OVERVIEW OF RENEWABLE ENERGY DEVELOPMENT IN CHINA: RECENT PROGRESS AND FUTURE PROSPECTS

I. Renewable Energy Resources and Their Use in China: Current Situation The use of renewable energy resources plays a key strategic role in maintaining balance between energy supply and demand in China; and the Chinese Government has therefore consistently promoted renewable energy. At present, traditional, noncommercial renewables (e.g. fuel wood) provide China with energy of over 300 million tons of standard coal equivalent (tce) annually. Small hydropower installations provide about 100 billion kilowatt hours (kWh) of power annually, accounting for five percent of China’s total electricity output. Adding in other renewable resource applications, China’s total annual use of renewables surpassed 12,000 Petajoules (PJ) in 2003, accounting for 15% of the nation’s total energy use that year. Comparison of these figures with those of other nations shows that China has climbed to the top position globally both in total application of renewables and in proportion of renewables in overall energy use (see Figure 1).

Figure 1：Comparison of energy derived from renewable resources (2002) in selected countries around the world in units of Petajoules (PJ). (Note: 1 PJ = 1015 Joules) P

P

Biomass Energy China’s main biomass resources are agricultural wastes, scraps from the forestry and forest product industries, and municipal waste. Agricultural wastes are widely distributed. Among 1

them, the annual production of crop stalks alone surpasses 600 million tons; and crop stalks suitable to energy production are estimated to represent a potential of 12,000 PJ annually. Wastes from the processing of agricultural products and manure from livestock farms in theory could yield nearly 80 billion cubic meters of biogas. Scraps from forestry and forest product industries represent a resource equivalent to 8,000 PJ per annum. Furthermore, with the implementation of China’s Natural Forest Protection Program (which includes logging bans and logging reductions over much of the nation’s natural forests) and its Sloping Cropland Conversion Program (which calls for the conversion of much of the nation’s sloping cropland to trees and grasses), it is expected that the amount of scraps from forestry and forest product industries used in energy applications will increase substantially, with the potential of reaching 12,000 PJ per annum by 2020. Municipal waste in China is expected to reach 210 million tons per annum in 2020. If 60 percent of this is used is used in landfill methane applications, two to ten billion cubic meters of methane could be produced. Finally, “energy crops” are a biomass energy resource with the potential for commercialization. There are many types of energy crops that are suited to growing in China. Chief among these are rapeseed and other edible oil plants and some plants that grow in the wild, such as sumac, Chinese goldthread, and sweet broomcorn. By 2020, such crops could potentially yield over 50 million tons of liquid fuel annually, including over 28 million tons of ethanol and 24 million tons of bio-diesel. In sum, whether burned directly, used to produce electricity, or used as a substitute liquid fuel, biomass energy resources have the potential for playing a decisive role in China’s energy supply.

Digester Tanks Shunyi Livestock Farm

Figure 2: Industrial-scale Biogas Plant in China

At present, biomass energy resources in China are utilized mainly through conventional combustion technologies. Biomass gasification, biomass liquefaction, and biomass power generation technologies, however, are gradually being developed. For gasification, the main method being promoted and used is anaerobic fermentation, though at the same time technology for the direct gasification of biomass resources is being developed. China currently has a total of over 12 million household biogas digesters and over 1,500 industrial-scale biogas plants, which 2

together produce over five billion cubic meters of biogas annually. In terms of biomass liquefaction technology, China is in an investigative and experimental phase. Currently the main technologies developed and in use are ethanol fuel technology and bio-oil technology. China has already established two large ethanol fuel production bases, one in the north and one in the south, with a total annual production capacity of over one million tons. Production of bio-oils in China has reached about 500,000 tons annually. Biomass power generation in China, with an installed capacity of almost 2,000 megawatts (MW), consists mainly of combined heat and power (CHP) in sugar mills and power generation using rice husks. Other types of biomass power generation, such as that achieved through biomass gasification or hybrid fuel technologies, have not yet reached significant scale in China.

Small-scale Hydropower Water resources appropriate to small-scale hydropower are plentiful in China. According to the results of China’s latest hydropower resource survey, the potential total capacity of small-scale hydropower that could be feasibly developed in the country is 125 gigawatts (GW). The resource base is widely distributed, including sites in over 1,600 counties (or cities), spread over 30 of China’s provinces (or provincial-level municipalities). Of 1,600 counties, 65% are located in Southwest China; and the small-scale hydropower resources of this region account for over 50% of total national potential capacity. The Chinese Government has implemented policies that strongly support small-scale hydropower and has included small-scale hydropower in its rural electrification plans. Small-scale hydropower has already played a very important role in the electrification of China, particularly in rural areas. About one-third of China’s counties rely on small-scale hydropower as their main source of electricity. China has further made the building of small-scale hydropower stations a critical component of rural energy development in its Western China Cropland Conversion Program and its Western China Energy Development Program, providing special funds derived from Government bonds for small-scale hydropower development. At present, existing small-scale hydropower stations, with an installed capacity of 30 GW, represent about 20% of the total projected potential capacity. It is expected that during the period between 2020 and 2030, China’s small-scale hydropower resources will be almost fully developed, with a capacity of 100 GW and accounting for about 10% of China’s total installed power capacity at that time.

