U.S. Department of Commerce International Trade Administration Clean Energy: An Exporter’s Guide to ChinaThe International Trade Administration’s mission is to create prosperity bystrengtheningthecompetitivenessofU.S.industry,promotingtradeandinvest-ment, and ensuringfairtrade and compliance withtrade lawsand agreements. Market Access and Compliance 1401 Constitution Ave., NW Washington, DC 20230 T 202.482.3022 F 202.482.5444 www.trade.gov
Clean Energy:An Exporter’s Guide to ChinabyEnergy and Security GroupReston, VA 20190for U.S. Department of Commerce,International Trade Administrationhttp://trade.govunder contract number DG1350-07-SE-4516 ESG104 ITARelease Date: July 2008
Abbreviations and AcronymsAcronyms DOC U.S. Department of Commerce DRCs provincial Development and Reform CommissionsABS asset-backed securities DSM demand-side managementAC alternating current EC energy conservationACEEE American Council for an Energy-efficient ECB external commercial borrowingEconomy ECBC Energy Conservation Building CodesACORE American Council on Renewable Energy ECO Energy Efficiency Commercialization ProjectADB Asian Development Bank EE energy efficiencyAEE Association of Energy Engineers EEB Bureau of Economic, Energy and Business AffairsAESP Association of Energy Services Professionals (United States)AFV alcohol fuel vehicle EEI energy efficiency indicatorALM asset liability management EERE Office of Energy Efficiency and Renewable EnergyAPM administered pricing mechanism (United States)APP Asia–Pacific Partnership on Clean Development and EIB European Investment BankClimate EJ exajouleAQSIQ Administration of Quality Supervision, Inspection, EMCO energy management contractand Quarantine EOU export-oriented unitASE Alliance to Save Energy EPC equipment procurement and constructionASEAN Association of Southeast Asian Nations ERI Energy Research InstituteASTAE Asia Alternative and Sustainable Energy ESCO energy service companyASTM American Society for Testing and Materials ETC evacuated tube collectorsbcm billion cubic meters EV electric vehicleBIPV building-integrated photovoltaics EVA solid phase crystallization of evaporated siliconBOO build, own, operate Ex-Im Export–Import Bank of the United StatesBOOT build, own, operate, and transfer FAS Foreign Agricultural Service (United States)BOV battery-operated vehicle FDI foreign direct investmentBPL below poverty line FI financial institutionBT billion tons FPC flat plate collectorCATARC China Automotive Technology and Research FYP Five-Year PlanCenter GATT General Agreement on Tariffs and TradeCCC China Compulsory Certification Mark GB Guojia BiaozhunCDM Clean Development Mechanism gce gram of coal equivalentCE European Conformity (French acronym) GDP gross domestic productCEC China Electricity Council GEF Global Environment FacilityCER credits for emission reductions Gg gigagramCET clean energy technology GHG greenhouse gasCFL compact fluorescent lighting GNP gross national productCGC China General Certification Center GPV gas-powered vehicleCHCP combined heat, cooling, and power GRP glass fiber–reinforced plasticCH4 methane GW gigawattCHP combined heat and power GWe gigawatt electricCLASP Collaborative Labeling and Appliance Standards GWp gigawatt peakProgram HFC hydrofluorocarbonCNCA Certification and Accreditation Administration HIT heterojunction with intrinsic thin layerCNG compressed natural gas HT high-tensionCO2 carbon dioxide IBRD International Bank for Reconstruction and Devel-CREIA Chinese Renewable Energy Industries Association opmentCSC China Standard Certification Center ICB international competitive biddingCWEA Chinese Wind Energy Association ICBC Industrial and Commercial Bank of ChinaDC direct current IEA International Energy AgencyDFI development financial institution IEC International Electrotechnical CommissionDME di-methyl ether IFC International Finance CorporationClean Energy: An Exporter’s Guide to China v
IFI international financing institution NDRC National Development and Reform CommissionIGCC integrated gasification combined cycle N2O nitrous oxideIIFCL India Infrastructure Finance Company Limited NOx nitrogen oxideINR Indian National Rupees NPC National People’s CongressIP intellectual property NREL National Renewable Energy Laboratory of the U.S.IPA Indian Patent Act Department of EnergyIPP independent power producer OECD Organization for Economic Co-operation andIPR intellectual property rights DevelopmentIREDA Indian Renewable Energy Development Agency OFAC Office of Foreign Assets Control (United States)ITA U.S. International Trade Administration OGL open general licenseJBIC Japan Bank for International Cooperation O&M operation and maintenanceJCF Japan Carbon Finance, Limited OPIC Overseas Private Investment Corporation (UnitedJV joint venture States)kgce kilogram of coal equivalent PCF Prototype Carbon Fundkha kilohectare PDD Project Design DocumentationKP Kyoto Protocol PE private equitykT kiloton PECVD plasma-enhanced chemical vapor depositionkV kilovolt PEMF Private Energy Market Fund LPkW kilowatt PEMFC proton exchange membrane fuel cellkWe kilowatt electric PHWR pressurized heavy water reactorkWh kilowatt hour PPA power purchase agreementkWp kilowatt peak PPP public–private partnershipLC letter of credit PSU public–sector undertakingLED light-emitting diode PV photovoltaicLNG liquefied natural gas R&D research and developmentLOLP loss of load probability RE renewable energyLPG liquefied petroleum gas (Propane) REDP World Bank Renewable Energy DevelopmentM&A mergers and acquisitions Programmb/d millions of barrels per day REL Renewable Energy LawMIGA Multilateral Investment Guarantee Agency REPS renewable energy portfolio standardMJ megajoule RMB Chinese Yuan RenmimbiMMSCM million standard cubic meter RPS reserve energy portfolio standardMOC Ministry of Construction RSPM respirable suspended particulate matterMOF Ministry of Finance SAC Standardization Administration of ChinaMOFCOM Ministry of Commerce SAFE State Administration of Foreign ExchangeMOFTEC