In a world where its populations are increasingly proactive in battling problems such as climate change, greenhouse gas emissions, and rising oil prices, renewable energy is not only an option – it is now considered a necessity. Being one of the most populated countries in the world, China is not short of human resources and is a force to be reckoned with in terms of economic growth, not the least of which in the manufacturing sector where China is poised to be the world’s hub of manufacturing activities. However in recent years, China has come under intense scrutiny for the negative impacts this rapid growth has brought with it, most specifically in regards to the environment. The government is prompted to take effective emergency measures in order to preserve the amount of energy available within the country. This is supported with a continued interest in the matter even though the current economic development and growth is slowing down.
The subject of renewable energy has been on China’s main agenda these last few years, primarily since China has been in a rush to complete its self-prescribed target to reduce, among other environmental-related matters, carbon dioxide emissions released from greenhouse gasses. The development of renewable energy in China has been nothing short of rapid, and this can be seen by the increased amount of investment in renewable energy technologies and installations that have shown a significant rise throughout the 2000′s in China. However, while all this significant interest and rapid growth are encouraging, the consequences of rapid infrastructure building out such poorly aligned integration points (wind turbines to smart grid, for example) must first be dealt with before China can realize any of the aggressive targets it has set for itself.
China’s Stance on Renewable Energy
In order to acquire better insight into this continued interest in renewable energy in China, it is important to gauge its main causes. Solidiance has analyzed and identified 3 key factors: (1) China’s increasing demand for electricity; (2) the need to reduce its reliance on coal; (3) the need to reduce its greenhouse gas emissions. That being said, China’s increasing demand for electricity can be explained by a combination of the country’s rapid urbanization and significant fixed asset investment over the last two decades. China is not showing any signs of slowing down its productivity, but its increasing demand for electricity in order to keep these activities afloat can only hinder the available resources in the country. Despite that, there is encouraging progress regarding the use of electricity in China: according to World Watch Institute, about 17% of China’s electricity came from renewable sources in 2007, led by the world’s largest hydroelectric generators.
Meanwhile, China is also quickly realizing that coal will no longer be able to support the growth of its economy. Its reliance on fossil fuels in general, and coal in particular, is unsustainable and will put pressure on its abilities to continue a rapid growth trajectory in the long run. Moreover, there is also the fact that China is recorded as the third consumer of coal and peat in the world, generating up to 77% of the total electricity in 2010, after Brazil and India.
Source: BP Statistical Review of World Energy June 2011
China’s constant reliance on coal and peat also makes it the world’s highest emitter of greenhouse gasses, which results in alarmingly high carbon dioxide emission. China’s carbon dioxide emissions had reached such high levels in 2005 that it made the Chinese government pledge to reduce it by 40-45% in 2020. Based on these findings, the Chinese government has made a priority to heavily invest in renewable energies and increase the use of sustainable energy sources. However, much of this commitment is doubted by many experts who have commented that China’s reliance on coal and peat is indeed too heavy and they don’t see the situation changing any time soon, despite the fact that the Chinese government is confident in their ability to meet the self-prescribed target to heavily invest in renewable energy by 2020.
The Chinese Government Targets
The government’s decision was first demonstrated officially with the implementation of the China Renewable Energy Law, which was accepted as China’s first state-supported mandate to help develop the use of renewable energy in China. Even though the Chinese government is implementing multiple policies to promote renewable energy, the China Renewable Energy Law is still the key driver of renewable energy development in China. Passed in 2005 and officially implemented in January 2006, the China Renewable Energy Law stresses that the development and the usage of renewable energy is to be prioritized in the energy department.
By prioritizing the renewable energy sector, it presents China with an opportunity for global leadership. As further stated by China’s Vice Premier Li Keqiang: “In that environment, all we need to do is to take advantage of these [market] trends; if we respond appropriately we can seize this opportunity, gain the upper hand, and push forward a new breakthrough in development.” Indeed, China later proves its commitment in pursuing global leadership in renewable energies by increasing its investment at a staggering 80% per annum since 2004, as shown in the Solidiance analysis.
The 12th Five Year Plan 2011 – 2015
China’s driving policy doctrine, referred to as the “Five Year Plan”, is in its 12th issuance for the period from 2011 – 2015 and has a distinct and new focus on adjusting the country’s economic growth model with a specific focus on energy.
For the country’s energy objectives, it was decided that there would be 3 areas of focus for investment: clean energy, energy conservation and clean energy cars. Energy use is targeted to be reduced by 15% per unit of GDP, with carbon dioxide emissions to be reduced by 17% by the end of the planning period. However, despite its ambitious planning, there are many who are still not quite convinced by this pledge. As expected, many still question how effective these strategic targets will be at developing the supporting industries.
For example, to help meet its target during the 11th Five Year Plan, factories were shut down periodically during peak season. Naturally, as it was not the most effective and innovative method, it raises questions as to how well the government targets at a national level are coordinated with the development of China’s manufacturing and industrial sectors. .
The rapid growth of renewable energy projects being seen across China must be taken with a grain of salt. The “accomplishments” cannot be measured by the number of solar panels produced and the number of wind farms erected across China’s vast lands, but rather, the effectiveness of these tools to harness energy and the industrial population gradually shifting their reliance from traditional coal and peat to alternative sources is the true and only gauge of achieving these aggressive targets. Being acutely aware of this reality, the government’s energy plan aims to properly incent behaviors in these large emitters of greenhouse gas emissions to properly, albeit gradually, seek ways to reduce their dependence on coal. At the end of the day, the market economics must make sense for both the energy companies and the industrial consumers to come close to achieving the government’s aggressive targets.
Articles in the Series
This article is based on Solidiance‘s recent study about China’s Renewable Energy. The complete report of the study is free to download here. Solidiance is a leading Asia-centric B2B growth strategy advisory firm with full fledged presence across the Asia region.
More about Solidiance : www.solidiance.com