3

Figure 3: Small-scale Hydropower Installation and Resource Base

Wind Power With its large land mass and long coastline, China has relatively abundant wind resources. According to estimates by the China Meteorology Research Institute, land-based, exploitable wind resources represent a potential power generation capacity of 253 GW. (Note: This estimate is based on wind resources at a height of ten meters above the ground.) The institute has further estimated ocean-based wind resources to represent an exploitable potential of about 750 GW, so that the total estimated wind power potential of China is about 1,000 GW. Areas rich in wind resources are located mainly along the southeast coast and nearby islands and in Inner Mongolia, Xinjiang, Gansu Province’s Hexi Corridor, and in some parts of Northeast China, Northwest China, North China, and the Qinghai-Tibetan Plateau. Aside from this, there are also certain areas in China’s interior that are rich in wind resources. See Figure 4 for an illustration of the distribution of China’s wind resources. China has large marine areas; and ocean-based wind resources are plentiful. With current technology, wind turbines can be installed in the ocean up to 10 kilometers away from the coast and at ocean depths of up to 20 meters. By the end of 2003, total grid-connected installed capacity of wind power in China was 560 MW. (See Figure 5 for growth in installed wind capacity over the past 13 years.) Currently, China is tenth in the world in terms of total installed wind power capacity. Aside from grid-connected installations, China also has about 200,000 stand-alone small-scale wind turbines (with installed capacity of 25 MW) that provide electricity to rural households located in remote areas. China has basically fully mastered the manufacture of large-scale wind turbines of 750 kW or less and is in the process of developing megawatt-scale turbines, which are expected to be available in 2005. China has also established 40 wind farms and has mastered wind farm operation and management. The nation now has qualified technical personnel in the areas of wind power design and construction. Thus, a sound base for developing large-scale wind power in China has been developed.

4

Figure 4: Distribution of Land-based Wind Resources in China (in units of watts per square meter)

600

500

400

300

200

100

0 1990

1993

1994

1995

1996

1997

1998

Annum

1999

2000

2001

2002

2003

Accumulated

Figure 5: New Wind Power Installed Annually and Cumulative Capacity in China 1990-2003 (in units of MW)

Solar Energy China has extremely rich solar energy resources. According to estimates, the total solar radiation hitting China’s land area annually is 5 x 1019 kilojoules (1.2 x 1019 kilocalories), equivalent to about 170 billion tons of standard coal equivalent (tce). Based on the distribution P

5

P

P

P

of the total radiation hitting China’s land surface, it can be seen that Tibet, Qinghai, Xinjiang, the southern part of Inner Mongolia, Shanxi, northern Shaanxi, Hebei, Shandong, Liaoning, western Jilin, the middle and southwest parts of Yunnan, the southeastern part of Guangdong, the southeastern parts of Fujian, the eastern and western parts of Hainan, and the southwest part of Taiwan all receive a relatively large amount of solar radiation. In particular, areas on the Qinghai-Tibetan Plateau receive the largest amounts of solar radiation in all of China. The distribution of China’s solar energy resources is illustrated in Figure 6 below.

Figure 6: Distribution of China’s Solar Energy Resources (in units of million joules per square meter per year)

Currently, the main use of solar energy in China is the supply of hot water to urban and rural households. The cumulative installed capacity of solar water heaters now surpasses 50 million square meters of collector area. In 2020 and 2050 total installed capacity could reach 200 million and 500 million square meters, respectively, with the potential to conserve 120 billion kWh in 2020 and 300 billion kWh in 2050. Potential reductions in peak power loads resulting from these installed capacities would be 80 GW (2020) and 200 GW (2050). Photovoltaic technology (PV) is the main technology used in China for the generation of electricity from solar energy. PV modules are used in both industrial and commercial applications and provide electricity to remote rural areas and urban lighting applications. At present, China’s installed capacity of PV systems in over 50 MW, of which about 50% is used to supply electricity to the residents of remote rural areas, a market that is growing at 20% annually. The industrial and commercial PV markets are also relatively stable. China’s annual production capacity for urban PV lighting systems is over 10 MW, accounting for 70% of the world total. Among China’s manufacturing capabilities for solar energy applications, production of solar thermal equipment, namely solar water heaters, is first in the world. China now has a solar water heater production capacity of over 12 million square meters per year. PV cell production capacity in China has reached nearly 100 MW. Thus, a firm basis for the large-scale development and utilization of solar energy resources in China has been established.

