|
Resources
and Status of Application
|
China
has one of the best renewable energy resource endowments in the world.
National wind resource potential exceeds 255 gigawatts (GW). Solar
insolation is excellent, in some places reaching as high as 8,400 MJ/m2/year,
and with a median value of 5,852 MJ/m2/year[i].
Biomass, mini-hydro, and geothermal resources are also
abundant—potential annual resources are 300 Mtce[ii]
for biomass, 76 GW for mini-hydro (facilities of less than 25 MW) and
6.7 GW for geothermal energy. |
Table
1:
Status of Application of Selected Key Renewables in China
in 1999.
|
Technology |
Installed
Capacity to end of 1999 |
|
Solar
PV (MW) |
13 |
|
Solar
Water Heaters (106 m2) |
15 |
|
Grid-Connected
Wind (MW) |
262 |
|
Small
Wind (MW) |
26 |
|
Geothermal
Power (MW) |
30 |
|
*
Biogas Livestock Farms (108 m3) |
0.6 |
|
*
Biogas Industrial Wastewater |
3.2 |
* Figures
for 1998
|
By the end of 1999, China had over 20 grid-connected wind farm sites with a total installed capacity of 262 MW, and over 160,000 small wind turbines (50 to 5,000 W) with a combined off-grid capacity of 26.3 MW. There is an established domestic manufacturing base for small-scale wind turbines (50W-10kW) and emerging capacity to manufacture larger-scale turbines (>250kW). Recently a series of joint-venture companies have helped to bring the capacity to manufacture wind turbines suitable for grid-connection in-country. |
| In 1999, the installed capacity of photovoltaic cells (PV) reached 13 MW, about a third of which was as dispersed household systems. Despite a large potential market, the local manufacture of PV components remains on a scale far removed from the economies of mass production. In contrast, China’s solar hot water heating (SWH) industry serves half the entire world market. Annual production totals around 4M m2 and installed capacity has surpassed 15M m2. Nevertheless, growing demand cannot be met by existing production capacity and the sale of sub-standard equipment has already threatened to damage this promising market. |
| China has extensive experience in the application of anaerobic digestion technologies, a network of research centres and capacity to manufacture anaerobic digesters. Over 6 million household-scale biogas digesters and around 500 large-scale units are now operating in China. The comprehensive application of existing environmental regulations for the discharge waste waters would do much to increase the financial viability of such biogas installations. |
| Around 800MW of bagasse power is presently installed and used on-site at sugar mills in Guangdong and Guangxi[iii]. The construction of facilities capable of generating surplus power for sale to the grid, as practiced elsewhere, could provide an additional 800MW in generation capacity. |
|
Installed capacity for electricity generation from high temperature geothermal resources totals 30 MW (of which 25MW is at one plant in
Tibet). This represents
roughly 6-12% of the estimated technically and economically viable
potential. Low and medium temperature geothermal resources are harnessed
for direct heating applications at 1300 utilization sites, comprising 24%
of the global installed capacity. Nevertheless
this represents only a small fraction of the resource potential of
0.6Mtce. |
|
Despite
this rich resource and the potential to reap associated environmental and
social benefits, renewable energy remains on the margins of the energy
sector in China. Only small hydro power is fully commercialized, achieving
a total installed capacity of 15 GW in 1993, and representing 8% of the
total national generating capacity. Figure 2 shows how different energy
carriers contribute to the production of China’s electricity. Excluding
small hydro, renewable energy as a whole still contributes less than 1% of
the national electricity supply. |
| It is worth noting that in 1997 only 35% of national coal consumption was in the power sector. Thus the penetration of renewables, in terms of their contribution to the overall national energy portfolio, can be seen in an even starker context. However, despite the present situation, the previous section has shown the large potential for renewables to play an increasingly significant role in China’s energy supply base. |
|
|
*Thermal includes power from coal, oil, gas and nuclear power plants.
In 1996 power generation from coal accounted for over 70% of thermal
power production, and nuclear accounted for 1.3%[iv]
Institutional
Framework for Design and Implementation of Polices and Initiatives
|
The
State Council, headed by the Premier, acts as the executive of the Chinese
National People's Congress. It co-ordinates the work of government
commissions, ministries, administrations, bureaus, offices, and
state-owned corporations. Under the State Council, two principal
Commissions manage government policy and planning in their respective
areas, while the ministries manage the implementation of projects.
