November China Energy Monthly

WIND

Feed-in Tariffs are only part of the renewable energy plan (Nov. 2009)
High capital cost and investment uncertainty are two of the renewable energy sector’s most formidable barriers. While dirty, carbon-intense fuel prices are on the rise, renewable power sources are still not being connected to the larger global energy market for a variety of reasons. Feed-in tariffs (FIT) could be the policy instrument that eases some of renewable energy’s uncertainty. Under a FIT incentive structure, public utilities are required to buy renewable energy power at a premium rate, typically over a definite time period. The increase in cost is spread across all users. Thus, one customer does not bear the burden of financing renewable energy technology.

Several European nations have already experienced considerable success with FITs. Notably, Germany’s FIT is responsible for bolstering growth in the renewable energy sector—all at only a 1.50€ (2.25$) increase on each customer’s monthly bill. Individual states in the US have also implemented FITs, with Vermont as the most recent to do so. Cite In addition, China has set regional FITs for all new onshore wind generation. Cite Many more nations and private companies would like to take advantage of FITs, but it is clear there are still several technical barriers to utility-scale implementation.

China’s specific energy situation is a prime example of the many technical and non-technical barriers FIT implementation must overcome. Undeniably, China’s renewable energy industry has grown rapidly in the past 5 years—however, a lack of regional planning has left many new wind projects without connection to the grid. A FIT does nothing to assist in the recovery of investments if it depends on customers being able to purchase the power and the renewable power isn’t even available for purchase because it is not connected to the grid. This hinders the overarching goal of a FIT: bringing online a variety of renewable power sources to as many customers as possible.

FIT implementation in China faces other challenges as well. Although an electricity bill increase of 2.25$ per month may seem trivial for US and German customers, many Chinese live on less than less per day. In China’s case, more government involvement will be necessary to ensure a FIT’s success. Governmental assistance could take several forms. First, the government could pay for some of the FIT as a production subsidy and consequently lower customer fees. Second, another option is to have FITs for industrial customers only, or a portion of customers that can pay.

At any rate, China’s government must employ a variety of tools to meet its proposed renewable energy standards (15% renewable by 2020). A FIT structure must be a part of larger regional planning initiative coupled with federal financial assistance. As technical barriers fall, increased cooperation and information sharing among all nations will spur growth and investment in renewable energy technology. Frankly, there is a dearth of evidence supporting FITs. Current FIT models, namely the German and the regional US systems, may not be applicable to China’s least developed areas. As a result, it is too early to tell whether China’s FIT will result in long term success in the renewable energy sector.

Sources:
http://www.worldfuturecouncil.org/fileadmin/user_upload/Maja/Feed-in_Tariffs_WFC.pdf
http://www.pewclimate.org/node/6558
http://en.wikipedia.org/wiki/Feed-in_Tariff

GOVERNMENT

“CO2 target ‘opens door for reform’” (11-27-09)
Chinese economists and researchers suggests that the career prospects of public officials should be tied to developing and advancing a low carbon economy in order to achieve the China’s new 40% to 45% reduction in carbon emissions by 2020. To ensure that the reduction in emissions will not result in economic detriment, it is important to keep in mind that annual GDP growth should be at least 8%, renewable energy use should be at 15% and reducing energy intensity (efficiency) by 18% to 20%. The local officials’ performance assessment system should not only encourage emissions reduction, but also GDP grown, renewable, and energy efficiency.
http://www.chinadaily.com.cn/bizchina/2009-11/27/content_9061427.htm

ENERGY TECH BUSINESS

“China wind power group seeks U.S. $2.2 Billion in Hong Kong IPO” (11-23-09)
Longyuan, the largest wind power generator in Asia, has a 24% share of China’s wind power market in total installed capacity. It is planning on selling 2.1 billion shares, approximately 30% of its enlarged share capital. This summer, it had planned to raise only $700 million through the IPO, but now due to stronger demand, it plans to raise U.S. $2.2 Billion. The company aims to list on December 10, in a deal handled by Morgan Stanley and UBS.
http://www.chinadaily.com.cn/china/2009-11/23/content_9022696.htm

“The Price of a Green Revolution” (11-17-2009)
China’s renewable energy sector is growing at a blistering pace, but the price of progress is not cheap. Government officials expect that up to 600,000 workers from coal fired plants and mines will be unemployed by 2020. This is due, in part, to China’s push to meet 15% of its energy needs with renewables by 2020. The government also expects that the solar industry alone will need some 200,000 workers to meet rising demand for renewable energy. Unfortunately, the Chinese government has not provided the unemployed coal miners and plant operators with the proper training to find jobs in the renewable industry. Cutting carbon emissions should remain one of China’s top priorities, but retraining the unemployed to meet new demand is an essential first step toward meeting that goal.
http://www.chinadaily.com.cn/cndy/2009-11/18/content_8991349.htm

