Friday, May 18, 2007

Chinese Renewable Energy Markets

Frost & Sullivan, March 2007, Pages: 91

Government's Renewable Energy Law and Economic Incentives Encourage the Development of Renewable Energy Market

The Chinese Government is actively encouraging the deployment of renewable energy having passed its first renewable energy law that requires power grid operators to purchase resources from registered renewable energy. The law offers a national fund to foster renewable energy development and tax preferences for renewable energy projects. "It aims to promote the development and utilization of renewable energy, increase energy supply, improve the energy structure, safeguard energy security, protect the environment, and realize the sustainable development of the economy and society," notes the analyst of this research service.

The series of incentive policies that have been adopted to stimulate various types of investments in renewable energy is urging active participation in the Chinese renewable energy market. Several European, U.S., and Asian manufacturers are already setting up operations in China, while others are seeking opportunities to penetrate the market. In addition to the renewable energy law, the National Development and Reform Commission (NDRC) has proposed the promotion of renewable energy and aims to achieve 16.0 percent of renewable energy consumption through its middle- and long-term program of renewable energy development.

Promising Growth in Most Sectors of the Chinese Renewable Energy Markets

The Chinese renewable energy industry is growing, with the wind power industry at the forefront experiencing the most rapid growth and the best prospect in the near term. The solar photovoltaics (PV) industry is still small but with leading manufacturers already investing heavily in new production technologies such as thin film solar technology, this segment is likely grow rapidly over the coming 15 years. The solar thermal market is also showing promise, with many companies having entered over the past few years and as more are expected to follow suit. The biomass power industry has gained great momentum partly because of sufficient Government funding and also due to the adequate availability of feedstock fuels. Small hydropower market is also undergoing a period of resurgence, but developments are likely to be slower than in other market segments as it is a comparatively mature technology.

"These renewable energy technologies must continue to compete with the relatively low cost of conventional fossil fuel-based generation," says the analyst. "Increasing support by providing incentives and by establishing economic incentives, combined with rapidly declining installation costs, can ensure that renewables gradually become an established part of power generation portfolios."

New Light on Solar Energy

The market isn't mature yet, but it's rapidly picking up speed thanks to rising environmental consciousness and innovative initiatives
by Cassidy Flanagan

Kermit the Frog once exclaimed, "it's not easy being green," but today being green is the fast track to raising both profits and environmental consciousness. Take the rapidly expanding solar-energy market, which has picked up momentum in the past few years and which was the topic of a RBC Financial Group report, "Investing in Solar Now," released on May 9.

The report from the New York City-based group provides a useful snapshot of the current state of the solar-energy industry and its potential for investors. According to the report, the demand for photovoltaic solar power will grow about 40% by 2011, making it an attractive market for venture capital and private investment.

"[Solar energy] isn't mature yet, so a lot of money is going into research and development. About $1.7 billion was invested as private equity and venture capital in the solar industry in 2006—mostly private equity for factories in China and investment in technology companies in the U.S. and Germany," explains Jenny Chase, a senior solar analyst for London-based investor research and information firm New Energy Finance. "In addition, $4.5 billion was invested in publicly quoted solar companies in 2006, most of which is being spent on expanding global manufacturing capacity," she adds.

Solar energy's recent boom is due in part to growing public and governmental awareness of the developing technology, which was introduced as an energy option during the oil crisis of the 1970s. In 1999, German legislation—known as the "100,000 Roofs" law, due to its aim to cover 100,000 roofs with panels—followed by the Renewable Energy Law in 2000, provided low-interest loans for home and business owners to install solar-power panels. It also gave installers the opportunity to earn half a euro for every kilowatt of electricity they generated in the power grid.

Silicon Panels Still Rule

In the U.S., the Energy Policy Act of 2005 currently provides a 30% tax credit on all solar systems installed by private homeowners and businesses. This policy is set to expire at the end of this year, though newly proposed legislation would extend these same credits until 2016.

Of the total solar-energy market, 95% is dominated by photovoltaic solar power, which directly converts the sun's rays into electricity. These panels use silicon, a material that raises its own environmental red flag, though industry professionals claim it has had no proven negative effects on the environment. In 2004, high demand for solar panels led to a bottleneck in the supply chain of silicon, driving up prices—and providing opportunities. "There's currently a lot of money being invested in new silicon production capacity to respond to the demand," says Chase.

But despite growth in the sector, solar power still plays a minimal role in energy production, with only .03% of worldwide electricity generated from photovoltaic power. As Chase points out, the technology is still underdeveloped, though that hasn't stopped innovative engineers and designers using what's available to produce viable, commercially focused products.

One such group is London-based SolarLab, which was founded in 2006 by Swiss-born Christophe Behling. Behling, a designer who has previously worked with companies such as Tag Heuer and Nokia (NOK), has created items from luxury products to solar vehicles. He designed the world's largest solar-powered vessel in Hamburg, Germany. The Hamburg Solarshuttle seats 120 passengers and was launched in 2000. To date, Behling has designed over 40 solar-powered water vessels, from large, commercial boats to smaller, private boats for personal use.

