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It
is clear the present Chinese leaders intend to solve their nation's
energy and pollution problems while at the same time strengthening its
economy by developing their nation's abundant New Energy assets.
What
the U.S. will do with its New Energy assets remains to be determined.
They are the subject of an all-too-familiar partisan bickering and
political backstabbing between the frightened forces of yesterday and
the far-seeing forces of tomorrow that is the essence of this strange
but wonderful constitutionally-based representative democracy. Some
of the provisions the U.S. New Energy industries urgently need may make
it into the upcoming jobs bill, a piece of legislation Senators and
Representatives from either side of the aisle will be hard-pressed to
oppose.
Meanwhile, the command authority of China's leadership
is unhesitating. They obviously agree with President Obama that the
economy that masters New Energy will be the master of the world's
economy in this century.
EVERYTHING ANYBODY KNOWS ABOUT CHINA NEW ENERGY, posted here in September, was an ambitious attempt to hit the highlights of The China Greentech Report 2009, a remarkably comprehensive look at China’s New Energy and Energy Efficiency sectors.
A new, just-released set of chapters update the topics of Cleaner Conventional Energy, Electric Power Infrastructure, Green Building, Cleaner Transportation, Cleaner Industry and Clean Water as well as Renewable Energy. They describe present market factors and what is coming in New Energy in China.
The
Renewable Energy chapter mentions geothermal and hydrokinetics in
passing but focuses in great detail on the solar energies, wind power
and the bioenergies in China.
It begins by describing the
Chinese New Energy market. As might be expected, it is a description of
an emerging, industrializing economy with an enormous appetite for
energy. Electricity consumption grew more than five times over from 1990
to
2007. Because electricity comes largely from coal in China, power
demand has created enormous air and water pollution problems.
At
the same time, China has become the world’s second biggest oil consumer
and, like the U.S., lacks domestic resources to meet demand. Like the
U.S., there are rising concerns about reliance on imports and national
security.
Like the U.S., China is blessed with great New
Energy assets. Two-thirds of China’s land area gets more sun than world
solar output leaders like Germany and Japan. China’s wind is adequate
to generate electricity equal to its current total installed
electricity generating capacity. In 2006, China had bioenergy resources
equal to 300 million tons of coal equivalent (MTCE). That is expected
to double by 2020 and triple by 2030.
The paper details a set of
35 New Energy solutions in solar, wind and bioenergy. Some are being
implemented already and another set will be implemented as they emerge
and transition from trial to mature technologies.
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Solar
solutions are divided into 3 areas: (1) Photovoltaic, (2) Concentrating
and (3) Water Heaters. Wind Power is divided into 4 areas: (1)
Turbines, (2) Development, (3) Maintenance and (4) Energy Storage.
Bioenergy has 3 solution areas: (1) Electricity, (2) Heat and (3) Fuels.
The
solutions were compared in terms of 2 key criteria, (1) environmental
impact potential and (2) overall commercial potential. They were also
considered according to whether they could be effective in the short
term (this year), medium term (1-to-5 years) or long term (5-to-10
years).
New Energy solutions score high for environmental impact
but there are differences. Some bioenergies, for instance, have greater
greenhouse gas emissions (GhGs) than others, and some may be no better
than fossil fuels.
The best commercial solutions in China are
(1) solar water heaters, (2) wind energy storage solutions and (3)
biofuels – at 10 years out. Wind is far ahead of bioenergy or solar as
a short term solution though they both beat wind in the medium and long
term because they have larger potential markets.
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Solar
photovoltaic solutions are a variety of competing solar cell
technologies. Concentrated Solar Power (CSP) solutions are a variety of
competing methods of concentrating the sun's heat. The solar water
heater solution (SWH) system absorbs the sun’s heat in water and holds
it in a water tank until it is needed.
The basic wind power
solution is the conversion of the wind’s energy into mechanical energy
that then is used to generate electricity.
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In
service to its burgeoning wind industry, China is developing skill at
wind project siting, resource assessment, turbine quality control and
maintenance. It is moving toward superior turbine electrical control
systems, improving the technology in a turbine that converts mechanical
energy to electricity and developing standardized operating procedures
in the factories and in the field. It is also orking in (1) battery
storage solutions, (2) Compressed Air Energy Storage (CAES) solutions
and (3) Pumped Hydro Storage for its wind resources.
In
bioenergy, China is working to improve electricity generation through
the conversion of biomass to gas. This can be done as part of a
conventional power plant (co-firing) or as the central energy source of
a power plant. It can also be done as a form of distributed generation,
either at a community level (Civil Heat) or at a conventional power
plant (Industrial Heat).