Ministry of Foreign Trade and Economic Coop- SBA Small Business Administration (United States)eration SDDC Song Dian Dao Cun (China’s National Village Elec-MOST Ministry of Science and Technology trification Program)MSIHC Manufacture, Storage, and Import of Hazardous SDDX Song Dian Dao Xiang (China’s National TownshipChemicals Electrification Program)mt million tons SEFI Sustainable Energy Finance InitiativeMT magnetotelluric SEK Svensk ExportkreditmToe million tons of oil equivalent SEPA State Environment Protection AdministrationMU million units S/F JV Sino-Foreign Joint VentureMW megawatt SHP small hydropowerMWe megawatt electric SHS solar home systemMWeq megawatt equivalent SI solar ingotMWp megawatt peak SICLIP Swedish International Climate Investment Pro-NAESCO National Association of Energy Service Compa- gramnies SME small and medium enterpriseNB national competitive bidding SO2 sulphur dioxideNBSC International Center of National Bureau of Statis- SOE state-owned enterprisetics of China SPV solar PVNCCCC National Coordination Committee on Climate SWH solar water heatingChange TC-88 Technical Committee 88 of the IECNCE non-conventional energy tce tons of coal equivalentvi U.S. Department of Commerce | International Trade Administration
T&D transmission and distributionTEDA Tamil Nadu Energy Development Agency (India)TERI Tata Energy Research Institutetoe tons of oil equivalentTPES total primary energy supplyTRIPS Trade-related Aspects of Intellectual PropertyRightsTüV Technische Überwachungsvereine (Germany stan-dards/testing company)TWh terrawatt hourUCP Unified Customs and PracticeUL Underwriters LaboratoriesUNDP United Nations Development ProgramUNICITRAL United Nations Commission on Interna-tional TradeUPS uninterruptible power supplyURIF Urban Reform Incentive FundUSAID U.S. Agency for International DevelopmentUSDA U.S. Department of AgricultureUSDOC U.S. Department of CommerceUSDOE U.S. Department of EnergyUSTDA U.S. Trade and Development AgencyUSTR U.S. Trade RepresentativeVAT value-added taxVER Verified Emission ReductionVSD variable-speed driveW wattWEEA World Energy Efficiency AssociationWOFE wholly-owned foreign enterpriseWp watt peakWTG wind turbine generatorWTO World Trade OrganizationClean Energy: An Exporter’s Guide to China vii
Executive Summaryn IntroductionThis report is intended as a clean energy technology technology converts energy from a waste source, such as amarket overview for China, with two primary objectives: city’s municipal waste system, farms, and other agricultural(1) to analyze the clean energy markets in China and (2) operations, or waste from commercial and industrial opera-to identify opportunities for trade and investment through tions. Large-scale waste-to-energy systems can supply heat2020. The report provides the following: or electricity in utility-based electric power plants or district heating systems. Small-scale systems can provide heating analysis of the existing infrastructure of clean energy4 or cooking fuel and electricity to individual farms, homes, technologies and market opportunities in China and businesses. through 2020 including market forecasts, market driv- Solar technologies convert light and heat from ers, cost data, and market segment analysis. the sun into useful energy. Photovoltaic (PV) systems review of government policies for clean energy devel-4 convert sunlight into electricity, and thermal systems opment in China. collect and store solar heat for air and water heating detailed analysis of barriers and obstacles to clean4 applications. Wind power technology converts energy energy technologies trade and investment in China. in the wind into useful power; the primary market for definition of clean energy technologies for China.4 wind power technology is for wind turbines, which review of resources available to U.S. businesses that wish4 convert wind energy into electricity. Geothermal power to enter Chinese clean energy markets. is generated using thermal energy from underground sources, including steam, hot water, and heat stored in After a short introduction, Section 1 addresses clean rock formations; various technologies are used to gener-energy technologies for China, including information on ate electricity. Hydropower is the conversion of energyChina’s overall energy status, both current and projected; embodied in moving water into useful power. Today,a market overview; identification of clean energy policies; hydropower supplies about 19 percent of the world’strade and investment opportunities for U.S. firms; and electricity. Finally, ocean power – sometimes referred tobarriers to clean energy market entry, development, and as tidal – technology makes use of energy in the ocean bycommercialization. This chapter also includes annexes on converting it into electricityChinese policy-makers with authority over clean energy Hybrid and co-generation power systems take advan-technologies and information on the renewable energy tage of the benefits of multiple technologies in a single,industry in China. Section 2 provides definitions of the integrated system for power generation. Renewable-basedclean energy technologies addressed in the report. hybrid power systems use combinations of wind turbines, PV panels, and small hydropower generators to generate electricity. Hybrid power systems typically include a dieseln Clean Energy Technology Defined or other fuel-based generator (including biofuels) andClean energy technologies include renewable energy, may include batteries or other storage technology.hybrid and co-generation, and energy efficiency technolo- Co-generation systems, also called combined heatgies for power generation; alternative fuels; and advanced and power (CHP) systems, generate both electricitytechnologies for transportation. They produce power and useful heat. Conventional fossil-fuel-based electricfor a wide range of applications using no fuel or less fuel power plants generate heat as a byproduct that is emit-than fossil-fuel-based