Energy Paper Deng Pan&Wang (1)

Renewable Energy in China: A Report on the Current Status and
Policies towards Renewable Energy Development in China

Prepared by:
Yaxi Deng
Zhifen Pan
Xinyi Wang
PPHA 36921 Final Project
06/11/2014
Harris School of Public Policy

Deng, Pan & Wang PPHA 36921 Renewable Energy in China
Renewable Energy in China: A Report on the Current Status and Policies towards
Renewable Energy Development in China
Introduction
Increased smoggy days looming over various regions in China have become a major
concern to the general public and have raised an alarm amongst the capital’s decision makers.
Due to the most recent smog incidents that occurred earlier this winter, poor air quality has
alerted officials across the country, and there is strong call for the central government to take
action to control air pollution problems. As Chinese Premier Mr. Li Keqiang said during the
most recent National People’s Congress: “We will declare war against pollution and fight it with
the same determination we battled poverty” (New York Times, 2014). As a step to fight air
pollution, the government has pledged to decrease the share of coal in the energy mix, making
renewable energy sources highly sought after. It is perceived that cleaner and greener renewable
energy sources will be playing an increasingly significant role in the future of China’s energy
development.
In this report, we will begin with an overview of energy in China including energy
production and policies. Then we will proceed with more detailed description of the renewable
energy sources and related policies including wind, solar, hydropower, biomass, and geothermal
power. More emphasis will be put on wind and solar energy since we believe these are less of a
“public bad”, causing less controversial issues and having the greatest potential for further
development.
Overview
Since China adopted the policy of reform and opening up in the late 1970s, its energy
industry has made great advances. China is now the world's largest energy producer. It has built
up a comprehensive energy supply system comprising coal, electricity, petroleum, natural gas,
and new and renewable energy resources. Its universal energy service and civil energy use
conditions have markedly improved. Its thriving energy industry provides a guarantee for the
country to reduce poverty, improve the people's livelihood and maintain long-term, steady and
rapid economic development.

However, China's energy development still faces many challenges. The country's energy
resource endowment is not high and its per-capita share of coal, petroleum and natural gas is
low. Its energy consumption has grown too quickly in recent years, increasing the strain on
energy supply. In order to curb excessive consumption of energy resources and achieve the
comprehensive, balanced and sustainable development of the economy, society and ecology,
China keeps strengthening its efforts in energy conservation and emission reduction, and strives
to raise the efficiency of energy utilization. As a result, energy consumption per unit of GDP has
been decreasing year by year. China will continue to take the Scientific Outlook on Development
as its guiding principle, and work hard to transform its development pattern, giving prominence
to building a resource-conserving and environment-friendly society. It relies on scientific,
technological and system innovation to raise efficiency in all aspects of energy utilization,
further develops new and renewable energy resources, and promotes the clean and efficient
development and utilization of fossil energy resources. The country endeavors to build a modern
energy industry which is secure, stable, economical and clean, in order to provide a solid
guarantee for building a moderately prosperous society in all respects and make greater
contributions to the world's economic development.
As the largest developing country in the world, China is facing with many tasks of
developing its economy. The basic contents of China's energy policies are: "giving priority to
conservation, relying on domestic resources, encouraging diverse development, protecting the
environment, promoting scientific and technological innovation, deepening reform, expanding
international cooperation, and improving the people's livelihood." The state strives to advance
the transformation of its energy production and utilization modes, and build a modern energy
industrial system which features secure, stable, economical and clean development, so as to
support sustainable economic and social development with sustainable energy development.
To achieve this goal, the government has promised not only to give priority to the
development of renewables, but also adopt appropriate market mechanisms and financial
incentives to increase capital for the development of the resources while also encouraging more
local governmental participation. In addition, national science institutions need to enhance
research on technologies for using renewable energy resources and continue international
cooperation to share technology and research efforts. The role of technology leadership and