One of the most interesting parts of
the new New Energy chapter is its outline of the key challenges facing
China’s 3 major sources of New Energy. For each energy source, Market,
Technology, Financing and Regulatory challenges are detailed.
The
New Energy chapter also includes a discussion of New Energy
opportunities emerging in China. For each of the 3 major New Energies,
it details opportunities for (1) solution adopters, (2) solution
providers, (3) financial investors, (4) government regulators, and (5)
other stakeholders.
The chapter concludes with a list of the opportunities in China’s 3 biggest and fastest growing New Energies.
Sources and methods of the Greentech Initiative are detailed in the September post and at greater length on the report’s website.
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COMMENTARY
The Renewable Energy chapter begins with definitions of its 3 primary topics:
Solar
Energy is defined as “the conversion of the energy from the sun into
thermal heat or electricity…” It includes photovoltaic (PV) cells that
convert the sun’s light into electricity directly and solar power
plants that concentrate the sun’s heat, route it to boil water and used
the steam to drive a turbine. The definition also includes the direct
use of the sun’s heat for hot water in solar water heater (SWH) systems.
Wind
Power is defined as the conversion of the force of blowing wind into
the mechanical turning of a turbine and the use of that mechanical
energy to generate electricity. This includes huge onshore and offshore
turbines in sprawling wind proects and small turbines at businesses and
residences.
Bioenergy is the energy extracted from any kind of
organic matter (recently living organisms or their metabolic
byproducts) called biomass (straw and crop residues, energy crops such
as sweet sorghum, jatropha and rapeseed, and waste). Bioenergy output
is in 4 forms: bioelectricity (from burning the gas produced by the
decay of biomass to drive a turbine), bioheat (from the heat given off
in decay or when the gas is burned), biofuels (when biomass gases are
refined to liquid or gas fuels) and co-products.
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Highlights of the introduction to Solar Energy in China:
(1) China is the world leader in solar PV materials and SWH production capacity and
and ambitious government targets will capture the barely tapped domestic market to sustain China’s lead.
(2)
The still high cost of solar cells and the still relatively low
conversion efficiency define the limits of the solar industry in China
(and worldwide).
(3) China anticipates grid parity for solar PV in 2-to-8 years.
(4)
Solar manufacturing creates GhGs and toxic byproducts but using the
almost infinitely abundant clean resource remains appealing.
(5)
Two-thirds of China gets more than 2,200 radiation hours per year of
sun and there are solar resources in excess of 500 KJ/cm2 per year
across 70% of the country.
(6) In 2006, China had ~150,000 jobs in
solar PV and ~600,000 jobs in SWHs (and its solar industries have grown
enormously since then).
(7) In 2007, the SWH sector had sales of 32 billion yuan (US$470 million) in 2007.
(8) Combined solar PV and SWH potential could supply 0.8% of China’s total energy by 2020, up from 0.01% in 2006.
(9)
China leads the world in solar PV production capacity and produced
1,088 MWp (megawatt peak) in 2007. That was ~27.2% of world solar PV
production. 90+% of China’s solar PV cells and modules were exported
and its domestic market was only 4% of global PV installations.
Government programs are aimed at boosting domestic demand to 20
gigawatts by 2020.
(10) China leads the world in production and installation of SWHs.
(11) China lags the U.S. and Spain in solar power plant development but is getting involved.
(12)
The recent drop in silicon price revealed weaknesses in China’s solar
industry. Because they are so overly dependent on the manufacturing
part of the solar business, the drop in international demand for
silicon panels left them hamstrung. Development of domestic markets is
the solution they are aiming for.
(13) To develop its domestic
market, the China solar industry must improve its skills downstream in
the value chain (solar forecasting, planning, installing and
maintaining solar arrays).
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Highlights of the introduction to Wind Power in China:
(1)
China’s wind industry is one of the fastest growing in the world. It is
supported by a lot of wind and strong government policies. It reached
its 2010 targets in 2009. It is expected to pass its earlier 2020
target of 30 gigawatts in 2012. So the National Development and Reform
Commission (NDRC) revised the 2020 target to 100 gigawatts.
(2)
China was 5th in the world in installed wind capacity in 2008 and moved
to 3rd in 2009. It is either 1st or 2nd in new capacity yet gets only
0.8% of its electricity from wind (which provides 2% worldwide).
(3)
Because the Chinese government sees the potential, policies and
incentives strongly support the domestic wind equipment manufacturing
industry and wind project development – by Chinese companies.
(4)
Because the government has somewhat shut out more advanced foreign
companies, the domestic industry is still developing and learning. It
is improving quality, technologies, financial incentives and grid
connectivity. But the potential, it is agreed by a wide range of
observers, is unquestionably there.