technologies, produce no or fewer ted into the environment; co-generation power plantspollutants than conventional technologies and can use collect this heat for use in thermal applications, therebyrenewable energy sources, which, unlike fossil fuels, are converting a higher percentage of the energy in thenot depleted over time. The renewable energy technolo- fuel into useful energy. The most efficient conventionalgies considered in this report are biomass and biofuels, power plants have a typical fuel-to-electricity conver-waste-to-energy, solar power, wind power, geothermal, sion factor of about 50 percent, while co-generationhydropower, and ocean power. plants can achieve efficiencies of over 75 percent. Biomass consists of plant and plant-derived material. Examples of thermal loads that can be served by aSources include agricultural residues such as rice hulls, co-generation plant are: district heating systems thatstraw, bagasse from sugarcane production, wood chips, provide heat for towns and neighborhoods; industrialand coconut shells and energy crops such as sugarcane processes that require heat, such as paper mills; institu-or switch grass. Biomass can be used directly for energy tions such as prisons and hospitals; and wastewaterproduction or processed into fuels. Waste-to-energy treatment plants.Clean Energy: An Exporter’s Guide to China 1
Energy efficiency (EE) involves replacing existing ambitious rural electrification program, which has helpedtechnologies and processes with new ones that provide China’s renewable energy consumption increase to 7.5equivalent or better service using less energy. EE results percent of the country’s total primary energy consumptionin energy savings at the time that the energy service is as of 2005. However, although the markets for hydropowerprovided. Energy service providers can also use load and solar water heating technologies are mature, the usemanagement to change the time that an energy service and development of most other renewable energies hasis delivered in order to reduce peak loads on an energy lagged because of high investment costs, specific primarydistribution system. Demand-side management uses both resource shortages, dependence on foreign technology,load management and EE to save the amount of primary and small-scale production.energy required to deliver the energy service. Almost half a billion vehicles on the world’s roads Renewable Resources, Capacity, and Potentialcontribute to half of the global oil consumption and gen- China has a large untapped potential for wind energy,erate about 20 percent of the world’s greenhouse gases, perhaps as high as 750 gigawatts (GW) of potentiallyincluding carbon monoxide, nitrous oxides, and particu- utilizable onshore resources (250–300 GW of which arelates. Transportation technologies can help address these considered commercially feasible) and over 1,000 GW ofissues through the use of alternative fuels and advanced offshore resources. In recent years, Chinese wind genera-technologies. Alternative fuels for transportation include tion technology has matured with the help of technologybiodiesel, ethanol, natural gas, and propane. Advanced transfer from foreign countries and a national conces-vehicle technologies include electric vehicles and hybrid sion policy that stipulates 70 percent of wind turbineselectric vehicles, which offer air pollution improvements in developer tenders must be sourced from domesticover average fossil fuel vehicles. Finally, mobile idle reduc- manufacturers—which has helped the domestic industrytion systems and diesel engine retrofits can reduce the substantially. Still, as of 2006, China’s total installed windemissions of heavy-duty vehicles. power generation capacity was only 2.6 GW, indicating substantial growth opportunities going forward. The resource potential for solar power in China is equal-n China: Energy Overview ly promising. China receives the equivalent energy potentialSince the start of the open-door and reform policies of 1.7 trillion tons of coal in the form of solar radiation. Byin 1978, China has experienced consistent economic the end of 2006, the cumulative installed capacity of solargrowth on the order of 9.5 percent per year. While on cells in China had reached 80 megawatts peaks (MWp),average energy demand grew at about 5 percent per year with rural electrification, communications, and industryprior to 2001, the past seven years have seen a tremen- accounting for the majority of the market share. Currently,dous surge in energy-intensive heavy industries, which China is the third-largest PV panel manufacturing countryhas dramatically accelerated energy demand. According in the world behind Germany and Japan, developing 370to the National Bureau of Statistics of China, China’s cur- MWp of solar PV cell modules in 2006 – however, only 10rent energy consumption increase stands at a rate of 9.3 MWp were consumed domestically. Consequently, solarpercent, and this rapid growth is expected to continue. power production remains much lower than actual capac-In fact, China is predicted to surpass the United States as ity. While policy support and government subsidy programsthe largest energy consumer soon after 2010. can be credited with 46.2 percent of China’s developed Although China’s energy resources are substantial, capacity, high investment costs, undefined feed-in tariffs,the country’s self-sufficiency is decreasing as the overall and the lack of fiscal incentives means a significant on-gridenergy demand has grown much faster than its domestic solar PV market has yet to materialize.output. In 2005, foreign supply accounted for 7.7 percent Solar thermal energy for water heating is one of theof the total energy consumption in China, and in 2007 most advanced renewable energy technologies in Chinathe country became a net coal importer for the first time. with a mature commercial domestic market. China hasChina has become increasingly dependent on oil imports a cumulative installed capacity of solar water