities, the price gap can be as wide as RMB 0.1 per kilowatt-hour (price for coal power averages RMB 0.39 per kilowatt-hour). Today hydropower accounts for about one sixth of China’s overall power supply.

However, China’s larger hydropower projects find themselves increasingly embroiled in environmental disputes. Many environmentalists argue that dams interrupt the flow of rivers, and therefore weaken biodiversity. As the environmental consequences of these constructions are only revealed after many years, or decades, people on all sides of the debate find it difficult to provide solid evidence to support their views, leaving their battle at a stalemate.

These issues have made the government more prudent about its hydropower development. The Ministry of Environmental Protection has intensified the vetting process for hydropower projects before signing off on them, resulting in a decline in the number of projects initiated in recent years. Another consideration is that construction of a reservoir requires the relocation of people in the area, a sensitive social issue. The reservations the Chinese government has toward planning new hydropower developments make it appear they lack a clear strategy for development in the sector.

Q: Does the lower percentage of new energy sources in China’s power consumption imply there is difficulty generating electricity with these new resources?

A: In 2008 China’s production capacity for photovoltaic cells rose to 30 percent of the world’s total, for the first time beating Germany to the top slot. And for two years in succession China-made photovoltaic cells snagged the largest share of the global market in 2007 and 2008, but 98 percent of those cells were sold abroad. For solar technology applications, the most common domestic usage is for heating water; the annual production is 15 million square meters. The production of SPV power is more complicated. The core technologies employed in the manufacturing of polysilicon materials, crucial components of SPV equipment, are still in the grip of foreign enterprises, particularly those based in Germany and Japan. Chinese manufacturers stay at the lower end of the industrial hierarchy, doing little more than processing. Without a technical advantage in the field, China faces exorbitant costs in the generation of SPV power, which translates to higher prices for consumers C RMB 3 to 4 per kilowatt-hour, ten times that of coal power.

SPV power was first used in China in the 1970s, for satellites. China lagged behind world levels in both technology and output in the following decades. It is only in the past five years that major leaps have been made in the realm, spurred on by international demand and a growing desire for new energy at home. But the technical gap remains wide between China and some international counterparts. Globally the solar power industry is still wrestling with hurdles ranging across the high costs (due to technical difficulties), low efficiency and unstable supplies. It remains to be seen if solutions to these problems can be found in the near future.

In contrast to SPV’s, wind power has entered into wide commercial use in China, seeing exponential growth since 2006. With advances in technology and increases in the scale of applications, its costs are falling. Now on-grid pricing for electricity from turbines is about RMB 0.7, merely double that for coal power. According to the current growth rates, China’s wind power generation capacities will far exceed the projected 30 million kW by 2020.

The shortcoming of wind power lies in its lower efficiency levels when compared with hydro, coal and nuclear power. Its availability and density is largely dependent on season and climate, which impose safety risks on the power grid. The state has stipulated that the power grids must accept all the electricity generated from renewable energy. Walking that talk will have to wait until technical limitations are resolved.

Another hindrance is that most wind farms are located in sparsely populated areas, like prairies and deserts, well out of the way of the power grids they must connect to.

Q: Nuclear power is another controversial green energy. China’s nuclear power sector became stagnant a few years ago. Why did it suddenly reemerge in the 2007 Plan?

A: China started planning for nuclear power as early as the 1970s. Today there are three nuclear power bases in China C Qinshan in Zhejiang Province, Dayawan in Guangdong Province and Tianwan in Jiangsu Province. Last year was a landmark for nuclear power when the largest number of generation units in China were sanctioned and launched. That year saw four new projects, comprising 14 one-million-kW-class generating units, being approved, hoisting China’s total number of nuclear facilities to eight.

Nuclear power represents a paltry two percent of China’s power supply at present, but features a sharp competitive edge in price, which now stands between RMB 0.393 and 0.46, almost on par with coal power, and even lower in regions with existing nuclear power plants such as Guangdong and Zhejiang. Nuclear power production has the merits of high efficiency and stability, but requires a greater initial investment, almost two to three times that of coal-fired power plants. Rigid location requirements have to be met, concerning local populations, regional industrial and agricultural development and facilities for the disposal and transportation of toxic waste products. It usually takes five years to select an appropriate site and complete a feasibility study. Another major obstacle to nuclear energy production is the scarcity of uranium. To meet these needs China must import over 50 percent of the required uranium materials.

