The quest for clean energy: China's green revolution

The air in Beijing was classified as 'hazardous' this week as the city became choked with smog, but following dire warnings of rampant pollution, alternatives are emerging. By Clifford Coonan reports

Published: 23 November 2006

Desert winds drive the turbines in the vast wind farm on the outskirts of Urumqi, dusty capital of the north-western Chinese region of Xinjiang, and day-trippers come from the city to photograph the spectacular sight in the barren wilderness.

Just down the road, white-domed houses in a village of Central Asian Uighurs use solar power to provide their energy. In the province of Gansu, officials have announced plans to build the world's largest solar power station, part of efforts to ease China's dependence on coal. In fast-moving, sophisticated Shanghai, China's biggest city and its financial hub, hundreds of thousands of householders are using solar panels to heat the water for their morning showers.

Meanwhile in the capital, Beijing, plans are well advanced to use renewable energy for a big chunk of the city's power needs by the time it hosts what China is billing as the first "green" Olympics in 2008. Beijing intends to build a "solar street" where buildings and streetlights will run entirely on energy from the sun. To be green is to be hip in China these days, and even the government is taking note.

But is this the same China, infamous for its dirty rivers and poisoned skies? Nearly all of the world's most polluted cities are in China, and other urban centres such as Los Angeles are suffering the effects of pollution from China's factories. Green China as a concept seems ridiculous, particularly when you look at other headlines coming out of China. Strong economic growth led to a major increase in the discharge of major pollutants in the first half of this year.
Indeed, Beijing's air pollution became so bad this week that it reached "hazardous" levels on a government air quality index. The city was blanketed in heavy fog, visibility was cut to a few hundred metres, 80 flights were delayed and some motorways were closed. From July to September, in Beijing and 15 other major cities, one out of every three days was classified as polluted.

Seventy per cent of China's energy needs are met by coal, and every week to 10 days another coal-fired power plant opens somewhere in China, adding to the country's environmental woes. Meanwhile, China is the world's second-largest consumer of oil, behind the United States.

But China is on a major drive to boost renewable energies and cut pollution - for sound financial and political reasons. Oil is too expensive and the government wants alternative energies to reduce China's dependence on it. People in the highly polluted cities often complain that their children have nowhere to go to escape the bad air, and that they are worried about what all this will mean for their health.

Farmers have rioted and held demonstrations over pollution damaging their crops, making environmental hazards a potential source of political instability, something the ruling Communist Party refuses to tolerate.

China's top environmental watchdog, the State Environment Protection Administration (Sepa), said in September that pollution cost China £34bn in 2004, about 3 per cent of the GDP that year. In true pragmatic style, Chinese leaders introduced laws this year that set a goal of doubling the use of alternative sources of energy. By 2020, 15 per cent of China's energy needs will be met from renewable sources, with the amount of green power produced rising to 10 gigawatts by 2010 and 30 gigawatts by 2020.

"I'm very optimistic about the outlook for renewable energy here. In China, introducing renewables is good industrial development strategy, it's not part of the climate-change argument," says Dr Eric Martinot, a senior research fellow with the US-based Worldwatch Institute and a senior visiting scholar at Tsinghua University.

China invested £3.3bn in renewable energy last year, making it one of the biggest investors in renewables in the world, and Dr Martinot believes the spending was based on sound reasoning. "In other countries it's a question of 'a' or 'b', but here people say 'Let's develop everything - 'a' and 'b' and 'c', we need it all'," he says. "Local air pollution is playing a big factor in driving many of these arguments, as ordinary people don't accept this kind of pollution." There are 30 million solar households in China, which account for nearly 60 per cent of global solar capacity. Wen Jiabao, the Prime Minister, says solar power is central to his government's efforts to cut the use of fossil fuels by 20 per cent as a percentage of gross domestic product over the next five years.

Industry leaders all over the world are watching what is happening in China. The scale of the country makes it prime testing ground for new technologies - if something works in a country of 1.3 billion people, then it is likely to be viable the world over.

The Chinese Renewable Energy Industries Association (CREIA) was set up in 2000 to promote the industrialisation of the use of green energy in China. "Using renewable energy can promote economic development in an environment-friendly way, which would be the key method to balance China's economic development and its environment protection," says Li Junfeng, CREIA's secretary general.