heatersand liquid natural gas imports, the latter of which were (SWHs) that surpasses 90 million square meters (m2) ofseen for the first time in 2006. Coal is China’s predominant collector area—roughly 60 percent of the world’s total. Inenergy source; however, with the rapid increase in energy fact, nearly one in ten Chinese households owns an SWH.demand and the urgency of energy and environmental Notably, China has over 1,000 solar water heating manu-security issues, the shift away from conventional energy facturers, and 95 percent of the intellectual property rightstoward clean energy has become an interesting strategic for solar thermal technologies used in China are domesti-option for China. cally owned. In 2006, the domestic production capacity Exploration for the use of renewable energy technolo- stood at 6 million m2, but the domestic market lags behindgies in China began in the 1980s, but government support this capacity—the excess production is currently exportedfor these options did not officially begin until the 8th Five- to Europe and Southeast Asia. China has recently devel-Year Plan in 1991. In the late 1990s, China launched its oped national testing centers and a national certification2 U.S. Department of Commerce | International Trade Administration
center for SWH technologies based on international best the lowest EE level. Operational efficiency for end-usepractices, and this has led to improved product quality equipment in China is generally 20 percent lower thanand domestic consumer confidence. Building integrated the international average for advanced countries, which isSWHs is in the early stages. Low aesthetic quality and lack mainly due to obsolete and poorly maintained productionof support from building developers remain challenges for equipment. Nonetheless, the 11th Five-Year Plan includesthe industry. an ambitious target to decrease energy intensity by 20 per- China has a vast bioenergy potential with recent aver- cent through 2010, which is being pursued through 10 keyage biomass resource utilization above 500 million tons of government programs. The challenges facing increased EEcoal equivalent (tce). The majority of the resource potential include a lack of expertise in demand-side managementcomes from wood (300 million tce), followed by straw and and energy-auditing services and a lack of capacity for in-stalk resources (150 million tce), waste water (57 million novative high-efficiency technology development.tce), and urban garbage (23 million tce). The key technolo- Co-generation, or combined heat and power (CHP),gies for biomass include combined heat and power com- remained the major heat supply source in China untilbustion (CHP), biogas, landfill, and other waste gasification. recently, covering 82 percent of total heat demand andIn 2006, power production from CHP amounted to 1.7 GW; 27 percent of the total water heating demand in 2004.biogas amounted to 500 megawatts (MW) minus rural use; Mixed political signals from the provincial and centraland 30 MW was produced from landfill and other gasifica- government, as well as sustained growth of coal utiliza-tion. Biogas development is backed by the central govern- tion and inconsistent electricity tariff increases, havement through strong fiscal incentives as well as investment caused 90 percent of China’s domestic CHP opera-subsidies. By the end of 2006, 17 million household biogas tors to take heavy losses over the last five years. Thedigesters, 140,000 municipal waste treatment facilities, and situation is similar for foreign operators. In fact, CHP4,000 industry sewage biogas facilities providing 1.9 million installations make up almost 50 percent of the powercubic meters (m3) of biogas per year had been installed. plants closed since the beginning of 2007. Nonetheless,It is estimated that the current biogas potential in China co-generation was identified as an important energyfrom industry could be used to generate 3.8 GW of base conservation technology for reducing coal consump-load electricity with 23 terawatt hours (TWh) of electricity tion in the 11th Five-Year Plan, with ambitious targetspotential by 2010. The estimate is considerably higher for set for its development.2020 projections. China has been actively involved in the demonstration Compared to biogas, liquid biofuel technology de- and development of large-scale clean transportation tech-velopment is still in an early stage. China has important nologies since the launch of the “Clean Vehicles Action”bioethanol potential based on sugarcane, cassava, corn, Program in 1999. Gas-powered vehicles (GPVs) are now inand broomcorn cultures. The 10th Five-Year Plan saw the operation, and those on the market are third-generationbeginning of a national program aimed at developing products. As of end-2006, the GPV fleet numbered 265,000technologies for making bioethanol from broomcorn and vehicles. Compressed natural gas vehicles are rapidlysimilar cellulose waste such as corn stalk. Biodiesel devel- growing, with a fleet of 174,170 in 2006. Alcohol fuelopment is also included in the 11th Five-Year Plan but is still vehicles are found in the eastern portion of the country,at the research stage. Its commercialization will depend on and the planned production level for ethanol fuel was re-production cost reductions and increased conversion rates. cently set at about 1 million tons per year. There has been The total potential for small hydropower (SHP) in a considerable amount of government investment in fuelChina is estimated at 71.87 GW and is concentrated cell technology research, and a demonstration program isamong more than 1,600 mountain counties in the middle underway in Beijing for fuel cell bus commercialization.and western regions. However, as of the end of 2004, only Finally, electric vehicle technology is under development,2.1 percent of the total potential had been developed in but applications are still limited by low power capacitywestern China, where the majority of the unelectrified