“Think Again: Green China” (11-13-2009)
As noted in the September newsletter, Thomas Friedman has championed China as a leader in renewable energy technology. Conversely, many reports—including some from the NY Times—claim that China’s environment is choking on the nation’s economic growth. This opinion piece from Foreign Policy magazine looks to clarify some of the contrasting viewpoints that have emerged in recent years. For example, China’s environmental policy is definitely moving forward, but its starting point is behind that of the US. The Chinese government has also elected to focus on energy policy before pollution abatement—this is a reversal of the US model. While implementing this measure might indirectly improve environmental conditions through clean energy growth, it does nothing to specifically address the pollution problem. Furthermore, China manufactures green technology for sale in other countries, so measuring manufacturing levels alone is a misrepresentation of the amount of renewable energy used by China. Putting these discrepancies in context shows that there is no easy answer, and that perspective is an important factor for consideration.
http://www.foreignpolicy.com/articles/2009/11/13/think_again_green_china?page=0,0
See also http://www.nytimes.com/2009/09/27/opinion/27friedman.html?_r=1

China’s Co-op with Africa: How important is energy? (11-8-2009)
According to Chinese Premier Wen Jiabao, energy is not the driving force behind China’s presence in Africa. Wen citied aid efforts to Africa that date back to the 1950’s to rebuff some Western claims that China is courting Africa for increased access to energy. In addition, China sent thousands of workers to Africa in the 1960s to help construct the 1,860-kilometer Tanzania-Zambia Railway, better known in East Africa as the TAZARA. Though oil may not be China’s only concern in Africa, it is nonetheless an issue of great importance. Sinopec, a Chinese state-owned oil giant, has bases in Africa and will continue to grow as more resources are made available.
http://www.chinadaily.com.cn/china/2009-11/08/content_8928961.htm

COAL

French company partners with China and CCS (11-13-2009)
Alstom, a French power and rail infrastructure company, is looking for partners to develop CCS applications in China. Recognizing that China has the unsavory title of leader in carbon emissions, Alstom hopes to fully commercialize CCS by 2015. Alstom Power has also played a principal role in developing more efficient boilers for coal-fired plants. This boiler technology in new supercritical and ultra-supercritical coal-fired plants could save 6,000 tons of CO2. Additionally, Alstom recently purchased a 51% stake in Wuhan Boiler Company, a State-controlled company has produced boilers for power plants for 50 years. Supporting CCS technology and more efficient boiler technology ensures that Alstom will be financially connected to China’s power sector for the near future. This is not surprising given that Alstom “designs, manufactures, supplies, installs and services more than 25 percent of the world's installed power generation base.”
http://www.chinadaily.com.cn/cndy/2009-11/13/content_8962688.htm

NATURAL GAS

“Energy firms step up output, imports” (11-27-09)
Natural gas production and imports are up due to cold weather in November. China National Petroleum Corp, China’s leading oil and gas producer, will transport natural gas from western China, importing gas from Turkmenistan, and purchase at least 700 million cu m of gas in the global spot market.
http://www.chinadaily.com.cn/bizchina/2009-11/27/content_9061957.htm

TRANSPORTATION

“Beijing has ‘more room’ for cars” (11-27-09)
Next month, the number of cars in Beijing is predicted to exceed four million. More than 100,000 cars with high emissions were removed from the roadways due to a program similar to the U.S. Cash for Clunkers. A professor from Tsinghua University said the emissions from one of these cars are approximately 20 time of a conventional car. The director of the vehicle emission management division at the Beijing municipal environmental protection bureau optimistically said the removal of high emissions vehicles allows for more cars. Further, since 2008, Beijing has used cleaner fuels that meet the Euro IV standards. The emissions issue aside, car owners have decided to use public transportation, such as the subway, simply to avoid driving in the clogged streets.


NUCLEAR

“China's nuclear power giant buys from private businesses” (11-3-2009)
China Guangdong Nuclear Power Group (CGN) recently announced that it would have to purchase 1 billion yuan ($146 million) worth of nuclear power materials from private enterprises. CGN traditionally buys its construction materials from state-owned companies, but a recent surge of construction in the renewable energy sector has limited supply. That state-owned companies cannot supply materials for nuclear plant construction indicates the Chinese government’s priorities are focused on other renewable energy sources.
http://www.chinadaily.com.cn/bizchina/2009-11/03/content_8907501.htm