technology transfer will continue to play an important role in policy thinking, perhaps becoming
an event more dominant role than before. China wishes to develop and enhance its own
technologies will reducing dependence on foreign technology and aid.
Vigorously developing new and renewable energy is a key strategic measure for
promoting the multiple and clean development of energy, and fostering emerging industries of
strategic importance. It is also an urgent need in the protection of the environment, response to
climate change and achievement of sustainable development. Through unswerving efforts in
developing new and renewable energy sources, China endeavors to increase the shares of non-
fossil fuels in primary energy consumption and installed generating capacity to 11.4 percent and
30 percent, respectively, by the end of the 12th Five-Year Plan (China’s Energy Policy, 2012).
We will provide a detailed description of each of the renewable energy categories in the sections
below.
Current Renewable Energy Sources and Policies
Wind
China is endowed with huge potential for developing wind energy. Wind energy
nowadays is the third largest energy source of China, right after coal and hydropower. The major
advantages for developing wind energy market in China are: First, wind energy is clean, without
producing emissions; and using wind energy as substitute can meet carbon emission reduction
goals in China. Secondly, wind energy is more cost effective compared with traditional energy
resources. The demand for electricity is increasing in China and the costs from non-renewable
energies have risen. As the wind industry grows and the production costs fall, wind energy is
becoming more and more competitive than non-renewable energy sources. According to joint
research from Harvard University and Qing Hua University, wind energy can replace 23% of
coal-generated electricity, and would eliminate 9.4 percent of the country’s annual emissions.
Last year, wind supplied 12.2 GW of installed capacity, which accounts for about 0.4% of
China’s total electricity supply (Block, 2013). The 12th
five-year plan has a target of installing
100GW of wind energy capacity by 2015 and 200 GW by 2020.
From a global perspective, China has been recognized as the world’s leader in Wind
Energy Market. Currently, China ranks fourth in the world in terms of installed capacity and in

year 2012, China ranks first in annual installed capacity among the world. From year 2013,
China speeds up the development on wind energy, as the U.S. and Europe slowed down. China
built 16,100 MW new turbines in year 2013, accounts for almost half of the new capacities added
worldwide, and is now with total installed capacity of 91,424 MW and China’s wind turbine
manufacturing industry is also highly ranked amongst global producers (Marcacci, 2014).
In terms of geographical distribution for potential wind energy resources, the north and
western areas, called “Three North Regions” is with the greatest potential wind resources,
including provinces of Heilongjiang, Jilin, Liaoning, Hebei, Inner Mongolia and Xinjiang. North
and northwest of China have vast land for onshore wind energy development. South-east costal
regions also have plentiful wind energy resources, represented by Shanghai, Jiangsu, Zhejiang,
Fujian, Guangxi, Guangdong and Hainan. (Xia & Song, 2009) However, an economic problem is
associated with the onshore wind energy development: the lands needed for onshore wind energy
are located on north and North West of China, where it is also with relatively less population and
less demand for wind energy. Regions in south and south-east China have dense population. The
demand for electricity from wind power is relatively higher in south and east coastal regions.
Thus, the wind energy developed in northern and western onshore land areas needs to be
transmitted to south and east coastal areas to satisfy the local demand. The transmission from
west to east is associated with costs and inefficiency. In south-east coastal areas such as Jiangsu,
Fujian and Guangdong…etc., there is great offshore wind energy resources, but the offshore
wind energy resources has not yet been developed as much as onshore wind resources in north
and west China.

The
Chinese government had implemented varies of policy mechanisms to boost the
wind energy industry of China through cost reduction and market expansion. Major policies
regarding the wind energy development of China include: tax reductions, subsidies, and low cost
loans from State-Owned banks and national industry policies…etc. Major policies have been
implemented include: the Renewable Energy law in 2005, which offer national funds for
renewable energy development and discounted lending for renewable energy projects; the
regional Feed In Tariff for wind power that has been implemented since 2006; the National Debt
Wind Power Program, which supports the building of wind farms using “national debt and
favorable interest subsidy conditions” (Xia & Song, 2009). Government Subsidies and Tax
reductions enabled the cost reduction in the development of wind energy projects. In addition,

the Wind Power Concession Project incentivized domestic and foreign investors to invest in
larger scale (more than 100 MW) wind power project. By developing larger scale wind farms,
the price of wind power reduced and the market for wind power further increased. (Xia & Song,
2009)