as well as high production costs. Nonetheless, there is apoor are located. SHP is now one of the mature renewable vibrant market for electric bicycles in China, with about 10energy technologies in China, with a significant domestic million units produced in 2005 alone.manufacturing capacity and competitive export potentialin Asia. This is the result of strong fiscal support from the Market Analysiscentral government. By 2004, there were over 100 SHP Projections for 2010 and 2020 from government planningmanufacturers in China, with an annual production ca- documents indicate that the clean technology marketpacity of around 6.3 GW. will increase to $186 billion (based on an exchange rate of $1 = 7.208 RMB) in 2010 and to $555 billion in 2020.Energy Efficiency, Co-Generation, and Transportation Policy objectives for the five key renewable energy (RE)In general, production and operation energy efficiency technologies are shown in Table A below. Market develop-is low in China. Recently, energy efficiency (EE) has ment for some renewable energy technologies has alreadydecreased due to the growing industry sector, which has surpassed the targets established by the government,Clean Energy: An Exporter’s Guide to China 3
such as wind; others like SWH, will easily reach the targets percent of the domestic manufacturers produce mono-established if not overtake them. Although the domestic ingot. Two companies—Suntech and Ningbo Solar—market for solar PV generation is not as developed as the dominated the market prior to 2006; in that year the size ofwind and SWH markets, plans have been made for the the market grew with new companies entering the scene.construction of large-scale on-grid PV and concentrated In total, there are over 3,500 SWH system manufacturerssolar power plants in desert areas of Inner Mongolia, in China, the top ten of which are able to provide high-Gansu, and Xinjiang provinces. Two government-led roof- quality products and good after-sales services. Smalltop PV programs will also stimulate the PV market. hydropower technologies are mature in China, with over The targets for co-generation are equally ambitious. 100 manufacturers. Finally, as a result of energy efficiencyBased on the installed production capacity and the cur- policy and goals set forth in the 11th Five-Year Plan, therent 6.5 percent average annual growth for CHP genera- energy efficiency market is booming as numerous com-tion in China, the total CHP generation capacity will panies and organizations have developed operations inreach 47 GW in 2010 and 87.5 GW in 2020, corresponding various fields.respectively to 37 percent and 68.5 percent of the total The largest market drivers for energy demand areCHP potential. urbanization and economic growth, the latter of which The current cost of investment in wind energy is is a direct result of the country’s booming and energy-in the range of $1,110–1,387/kW. It is expected that intensive industrial exports. In 2006, according to China’swith increasing domestic manufacturing capacity and National Bureau of Statistics, China’s gross domestic prod-technology transfer, the investment costs can be brought uct (GDP) increased by 10.7 percent, while the primarydown to the range of $832–971/kWh by 2010. Similarly, domestic energy consumption rose by 8.4 percent. Notsignificant future cost reductions are expected for solar surprisingly, China is dependent increasingly on energyPV. Other technologies, however, have less scope for cost imports to keep up with the demand.reduction as these are already fairly mature in China and Dependence on costly imports, and the related issueworldwide. of energy security, represents another market driver. Oil In China, there are currently over 80 wind turbine gen- imports alone reached 169 million tons in 2006, and theerator manufacturers and 200 wind developers. Domestic dependence on exports accounted for 47 percent of the oilcompanies occupy over 75 percent of the market. China’s balance. Environmental concerns are an additional marketsolar industry has matured in recent years, with booming driver, specifically in response to the high polluting Chineseinvestments providing an important opportunity. Over 80 coal industry. The International Energy Agency (IEA) concluded that China overtook the United States as the Table A. Policy Objectives for Key RE Technologies. world’s biggest carbon dioxide (CO2) emitter in 2007. The World Bank estimates the total cost of air and water pollu- Objectives Objectives tion in China is roughly $50.22 billion, or about 2.68 percent RE Utilization by 2010 by 2020 of GDP. Acid rain is estimated to cost $4.16 billion in crop damage and $138.73 million in material damage annually. Hydropower Large scale 140 GW 225 GW Moreover, about 54 percent of surface water resources in Small scale 50 GW 75 GW China have been deemed unsafe for human consumption. The Chinese Government considers these issues to be very Bioenergy Generation 5.5 GW 30 GW serious, and the ambitious targets, state investment, and Solid biofuel 10 bil. tons 50 bil. tons policy seen in recent years can be considered an important Biogas 19 bil. m3 44 bil. m3 result of the country’s high priority on sustainable (and sustained) development. Bioethanol 2 mil. tons 10 mil. tons Biodiesel 0.2 mil. tons 2 mil. tons Energy Policy The development of a more robust clean energy policy Wind Generation 5 GW 30 GW is accelerating in response to China’s mounting energy On-grid solar pressures. The strategic position of renewable energy was Solar * 150 MW 1.5 GW PV confirmed with the passage of the Renewable Energy Off-grid solar Law (REL), which was approved by the National People’s 150 MW 0.3 GW PV Congress in February 2005 and took effect on January 1, Solar thermal 150 mil. m2 300 mil. m2 2006. The REL is a framework law that creates targets for renewable energy development and stipulates a number Geothermal 4 mil. tce 12 mil. tce of broadly defined instruments to reach these targets. The NDRC, 2006 Mid- and Long-term Renewable Energy Development Plan. targets are shown above in Table A; the overall renewable * Total solar PV installation includes both on-grid and off-grid generation energy target as a percentage of energy consumption is 10 capacity. percent by 2010 and 15 percent by 2020. The REL mandates4 U.S. Department of Commerce | International Trade Administration
