|Even if China cuts energy per unit GNP by 50%, to
increase per capita income to 50% of the USA,
energy production will still need to increase 40%.
Editor’s Note: China and India, along with much of the rest of Asia, is industrializing at a pace that is astonishing by any historical standard. And with nearly double digit annual economic growth impacting literally 50% of the world’s population, roughly 3.0 billion people, comes an insatiable appetite for energy.
With reference to China in particular, we have covered their ongoing and epic transformation to a fully industrialized nation within mere decades before, in our reports “China’s Energy Demand,” “China’s Renewable Energy,” “Wind Power in China,” “China’s Energy Outlook,” “Fuel Cell Development in China,” “China, Canals & Coal,” and others. In all of these reports the message is the same – with over 1.3 billion people, the industrialization of China (along with India) is turning the global energy economy on its ears.
Between 1995 and 2005 China’s energy consumption has more than doubled – from 33 quadrillion BTUs to 67 quadrillion BTUs, and her economy has increased by a factor of 13x, from $700 billion to 10.1 trillion dollars. The perspicacious reader will take heart from the fact that these numbers mean China’s energy intensity – the efficiency whereby energy is converted into wealth – has improved by an impressive 86%, from 46,000 BTU’s per dollar of GNP in 1995 to only 6,600 BTUs per dollar of GNP in 2005. This is probably due to most of the new energy currently being produced in China going to manufacturing. As the Chinese middle class continues to grow, China’s energy intensity may become less efficient again. By comparison, the USA in 2005 had an energy intensity virtually tied with China’s – 7,000 BTUs per dollar of GNP.
In the following report by Sam Goffman and Peter Wang, part one of a five part series, China’s renewable energy prospects are explored in depth. In summary, renewable energy production in China is expected to increase from 7.5 percent of total energy produced today to over 15 percent by 2020. This is an impressive goal, but is overshadowed by the fact that total energy production in China must increase dramatically. As the above table demonstrates, even if the Chinese improve their energy intensity by another 50%, which would be an incredible achievement, in order for China’s 1.3 billion people to attain a per capita income only 50% that of the United States, energy production in China will still need to increase by 40%, from 62 quadrillion BTUs (“quads”) per year in 2006 to over 94 quads per year. If so, doubling China’s renewable energy sector to 15% of all the energy they produce would nonetheless require annual nonrenewable energy production to increase from 62 quads to 80 quads, an increase of nearly 30 percent. Can the global energy economy sustain this rate of depletion of nonrenewable energy resources, particularly since India and other rising nations will need to log similar overall increases in energy production?
One factor however that may be grossly underestimated in this report is the speed with which solar energy will grow. In this report, solar energy is projected to reach “1.8 gigawatts by 2020.” We think this projection is way too low. According to a white paper prepared by THT Research, China is projected to increase polysilicon production for photovoltaic cells from 230 tons per year in 2006 to 12,660 tons per year by 2011. In 2005 roughly 30,000 tons of polysilicon was produced worldwide, with one third of it going to production of photovoltaics (the rest was used by the semi-conductor industry). And in 2005 the worldwide manufacturing output of photovoltaics was about 2.5 gigawatts.
This means that unless China intends to export most of her polysilicon, by 2011 she will be manufacturing in excess of 2.5 gigawatts of crystaline photovoltaic capacity every year. And given the very recent viability of thin film photovoltaic manufacturing technologies which don’t require polysilicon, the ratio of gigawatt capacity to tons of polysilicon feedstock will not be nearly as relevant in the future as it is today, since thin film only accounted for about 6% of global photovoltaic production in 2005. Moreover, none of the projections in this report address the potential of utility scale solar thermal power, which has just become economically competitive with conventional electricity generation. The report to follow may well be underestimating the potential of solar power in China by several orders of magnitude, and if so, that is a very, very good thing. – Ed “Redwood” Ring
|Lake Tai’s breathtaking beauty
belies the fact it is one of
the most polluted lakes in China.
It’s no secret that China is on the brink of environmental crisis. As the country works to clean up its act, the development of the renewable energy industry could mean a big payoff to investors as well as Chinese society as a whole.