The Government agencies at the forefront of national renewable
energy development are: the State Development and Planning Commission (SDPC), the State Economic and Trade Commission (SETC),
the Ministry of Science and Technology (MOST),
the Ministry of Agriculture (MOA),
and the State Environmental Protection Administration (SEPA)
and the State Power Corporation (SPCC).
However, these are by no means the only government bodies working
in this field—the Ministry of Finance (budgetary affairs); Ministry of
Forestry (off-grid electrification); Ministry of Water Resources (small
hydro); Ministry of Foreign Trade and Economic Cooperation (development
assistance); Ministry of Construction (energy use and integrated
construction); and the Office of Poverty Alleviation and Development
(rural electrification) all contribute to renewable energy development in
their particular fields of operation. |
| In principle SDPC is responsible for macro-economic planning and oversees large infrastructure projects. SETC oversees upgrading of existing industries, and the MOST oversees R&D. SEPA is responsible for the enforcement of environmental regulations and standards and co-ordination of important environmental programs and projects. National state bodies are represented at provincial level by bureaus reporting both to the State Agencies and to the provincial Governments. Every province (except Tibet) has a Renewable Resources Office whose operations include Rural Energy Offices. These offices initiate independent projects under the overall authority of the Agriculture Bureau[v]. |
|
The SETC is tasked with
overseeing industrialization and the retrofitting of existing industries.
Under the Department of Resource Conservation and Comprehensive
Utilization, The Renewable Energy Division and the Energy and Material
Saving Division take the lead in direct support for renewable energy
development. Since the transformation in 1998 of the Ministry for Electric
Power into the State Power Corporation of China, the SETC has also been
tasked with regulating the electricity sector. In this regard, the
Department of Electric Power develops policies and regulations, while the
Department of Legal Affairs manages legislation and enforcement.
SETC has initiated many activities in support of renewable energy
development in China, making available 120 million RMB for low interest
loans (less than 6%) through the Double Increase Programme. Recently
SETC has linked-up with international development agencies to promote the
adoption of renewable energy. A
recent ADB technical assistance project has analyzed the economic
potential for bagasse, biogas and solar thermal applications, while a $440
million programme with the World Bank proposes to realize 190MW of wind
development, disseminate 200,000 solar and hybrid home systems and buy
down the costs of technology improvements.
Finally, the present UNDP/GEF Capacity
Building for the Commercialization of Renewable Energy in China is
being implemented by SETC. |
| The SDPC is responsible for macro-planning and budget approval. Renewable energy development is handled by the Division of Energy Efficiency and Renewable Energy, under the Department of Basic Industries. In addition, the Department of Product Pricing and Management is responsible for approving electricity prices. SDPC also approves financing and foreign exchange requirements for new renewable energy projects. To support its work in the field, SDPC created the Energy Research Institute, whose operations include the Centre for Renewable Energy Development (CRED), an institution at the forefront of renewable energy development in China. |
|
Recent efforts initiated by SDPC in support of RE development include the
established the China Fulin Wind
Energy Development Company, the Cheng Feng Programme to
develop domestic manufacturing of wind turbine components, and The
Brightness Programme, a large-scale rural electrification programme.
At present SDPC is taking the lead in the identification of new
competitive polices to promote the use of renewables during and after the
ongoing-and far reaching reform of the energy sector (such as Renewable
Portfolio Standards). |
| The MOST takes the lead in planning and program administration of scientific research and development (R&D) projects. The MOST is also in charge of technology transfer, including acquisition of foreign technology. It supports manufacturing actively through the provision of venture capital. |
| The SEPA is responsible for all aspects of environmental policies, the formulation of the national environmental regulations and issuing national environmental quality standards. SEPA is entrusted by the State Council for the enforcement of the regulations and standards and co-ordination of the important environmental programs and projects. In recent years, SEPA has been involved in the renewable energy development programs. |
| The State Power Corporation of China (SPCC) was created from the then Ministry of Electric Power in 1998 as a preparatory step for the planned reform of the power sector. SPCC and its subsidiaries own around 90% of national generation capacity and administer all grid-connected transmission and distribution facilities. SPCC remains involved in policy formulation and responsible for coordination of resource assessments. |
|
The Ministry of Agriculture (MOA) is responsible for agricultural and rural economic development.