the establishment of priority grid access for renewable elec- Analysts anticipate that the Energy Law will be enacted in thetricity generators, a feed-in tariff for renewable electricity years to come. In the meantime, the National Energy Bureaudelivered to the grid, a national and regional cost-sharing under the National Development and Reform Commissionmechanism for renewable energy subsidies, a special fund will continue to administer energy policy.for renewable energy, and favorable loan conditions and taxtreatment for renewable energy. Opportunities for U.S. Clean Technology Firms in China The successful implementation of the REL depends on The opportunities for U.S firms entering the Chinese cleanits implementation regulations, which further elaborate energy market have grown tremendously during recentupon the policy instruments defined in the REL. Ten such years. The development of a market economy, increasingregulations have been issued so far, including the Mid-and concerns about energy security, and the mounting envi-Long-term Renewable Energy Development Plan, which ronmental pressures have all incentivized clean technolo-stipulates that renewable energy utilization should reach gies and facilitated their entry into the market. Yet the300 million tce by 2010 and 600 million tce by 2020. An- rapidly growing government push and resulting marketother is the Guidance Catalogue of the Renewable Energy pull for clean energy development presents special chal-Industry, which was released by the National Develop- lenges for China due to the technological requirementsment and Reform Commission (NDRC) in November necessary to reach the aggressive government goals. The2006 and aims to guide provincial decision-making on the commercial market for clean energy technologies in Chinadirection for technological research and innovation and at this time should be considered embryonic at best. Asrenewable energy investment. Finally, a special fund for the demand for clean energy technology increases, it canrenewable energy development supports the key fields of be expected that there will be an increasing demand forfossil fuel alternatives, building heating and cooling, and proven, high-quality products and services—which pro-renewable energy electricity generation through no-inter- vides an opening in the market for qualified internationalest and discount loans. An application guidebook for the companies with sustainable business operations.funds is drafted annually and published by the NDRC and To fulfill the objective of a 20 percent decrease in en-the financial department of the State Council. ergy intensity by 2010 (relative to 2000 levels), the Chinese China’s new Energy Conservation (EC) Law was ap- Government has recognized that major developments inproved by the 10th State Congress on October 28, 2007, technology and energy management must be achievedand entered into effect on April 1, 2008. The Law identifies across industrial, commercial, and residential sectors.key policy instruments, which includes setting targets, According to China’s Energy Research Institute, thedeveloping procedures for product standardization investment potential for energy efficiency in China fromand efficiency labeling, and establishing incentives for 2007 to 2010 will be about $120–160 billion. In general,EC technologies, as well as demand-side management there is a lack of expertise in China in energy efficiencyincluding preferential tax policies and subsidy funds. technologies and innovation, energy auditing, and energyIndeed, many preferential tax policies have been imple- management. Areas such as operation and maintenancemented to support clean energy research, development, for renewable energy (RE) generation, energy auditingand production. For example, since 2001 waste-to-energy and advisory services, consulting on energy managementprojects have been value-added tax (VAT) exempt, and and RE integration, and standard energy services are alla 50 percent VAT discount applies for the use of energy- potentially profitable business opportunities.saving materials in buildings, for wind power projects, and Technological needs in the clean energy industryfor coal bed methane projects. include remote monitoring and control systems for wind A draft of China’s integrated Energy Law was recently farms, technology for large-scale wind turbines (over 2published. The forthcoming law provides a framework law MW), and software for resource assessment and grid in-for overall national energy development and will include tegration. In solar power, opportunities include aestheticguiding principles for legislation on energy structure, energy building integration for SWHs, improved technology inefficiency, energy security, energy development and utiliza- thin film, interface technology for building-integrated PVtion, and energy and environmental coordination. One of and for power plants, and high-quality converters. In bio-the most important changes in the new Energy Law is the energy, needs include research and development (RD)proposed establishment of an Energy Ministry directly under on the production of ethanol from cellulosic feedstock,the State Council. The Energy Ministry would be responsible high-efficient fermentation technology for higher biogasfor overseeing energy management in China, including yield, demonstration of new building material and tech-monitoring energy-intensive exports, approving energy and nology for digester construction and biogas storage, andmining activities, promoting energy efficiency and inter-re- biogas processing for feed-in to the natural gas grid.gional energy infrastructure, and establishing market-drivenprice mechanisms as well as incentive policies. The law also Barriers for U.S. Firmsmandates that a 20–30 year energy strategy will be developed Despite the significant opportunities that the Chineseevery five years, along with five-year energy plans. Industry clean energy technology market presents, importantClean Energy: An Exporter’s Guide to China 5