Slow Boat to Hyde Park

"The costs can be recovered on a boat like this in as little as three years," says Behling. "If you were to build a solar powered boat to the same size as a boat with a diesel engine, you would save 15% to 20% from the cost of fuel alone."

Most recent is SolarLab's design of the largest solar-powered boat in Britain, the Serpentine Solar Shuttle. Permanently moored on London's Serpentine Lake, the stunning craft made its maiden voyage last July, its two, silent engines completely powered by the sun. The shuttle moves slowly (at about 5 mph) and can hold up to 42 passengers. The battery can store up to 80 miles of energy when there's no direct sun (as on overcast days) and can travel for 20 miles in complete darkness.

Both the Serpentine and Hamburg Solar Shuttles usually generate more power than necessary and can feed excess energy back into their respective national grids in Britain and Germany. In Hamburg, the shuttle spends the three months of the year it's not sailing docked on the lake, feeding energy into the grid of the Hamburg Electric Company. According to Behling, it provides enough energy to fuel the city lights. In Germany, power companies must buy back photovoltaic power at about 50 cents per kilowatt hour, more than twice what normal utilities charge.

Next Project: Solar Golf Cart

SolarLab's latest ventures include building an even larger vessel, which will be a hybrid boat using solar power and bio-diesel fuel. Does that mean solo solar isn't viable? No, argues Behling. For now it's a question of practicality: As long as solar technology remains underdeveloped, the combined energy vessel can travel at greater speeds and navigate waters with stronger currents.

This boat is intended for London's Thames, and Behling's goal is to have it on the water in time for the 2012 Summer Olympics in London. The Thames boat will be able to reach speeds of 18 knots and will hold up to 200 passengers. SolarLab is also working on a solar-powered golf cart, which the company hopes to mass-produce. Currently, all of SolarLab's vehicles are custom made, making them pretty expensive—the Serpentine SolarShuttle cost around $470,000. Thinking small but mass market could revolutionize SolarLab's business.

For Behling, however, the most difficult part of the solar story is to change consumers' awareness of its current, and potential, capabilities. "Our most challenging aspect is the perception of the client. Many believe solar power isn't a reliable energy or that it's not sustainable. One of our goals is to shift the consumer mindset," he says. By creating vehicles that use reliable solar technology, and are accessible and aesthetically pleasing, SolarLab aims to create change through inspiration.

China will release new policy to support solar energy application in 2007

At present the cost of solar electricity is very high compared with the conventional electricity, in order to promote renewable energy, China's government is expected to release some policy to support solar energy applications in 2007.

China Speeds Up Renewable Energy Development

Jianxiang Yang – October 26, 2006 – 11:03am

Statistics show that in 2005, a total of US$38 billion was invested in renewable energy development worldwide. China topped the list with a commitment of US$6 billion, excluding spending on large hydropower projects.

China has good reason to speed up its renewables development, as the country is fairly poor in many energy resources in per capita terms. Its remaining exploitable reserves of petroleum and natural gas are merely 7.7 percent and 7.1 percent of world averages, while those of coal are 58.6 percent of the world average. At the current rate of extraction, China's proven reserves of these resources could last 15, 30, and 80 years, respectively, compared with world averages of 45, 61, and 230 years.

At a Sino-European economic summit held September 12 in Hamburg, Germany, Chinese Premier Wen Jiabao assured the world that China would rely mainly on domestic supplies to meet energy needs. The government's energy policy would aim to integrate development and conservation, giving priority to the latter. China could definitely find a "new path" for sustainable development, the Premier said.

This new path would have to include energy from renewable resources, in which China is abundant. Two-thirds of its hydropower potential is untapped. Exploitation of wind, solar, and biomass energies has just started. Although renewable energy may not yet be ready for prime time, it is expected to deliver sooner or later.

Already, the pace of adoption is noticeable. China's renewable energy development has grown at an annual average of 25 percent over the past few years, according to Zhang Guobao, deputy director of the National Development and Reform Commission (NDRC). By the end of 2005, the country's installed hydropower capacity reached 110 million kilowatts (kW), compared with 1 million kW in 2004 and only 0.492 million kW in 2000. China's 61 wind-power plants claimed a total generating capacity of 1.26 million kW in 2005, up from 0.764 million kW the year before. The 1,500 or so biogas projects resulted in a combined annual capacity of 1.5 billion cubic meters. In addition, 70,000 kW of solar power facilities were operational nationwide in 2005.

Compared with China's total capacity of 508 million kW for all forms of energy, however, the overall shares of renewables (24.3 percent for hydropower, 0.5 percent for wind, and even smaller amounts for others) remain limited. This means enormous room for development. An incomplete list of exploitable renewable energy reserves puts the country's hydropower potential at 400 million kW, wind at around 3 billion kW, biomass energy at 800–1,000 million tons of coal equivalent a year, and solar energy at a theoretical 1.7 trillion tons of coal equivalent a year.

Premier Wen Jiabao has urged all relevant government departments to take effective measures to accelerate the development of renewable energy, so as to "raise the share of quality, clean energies in the total energy mix."