6

NOTE: FIGURE 7 IS MISSING FROM THE ENGLISH VERSION (SEE CHINESE VERSION) Figure 7: Building – Solar Water Heater Integration in China

Figure 8: Off-grid PV Power Station in Rural Area of China

Other Renewable Energy Aside from biomass energy, wind power, small-scale hydropower, and solar energy, which have all been developed on a relatively large scale in China, the Chinese Government has been paying close attention to the development and utilization of other renewable energy resources, such as geothermal resources, ocean energy sources, and hydrogen. The Government has set up several pilot projects and demonstrations in geothermal power generation, wave power generation, geothermal heating and cooling and other areas. Geothermal pumping technology, in particular, has already began to play a meaningful role in building energy conservation in China.

II. Policies and Actions Taken by the Chinese Government Policy and Legislation The Chinese Government has been attaching great importance to the development and utilization of renewable energy for many years. In the 1980s, the State Council issued Several Recommendations on Promoting the Development of Rural Energy, which made renewable energy a part of the plans for the development of rural energy and rural electrification. With the maturation 7

of renewable energy power generation technologies, particularly wind power technologies, in 1994, the then Ministry of Power issued Several Recommendations on the Construction and Management of Wind Farms, establishing a firm foundation for wind power in China. In 1999, the Chinese Government issued Several Policy Recommendations on Promoting the Development of Renewable Energy, making further progress in removing barriers to the development of renewable energy. In 2003, the Government began to set about formulating its Promotion Law for Renewable Energy Development and Utilization. The goals of this law will be to: (1) confirm the important role of renewable energy in China’s national energy strategy; (2) remove barriers to the development of the renewable energy market; (3) create market space for renewable energy; (4) set up a financial guarantee system for the development of renewable energy; and (5) and create a social atmosphere conducive to renewable energy. The basic principles of the law will reflect the integration of: (1) citizen obligations and Government responsibilities; (2) Government promotion and market guidance; (3) present needs and long-term development goals; and (4) international and domestic experience. Through the means of this legislation, the following critical systems will be set up: (1) a system of Government responsibility, requiring the Government to formulate development targets, strategic plans, and guarantee measures for renewable energy; (2) a system of public cost sharing (realized by a grid cost-sharing system), whereby all citizens will be required to share the extra costs associated with developing renewable energy; and (3) a system of punishment and reward, which will encourage the entire society, particularly companies, to develop and use renewable energy, and will punish financially those companies and individuals that do not meet the obligations set out for them in the law. At present, the National People’s Congress has already initiated procedures for formulating China’s Promotion Law for Renewable Energy Development. It is expected that the law will be formally promulgated in 2005.

Figure 9: Workshop for Gathering Input for the Drafting of China’s Renewable Energy Legislation

8

Strategic Plans and Development Targets At present, the Chinese Government is in the processes of formulating its Medium and Long-term Energy Development Strategy and Plan to 2020. This work will set forth the basic principles, strategic targets, and relevant guarantee measures for renewable energy in China up until 2020. The basic principles of the energy strategy and plan as relates to renewable energy are as follows: 1.

2.

3.

4.

Support the harmonious development of society, the economy, and the environment, with priority on the development of renewable energy technologies that are closely related to the realization of achieving China’s goal of a basic level of comfort for all citizens. These technologies include mainly PV, small hydropower and other renewable energy technologies, which can resolve the basic needs for electricity in rural areas. This principle also calls for improvement in the quality of energy used by rural residents, which can be achieved through biomass energy technologies, particularly biogas technology, which can promote the development of ecological agriculture and organic food products. Stress should be put on the development of small-scale hydropower, solar water heaters, geothermal heating and other renewable energy technologies that are already competitive on the market. The share of renewable energy in overall energy consumption should be raised as rapidly as possible, so as to make a strong contribution to the adjustment of China’s energy consumption mix. The commercialisation of new and developing renewable energy technologies should be promoted actively. In particular, wind power and biomass power generation, for which resources are vast and commercialisation prospects good and which both can play a very important role in improving the structure of China’s energy mix in the future, should be promoted through adoption of necessary measures to stimulate market demand, technical progress, and growth of manufacturing capability. Long-term technical progress should be integrated with short-term development and utilization. Renewable energy technologies that have both a market at present and great potential for the future should be actively developed. PV technology should be developed so as to serve in speeding up the realization of rural electrification in the short term and to accumulate technical results for large-scale grid-connected PV in the future. Ethanol gasoline and bio-diesel technologies should be developed through pilots and demonstration projects in the short-term to establish the necessary basis for future development; and strategies and technologies for long-term development should be pursued, so as to realize large-scale use and the supplementing of China’s insufficient petroleum supply.