MOA is the principal authority managing national rural electrification
activities and has granted 10 million RMB for renewable energy
dissemination and demonstration projects (targeting biogas, biomass and
solar thermal). |
| In addition there is an extensive network of institutes and research centres, often specialising in specific technologies or applications (see CREIA website). |
National
Policies for the
Promotion of Renewable Energy
|
Over the years, national support for the development of renewable energy has been maintained through a wide array of projects and programmes. In the past these were often conceived with rural economic development objectives, as in the case of several mini-hydro and rural electrification programmes. In 1994, the State Council’s “White Paper on Population, Environment, and Development in the 21st Century”, issued in direct follow-up to the Rio Earth Summit, marked the first attempt to address renewable energy development at the national level. The White Paper identified a medium- to long-term guide for the economic and social development of renewable energy. |
| Building on the indicative guide outlined in the White Paper, the 1995 “Program of New and Renewable Energy Development - 1996-2010” laid down a roadmap for the development of renewable energy in China. Jointly formulated by the State Planning Commission (now SDPC), State Economic and Trade Commission (SETC) and State Science and Technology Commission (now MOST), the program aims to integrate adoption of RE into the wider economic development process. Specific intermediate targets for the penetration of individual technologies by 2020. |
| The strategy adopted to achieve these objectives incorporates two phases. During the first phase a modern industrial base and market infrastructure is to be developed for mature technologies; while research and development will be pursued to bring other promising technologies to maturity. During the second phase the new technologies will be popularized. The objectives of the Program are echoed in the development policies approved by the National People’s Congress in 1996, the “Ninth Five-Year-Plan” (1996-2000) and “2010: Long Term Objectives on Economic and Social Development in China”. |
| Despite the clear overview provided by the Program for the development renewable energy, to date no comprehensive, cross-cutting, national policy has been adopted to realize the goals it laid down. As a result, the many institutional role players in this field have launched their own particular programmes and initiatives. |
|
A
host of programmes and initiatives are contributing to achieving the
targets laid down in the New and Renewable Energy Development Programme
(see previous section).
These can be broadly identified as Financial Incentives, the
provision of modern energy services in remote rural areas, and support for
R&D and the development of domestic manufacturing. |
1) Financial Incentives
|
The State Development Bank, Agriculture Development Bank, and Industrial and Commercial Bank are used by the Government to provide low-interest rate loans in support of renewable energy. In 1987 the Energy Conservation Office of the State Council established a fund to finance 60M RMB in low interest rate loans (50% standard interest rates) for renewable energy development. By 1996 this had increased to an annual provision of 120-130 million RMB. SETC’s “Double Increase” programme has channeled an additional 120 Million RMB through this mechanism in support of industrial development of renewable energy. Under this programme financing for 80% of 74MW of wind power has been provided, with the balance of financing coming as equity investments from the loan beneficiaries. |
| Low
interest loans have proved an effective central government tool for
promoting renewable energy development in China.
Since 1986, manufacturers of small scale wind turbines (50 million
RMB), developers of grid-connected wind (10 million RMB), manufacturers of
PV systems (10 million RMB), and solar water heater manufacturers have
benefited significantly from this instrument.
