China: an unexpected leader on the renewable energy market

Before the Copenhagen Summit in 2009, China set as a prerequisite a series of measures it wish not accept to negotiate on. After that half-hearted summit, China had to face some criticism from the international community, particularly from Europe. China had then refused to set higher environmental goals, highlighting the paradox of Western countries not to grant the “right” to pollute as much as they have. But the 2011 Five-Year Plan significantly revised government targets. What accounts for such a policy shift?

First of all, China must manage the consequences of a fast-growing, energy-consuming economy. Annual growth between 1991 and 2011 almost reached 10%. Thermal power plants make up 70% of electricity production. Coal consumption has doubled since 2000 so as to meet the needs of the industry and households alike. Although China has the biggest coal reserves in the world, this very polluting electricity source will eventually run out. Economic growth inevitably transforms the Chinese way of life. Households are buying more and more domestic equipment. Whereas in 1980 they accounted for only 3% of the country power use, in 2007 they accounted for 11% of electricity consumption.

Other fossil fuels also represent a crucial energy concern, since China endeavours to decrease its dependence on imported oil and gas (the country imports half the oil it uses, and it uses more and more because of the dramatic increase in car ownership). According to Liu Hanyuan, CEO of the solar panels manufacturer Tong Wei Group, “China must move away from its dependence on coal and oil toward clean energy. Solar energy, particularly, could be a solution.” The Chinese government is aware of these issues and has been working for a while on restructuring its energy mix. For instance, the Three Gorges Dam opened in 2006 and provides nearly 10% of the nation’s electricity. Moreover, over 200 million households were already equipped with solar water heaters in 2008.

This shift in attitude on the part of the government enabled China to meet the energy challenge. It is taking advantage of the highly profitable clean energy market, both at home and abroad, being the biggest “green business” market, as its installation potential is still largely untapped. Well-established industries cater to domestic needs while aggressively targeting foreign markets. Today, 7 of the 15 first solar panel manufacturers are Chinese and they alone meet 51% of global world demand (see our Electrical Efficiency Magazine, December 2011). The Chinese wind energy sector also develops and has just entered the European market: two Chinese-made windmills were installed in Tjurhojden, in the Swedish town of Molkom. These two 3MW turbines should produce 15,000 Mwh per year and thus cater to the needs of 3,000 households.

The government took a further step in early 2011 when it was decided that the Five-Year Plan would include a 300 billion-euro government grant on clean and sustainable energy. The process seems to have actually started for good: in 2010, construction of wind farms at home accounted for half of the newly implemented wind power capacity worldwide, making China’s reach 42GW, thus outstripping the US. The priority target is to reduce fossil fuel use by 15% by 2020, which entails producing 235GW through renewable energy sources in the next 5 years. This goal should be achieved by increasing the wind power capacity (42GW today) by 70GW, the solar energy capacity (625MW) by 5GW, the hydropower capacity (210GW) by 120 GW and the nuclear energy capacity (11GW) by 40GW. Furthermore, the government wishes to fund sectors of the automobile industry which specialize in hybrid or electric vehicles, so as to create an incentive for investors. Finally, in February 2012 the Chinese government created the National Renewable Energy Centre (CNREC, an institution in charge of designing strategies and research programmes) and thus openly strives to move progressively toward a carbon-free economy. In 2040, 40% of the Chinese energy mix could consist in renewable energies.

Despite this encouraging evolution, there a few black spots in two areas. Most parts of the power grid, for instance, are obsolete. For the moment, most wind farms are located in the Gobi desert and cannot be connected to the main network. Besides, the 300 billion-euro government grant does not seem to suit the interests of the US and the EU, both of which have made complaints to the WTO, accusing China of being protectionist. Undoubtedly, on top of obvious grievances (western industries will have to struggle to remain competitive) there are signs that western countries are somewhat envious of China’s fast move onto the renewable energy market.

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