The strategy for renewable energy development in the Government’s energy plan calls for making use, by 2020, of most of the available resources for small-scale hydropower, solar thermal (i.e. solar water heaters), geothermal, and other renewable energies that are already competitive on the market. It further calls for actively promoting the commercialization and development of related manufacturing capacity for wind power, biomass power generation, and solar energy-based power generation, so as to basically realize full commercialization and large-scale application by 2020. 9

Specific targets for renewable energy, as indicated in the Government’s energy strategy and plan, include the following: By 2010, the installed capacity of small-scale hydropower, wind power, biomass power, geothermal power, and power generated by solar energy will total about 60 MW and account for about 10% of China’s total installed power generation capacity. Of this, small-scale hydropower will account for 50 GW; wind power will account for 4 GW; biomass power generation will account for 6 GW; and power generated by solar energy will account for 450 MW. By 2020, the installed capacity for power generated by renewable energy will reach about 121 GW, accounting for about 12% of China’s total installed power generation capacity. Of this, small-scale hydropower will account for 80 GW; wind power will account for 20 GW; biomass generated power will account for 20 GW; and power generated by solar energy will account for 1 GW. At the same time, great emphasis will be put on technologies using renewable energy to supply heat and on liquid biofuels, etc., so that the target of providing, by 2020, 200 million additional tons annually of standard coal equivalent (tce) of renewable energy of all types in the energy mix. This amounts to an additional 8,000 PJ, which would bring China’s annual use of renewable energy up to 20,000 PJ and up to a 17% share in China’s projected energy consumption in 2020.

Renewable Energy Activities and Programs of the Chinese Government The Chinese Government has undertaken a series of national activities and programs in order to promote the development and utilization of renewable energy. These include: the Comprehensive Rural Energy Planning and Construction Program; the Rural Electrification Program, pilots of which focus on the development of small hydropower; the Brightness Program; the Township Electrification Program, and the Wind Power Concession Program. Particularly in recent years, the Brightness Program, the Township Electrification Program, the Wind Power Concession Program, and the Government Bond Wind Power Program, have raised the development of China’s renewable energy industry to a much higher level than before. Comprehensive Rural Energy Planning and Construction Program: Starting in the 1980s, the Chinese Government began rural energy construction work that focused on renewable energy. The main areas of work were in promoting energy efficient stoves, rural biogas digesters, fuel wood forests, and solar energy. The results of the energy efficient stove and rural biogas digester components were particularly outstanding. At present, the coverage of energy efficient stoves in China’s rural areas is over 95%. Biogas work has moved from merely resolving energy needs to being a key component in the development of ecological agriculture and rural sanitation. Biogas has created the development mechanisms of “pigs, biogas, and fruit,” and “greenhouses, biogas, pig raising, and vegetable planting.” It has promoted the economic development of the countryside and improved the ecological level of agriculture. Since commencement of the twenty-first century, the Chinese Government has been investing over one billion Renminbi annually in the building of rural biogas digesters, with emphasis on providing these subsidies to biogas work in China’s western regions, thus benefiting the development of renewable energy in China’s rural areas.

10

Figure 10: NEED TO ADD PHOTO Rural Electrification Program: Use of small-scale hydropower to achieve rural electrification is a major characteristic of renewable energy development in China. In the 1950s, the Chinese Government began to develop small-scale hydropower in rural areas. In the 1980s, the Government began rural electrification pilots focused on small-scale hydropower. At present, there are over 600 counties (accounting for 30% of all of China’s counties) that rely mainly on small-scale hydropower for electricity. Each year, the Chinese Government invests 300 million Renminbi in the development of small-scale hydropower, attracting additional investments from local governments, enterprises, and individuals of over 100 billion Renminbi. The total installed capacity of small hydropower in China is now 30 GW. At present, in order to create synergies with the Sloping Cropland Conversion Program and the Western Development Program, the Chinese Government is in the midst of formulating a plan to replace electricity with fuel wood in rural areas of Western China by developing small-scale hydropower and thus improving the ecological environment and promoting economic development. Figure 11: NEED TO ADD PHOTO Brightness Program: In 1996, China’s former State Planning Commission formulated and put forward plans for the Brightness Program. The aim of the program was to use PV modules and wind power systems to provide power for daily needs to the population of 23 million in China without access to electricity. The program targeted to provide this populace with a capacity averaging 100 watts per person, at that time equivalent to China’s overall average per capital installed power generation capacity. The Brightness Program is not like other projects. It targets to serve the widely dispersed population of 23 million farmers and pastoralists without access to electricity. These people are spread out over nearly half of China’s total area. A substantial proportion of them suffer from poverty. Thus, the Brightness Program is a project that addresses poverty alleviation, is large in scale, and has a relatively high level of investment. According to estimates, the total investment in equipment and services needed to achieve the project goals is about ten billion Renminbi. Implementation is to focus on the provinces of Western China, with special support given to Xinjiang, Inner Mongolia, Gansu, Qinghai, and Tibet. At present, four provinces (or provincial level municipalities) have established Brightness Program project companies to develop projects associated with the program. At the same time, the Brightness Program has attracted the attention of the outside world. The Government of Holland is supporting in Xinjiang the “Silk Road” Brightness Program. The German Government has given technical and financial support for the Brightness Program in Yunnan, Qinghai, Inner Mongolia, and other areas. Figure 12: NEED TO ADD PHOTO Township Electrification Program: In 2002, in order to meet the power needs of public utilities and residents of un-electrified townships in remote, border regions of Western China, the National Development and Reform Commission (NDRC) initiated its Township Electrification Program. Of the 1,065 townships included in the program, 688 were targeted for the 11