China still has vast coal reserves, but officials are examining the potential of renewable energy to resolve a potential bottleneck to faster economic growth. The experts say the challenges facing China's environment require a multi-faceted response - wind power in particular is especially suitable for remote, economically underdeveloped regions, such as Xinjiang and other barren provinces such as Inner Mongolia. Meanwhile, the CREIA is developing solar energy and biomass energy in several other provinces, including Hebei and Jiangsu.

Local government officials in Dunhuang in Gansu province said they would build the world's biggest solar plant there, a 100-megawatt project costing £400m that will take five years to build. Dunhuang is sunny, with 3,362 hours of sunshine every year, making it a prime spot for solar energy development.

The world's biggest solar plant is at Arnstein, near Wuerzburg in southern Germany, with a 12-megawatt capacity. Beijing is also examining the potential of ethanol and biodiesel. China produced one billion litres of ethanol last year - a small proportion of global production (which hit 33 billion litres) but one that is growing.

China is also getting help from some significant global players, including the World Bank and General Electric. British companies such as BP are also getting involved - the Tsinghua-BP Clean Energy Research and Education Centre was launched by Tony Blair three years ago and receives more than £500,000 a year from BP. It aims to develop clean energy technologies and advise China's National Development and Reform Commission on the use of clean energy. In May, the World Bank said it would work with China to look at how to optimise energy use.

"As the 2008 Beijing Olympics approaches, we are also conducting several related projects, such as the sustainable urban energy system," says the centre's administrative director, Jiang Ning. Ah, yes, the Olympics. With less than two years to go, Beijing is working hard to meet its pledge to make the 2008 Games a "green Olympics" and provide a platform for China to show itself as a modern, progressive country.

It's hard to overstate the importance of the Games as a symbol of national pride and as a motor for change. A pilot project is up and running in Xuanwu Park with solar power for lighting, heating and refrigeration. The goal is that by 2008, up to 90 per cent of the city's street lamps will use solar power, which will also heat 90 per cent of the water used for bathing, according to Tian Maijiu, the deputy director of the Standing Committee of Beijing Municipal People's Congress.

Wind power will generate 20 per cent of the electricity for the Olympic venues, and the city will provide direct investment or interest-free loans to key projects. Solar power, biomass and wind power development will be the three main projects in Beijing's rural ecological park, and the city is also planning to build a series of recycling projects that will include refuse incineration, processing plants and a disposal centre for dangerous waste.

Then there is hydroelectric power. The redirecting of rivers and relocating of millions of people for giant dam projects has caused consternation among environmentalists and human rights activists. But the government sees it as a viable alternative to coal, and the Three Gorges Dam, the world's biggest, which partially opened in May, will produce 22.4 million kilowatts when it is fully operational by 2009. The government is also sensitive to criticism: after Fu Xiancai gave an interview to a German television station in June 2006 to complain about insufficient compensation for relocation, he was beaten so badly that he will be paralysed for the rest of his life.

Another controversial power source is nuclear energy. Six nuclear power plants are due to be built in the south-eastern province of Fujian, part of China's goal of having 40 gigawatts of nuclear power on line by 2020.

It would be naive to think that China is planning to become a green superpower. Coal will continue to provide the lion's share of its energy needs. But crucially, renewable energy will form a more important part of the overall jigsaw of energy provision and that can only be good news for China, and the planet.

The world's economic powerhouse

While China is stepping up its efforts to promote renewable energies for hard-headed pragmatic reasons, there is no question that the environmental picture remains grim.

A relentless drive to boost the country's gross domestic product (GDP) - the economy grew 10.9 per cent in the first six months of the year) led to an increase in the discharge of major pollutants in the first half of this year, according to the State Environment Protection Administration (Sepa).

Over half of all finished industrial goods are made in China these days, and the reason why so many Western companies are turning to China to manufacture their products is because of cheap production costs. But pressure to keep manufacturing costs down generally bodes ill for the environment as companies use the cheapest means of production available, which is often not the most environmentally friendly means. And growing domestic demand for everything from cars to washing machines to double-glazing, all products long denied the vast majority of Chinese people, has also put pressure on the environment and on energy use.

