January 15, 2010

With global climate change talks in the hot seat, lots of attention is now on China. But what most don't know is that the country has become a world leader with respect to the development of renewable power.

The nation has just surpassed Spain and become the globe's third leading producer of wind energy behind the United States and Germany. And despite the perception that China was an obstacle at the recent Copenhagen talks, the reality is that it is moving forcefully ahead to produce 15 percent of its energy from green sources by 2020 and 30 percent by 2050. To get there it must attract hundreds of billions in foreign capital.

And that opens up possibilities for this country to assist China. The current administration, of course, is committed to reducing global greenhouse house emissions and building the economic foundation between the two nations. The dual course would position American enterprises to share in that growth potential.

"China has been reducing its energy intensity and recently announced it would reduce carbon intensity (carbon emissions per unit of GDP) by 40 to 45 percent by 2020," says Jonathan Lash, president of the World Resources Institute.

With China having overtaken the United States as the leading contributor to greenhouse gases, the direction of its energy policy will have profound implications not just for it but also for the rest of the world. For sure, coal now provides 70 percent of that nation's generation. But green energy programs currently provide 9 percent.

Since the government in 2006 mandated certain renewable targets, China is expected to keep or exceed its goals. It just enhanced that law by requiring utilities there to buy all power produced by wind farms. According to the World Wind Energy Council, the average annual growth rate in wind energy alone has been 46 percent since then.

Much of the focus during the global climate negotiations had been China's refusal to obligate itself to firm cuts in emissions as well as the Asian giant's demand that the industrialized world help finance its move to a greener future. Even then, China said that its top priority would be to maintain its unparalleled growth rate of 8 percent annually in an effort to first increase living standards for its own people.

China has chosen wind power as an important alternative source in order to rebalance the energy mix, combat global warming and ensure energy security," says Steve Sawyer, secretary-general of the wind council. "Supportive measures have been introduced. In order to encourage technical innovation, market expansion and commercialization, development targets have been established for 2010 and 2020, concession projects offered and policies introduced to encourage domestic production."

Serious Obligations

Without a doubt, coal is abundant and cheap in China. As such, the U.S. Energy Information Administration is predicting that that coal consumption there will grow annually by 3.5 percent. While the nation is investing in new clean coal technologies to curb the level of harmful emissions, the World Bank is reporting that China is home to the most polluted cities in the world.

To compound matters, rolling blackouts are prevalent. To keep up, power plant construction in China rivals that of Western Europe. The government there is approving all kinds of projects, most of which are to be fueled with coal. But the country recognizes that it must quickly diversify its energy mix if its economic dream is to continue to flourish well into the future.

Altogether, the plan is to have 120,000 megawatts of total renewable energy capacity, or 15 percent of the nation's total generation, by 2020. By comparison, the European Union has set a goal of producing 20 percent of its power from green sources by 2020.

If China is to hit its sustainable energy targets, it must attract foreign capital. While it has some trade impediments, investors in energy projects there have critical opportunities. It is restructuring its electricity sector to allow risk takers to earn competitive returns by, in part, easing long-standing subsidies. In return it is asking the richer countries for billions in economic aid so that it can use the best available clean energy tools.

Diversifying its generation portfolio is one issue. Expanding its transmission grid is another, particularly to accommodate the level of wind energy it hopes to transport from its rural regions into major Chinese cities. The fear is that an inadequate infrastructure will mean that the country would not be able to meets in renewable targets. To that end, some Chinese lawmakers want the U.S. to help it build out a smart grid that encourages energy efficiencies and makes more room for wind and solar power.

China is insistent that it takes seriously its global obligation to reduce greenhouse gas emissions. But it is just as adamant that the approach conform to its internal goals and that it be in conjunction with international efforts. It's a daunting challenge that China says it can master.

"Our analysis shows that shifting China towards a low-carbon economy also brings with it large opportunities, not only costs," says Feng Fei, director of industrial economics research for the Research Development Center of the State Council of China.

China's high pollution rate has been the stuff of news reports. But global institutions that follow closely say that it has invested heavily in its green energy sector while also rewriting its laws and regulations so as to attract foreign bidders. Its goal is to slowly wean itself away from fossil fuels and to breed more sustainable energy without having to abate its impressive rate of economic growth.

 

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Ken Silverstein EnergyBiz Insider Editor-in-Chief
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