(5) The abundance of the free
asset and its emissions-free nature suggest wind could even challenge
coal for dominance in China’s electricity mix by 2020 if emissions
restraints tighten.
(6) The wind industry in China employs ~25% more people than coal on a per megawatt-hour basis.
(7) China’s wind power industry doubled its total generating capacity in 2009 for the 4th year in a row.
(8) It also built its first offshore wind turbines, something the U.S. wind power industry has yet to do.
(9)
Most observers expect a shakeout of major wind industry players but
they also expect the winners in China to emerge as dominant global wind
industry forces.
(10) State-owned enterprises (SOEs) retain inappropriate, industry-skewing advantages and own 88% of the market.
(11)
Though China was the 2nd-biggest buyer of wind turbines in the world in
2008, at least 30% of them are unused for lack of grid connection. This
is a problem that especially plagues foreign-built wind projects in
China and is a way the government helps keep China’s wind market
China’s.
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Highlights of the introduction to Bioenergy in China:
(1)
There is enormous growth potential for biomass resources in China.
Remaining to be developed are: ~3.7 million metric tons of agriculture
waste, 1.2 billion metric tons of forestry residue and 150 million
metric tons of municipal solid waste (MSW).
(2) China’s 2006 total
of 300 million tons of coal equivalent (MTCE) of biomass supply is
expected to grow at 4% compound annual growth rate (CAGR) over the next
20 years.
(3) The government intends to double the 2006 bioenergy
generation by 2010 and increase it 6 times over by 2020 but the
government’s aggressive ambitions have resulted in the market being
controlled by SOEs.
(4) The government is ambitious for bioenergy
because it offers millions of rural jobs and new rural income streams
for hundreds of millions of poor farmers. It could be worth as much as
100 billion yuan per year.
(5) Bioenergy would relieve some of
China’s burgeoning need for oil and oil products and thereby ease
national security concerns.
(6) Bioenergy would be a marginal improvement on coal as a source of electricity generation.
(7)
Bioenergy generation was 12 MTCE in 2006, mostly as biofuels,
electricity and bio-gas from biomass. The government wants at least 24
MCTE by 2010 and as much as 168 MCTE by 2020.
(8) The chief
impediment to growth is the upfront cost of owning the feed source,
especially when ag crops must be changed to bioenergy crops.
(9) “Costly wastes” have been transformed into expensive commodities (300 yuan/metric ton).
(10)
Seasonal and storage constraints as well as constraints on securing and
storing continuous feedstock supplies must be resolved.
(11) More efficient and cost effective technologies must be developed.
(12) China still needs national standards and transparent market data for biomass.
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One
of the most interesting parts of the new New Energy chapter is its
outline of the key challenges facing China’s 3 major sources of New
Energy. For each energy source, Market, Technology, Financing and
Regulatory challenges are detailed.
The key market challenges
for solar energy are its potential use of fossil fuels in manufacturing
which increases its GhG footprint, problems with recycling potentially
toxic materials used to make solar cells and the high cost of solar
energy.
Technology challenges include the technological
improvements’ slow transition from the lab to the field and quality
control concerns for the massive numbers of products needed to make a
dent in electricity demand.
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Financing
of solar energy is challenged in China because the government limits
foreign investment and controls a very narrow set of financing vehicles.
In
China, regulatory hurdles are always a problem. Inadequate brand
protection discourages foreign participants, government policies do not
create incentives or protections and there is little enforcement of
what protective regulations there are.
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The
wind market is challenged in 2 imposing ways: (1) The government gives
preferential treatment to Chinese manufacturers and developers and (2)
there are still severe limitations on the Chinese grid’s ability to
connect and intergrate new projects.
Chinese technology is getting better all the time but still faces high costs and quality concerns.
In
financing, new market players face very low bids for the power they
generate and, as with the solar sector, there are inadequate incentive
policies and financing vehicles.
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On
the regulatory front, wind faces confusing incentive policies, limited
transparency and the same issues with enforcement so often found by
others trying to do business in China.
Bioenergy market
challenges begin with an unreliable biomass feedstock supply that
varies with the many other mass human fluctuations in China’s rural
regions. Part of this unreliability does not begin with China’s growers
but with a failure of the government to enforce consistent purchase
requirements.
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As
with bioenergies worldwide, the most promising technologies remain
unproven (and the most proven technologies are unsatisfactory, often
causing as much GhG generation as they relieve.
Bioenergy
financing is inadequate because their cost keeps them from competing
with fossil fuels, especially because growers face significant up-front
capital costs in transitioning to the most promising feedstocks.
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Bioenergy regulatory challenges are the familiar lack of consistency, transparency and high standards.
China
has serious regulatory issues associated with its 3 major New Energy
industries. The chapter deals with these issues at great length and
there is simply no point in attempting to summarize them here because
if they are relevant to any reader, they should be studied in the
detail offered by the Renewable Energy chapter.