construction of PV power stations, with a total installed capacity of 20 MW. Of these 688 townships, 585 were to be included in the first phase of the program, with a total installed capacity of 17 MW, while 103 were to be electrified in the second phase, with an installed capacity of 3 MW. Small-scale hydropower stations were planned for 377 townships, with a total installed capacity of 264 MW. Of these 377 townships, 114 were to be included in the first phase, with an installed capacity of 90 MW, while 263 were to be included in the second phase, with an installed capacity of 174 MW. Since initiation of the project, progress has been smooth in all areas of work. At present, the great majority of PV stations have been constructed and are now generating power; and the majority of planned hydropower stations are in the midst of construction. The 1,065 townships encompassed in the Township Electrification Program are spread across 12 provinces (or provincial level municipalities), including Inner Mongolia, Qinghai, Gansu, Sichuan, Tibet, and Shaanxi. The total investment for the program is 4.7 billion Renminbi (of which 2.96 billion Renminbi is provided by Government bonds). The program is divided into two phases. The first phase includes 699 projects and an investment of 2.56 billion Renminbi (of which 1.76 billion Renminbi is provided by Government bonds). The second phase has 366 projects, with an investment of 2.13 billion Renminbi (of which 1.2 billion Renminbi is provided by Government bonds). The Township Electrification Program represents the first time that the Government of China has used stand-alone renewable energy power generation systems on a large scale to resolve the electricity needs of un-electrified areas. The program has realized a transition from pilots and experiments in the use of stand-alone renewable energy power systems for resolving rural electrification needs to actual projects and implementation. At the same time, the program has, to a large extent, stimulated the rapid development of China’s PV industry. The program’s success is evidenced by the fact that China’s capacity for production of PV modules has increased by ten times in just the past three years. Figure 13: NEED TO ADD PHOTO Wind Power Concession Program: In order to promote the commercialization of wind power, the Chinese Government has adopted the concession approach, which has been used relatively successfully for the exploration and development in China’s petroleum and natural gas sectors. The basic method China is using in implementing a concession approach to wind power development is to select potential projects of relatively large scale (100 MW); take the price of electricity and the level of domestic content in equipment as the key criteria; and select the investor through competitive bidding. The Government guarantees that the grid price for electricity will be that set by the bidding and that all electricity generated by the wind farm will be purchased. In 2003, the Chinese Government completed the bidding and approval work for two wind concession power projects of 100 MW each, one in Rudong, Jiangsu, and the other in Huilan, Guangdong. The bidding attracted a total of nine companies, three of which are foreign and one of which is private. The success of the Wind Power Concession Program is evidenced by the great reduction in grid price for wind power. The grid prices for the two projects are 0.43 Renminbi and 0.50 Renminbi, respectively. Thus, an end was put to the history of consistently high grid prices for wind power in China. By attracting multiple investors and increasing competition, life has been given to the development of China’s wind industry; and the 12

competitiveness of the wind power market has been raised greatly. The domestic content of wind equipment used in China has also been increased, as have the capabilities of the domestic wind equipment manufacturing industry. At least five international manufacturers of large-scale wind power equipment are either preparing or have already begun to manufacture their products in China. At the same time, the program has stimulated domestic companies to greatly increase their investment in wind power equipment manufacturing. Based on the successful experience gained in bidding for the aforementioned two concession projects, the Chinese Government will, in 2004, initial three more 100 MW concession projects, one in each of Jiangsu, Inner Mongolia, and Jilin. At the same time, the Government will arrange for wind resource assessment and other preparatory work, so that by 2006, pre-feasibility work will have been completed for large-scale wind farms at about 30 sites. These sites will thus be ready for bidding, which will then be conducted, moving the scale of wind power installation in China forward by a great degree. Figure 14: PICTURE NEEDED Riding the Wind Program: In order to promote the domestication of large-scale wind turbines and to realize the large-scale development of wind power in China, the former State Planning Commission launched its Riding the Wind Program in March of 1996. The main contents of the program are: (1) introduction of advanced technologies through China-based Sino-foreign joint ventures; (2) mastering of large-scale turbine technologies through State Planning Commission-organized projects for scientific research on key technology issues; and (3) provision of special subsidies for field pilots of domestically produced wind turbines and for the establishment of quality testing systems. At present, China has the ability to produce wind turbines of 750 kW or less, with domestic content of 40%.