From now on, the Chinese government will focus more on expanding wind farms to
offshore areas, in order to ease the long distance, west-to-east electricity transmission problem
generated by onshore wind energy production. To achieve its wind capacity installment goal and
carbon emission abatement target by 2020, technologies in the industry need to be further
advanced to improve the efficiency of wind energy industry. The “land-based and near offshore”
resources are in the focus of being developed. The Energy Research Institute of National
Development and Reform Commission (NDRC) has made recommendations for future policy
goals after the 2020 goal has been reached. In accordance with the recommended policies, far
offshore wind demo projects need to start after year 2020 and by the year of 2050, policy makers
need to better integrate the wind power into the national power system; there will be co-
developments of land-based, near offshore and far offshore wind projects. This indicates Chinese
policy makers nowadays have no plan of ever halt the expanding of wind energy market in
China. Moreover, the feed-in-tariff for top-end grid connection need to adjust with more installed
capacities added to provinces and to offshore areas. In addition, considering the transmission
distance of the power grid connecting to wind farms, it will grant a subsidy of CNY 0.01/kwh to
CNY 0.03/kwh to cover the costs of “long distance transmission of wind power” (Shi et al.,
2011). By providing with the subsidy for long distance transmission of wind power, it also made
the development of wind energy more cost effective, and reduced the cost in the production of
wind energy.
Solar
Solar energy has been a rapidly developing market in China since it announced the China
Solar Subsidy Plan in 2008 (Heechan, 2009). It has been reported that the country has added at
least 12 gigawatts of solar capacity in 2013 alone, which is 50 percent more than any country has
ever been able to build in a single year (Plumer, 2014). The major areas with demonstration
projects of large-scale solar energy plants are in Tibet, Qinghai, Inner Mongolia, the Erdos
Heights, the flat desert along the Yellow River and the Hexi Corridor in Gansu Province (Zeng et

al, 2012). These are all places with relatively flat landscapes and receive adequate sunlight
throughout the year. According to the 12th
five-year plan the annual utilization of solar energy by
2015 is estimated to equal 500,000 tons standard coal (Zeng et al, 2012).Being the world’s
largest consumer of solar energy, China produces the majority of solar water heaters in the
world. They are also a leading producer of solar PV, supplying almost 40 percent of all solar PV
worldwide (Plumer, 2014). So there is also potential of China’s solar energy industry growth in
global exports. The graph below shows the anticipated expansion of China’s solar power
systems:
Table 1. Solar Power System Anticipated Development
Power Generation Category Power Generation
(MW)
Key Areas of Work
2015 2020
Solar power plants (total) 1100 2300 Photovoltaic (PV) and solar thermal power systems.
PV power facilities 1000 2000 Construct solar power generation facilities in Qinghai,
Gansu, Xinjiang and other regions to explore the
complementary operation of solar power stations with
hydropower and wind power.
Solar thermal power facilities 100 300 Carry out solar thermal power industrial
demonstrations in the regions with rich solar resources,
water resources and available land.
Distributed PV power 1000 2700 Construct grid-connected PV power systems in roof
concentrated areas such as industrial parks and large
public facilities. Solve power shortage in Tibet,
Qinghai, Gansu Yunnan and other remote areas.
Total 2100 5000
Source: China Electricity Council, 2012.

Nevertheless, the development of the Chinese solar energy industry is not without
difficulties. The main problem is that China focuses on silicon-based solar cells which also
generate a series of environmental pollution problems. The more desired thin-film solar cell
technology is still largely in the R&D stage; therefore large scale installation still needs more
time. Once set-up at a large scale, the thin-film solar cells will be more cost effective, can be
installed more easily and are more aesthetically attractive, so it is considered that the solar
energy market still has a promising future.
As for incentives to boost the solar industry, the Chinese government has required grid
companies to build solar friendly networks and emphasized the need for financing the solar
manufacturers and encouraging mergers and acquisitions among solar companies (China
Economic Review, 2013).
Hydropower
China is actively developing hydropower nowadays. The country boasts abundant
hydropower resources, hosting the Three Gorges Dam which is the world’s largest hydropower
station. Moreover, its technically exploitable hydropower resources are equal to 542 million kW,
putting the country first in the world. The following figure shows the main locations of China’s
13 largest power plants:

Source: www.powermag.com
Calculated according to power generation, less than 30 percent of China's hydropower
resources are currently utilized, leaving plenty of room for development in this regard. In order
to attain the goal of increasing non-fossil energy consumption to 15 percent of the total energy
consumption by 2020, more than half will come from hydropower development (China’s Energy
Policy, 2012). But with the development of hydropower often comes controversial issues such as
negative ecological impacts, loss of biodiversity and the damage of historical, cultural sites, and
the mass relocation of residents. These are examples of “public bads” which require government
intervention to compensate for people’s losses.
On the condition that the ecological environment is protected and resettlements of local
people affected are properly handled, China will energetically strive to develop hydropower. By
integrating hydropower development with promotion of local employment and economic
development, the Chinese government aims to "develop local resources, stimulate local

economic development, improve the local environment and benefit local people." The country
strives to improve its resettlement policies regarding local people affected by hydropower
projects, and perfect the benefit-sharing mechanism. China will strengthen ecological-protection
and environmental-impact assessment, strictly implement measures to protect the environment of
existing hydropower stations, and improve the comprehensive utilization level and eco-
environmental benefits of water resources. In accordance with rational river basin planning for
hydropower development, China will speed up the construction of large hydropower stations on
key rivers, develop medium- and small-sized hydropower stations based on local conditions, and
construct pumped-storage power stations in appropriate circumstances. The country's installed
hydropower generating capacity is expected to reach 290 million kW by 2015 (China’s Energy
Policy, 2012).
Biomass
Bioenergy is another major focus under China’s 12th
five-year plan for developing
renewable energy. Biomass is an environmental friendly source of energy, without generating
emissions of pollutants. It can decrease greenhouse gases, decrease carbon and pollution and
relieve our reliance on petroleum and coal. According to the report by China Reform and
Development Commission, by year 2015 and by year 2020, the amount of electricity generated
by biomass can reach to the capacity of 13,000 and 30,000 respectively (Wang, 2013).The
challenges and bottlenecks in the development of biomass energy market in China not lie on the
technological aspects, but are associated with the high cost of using biomass energy sources. In
China, it is difficult to collect cheap non-grain raw materials for biomass energy, which is the
reason for the high cost of using biomass as energy supply. Another issue may occur when trying
to develop bioenergy at scale- there may be land-use conflicts between crops grown for food and
those grown for fuel. In order to solve the problems, according to experts from NEA, it is
fundamental to have government support for biomass industry(Yan, 2012).Since bioenergy
industry is relatively new in China, it is important for government initiate policies to support the
development of the industry so that more and more companies will enter into this industry, which
will be helpful for further R&D in the industry, to explore cheaper ways of collecting raw
materials and develop advanced technologies enabling the cost-effectiveness of producing

bioenergy. Policies such as financial subsidies from government are important in solving the
high cost problems in the producing of bioenergy.
Followed by the 12th
five-year plan, the Ministry of Science and Technology of PRC has
announced plans for policy support on biomass industry (Shi, 2012). Policy supports include: 1)
Developing new kinds of high efficiency biomass products as energy sources. 2) Develop a
system of cost effective technologies for the production and utilization of bioenergy 3)
Implement financial subsidies and tax reductions for the investment, research, and development
of bioenergy 4) Ensure government support in the financing in bioenergy industry. If these new
policies can be carried out successfully in China, bioenergy industry in China will increase in
scale and the cost of using bioenergy will decrease. The ultimate purpose is to make biomass as a
substitute source of energy for coal, and ensure a sustainable way of energy usage, and attain the
target of carbon emission.
Geothermal
There are several regions abundant in geothermal resources distributed across China
(Taylor & Zheng, 1996). These are mostly hot springs which are generally most widely available
in regions that are active tectonic areas (Wang & Huang, 1990). Mainly the hot spring resources
are applied to various industrial processes, fish farming and heating. To date there have been
approximately 200 geothermal systems established and it is predicted that by 2015 the total
amount of various types of geothermal energy projects can reach 100 MW and utilization will
amount to the equivalent of 15 million tons standard coal (Zeng et al., 2012). Again, just like any
other type of renewable energy, geothermal energy also has not been utilized at a large scale.
Technology improvements are also needed for the current geothermal energy products since the
sites often suffer from corrosion, calling for better reservoir engineering. China will spread the
technology of efficiently using geothermal energy which requires more research, planning and
better management on the condition that underground water is protected and the process is
environmentally friendly. Though it is difficult to say that geothermal energy can significantly
reduce the reliance on coal, it is still a step forwards in innovating green technology geared
towards fewer emissions.