Q: What measures can be taken to overcome the impediments to China’s development of green energy?

A: The government now offers subsidies to new energy producers to entice technical innovations in the field, which is vital to bringing down the costs. In the Netherlands citizens are encouraged to voluntarily draw a part of their monthly consumption of electricity from green resources. A similar experiment has been put into practice in Shanghai, but so far has largely received a cool reception from the public. The concept and desire for green energy practices has yet to be cultivated among the Chinese people.

In September 2009 Premier Wen Jiabao made statements on several occasions warning of excesses in SPV manufacturing. Macro-control of industries by the government is justified, but I believe people’s enthusiasm in developing new energy should be encouraged. Seeking profits is common in the early stages of every fledgling industry. Competition can act as a catalyst for technical advancement and as a filter for weaker players.

Macro-controls set by the government should focus on the distribution of the energy sector. Some experts hold the opinion that there should be a grading of electricity prices across different regions of the country. The overall distribution of energy resources is unbalanced in China due to geographic conditions. Wind power, for instance, has a larger base in northeastern, northern, northwestern and eastern coastal areas, and hydropower is in the southern river regions. A price classification scheme can facilitate regional planning and management for the power industry, effectively fending off production excesses. As the development of new energy requires massive investments, excessive production capacity amounts to a waste of funds.

Global Lessons in Green

Development

The U.S.: Going out on a Limb for Solar, Wind and Bio Energy

Nevada Solar One, the world's second largest concentrated solar power plant, began operation in 2007, followed by several smaller facilities. In August 2009 the Department of Defense started on its large solar energy project C a 500-megawatt installation at the Fort Irwin military base in the Mojave Desert in California, which is claimed to be the first step in what the army calls a far-reaching strategy to secure energy supplies to military installations. In 2008 the U.S. added 8.38 GW (one GW is 1 billion watts) to its wind generation capacity, increasing the amount to 25.1 GW, one fifth of the world's total, topping all other nations. Last February the Department of Energy earmarked US $93 million from the American

Recovery and Reinvestment Act to support further development of wind energy in the U.S. At present the U.S. annually produces 1.3 billion tons of biomaterials, which can be converted to at least 100 billion gallons of fuel, tantamount to half of the annual volume of gasoline and diesel consumed in the U.S.

U.K.: Leading in Offshore Wind Energy

The United Kingdom built its first offshore wind farm in 2000. Now it is the world's largest producer of offshore wind power, in terms of both the number of such projects and their installed capacities. Electricity generated from turbines powers as many as 1.5 million British homes. And that from offshore wind accounts for 20 percent of all electricity generated in the country. The U.K. plans to launch additional offshore wind projects upping its capacity to 25 billion watts in the coming decade. This means the total amount of electricity from offshore wind in the country is expected to reach 33 billion watts by the year 2020, half of the global aggregate.

Japan: Bright with Solar Energy

The Japanese government has long been subsidizing the installation of solar-power generators in homes and funding the development of solar technologies. In 2008 it commenced construction of the nation's largest solar generator in Hokkaido, which, with a hefty investment of US $756 million, will reach a capacity of 5,000 kW upon completion in 2010, the third largest in the world. Japan has vowed by the year 2020 it will see its current solar power generation capacity bumped by 20 fold. Then it will take the reins as the world's largest producer of solar energy.

Iceland: Forging a Future

Beyond Fossil Fuels

Iceland has the world's largest geothermal resource, and is tapping into merely one to two percent of its potential. Thermal energy can produce hydrogen gas, which is easier to store. Icelandic New Energy Company, a strong promoter of hydrogen fuels, recently submitted the goal of total conversion to hydrogen for the nation's transportation sector by 2050. Iceland is expected to be the first nation on earth to be completely free from dependency on fossil fuels.

Brazil: Most Advanced in Ethanol Fuel Application

Brazil is at the forefront of the world's production and application of ethanol fuel. Government incentives for automobiles running on E85 fuel, an alcohol fuel mixture that typically contains up to 85 percent denatured ethanol and gasoline or other hydrocarbons by volume, are a strong impetus for the ethanol industry. At present the country has 320 ethanol plants, with 50 more being built over the next five years. In response to surging demand, Brazil plans to invest another US $6 billion over this and the next four years, to set up new sugarcane plantations and ethanol plants. Given the magnitude of its grain output and the abundance of unused lands, escalation of ethanol production poses no threat to the country's food security, and instead, will create more jobs and increase the income of farmers.