Industry Overview
China’s rapid economic growth has been accompanied by widespread pollution and environmental degradation. This, combined with limited energy resources and inefficient use of energy, has caused the central government to make clean technologies and energy efficiency a strategic priority starting in 2005. In the 11th Five-Year Plan (2005-2010), the government has set targets of reducing energy intensity per unit of GDP by 20% and reducing emissions for major pollutants (e.g. carbon dioxide and sulphur dioxides) by 10%. To achieve these goals, the government is continuously drafting and implementing laws in all energy sectors.
Renewable energy (Renewable energy includes hydropower, solar power, wind, tidal, geothermal energy, biofuels, etc.) accounts for about 6% of the energy mix, with hydropower supplying the majority. However, the proportion of renewable energy is expected to rise because of the government’s shift in emphasis towards renewables, especially wind power and biofuels. Consequently, the ratio of coal use in the energy mix will decline (although coal use in absolute value will continue to increase). The energy mix is not expected to change dramatically over the next few decades. For renewable energy, China’s goal is to increase the proportion of usage from 7% of total energy consumption in 2006 to 15% in 2020. To achieve this goal, the government needs to focus on developing renewable energy sources, increasing the ratio of renewable energy in national energy construction plans, expediting technological progress, developing internationally advanced renewable energy technologies, promoting the change of energy construction in countryside, implementing gradually more efficicient fuel utilization, bringing power supply with renewable energy to remote areas, and solving the electricity supply problem in those areas.
I. Hydro Power. China envisages hydro power as the most important source of renewable energy into the foreseeable future. China has more than 100 gigawatts of hydro generating capacity already installed, and by 2020 it aims to increase this figure to 300 gigawatts. By 2020, China will have already exploited around three-quarters of its hydropower potential. Beyond that point, the viability of developing further hydro facilities may start to diminish, as the remaining potential capacity will be in more remote locations.
II. Nuclear Power. The installed nuclear capacity is currently over 7 gigawatts, with plans to raise this to around 40 gigawatts with the construction of 30 new plans by 2020. The government is actively promoting the construction of nuclear power plants as it is seen as a clean and efficient energy source for China’s densely populated East coast (currently it only accounts for 0.8% of the energy mix, but government targets are for nuclear to account for 6% by 2020). Large multinationals already present in China dominate the sector. Technologies that are needed include steam generators, main circulating pumps, monitoring systems, pressurizers, and valves.
III. Wind Power. Although China is both one of the world’s leading wind power generators and one of the fastest installers of new wind generating capacity, it’s wind energy generation contribution is tiny compare with that from coal or hydropower. Even by 2020, wind will not be a major source of energy –likely generating just 10% of the electricity coming from hydropower. But wind power receives particularly privileged treatment under China’s Renewable Energy Law. Large-scale generation projects - those with a capacity of more than 100 megawatts - receive substantial central government support. Customs taxes and value-added taxes are waived on imported equipment, and operators have the right to agree to long-term power purchase agreements with their local power grid, thus guaranteeing them revenues.
IV. Solar Power. Solar energy has enormous potential in China, but because the technology is still in its infancy compared to wind or hydro, it is difficult to ascertain realistic estimates about its future contribution to total generation. What seems certain, however, is that its potential is more likely to be realized at a very local level, particularly in rural areas. Currently, solar energy is a lot more expensive to generate than coal or wind power. Solar energy installation costs are around USD 5,000-6,000 a kilowatt - four or five times as much as coal-fired generation. Cost, however, is not the only obstacle to solar power’s development. China lacks any detailed implementing regulations governing how owners of photovoltaic cells can sell power to grid operators. Until such rules are in place, solar energy is unlikely to become viable in anything other than small stand-alone operations. As a result, most solar energy companies in China are primarily focused on the potential of the export market.
V. Biofuels. China has ambitious goals for its biofuels industry. It expects biofuels to meet 15% of its transportation energy needs by 2020. China’s 2020 goal will call for a combined ethanol and biodiesel output of 12 million tons. Under its current biofuel program, as plants now under construction become operational, ethanol output is set to rise to 4 million tons by 2010, and biodiesel should reach 2 million tons. Currently, more than three-quarters of China’s ethanol output is sourced from corn, with the remainder coming from wheat and sorghum. There are alternatives, among them rape-seed oil, which could be planted in the off-season across much of central China, as well as imports of fuel ethanol from other countries, particularly Brazil.