In addition 200 million RMB has been made available for large- to
medium– scale biogas projects, resulting in more than 100 new
facilities. Other impacts have been in the fields of manufacture of
improved biomass stoves (over 60 projects), geothermal applications, and
biomass gasification. |
| In January 1999 the SDPC and MOST released a document detailing new regulations for loan provision for renewable energy. Projects installing over 3MW of grid-connected renewable energy are to receive assistance form SDPC to have bank interest rated reduced by 2%. The State Development Bank is encouraged to give priority to Basic Construction Loans for renewables, particularly where these make use of domestically produced technologies, and to extend payback periods for such projects. |
Pricing Policy
|
The Electric Power Law of 1995 introduced the New Plant, New Price Policy. This policy provided a mechanism for new investors in power generation (such as self-financiers, joint-ventures, or shareholders) to sell their electricity to the power grid at a debt repayment price. This price consisted of operating cost, repayment of loan interest, taxes, and reasonable profit during the payback period. The Law made it possible for any additional costs of electricity generation at the new plants to be passed on to consumers throughout the electricity pool. As a result, new grid-connected windfarms have succeed in securing between 0.6 and 1.2 RMB/kWh for their power (or 7 US cents/kWh to 15 US cents/kWh). By comparison, the costs of producing electricity from coal and hydro in China have been estimated as 4 and 5 cents/kWh respectively.[vi] |
| Although this policy placed new energy investments on a sounder financial footing, the short-payback times used to calculate the debt repayment price resulted in electricity prices significantly greater than the pool price during the early stages of a plant’s lifetime. As a consequence of these high prices, provincial utilities have been reluctant to purchase more than a limited amount of electricity under these terms. |
Other financial
incentives
|
Taxation: Renewable energy imports enjoy relatively favorable customs duties. Duties are nominally 12% for PV systems compared to an average duty of 23% in 1996. Although whole wind turbines have been exempted from import duty, turbine components have not. Where hardware is used to supply remote rural areas (under national or internationally assisted programmes), it is eligible to apply for an exemption to reduce the duty. VAT and VAAT are collected at national and local levels. Biogas (13%) and small hydro (6%) enjoy uniform favorable rates of VAT. Other taxes (such as corporation tax and land use tax) and taxes on all other technologies, enjoy various rates according to the locality. For example, VAT for PV can vary from 17% (in Xinjiang) to 25% (in Gansu), and for wind from whole exemption for exports (in Xinjiang) to 17% (in Liaioning). |
| Subsidies: Some provincial governments (notably Gansu, Inner Mongolia, Qinghai and Xinjiang) have chosen use their own revenues to provide direct subsidies for renewable energy. For example, Inner Mongolia provided an average of 2.5 million RMB annually for 100W wind power systems and 16W PV systems between 1986 and 1996. While effective in increasing sales volumes, direct subsidies neglect other crucial factors for commercial development, such as lowering production costs, improving quality standards, and ensuring effective service networks. |
| Additional incentives for the formation of joint ventures between Chinese and foreign companies are also available, including tax incentives and local autonomy for projects less than 50 million RMB in special economic zones. |
2)
Extension of Modern Energy Services to Remote Rural Areas
|
Renewable
energy has long been recognized as a means to deliver improved energy
services and quality of life to populations in remote rural areas.
The Integrated Rural Energy Development Programme with Rural Economic
Development (IREDP), initiated by the Ministries of Agriculture,
Forestry and Water Resources in the early 1980s, has developed low cost
energy options contributing to rural economic and social development.
Activities have included dissemination of improved stoves, establishment
of fuel wood plantations, and installation of solar facilities.
From the original 3 counties, the program was expanded to include
100 counties during the 8th Five Year Plan and the State
Council has recently approved inclusion of a further 100 counties. In
addition, by 1994, the Improved
Stoves Programme for Women in Rural Areas
had distributed 150 million improved stoves. |
| Development
of small-scale hydropower (installed capacity 16GW) has been the backbone
of past rural electrification initiatives.
The Small Hydro Power Programme, initiated by the State Council in
1983, was implemented by the Ministry of Water Resources in 100 counties
without access to grid electricity.
By 1989 the programme had installed 100W per capita in 88 of the
program counties. In addition
the Warm Spring Programme
promotes micro-hydro (usually of less than 100kW) for several households
and/or small businesses. |
| Instigated
by SDPC, The Brightness Programme,
is a large-scale rural electrification initiative stemming from the 1996
World Solar Summit.
Over a period of 15 years, the programme aims to electrify 23
million people living in remote areas using wind, solar and hybrid
technologies. Systems for
individual households, villages, and remote stations will be installed,
according to the most appropriate technology and the ability-to-pay of the
beneficiaries. 86% of the
cost of the systems will be covered by the beneficiaries, with the rest
coming from local government (7%), central government (2%) and foreign
grants (5%). The associated distribution and service networks will
be wholly funded by grant financing.
Following a piloting period, the first phase of the project
(2000-2001) will connect 8 million people, 2000 villages, 100 border
stations and 100 microwave stations to stand-alone renewable energy power
supplies. The programme is already under implementation in Xinjiang
(supported by $15 million from the Dutch Government) and plans to operate
in Inner Mongolia, Gansu and Tibet. |
| The Solar Power Generation Programme, a bilateral/multilateral cooperation initiative implemented by the State Planning Commission with the Ministry of Electric Power has installed solar supply systems in Tibet, Gansu, Qinghai and developed wind power in Inner Mongolia and on the east coast. Between 1990 and 1995 Central Government invested 7 million RMB to build four PV stations with a total installed capacity of 85kW in Tibet, and in 1995 SPC provided 3 million RMB in support of PV projects. An additional programme is installing solar heating systems for primary schools in northern China. |
4)
Support for R&D and Development of Domestic Manufacturing
|
Central
government support for renewable energy R&D is channeled through MOST
and SPC. Under the Ninth 5
Year plan, MOST provided 60 million RMB ($7.5 million) for research and
development of renewable energy technologies.