barriers need to be carefully considered in developingbusiness in China. These include lack of a transparent andconsistent body of laws and regulations, lack of a super-visory mechanism for renewable energy implementation,customs regulations and a phasing out of favorable tariffsfor foreign investment, and restrictions on foreign directinvestment that include biofuels manufacturing. Lack oftransparency in government procurement, including in-stances of corruption, can also present challenges as wellas intellectual property rights and contract enforcement.Finally, other considerations like understanding Chinesebusiness culture, identifying local partners, and buildinggood government relationships are also important non-policy related barriers that must be considered.ConclusionIn summary, China presents both unprecedented op-portunities and challenges for clean energy technolo-gies, due to the sheer scale of the market, the demand,and the projected future energy scenario. Over thelast decade, China faced serious difficulties related toenergy shortages and heavy pollution, both of whichhave been brought on by rapid economic development.In response, the government of China has actively pro-moted the development and deployment of renewableenergy with ambitious policies and targets. China will likely be a major net exporter of renewableenergy equipment in the near term, as the country pro-duces far more equipment than it can install domestically.However, as the demand for higher product quality andafter-sales service increases, and as Chinese consumersbecome more conscious of efficiency and environmentalconcerns, this situation is likely to change. The Renew-able Energy Law (REL) has already had a major impacton accelerating China’s clean energy market and resultedin an increase of new renewable energy projects, particu-larly in the areas of wind, solar, and biomass. Ambitioustargets are included in the REL for the next 10–15 years,which, when paired with the industry outlook, are likelyto be even higher. Therefore, U.S. firms should anticipatea growing demand for proven, high-quality products andservices in key areas such as energy service companies,energy efficiency auditing, wind farm operation and man-agement, technological innovation of large-scale turbines,aesthetic building integration of SWHs, and improvedthin-film PV technology.6 U.S. Department of Commerce | International Trade Administration
Introductionn Purpose International Institutions Asian Development Bank; 4 The report’s objectives are twofold: (1) to analyze the clean World Bank; 4 energy markets in China and (2) to identify opportunities International Energy Agency. 4 for trade and investment through 2020. T rade, Industry, and Sector Associations; Business Counselsn Approach Interviews conducted with key trade associations, 4 The report provides the following: including the Chinese Renewable Energy Industries As- sociation (CREIA)4 analysis of the existing infrastructure of clean An Documents from the American Council on Renewable 4 energy technologies and market opportunities in China Energy (ACORE). through 2020. This includes market forecasts, market drivers, cost data, and market segment analysis. T ransmission and Distribution Agencies,4 review of government policies for clean energy devel- Manufacturers, Generators opment in China. Annual Reports from various industry leaders operating 4 4 detailed analysis of barriers and obstacles to clean in China; energy technologies trade and investment in China. Annual Reports of major electricity generators in China. 4 4 definition of clean energy technologies for China. review of resources available to U.S. businesses that wish4 n Organization of the Report to engage in clean energy trade and investment in China. The remainder of this report is organized as follows:n Methodology Section 1 provides a market overview for China. 4 Both primary and secondary data sources were used in This chapter includes information on China’s overallthe preparation of this report. These included: energy status, both current and projected; a market overview; identification of clean energy policies; trade China Resources and investment opportunities for U.S. firms; and barriers Annual reports from relevant ministries at the national4 to clean energy market entry, development, and com- level and, where available, at the provincial levels; mercialization. The chapter also includes annexes on List of relevant agencies, areas of operation, and4 Chinese policy-makers with authority over clean energy contact details; technologies and information on the renewable energy Policy documents (e.g., China’s Renewable Energy4 industry in China. Promotion Law 2006 China’s Guidance Catalogue of Re- Section 2 provides a definition of clean energy 4 newable Energy Industry) as well as documents stating technologies addressed in the report. This chapter quotas, tax requirements, procurement requirements, includes energy efficiency, distributed generation, com- foreign investment policy, and master plans for technol- bined heat and power, wind, solar photovoltaics, solar ogy development in different sectors; thermal, small hydropower, biomass, biofuels, waste-to- Statistical documents containing installed capacity,4 energy, geothermal, and ocean energy technologies. energy balance, consumption, etc.; Appendix A provides a compendium of trade and 4 Five-Year Plans and ministerial long-term development4 investment resources for U.S. clean technology plans; Annual Reports of relevant corporations; firms. Contact information for individual organizations Data related to financial markets in China.4 is also included. Appendix B provides a directory of sustainable energy- 4 U.S. Government Sources financing sources. This directory is synthesized from the U.S. Department of Commerce;4 on-line resource available at www.sef-directory.net/, which4 Department of Energy, including the National Re- U.S. is maintained by the Sustainable Energy Finance Initia- newable Energy Laboratory, Energy Information Agency, tive, a joint initiative of the United Nations Environment and Office of Energy Efficiency and Renewable Energy; Program and the Basel Agency for Sustainable Energy.4 Trade and Development Administration; U.S. Export–Import Bank of the United States;4 Asia–Pacific Partnership on Clean Development and Climate.4 Clean Energy: An Exporter’s Guide to China 7