Energy Consumption and Efficiency
I. Energy consumption. Coupled with impressive GDP growth of about 9-10% annually over the past two decades, China’s energy consumption has more than doubled over the same period. In 2006, China’s total primary energy consumption reached 2.5 million tons-of-oil equivalent (t.o.e.). This represented an 8.4% increase over 2005. Although energy efficiency has been improving, (shown by the fall in energy intensity at an average of 4.1% over the past decade), the government has recognized that there is still a great need for continued efforts to improve energy efficiency and reduce environmental pollution. It is expected that energy consumption will continue to grow at between 5.5% - 6.5% annually until 2015.
II. Energy efficiency. China’s energy use is significantly less efficient than that of developed countries. Currently, overall energy efficiency is 32% – about 6% to 7% lower than OECD countries. In particular, for energy intensive industries such as steel and cement, China’s per-unit energy consumption is 40% higher than that of developed countries. Increasing efficiency is critical for China as it has limited energy resources – energy resources per capita are about 39% below the global average. Increasing energy efficiency is also key to reducing pollution - as a general rule, a 1% increase in efficiency leads to a 2% decrease in emissions.
III. Pollution. Reliance on coal combined with a lack of clean technologies and low energy efficiencies have resulted in extremely high levels of pollution. The main pollutants are CO2 (Carbon dioxide), SO2 (Sulphur dioxide), and NOx (Nitrogen oxides). China’s CO2 emissions are second only to the US – although some sources report China has already overtaken the US by 8%. China is also the world’s largest producer of SO2 emissions. 90% of SO2 emissions come from the burning of coal, of which 50% is produced by power plants. In addition, China is also a large emitter of NOx, which are produced by power plants and vehicular emissions.
Regulatory Environment
I. Government policies. The National Development and Reform Commission (NDRC) is the main central government institution that formulates and issues energy policies. The government recognizes the importance of energy conservation and, in 2004, the NDRC issued the “China Medium- and Long-Term Energy Conservation Plan” which aims to conserve energy, reduce energy intensity, improve energy utilization efficiency, and build an energy conserving society. Later, the “Energy 11th Five-Year Plan” was also formed to define clear objectives and targets to be achieved by 2010.
Energy Conservation Plan. This is the first Plan for energy conservation formulated and issued by the Government. Thus it has become a guiding document for China’s mid- and long-term energy conservation projects. The sectors of focus in the plan include 8 energy-intensive industries and transportation. The plan also mentions 10 key energy conservation projects, including the Coal-fired Industrial Boiler Retrofitting Project, the Petroleum Saving and Substituting Project, the Energy System Optimization Project, etc. The ultimate goal is to realize a total savings in energy consumption of 240 million t.c.e. by 2010.
Energy 11th Five-Year Plan. In the 11th Five-Year Plan, the government introduced its plans to reduce SO2 emissions by 8.4 million tons and CO2 emissions by 360 million tons by 2010. Construction of energy infrastructure will focus on five areas - 1) energy bases for raw materials (i.e. coal, oil) and electricity power plants (i.e. coal-fired, nuclear); 2) energy storage and logistics (i.e. coal tunnels, oil pipes and networks, electricity networks, etc.); 3) petroleum alternatives; 4) renewable energy; and 5) energy engineering in rural areas. In addition, there are several areas requiring advanced technologies that the government is emphasizing, including effective coal exploitation, deepwater offshore exploration, oil exploration in complex geologic conditions, Coal-Bed Methane exploitation, coal beneficiation and preparation, clean coal power generation, coal liquefaction, petrochemicals, and 1,000 MW Pressurized Water Reactor (PWR) nuclear power plants.
II. Government orientation. Developing its own technologies and manufacturing capabilities is critical for China. The government has formulated a series of preferential policies, fund support, and tariff breaks to encourage domestic production. For all upcoming energy projects, the government strongly encourages prospective buyers to first consider domestic equipment. For equipment which domestic companies cannot produce or for which they lack key technologies, joint ventures are encouraged, as they bring in foreign technology and know-how. There are high import tariffs for complete-set equipment to deter imports; on the other hand, there are lower import tariffs for imports of key components that are used for domestic assembly or the production of complete-set equipment.
III. Government plans. In line with the significant attention on energy, the central government intends to issue China’s first comprehensive Energy Law by 2010. Clean technologies and efficiency will be encouraged via preferential policies, subsidies, and tax breaks. At the same time, law enforcement for polluters will also be strengthened, including more severe fines. In addition, the NDRC is planning to introduce laws that will assess power generators on their consumption efficiency and pollution level. The central government will no longer approve new projects that fail to pass the government’s Energy Saving and Environmental Impact Assessment; it has also pledged to shut down businesses that do not comply with standards.