In addition SETC, MOF and MOA have made more than 9.2 million
available for training and demonstration of technologies aimed with rural
electrification applications. |
|
Low interest rate loans (see above) are one of the principal instruments used to support the development of existing manufacturing industries. Where domestic manufacturing is at an early stage of development, the government has launched additional support activities. For example, in 1992 the China Fulin Wind Energy Development Company was established with an endowment of 70 million RMB and tasked with the development of wind power, from research and development through to commercial investment. By 1998 its investments totaled 50 million RMB. The Cheng Feng (or Ride the Wind) Programme was launched by SDPC in January 1997 to develop domestic manufacture of wind turbine components. Under the programme two new joint venture companies have been established. These aim to increase the local content of wind turbine generators to 80%, and establish the capacity to manufacture large (600kW) turbines in China. |
Renewable
Energy and Power
Sector
Reform
| China has recently embarked on a far-reaching reform of its energy sector. Essentially, the objectives are to separate the commercial elements of the sector, to increase private investment, and to improve operational efficiency. This process of reform has direct implications for the development of renewable energy in China. The separation of generation from transmission and distribution functions, and promotion of private investment and competition in generation, will go some way towards removing many of the persisting barriers to the large-scale commercial development of renewables. Nevertheless, it is clear that unless new instruments are developed to support the establishment of renewables in the national energy portfolio (such as an obligatory Renewables Portfolio Standard), renewables will face severe difficulties in the competitive environment of a post reform energy market. |
International
Support for the Development of Renewables in China
|
|
Overseas
financing, both development assistance and, more recently, some
commercial investment, has made a significant contribution to the
development of renewables in China.
Development assistance is administered through two principal
mechanisms, soft loans (sometimes as tied-aid), and ODA grants. |
|
Bilateral soft loan financing has supported the majority of wind development in China to-date. However, the generous terms offered by these sources (upto 0% interest, 5 years grace and 40 years pay-back period) create an artificial financing “bubble” capable of sustaining the commercialization of wind power on only a limited scale, and giving limited incentive for cost-reduction. |
|
However,
multilateral financing, from the World Bank and Asian Development Bank,
is poised to step-up the commercialization of renewables in China to a
much larger-scale. The
World Bank has prepared a $215M financing package to support
installation of 190MW of wind power, market expansion for solar home
systems, and technology improvement manufacturing of PV and wind systems
components. Also under preparation is the World Bank's Strategic
Partnership for Renewable Energy Development , which will provide a
5 - 10 year framework for GEF supported activities in China.
The Asian Development Bank has supported technical assistance grants
(focusing on wind, solar thermal, and bagasse technologies) to explore
the potential for provision
of renewable energy loans. |
|
Grant financing has primarily been directed at projects with social development goals – such as rural electrification (for households, clinics and schools) in remote areas – and with environmental goals – such as landfill gas recovery. However, under the Sino-US Energy Cooperation Protocol, the National Renewable Energy Laboratory of Colorado (NREL), is leading a bilateral cooperation programme specifically targeted at promoting renewables. |
|
In addition, charitable foundations, such as The Packard Foundation, The Energy Foundation, and the World Wide Fund for Nature (WWF), are currently managing programmes to promote the more widespread adoption of renewables in China. |
|
The SETC UNDP/GEF Project is compiling a database of internationally supported projects to facilitate information sharing between these initiatives and, where possible, to ensure that their efforts are mutually reinforcing. The database is available for consultation online. Representatives of organizations working in this field are strongly encouraged to include their own activities through the facility to submit information. This information will be sent directly to the PMO and included on the database. |
|
Comments
to improve the structure and usefulness of the database are welcomed
prior to June 2000, when a meeting of international organizations
working in this field will be asked to endorse the database format.
Please send any comments to the PMO |
| Updated 6/1/2003 |
|
Copyright UNDESA |