Conclusion
Despite the dramatic progress China is making in the clean energy market, fossil fuel
continues to dominate the energy sector. How the country chooses to manage its greenhouse gas
emissions and how the Chinese can change their coal-burning habits is essential to global efforts
to mitigate climate change. With a transitioning economy, pro-environment leadership and many
political and economic incentives for renewable energy in place, coal-plant construction will
definitely slow down to make way for cleaner energy sources.
In fact, we can explain this stage of development using the Environmental Kuznets
Curve:
This curve shows the relationship between environmental quality and income per capita. . It is
intuitive that more development will bring about more pollution, and as people get richer, they
pay the price of degrading environmental quality. However, when economic development
evolves to a certain level, more development may create the demand for better environmental
quality to rise, and therefore will trigger technology innovation and other mechanisms to
decrease pollution. Pollution is a function of the scale of aggregate economic activity which can
be reduced by investing in clean technology. Many scholars predict that China is currently
approaching the threshold point of the Kuznets Curve, and believe that the government should let
the economy keep on growing until it reaches the right-hand-side of the curve where industries
Income
Per
Capita

Pollution

will start to spend more on environmental quality improvement. This also indicates a bright
future for renewable energy resources since the country is transitioning to a cleaner and greener
energy sector.
Not surprisingly as a country with such rapid economic growth, China is now caught up
in multiple issues including local government debt, currency, food and water resource, and
environmental crises. In terms of blending economic and environmental considerations while
closing the gap between renewables and coal, the Chinese government indeed faces the dilemma
of economic-first approaches versus more sustainable development. However like Premier Li
mentioned, the Chinese government has now “declared war” against environmental damage and
pollution, placing green development way on top of the policy agenda. Finding a path to a
greener, low-carbon economy is essential for China’s next step in development, with which its
core should be the change in energy technology innovation, institutional improvements and the
change in public attitudes towards green consumption.

References
Block, B. (2014). Wind energy could power China, study finds. Worldwatch Institute.
http://www.worldwatch.org/node/6255
China’s Energy Policy White Paper. (2012). State Council Information Office of the People’s
Republic of China. http://news.xinhuanet.com/politics/2012-10/24/c_113484453.htm
Heechan, K. (2009). Solar energy markets in China and India. SERI Quarterly. 2(4), pp.104-107.
Marcacci, S. (2014). 2013 Wind energy installation stall in US, surge in China. Clean Technica.
http://cleantechnica.com/2014/02/06/2013-wind-energy-installations-stall-u-s-surge-china/
Plumer, B. (2014). China installed record amounts of solar power in 2013. But coal is still winning.
The Washington Post. http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/30/china-
installed-a-record-number-of-solar-panels-in-2013-but-coal-is-still-winning/
Shi, H. (2012). Increasing support on biomass energy policy. Sinopec News.
http://www.sinopecnews.com.cn/news/content/2012-06/15/content_1186015.shtml
Taylor, A., & Zheng, L. (1996). Geothermal resources in China. BL & A Report. http://bl-
a.com/ecb/PDFFiles/China1996.PDF
Wang, M. (2013). Incentives in policies encourage eco-farming. Sina Finance.
http://finance.sina.com.cn/stock/hyyj/20131122/014017398475.shtml
Xia, C., & Song, Z., (2009). Wind energy in China: Current scenario and future perspectives.
Renewable and Sustainable Energy Reviews. 13(8), pp.1966-1974.
Yan, Y. (2012). China targets renewables to cut energy dependence. Chemistry world.
http://www.rsc.org/chemistryworld/2012/09/china-renewables-five-year-plan-biomass
Zeng, M., Lu, C., Ma, M., Peng, L., Yan, B., Na, L., & Xue, S. (2012). Renewable energy
development thrives during China’s 15th
five-year plan. Powermag December 2012.

http://sinosphere.blogs.nytimes.com/2014/03/05/china-declares-war-against-
pollution/?ref=environment

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