III. International Cooperation Projects Aside from the domestic programs described above, the Chinese Government has developed some influential projects through international cooperation. These projects have promoted development of China’s renewable energy sector. They include the World Bank and Global Environmental Facility (GEF) supported Renewable Energy Development Project (REDP), the World Bank-GEF supported China Renewable Energy Scale-Up Project, the United Nations Development Program (UNDP) and GEF supported project Capacity Building for the Rapid Commercialization of Renewable Energy, the UN Foundation supported Solar Water Heater Development Project, each of which is described below, and others. There are also a number of bilateral cooperation projects in the field of renewable energy. These projects have played an active role in promoting the rapid development of China’s renewable energy sector. The Chinese Government will work to strengthen cooperation with the rest of the world to promote the development and commercialization of the world’s renewable energy sector.

13

World Bank/GEF China Renewable Energy Development Project (REDP) Background The China Renewable Energy Development Project (REDP) is an international cooperation project of the National Development and Reform Commission (NDRC) and the World Bank, with international grant financing provided by the Global Environment Facility (GEF).

Objective The project aims to establish sustainable markets for wind and PV technologies in order to: (1) supply electricity in an environmentally sustainable way; and (2) increase access of isolated rural populations and institutions to electricity services.

Project Implementation Period Five years, from December 2001 to December 2006.

14

Project Content 1. Photovoltaic (PV) Component The project has adopted the following approaches to accelerate development of China’s PV market: Sales Grants: Grants are provided to participating PV companies to strengthen their marketing, sales, and maintenance of PV household systems with a capacity of 10 Wp or greater in Tibet, Qinghai, Gansu, Inner Mongolia, Xinjiang, and Sichuan Provinces. The total capacity to be supported by the project is about 10 MWp, or about 350,000 systems. Grants are paid to the companies at the rate of US$1.50/Wp to help them expand their sales networks, thereby promoting development of the PV market. Market Development: The project supports a series of activities to help PV companies overcome barriers and expand their market. These activities include a public information campaign, strengthening of commercial capabilities of PV companies, development of mechanisms for consumer financing, etc. Institutional Strengthening: So as to improve the quality of PV systems manufactured in China, the project supports capacity building for China’s PV product testing and certification center and the development of national standards for PV components and systems.

2. Technology Improvement Component The project has adopted the following approaches to improve the technology and quality of PV products and/or to reduce their cost: 15

Investment: This project provides financial assistance to companies producing PV equipment in order to accelerate technical innovation aimed at raising quality and performance, while at the same time lowering production costs. The project’s investments for technology improvement consist of two types: (1) Competitive Grant Facility and (2) Quick Response Facility. Institutional Strengthening: The project provides support for: (a) program management, including monitoring and evaluation, and preparation of annual plans; and (b) raising the level of manufacturers’ understanding of contracts, technology transfer, legal matters, etc. and carrying out research work required by the project.

3. Wind Farm component The project will provide support for the construction of a 20 MW wind farm in Shanghai and related institutional strengthening.

Budget GEF grant Chinese Government funding

US$27 million US$100 million

16

Project Achievements Project achievements since the initiation of REDP in December 2001 include: 1.

2.

3.

4.

5.

6.

7.

8.