Lake RUSSIA Baikal KAZAKHSTAN Hailar Lake Heilongjiang Balkhash Qiqihar Harbin Karamay MONGOLIA Changchun Kulja Nei Mongol Jilin Urumqi KYRGYZSTAN Shenyang Liaoning Hebei NORTH Kashgar Xinjiang KOREA Hohhot Beijing AFG. Dalian Yumen Tianjin SOUTH PAK. Taiyuan Shijiazhuang KOREA Yinchuan Yantai Ningxia Qingdao Golmud Shanxi Jinan Xining Lanzhou Shandong Yellow Qinghai Jiangsu Sea Gansu Zhengzhou Shiqunhe Xian Henan Anhui Shaanxi Nanjing Xizang Shanghai Hefei Sichuan Hubei Hangzhou Wuhan Lhasa Chengdu Chongqing Zhejiang Nanchang NEPAL East China Changsha Sea Jiangxi BHUTAN Hunan Guizhou Fuzhou INDIA Guiyang Fujian Xiamen BANGLADESH Kunming Guangdong Taiwan Guangxi Guangzhou Yunnan China Nanning Hong Kong MYANMAR VIETNAM National Capital Xian City LAOS Haikou International Boundary Bay of Hainan Provincial Boundary Bengal South China Hunan Province Name Sea Disputed Boundary 500 km THAILAND PHILIPPINES 0 500 Miles CAMBODIA8 U.S. Department of Commerce | International Trade Administration
Section 1: Chinan Chapter 1: China’s Energy StatusSince the start of China’s open-door and reform policies in 7.7 percent of the total energy consumption in China, as1978, China has experienced consistent economic growth shown in Figure 1.3.on the order of 9.5 percent per year.1 During that time, Coal is China’s predominant energy source. In 2005,energy demand grew roughly 5 percent per year, but has coal accounted for 69 percent of China’s total energygrown significantly more than that in the last seven years.2 consumption, but domestic coal production is no longerHistorically, China’s industrial development was labor- sufficient to meet China’s increasing demand. China be-intensive and heavily dependent on manufacturing with came a net coal importer for the first time in 2007. In 2030,relatively low energy intensity, but since 2001, China has net imports are expected to reach 3 percent of China’s coalseen a surge in energy-intensive heavy industry. demand and 7 percent of global coal trade.8 China’s oil balance deficit has been increasing rapidly forEnergy Supply and Demand more than a decade. The country became a net importer ofAt the beginning of the new millennium, both the Chinese petroleum in 1993. In 2006, China imported 3.7 million bar-Government and the International Energy Agency (IEA) rels of oil per day (mb/d); nearly half its domestic petroleumpredicted a 3–4 percent growth in energy demand for China consumption (see Figure 1.4 below). Such a trend is likelybetween 2000 and 2010. These scenarios were based on ex-pectations of a structural shift away from heavy industry and Figure 1.1: China Energy Consumption in the Future (mToe)toward light industry, as well as a projected economic growth 4000rate of 7–8 percent.3 These forecasts reflected trends in energy (millions of tons of oil equivalent) 3500consumption from around the year 2000 and were estab- CHINAlished following the scaling back of the centrally orchestrated 3000 Energy Demandconglomerate-building ambitions in China that followed 2500the Asian financial crisis.4 They also reflected a continuous USincrease in energy intensity efficiency since 1978. 2000 EU However, the shift away from heavy industry failed to 1500materialize and the trend toward greater energy efficiency 1000reversed around 2002. As a result, according to China’s INDIA JAPANNational Bureau of Statistics, the rate of increase for energy 500consumption in China currently stands at 9.3 percent.5 0The most recent IEA forecast predicts that China’s average 1990 2005 2015 2030increase in energy consumption will be up to 3.2 percentper year from 2005 to 2030 with a 5.1 percent annual growth Yearrate from 2005 to 2015 (see Figure 1.1 below). In compari- Source: World Energy Outlook 2007, IEAson, the Chinese Government’s new forecast for the averageannual growth in energy consumption is 4 percent.6 Thesenew scenarios are based on the expectation that China’s Figure 1.2: Primary Energy Demand by Regionheavy-industry sector will continue to expand and dependon the stability of the national energy policy environment. OECD Europe 0.5% OECD North America 1.0% Currently, China is the world’s second-largest energy OECD Paciﬁc 0.9%consumer after the United States. According to recent Transition economies 1.1%scenarios from the IEA, China will surpass the United China 3.2%States as the largest energy consumer soon after 2010. India 3.6%China’s energy demand will rise from 1,742 million tons Rest of developing Asia 2.3%of oil equivalent (mToe) in 2005 to 2,851 mToe in 2015 Latin America 2.3%and 3,819 mToe in 2030.7 Such an increase will signifi- Middle East 2.9%cantly affect international energy consumption patterns, Africa 1.8%as shown in Figure 1.2. Although China’s energy resources are substantial, the 0 500 1000 1500 2000 2500 3000 3500 4000country’s self-sufficiency is decreasing. Since 2004, China’s 2005 2030 % annual average growth rateoverall energy demand has grown much faster than the Source: International Energy Agency, World Energy Outlook 2007: Chinadomestic output. In 2005, foreign supply accounted for and India Insights (Paris, France: OCED/IEA, 2007).Clean Energy: An Exporter’s Guide to China 9
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