According to the State Renewable Energy Medium- and Long-Term Development Program, renewable energy is expected to account for 16 percent of China's total energy supply by 2020, up from 7 percent in 2005. In terms of capacity, hydropower is expected to reach 300 million kW, wind power and biomass energy 30 million kW each, and solar energy 1.8 million kW by 2020. Biogas utilization would reach 44.3 billion cubic meters, solar heating 300 million cubic meters, fuel ethanol 10 million tons a year, and biodiesel 2 million tons a year.

China's renewable energy development is guaranteed under the nation's firstRenewable Energy Law, whichcame into force on January 1 of this year. In February, the government issued a set of rules to implement the law. In addition, officials have decided to raise the rate for electricity consumption by 0.025 yuan per kilowatt-hour ($0.32 cents/kWh), a small fraction of which (0.001yuan/kWh, or $0.013 cents/kWh)—is being collected for the development of renewable energy. And in early October, the Ministry of Finance released details of a new fund dedicated to the development of renewable energy sources, which will use grants and interest subsidies to give government support to renewables' development in three main areas: oil alternatives, construction, and power generation.

In general, local government officials are enthusiastic about promoting renewable energy projects. Their motives vary from securing a lucrative source of government tax revenues, to building up a "green" government image, to adding a "bright spot" to their work performance records. Factors such as the embrace of new energy technologies now bear considerable weight in an official's promotion.

Jiangsu Province in eastern China is particularly active in the renewable energy game. The prosperous region appears determined to take the lead in wind power exploitation. In less than five years, it plans to boost its wind capacity from virtually zero to 1,500 megawatts (MW). The region is also an important base for the solar industry, where more than 180 companies are involved in the development, manufacturing, and servicing of solar heating appliances.

Earlier this year, Shanghai, China's leading industrial and financial city, announced a plan to build up 100 MW of offshore wind energy capacity. The metropolis hopes to raise the share of renewables in its total energy capacity to 5 percent by 2010. The capital city of Beijing, meanwhile, in its newly released infrastructure construction plan, has vowed to lift renewables' share in its total energy consumption from the present 1 percent to 4 percent by 2010.

Companies across China—whether state-owned or private, domestic or foreign-funded—are eager to embrace renewable energy projects. Many believe the sector will soon be a gold mine, if it is not already. For some companies, particularly state-owned enterprises, the government's strong support for renewables is an inspiration. At a number of public occasions this year, NDRC deputy director Zhang Guobao noted that big energy developers in the country would ultimately be expected to derive a certain proportion of their products from renewable sources.

Earlier this year, Longyuan Electric Power, the biggest wind player in China, announced a plan to raise its wind-power generating capacity from an existing 416 MW to 3,000 MW by 2010, and to 7,000 MW by 2020. Other major energy developers like Huaneng, Guodian, and the Three Gorges Corporation have set up subsidiary companies dedicated to new or renewable energy development.

Foreign companies have been active as well. The world's leading wind equipment suppliers—Vestas, GE Energy, Gamesa, and Suzlon—have each set up wholly owned manufacturing facilities in China. And seven foreign development banks, including the International Finance Corporation, Germany's DEG, and France's Proparco, have invested in China's renewable energy projects.

The 30,000 MW wind-power goal for 2020 represents a market of 210 billion yuan (US $26.6 billion), and the country's combined renewables targets amount to US$100 billion. The coming years are likely to witness rapid development of these energy sources, and the targets might even be reached ahead of schedule, industry analysts say.

Yet several major barriers are preventing more rapid development of renewable energy in China. One is the weakness the country has shown in independent technology development. To date, most of the renewables' equipment being used—whether for wind power, biomass, or solar—has been imported, resulting in higher production and consumption costs. The Outline of National Medium- and Long-Term (2006-2020) Program for Scientific and Technological Development, released by the government in February, designates energy as the top area needing "urgent S&T support." The document lists a host of government-supported plans covering key fields of study, cutting-edge technologies, and special large programs, as well as basic research.

China is one of 48 countries worldwide that have enacted laws for renewable energy development. But industries have given only a cautious welcome to the country's laws and accompanying rules of implementation. For many, the wording of the rules is too general to be practical. And some measures remain controversial. For instance, new regulations for wind power decree that the grid feed-in tariffs be decided through a tendering process. The measure has been criticized by industry players, who fear the practice will result in price cuts and thus deny companies a reasonable profit.

Human resources are another problem. According to experts, China aims to engage hundreds of thousands of people in wind power exploitation by 2020. The number of specialized workers alone would be in the tens of thousands. But China currently has a very meager supply of wind energy experts. Only one of the country's more than 1,000 institutions of higher learning provides a four-year program dedicated to wind energy. The situation for other renewables is not much better. Solving this problem will require the joint efforts of many government departments and social institutions, experts say.

While the shortage of conventional energy resources is the main driver behind China's push for renewable energy, the country is also making the transition out of environment concern. The nation's coal-dominated energy system has caused severe pollution in many regions, which has compelled the government to turn to cleaner energy resources. Meanwhile, China has pledged to stage a "green" Olympics in 2008, and the environmentally friendly games are expected to be a showcase for the nation's embrace of renewable energy.