The project management office (PMO) established is an effective organization with sound management systems. Project management staff have been well trained; and their abilities to manage international cooperation projects are improving. The PMO has established a “smart grant” mechanism for supporting the development of market-driven sales and after-sales service systems for solar home systems. The “smart grant” mechanism includes management rules for disbursement and verification of sales grants. The PMO has used the mechanism to assist in strengthening the sales and service capabilities of 25 PV companies selling solar home systems to consumers in un-electrified areas of Western China. The project’s sales grants have resulted in increased solar home system sales. In 2002, the 25 companies supported by the project sold 75,000 units, representing 1.35 MW of capacity; in 2003, they sold 79,000 units, representing 1.67 MW. By the end of 2003, the sale of 91,000 units, representing 1.7 MW of capacity, had been supported by REDP grants. It is expected that REDP support will result in a great increase in solar home systems sales in 2004, with volume reaching 10,500 units, or 2.35 MW. The capacity of the 25 PV companies participating in the project has been raised; and they have become the main participants in China’s PV market. Since the project’s initiation, these companies have played important roles in key Government projects (including the Brightness Program and the Township Electrification Program) and in international cooperation projects. In particular, project-supported companies were responsible for about two-thirds of the PV systems installed under the Government’s Township Electrification Program. During the first two years of implementation of REDP, the total capacity of newly installed PV systems installed by these 25 companies reached 15 MW. The PMO has established a standards, testing, and quality certification system for solar home systems. The system established has not only been used for REDP, but has also become the main quality control method for PV projects in China’s solar home system market and is well known and accepted by end users. Overall, the standards, testing, and certification system established under the project has improved the quality of PV systems, including modules and other components, both for REDP and for China as a whole. By the end of 2003, a total of 58 “Technology Improvement” projects had received cost-share grants under the REPD’s technology improvement component. Total investment in these 58 projects is 33.39 million Renminbi. The grants have been effective in improving the quality of PV products, while at the same time reducing production costs. Through the project’s encouragement of market competition and technical improvements, the price of PV systems in China has dropped significantly. Before 1997, the price of off-grid PV systems ranged from 120 to 140 Reminbi per Wp, while now the price has dropped to between 80 and 100 Reminbi per Wp, a reduction of 30 to 40 percent. The impacts of REDP reach beyond the project itself, as the project has had positive influences on both other PV projects and the overall PV market of China: The market-driven smart grant mechanism of REDP has provided a model in China, which has been recommended for use in other international cooperation initiatives, as well as in

17

domestic projects. For example, bilateral PV projects supported by Germany, the Netherlands, and Canada have to some extent drawn upon the mechanisms of REDP in project design and implementation. Partly as a result of the project’s influence, PV systems have come to be regarded by the Chinese Government as a main approach for supplying electricity to households and communities in Western China. In recent years, the Chinese Government has implemented rural electrification programs with strong PV components, such as the Brightness Program and the Township Electrification Program. These programs emphasize PV technology, in part due to the higher profile and increased legitimacy of PV as an energy solution resulting from REDP activities. REDP has resulted in the accelerated development of China’s PV industry. Before 1997, the nation had only seven PV module manufacturers, with a total annual output of 2 to 3 MW. At present, however, there are more than 20 manufacturers, with total annual production capacity having reached 100 MW and annual domestic sales having reached 20 MW. Commercially sustainable sales networks that reach deep into the remote rural areas of Western China have been developed, with coverage spreading over the entire nation. In addition,, with some products now certified as meeting international standards, the sales networks of Chinese producers are increasingly penetrating world markets.

Project Management Government Implementing Agency:

Energy Bureau, National Development and Reform Commission Project Management Offices: 18

1. PV and Technology Improvement Components China Renewable Energy Development Project (REDP) Management Office No. A2105 Wuhua Plaza Beijing, P. R. China, 100044 Tel: +86 10 6800 3690 Fax: +86 10 6800 2674 [email protected] www.ndrcredp.com HTU

UTH

HTU

UTH

2. Wind Component: Shanghai Municipal Electric Power Company 86-21-6329-1010 ext. 2508

19

China Renewable Energy Scale-up Program (CRESP) 1. Introduction The China Renewable Energy Scale-up Program (CRESP) was set up by the Government of China in cooperation with the World Bank and the Global Environment Facility (GEF). The program supports renewable energy policy development and investment and aims to: • • • •

Assess renewable energy resources in China Learn from the experiences of developed countries in developing renewable energy Research and formulate policies for the development of renewable energy in China On the basis of pilots, gradually achieve scale-up of renewable energy power generation, so as to provide cost-effective and commercialized renewable energy to China’s electric power market

2. Objective The objectives of CRESP are to: • Promote the scaling-up of power generation using renewable resources in China • Replace coal-fired generation, reducing local and global environmental impacts • Improve China’s energy mix • Promote sustainable development of China’s western region

3. Approach To achieve its objectives, the program has adopted the following approaches: • Support for the development of a policy mechanism that would legally require a certain share of China’s electric power supply to be met by renewable resources: The mechanism would be a mandated market share policy, which is defined as a legal obligation to meet a target for buying, selling or using renewable electricity, in which the incremental financial cost is passed on to end users in an equitable way. • Financing of a small number of projects in the early phases of scale up: These projects supported by World Bank financing are expected to play a catalytic and demonstration role, spurring the large-scale development of renewable energy power generation facilities and attracting significant participation from the private sector. • Provision of financial incentives, including: ♣ Tax incentives, such as income tax reductions or exemptions and reductions of VAT, import duties, and sales taxes ♣ Cost-sharing of demonstration projects and of technical R&D •