"It is almost impossible to reduce energy consumption within a short period while experiencing such a high economic growth rate," Lu Zhongwu, an expert at the Chinese Academy of Engineering, told the China Daily newspaper.

* Coal output grew by 12.8 per cent in the first half of this year. Coal-fired power plants emit greenhouse gases and a new plant opens in China every week to 10 days.
* Local governments in one-third of Chinese cities have banned increasingly popular electric bicycles, even though they are less polluting than cars. And bicycle lanes for regular bikes are being trimmed back in nearly every city in China to make way for cars.
* China produced 12 billion tons of industrial waste-water in the first half, up 2.4 per cent from the same period last year.
* China is the world's second-biggest emitter of greenhouse gases and is expected to overtake the United States as the biggest, bringing acid rain to roughly one-third of the country and poisoning nearly three-quarters of rivers and lakes.
* Sepa said that under 40 per cent of public projects had undergone environmental evaluations before receiving approval.
* Air pollution in Beijing was "hazardous", the highest category in the China Environmental Monitoring Centre's index, for the 24-hour period ending at noon on Tuesday this week, Xinhua news agency reported.
* Chemical oxygen demand (COD), a common index of water pollution, increased by 3.7 per cent, while emissions of sulphur dioxide increased by 4.2 per cent in the first half of this year.

China Energy Sector Analysis

China energy industry consumption is estimated to reach 1629 Million Tons of oil equivalent in year 2006. Non-fossil fuels, especially coal (it accounted for 69% of the total energy consumption in 2005) & oil (21%), are the major sources for energy in China. With the China's objective to secure energy for future & to look for and embrace clean renewable energy sources is expected to grow at rapid pace.

Key Findings

- Energy efficiency is the major issue for Chinese energy industry. E.g., if national commercial and residential codes are well enforced, they could reduce carbon emissions by 49 Million Tons in 2020, displacing the need for 23 large (1,000-megawatt) coal-fired power plants.

- Natural gas accounted only for 3% of China energy mix in year 2005. For this, Chinese government has see the target of 10% till the year 2010. With limited natural gas reserves, it is expected that to meet set target, China will emerge as big natural gas importer in near future.

- To ensure supply diversity, China aimed to reduce dependence upon oil & gas, which will offer immense opportunities for renewable energy source. Although China's share of renewable energy will rise in future but coal is expected to be the major source for energy in near term.

- In China's biodiesel industry, principal difficulty is the lack of eligible sources of production e.g. China is a net importer (in fact, it is the largest importer in the world) in all the major edible vegetable oils.

- China registered rapid growth in solar cell production. In only 2-3 years (roughly from 2003 to 2005), solar cell production share of the country increased from 1.07% to 8% with respect to the world, only after Japan and Europe. In wind energy, China's abundant inland and offshore wind energy resources provide potential for large-capacity in-grid wind farms.

Solar Panels 2007

China's production of solar panels is estimated to have more than doubled to 400MW in the past two years, making it one of the world's largest providers of the line. The country now accounts for approximately 20 percent of global solar panel output, up from 10 percent in 2004.

Output growth rate, however, will be slower in the next few years. In 2007, annual production is expected to increase by a modest 20 to 30 percent to reach about 500MW, still leaving much of capacity unutilized.

The main constraint to higher growth is the shortage of polysilicon, the main raw material of wafers and cells. While the supply situation is expected to improve, it is still projected to fall short of demand in coming months since most of the expansionary activities of polysilicon companies are expected to take effect only in or after 2008.

China is now capable of producing 1,500MW of solar modules, five times its capacity at the end of 2004, as many suppliers established new facilities or upgraded production lines to take advantage of the high demand coming from the EU and the US.

The following are some of the other key trends that we see in China's solar panel industry:

- Overall capacity will continue to expand, but not as fast as it rose in 2005. Most companies will increase capacity by only 20 percent or less.
- Prices will increase further as polysilicon remains in short supply. The majority of companies will limit adjustments to within 10 percent, however, to keep quotes competitive.
- The amorphous segment will continue to grow as more mono- and polycrystalline panel makers venture into the line. Crystalline panels, on the other hand, will adopt thinner, more efficient cells.
- More companies will vertically integrate their production facilities to improve their control over costs along the supply chain, and to ensure a stable supply of components, especially cells.