A recent article in the New York Times profiles a Chinese environmental activist named Wu Lihong. The article, part of the paper’s series on environmental degradation in China, documents Wu’s attempts to clean up Lake Tai, one of China’s most polluted bodies of water. As the article shows, Wu’s efforts have been truly heroic: he has campaigned vigorously against corrupt officials, has succeeded in generating public awareness about the problem and has risked his own livelihood – including possible jail time – for the cause.
Western reportage about the environment in China, such as the Times article about Wu, inevitably focuses on the disastrous environmental degradation that has accompanied the country’s rapid economic growth, noting that the government’s proclamations of concern for the environment mostly go unfulfilled. Such reporting usually carries with it the implication that pro-environment statements made by the Chinese government are just for show, and treats the government as a homogeneous entity and Chinese society as interested only in making money.
However, the reality is not so simple. China’s 5-year plans and far-reaching policies are indeed often bogged down in the obsession with economic progress, and the rapid pace of economic growth combined with the sheer size of the country means that effectively implementing those policies is difficult and prone to corruption and inefficiency. Focusing on activists such as Wu Lihong puts the problems of China’s embrace of capitalism in stark relief. Yet it should be noted that such cases may obscure the larger potential of China’s environmental efforts, specifically its renewable energy industry. Prominent officials and institutions in the Chinese government frequently indicate an awareness of the country’s environmental problems. China’s drive to build up its renewable energy industry will offer many opportunities for foreign investment, and the government’s plans for the future – the kinds of policies that will see fruit in the long term – are far from unpromising.
China’s plans for the future
The National Development and Reform Commission (NDRC), the institution responsible for the country’s macroeconomic planning, plans to have renewable energy account for 10 percent of China’s total energy consumption by 2010, and 15 percent by 2020, compared to 7.5 percent in 2005. (In comparison, in the United States about 7 percent of energy consumption was supplied by renewable energy in 2005 according to the U.S. Energy Information Administration, less than China’s figure for that year.)
|The main dam at the Three Gorges Complex.
When complete, this hydroelectric project will
generate a staggering 17.5 gigawatts of electricity.
Breaking that figure down further, the NDRC aims for hydropower generation capacity to reach 180 gigawatts a year by 2010 and 300 GW by 2020, compared to 115 GW in 2005; annual wind power generation capacity to reach 5 GW by 2010 and 30 GW by 2020, compared to 1.3 GW in 2005; biomass capacity to reach 5.5 GW in 2010 and 30 GW in 2020, compared to 2 GW in 2005; and, finally, solar power to reach 0.3 GW in 2010 and 1.8 GW in 2020, compared to 0.07 in 2005.
As for the very long term, an energy development plan compiled by the China Academy of Sciences (CAS), a Chinese government think tank, recently recommended that the country should push to make nuclear power and renewable energy (besides hydropower) main elements of the country’s energy mix by about 2030, and ensure that dependency on fossil fuels falls under 60 percent by 2050.
Government projections of renewable energy in China’s overall energy usage, 2005-2020
Can China achieve its goals?
Are these goals feasible? It’s too soon to know for sure. On the one hand, the government has often expressed its seriousness in reaching its environmental targets, and has issued several preferential tax policies and subsidies to support the development of renewable energy. On the other hand, the country has fallen short of some of its yearly goals. Energy consumption per unit of gross domestic product fell by only 1.23 percent in 2006, one-third of the country’s annual target of four percent. The government has said it will stick to its previous plan of cutting energy consumption per unit of GDP by 20 percent between 2006 and 2010, or 4 percent annually, as well as emissions by 10 percent for the period.
Taking wind power, one of China’s fastest growing renewable energy sectors, as another example, the sector ranked sixth in the world in terms of wind power generation capacity in 2006, up from eighth in 2005, according to the NDRC. Figures released by the Global Wind Power Council indicate that wind power installed capacity in China went up from 1260 megawatts in 2005 to 2610 MW in 2006, an increase of 107 percent.
In short, China’s record is inconsistent – some projects succeed, while others stall. What is clear is that the country will have to be more rigorous in implementing energy-saving measures if it really plans to achieve its environmental goals.
China’s renewable energy potential: analyses and predictions
Many Western analysts are optimistic about China’s renewable energy potential. Dr. Eric Martinot, a former senior energy and environment specialist at the World Bank, told Interfax in June, “For all the [renewable] technologies [apart from biomass], I think they’ll all achieve [the targets] early. Wind will go definitely more than 30 GW by 2020 and it would very likely achieve its 2010 target two years early. Also for hydropower, I think they’ll achieve the target early.”