The
chapter concludes with a discussion of the New Energy opportunities
emerging in China. For each of the 3 major New Energies, it details
opportunities for (1) solution adopters, (2) solution providers, (3)
financial investors, (4) government regulators, and (5) other
stakeholders.
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In the Solar Energies,
(1)
Solution adopters can find financing partners, win power purchase
agreements (PPAs) and find other ways to improve financing; they can
help bring in technology advances and support improved quality and
standards; and they can fund feasibility demonstration projects;
(2)
Solution providers can develop downstream skills and technologies,
diversify to lower cost options and drive more R&D, especially in
solar energy products with potentially less GhGs and toxic by products
in their production;
(3) Financial investors could use PPAs and
innovative financing to offset high upfront costs and drive economies
of scale to bring costs down, they could improve methods of
return-on-investment (ROI) and cost-benefit analysis and they could
promote transparency and equal access;
(4) Government regulators
could set well-designed feed-in tariffs to drive growth, make PPAs more
serviceable to developers, and improve monitoring, enforcement and
regulation of grid operator compliance to ensure grid connection
incentives; and
(5) Other stakeholders could create independent
commissions to increase quality standards, forums for dialogue and the
development of best-practices, teach market players how to improve
sustainability in the entire value chain, and collaborate on guidelines
and reporting.
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In Wind Power,
(1)
Solution adopters could work with providers to improve project
suitability, quality and sustainability, create industry associations
to improvement of industry standards, and help establish competitive
market mechanisms;
(2) Solution providers could work with local
and national licensing entities to improve procedures, shift the cost
analysis benchmark from the payback period to the return rate (IRR)
over the 20-to-25 year project life cycle, and assist in the
development of industry associations to facilitate both competition and
cooperation where they are most productive;
(3) Financial
investors could develop and drive innovative financing, develop teams
of wind sector specialist, increase the understanding of the maturity
and capacity of wind technology as well as its risks;
(4)
Government regulators could establish required rates of generation and
capacity targets over the each project’s 20-to-25 year life cycle,
ensure PPAs are appropriate to tariffs and wind resources, increase
transparency and open opportunity for project developers to choose not
just the best domestically-manufactured turbine but the best turbine;
and
(5) Other stakeholders could watch for gaps in knowledge and
standards in comparison to that in other nations, support industry
associations to do the same and guide regulators where necessary.
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In Bioenergy,
(1)
Solution adopters could help providers accurately assess projects’
suitability and sustainability, help set and implement quality
standards, and drive technology development to improve product quality;
(2) Solution providers could work with local stakeholders to
accurately assess the quantity and suitability of biomass supplies, set
government standards based on real-world experience and strengthen
local industry associations;
(3) Financial investors could work with
local governments to set and meet realistic bioenergy targets, write
set-time contracts with local biomass providers to guarantee
availability and price on feedstocks, and create collaborations between
stakeholders to increase financial support the implementation of
bioenergy projects;
(4) Government regulators could write compulsory
national standards for biodiesel and bioelectricity, provide
cultivation, distribution and conversion process information to growers
based on local conditions, and strengthen local PPA enforcement with
penalties for failure to meet terms; and
(5) Other stakeholders
could identify gaps in the process and suggest solutions, organize
collaboration on standards among key stakeholders, and work with the
government to improve guidance and provide new rural players with
needed training.
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The
section on opportunities is the perfect way to close the chapter
because it makes so vivid the one limitation of the Chinese system: It
can drive growth, but – from financing to R&D to manufacturing to
developing the market – China somehow lacks the instinct for innovation.
That
is why the fight at Copenhagen to get the Chinese to be more
transparent in exchange for providing them with new technologies was so
intensely fought. If China can remain less than transparent, it can put
Western technologies to use without paying for them; if the West can
make them be more transparent, all this New Energy development could be
a lot more expensive in China and a lot more profitable for the
innovators.
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QUOTES
Sandy
Butterfied, Principal Engineer, National Wind Technology Center at the
National Renewable Energy Laboratory of the U.S. Department of Energy:
“…There are 80 wind turbine manufacturers in China, 10 might be serious
and some report that less than 5 of those will survive...But that is
still a lot. There is a similar situation with blade manufacturing…I
want to say no disparaging words about my Chinese colleagues in the
wind industry. Some of them I am sure are not up to quality yet, but my
exposure to most of them demonstrates that they know how to build high
quality equipment and they are succeeding at it with several very well
run companies.”
The China Greentech Report 2009 Renewable Enerrgy Chapter Update
January 6, 2010 (China Greentech Initiative)
posted by Herman K. Trabish