Market Opportunities
I. Potential for Clean Technologies. China is one of the world’s largest polluters and is subject to intense international pressure to reduce its emissions. In fact, China has ratified both the Kyoto Protocol and the United Nations Framework Convention on Climate Change, but it is not legally bound by emission caps due to its status as a developing country. Nevertheless, China’s internal goals of reducing emissions and increasing energy efficiency are ambitious. This is driven by several political, market, and social forces including international pressure, increasing public awareness and the need to show tangible progress and improve general perception (e.g. the 2008 “Green” Olympics). Thus, despite the absence of formal legal “obligations” with the international community, China offers good opportunities for clean and efficiency-increasing technology. In particular, coal, oil, and nuclear account for about 90% of the energy mix. Implementing better technologies in these three sectors is critical to reducing overall emissions.
II. Best prospects and market access. The best opportunities are in areas where domestic technology is not adequate and foreign technology can significantly contribute to increased cleanliness and efficiency. Besides competition from domestically manufactured products, new entrants also face strong competition from other foreign importers that have a presence in China. The majority of foreign companies active in the market are already manufacturing here, or if not, they have at least a sales/technical center or office in China.
Major Shows & Exhibitions
This section provides a listing of upcoming clean and renewable energy-related events in China, including industry shows and trade missions. While FCS China is directly involved with some of these events, the others listed here have no direct relationship with the FCS and are listed solely as a convenience to our users.
For more information, please contact the organizing group as listed in the event description. Verify the information before making any commitments - we are not responsible for accuracy of information or changes in events' schedules.
Wind Power Asia 2008 Expo
June 25-27, 2008
Beijing
http://www.windpowerasia.com
International Conference on Biomass Energy Technologies
(ICBT2008)
Nov.29 – Dec.1,2008
Guangzhou
http://www.newenergy.com.cn/gz/english/
SNEC 3rd 2009 International Photovoltaic Power Generation
Expo
May 6-9, 2009
Shanghai
http://www.snec.org.cn
Useful Websites
Links to non-Commercial Service organizations are provided solely as a convenience to our users. The Commercial Service makes no representations about the accuracy or suitability of the information provided on the following web sites. The FCS is not responsible for the content of the individual organization webpages found through these links, and their inclusion here should not be understood as an endorsement of these organizations.
National Development and Reform Commission (NDRC)
China Renewable Energy Industry Association
China Renewable Energy Information Net
China Sustainable Energy Program
China Solar Energy Information Net
Guangzhou Institute of Energy Conversion
Key Industry Contacts
China Renewable Energy Industry Association
No. 2107, Wuhua Plaza, A4 Chegongzhuang Dajie, Beijing,
China
Tel: (86-10) 6800 2617
http://www.creia.net
China Wind Energy Association
Room301,Building 13,NO.18,Bei San Huan Dong Lu, Beijing ,
China
Tel:(86-10)-64228218;(86-10)-64228219
Fax: (86-10)-64228215
http://www.cwea.org.cn
China New Energy Chamber of Commerce
Address: Room 1243-1246, Center Tower South Wing, Junefield
Plaza, No. 10,
Xuan Wu Men Wai Street, Xuanwu District, Beijing, China Tel:
(86-10)-63100807
Fax: (86-10)-63107703
Website: http://www.cnecc.org.cn
U.S. Commercial Service Contact Information for Clean and Renewable Energy
The U.S. Commercial Service offers a broad array of market entry services to U.S. companies in the renewable energy industry. Please refer to the following relevant contacts for additional information on how we can help you expand your business in China.
Beijing Office:
Tel: (86-10)8529-6655
Fax: (86-10)8529-6558/9
Bryan Larson
Mingming Ma
Shanghai Office:
Tel: (86-21)6279-7930
Fax: (86-21)6279-7639
Eric Hsu
Scott Yao
Guangzhou Office:
Tel: (86-20)8667-4011
Fax: (86-20)8666-6409
Lena Yang
Chengdu Office:
Tel: (86-28)8558-3992
Fax: (86-28)8558-3991
Cui Shiyang
Shenyang Office:
Tel: (86-24)2322-1198x8142
Fax: (86-24)2322-2206
Liu Yang