There have also been indications that many elements in the Chinese government, including prominent government officials and institutions, are increasingly willing to confront environmental problems head-on. The Three Gorges Dam hydroelectric project, a pet project of powerful Chinese officials, has caused landslides, stagnant pollution and excessive algae. All of these problems were finally admitted openly in September by government officials (though there was no mention of another problem with the project, the forced relocation of nearby residents). Wang Xiaofeng, the director of the Three Gorges Construction Commission on the State Council, which is in charge of building the dam, reportedly said, “We must never lower our guard against environmental problems caused by the Three Gorges project, and we cannot achieve economic prosperity at the cost of damaging the environment.” Such openness has earned praise from international commentators. “It’s the first time that Chinese officials have (openly) talked about the pollution issues and environmental effects of the Three Gorges Dam. It’s a milestone for the Chinese government to show a positive attitude towards solving the ecological problems caused by the project,” Dr. Li Lin, the Conservation Strategy Director for the World Wildlife Fund’s China branch, told Interfax.
The development of renewable energy in China: pitfalls and opportunities
|The Dabancheng Wind Farm
At 100 megawatts, China’s largest
The country will face several hurdles in its development of the renewable energy industry. The biggest hurdle is also foreign companies’ biggest opportunity: the need to attract more foreign investment. As Francois Nguyen, senior policy adviser with Paris-based International Energy Agency, explained to Interfax in May, “The obstacle is that China needs to attract more foreign companies and in order to achieve that, China needs to provide more incentives.” Nguyen added that China needs a more diverse and competitive market that can ensure efficient allocation of resources, and needs to reorganize the government regulators in charge of the industry. “Right now the NDRC controls both policy-making and implementation,” he said. “If you have an independent market watcher and an independent regulator, that will give confidence to foreign investors.”
China will also have to improve its technology to develop the renewable energy industry. In the wind power sector, building wind turbines is expensive, and China still largely relies on foreign equipment. “In 2006, 60 percent of all wind power equipment in use in China was imported from overseas. Such equipment is expensive, as equipment prices have soared in recent years on the international market,” Qin Haiyan, secretary-general of the China Wind Energy Association, said in June, as cited by state media. He added that only three domestic companies are able to mass produce equipment with an individual capacity of more than 1.5 MW. Other sectors, such as solar and geothermal, face similar problems: the government will need to invest substantial resources in technological development to spur the renewable energy industry.
Another problem is that energy produced by renewable energy projects tends to be more expensive than traditional sources. The solar power sector is a good example. Eric Martinot, the former World Bank official, said that an important question is, “how soon will the cost come down so that there will be a domestic market for solar PV [photovoltaic]? We are looking at maybe at least five years. Actually a lot of people are thinking much longer. The first problem with solar in China is the acceptance by the utility companies to use power generated by solar power.”
Development of the industry may suffer from infrastructure problems as well. One potential obstacle that is often overlooked is the difficulty in connecting some renewable energy projects, especially wind power, to national and local grids. “The government likes to talk about how rapidly China is building up its wind power capacity, seeing it as a symbol of achievement in its renewable energy drive,” Shi Pengfei, the vice chairman of the China Wind Energy Association, told Interfax earlier this year. “However, to me, it means nothing, as it will only make a difference in our energy mix when the grid is able to receive a majority of the power generated.” Shi added that steps are being taken to address the problem, such as requiring wind power projects to consult with local and national grids before construction.
In the coming years, all sectors of the renewable energy industry – wind, solar, hydropower, biomass, nuclear, geothermal, waste-to-energy, clean coal and gas-fired power generation – will be expanded. All will face obstacles, but it is increasingly apparent that the Chinese government recognizes the reality of the environmental crisis, and will work to build up renewable energy in the country. As Li Lin from the WWF put it, “In recent years the central and local governments have gradually realized that sustainable economic development won’t happen without effective environment protection.”
This article was originally published by Interfax-China, and is republished with permission. Author Sam Goffman is the Editor of the Interfax-China Energy Sector Team, with special thanks to Terry Wang, Sector Analyst, Interfax-China. This article is part one of a five part series written as part of the research efforts for Interfax-China’s “China Clean & Renewable Energy to 2010″ special industry report. To automatically receive the other parts of the series please send an email to email@example.com.