Assistance in the development of the renewable energy industry though support for improving the quality and performance of equipment and for strengthening service capabilities

20

4. Phases of Implementation Program implementation will occur over a period of between 10 and 12 years and will be divided into four different stages as described below. Currently, CRESP is in the Preparatory Phase. • Preparatory Phase: The main content of the Preparatory Phase will include: (1) analysis of China’s renewable energy resources; (2) evaluation of the economic feasibility of developing renewable energy in China; (3) research on renewable energy policies and experiences in other countries; (4) development of policy recommendations for the promotion of renewable energy in China; and (5) preparatory work for demonstration projects, including selection of pilot provinces (or provincial-level municipalities), determination of project content, appraisal of planned projects, and preparation of project implementation plans. Preparatory Phase work will be used to answer the following four questions: (1) What will be done? (2) Who will do it? (3) What administrative arrangements are needed? and (4) What do we expect to achieve as a result of the work? • Phase One - Pilot Phase: During the Pilot Phase, CRESP will implement pilot projects in each of three to four provinces and support these pilot provinces in pilot implementation of renewable energy scale-up policies and investment activities. In this phase, the program will also carry out activities for: (1) developing market infrastructure; (2) reducing the costs and raising the quality of technology; (3) supporting the creation of a mandated market share policy at the national level. • Phase Two – Program Expansion: During Phase Two, the renewable energy scale-up model developed in the Pilot Phase will be extended to ten provinces based on mandated market share policies and economic incentive policies. • Phase Three – Full Nationwide Implementation: In Phase Three, policies for promoting renewable energy will be extended to all provinces (and provincial-level municipalities), thus realizing scaled-up development of renewable energy in China.

5. Budget GEF Grant: 141.57 million World Bank Loan 100.0 million USD Government of China and other organizations 125.0 million USD Total: 366.57 million USD U

6. Coordination and Management Government Coordinating Agency: Energy Bureau, National Development and Reform Commission Project Management Office: 21

China Renewable Energy Scale-up Program Management Office Address: B-1718, Guohong Building, Muxidibeili, No A 11, Xicheng District, Beijing, P.R. China 100038 Tel: +86 10 63908768 Fax: +86 10 63908769 Website: Http://www.cresp.org.cn HTU

UTH

22

Capacity Building for the Rapid Commercialization of Renewable Energy in China Background Efforts to promote renewable energy in China have intensified in recent years, with several domestically and internationally supported initiatives, but the widespread commercialization and adoption of associated technologies is impeded by many challenges in capacity, financing, policy, technology, and information. The international cooperation project Capacity Building for the Rapid Commercialization of Renewable Energy is meant to strategically address a number of these challenges, with an emphasis on spurring forward a group of technologies on the brink of commercialization. The project is supported by the Government of China and the Global Environment Facility (GEF) through partnership with the United Nations Development Program (UNDP) and with co-financing from Australia’s AusAID and the Government of the Netherlands.

Project Objectives and Strategy The overall objective of the project is to support the accelerated commercialization of key renewable energy technologies in promising market sectors. To achieve this, the project combines emphasis on two main priorities throughout all components: • Building Capacity (of organizations, key decision-makers, and experts in government and in business) • Commercialization (through the lowering of technical, institutional, and policy barriers and through the introduction of international best practices for market-ready renewable energy technologies) U

U

U

U

The project strategy is based on a market sector approach, with activities focused on the technology application areas of: (1) biogas, (2) grid-connected wind, (3) solar water heaters, (4) hybrid village power, and (5) bagasse cogeneration; additional, crosscutting focal areas are (6) finance, (7) business development, and (8) policy. Finally the Project has supported the establishment of a renewable energy industry association and has worked closely with the Central Government in support of the nation’s renewable energy programs.

Project Implementation, Financing, and Timeline China’s National Development and Reform Commission (NDRC) is the Project’s lead domestic implementing agency; with implementation support also provided by the State Environmental Protection Agency (SEPA). The United Nations Development Program (UNDP) is the 23

international implementing agency. The United Nations Department of Social and Economic Affairs (UNDESA) is the executing agency. The project’s overall budget is US $25.8 million, including funding from UNDP-GEF ($8.8 million), Australia ($3 million), the Netherlands ($2.53 million), and the Government of China ($11.5 million). The project was launched in March 1999 and will have a duration of six years, closing in at the end of 2005.

Selected Project Activities and Achievements Selected project activities and achievements are summarized below for market sector and crosscutting components, as well as for the industry association established: Wind Power: To address the negative impacts of lack of high-quality site-specific resource data on wind farm development in China, the project is supporting the assessment of wind resources at ten sites. Activities center on introducing international best practice and raising the capacity of local institutions in the area of resource measurement and data analysis. Achievements include: • Direct stimulus of China’s wind farm project pipeline: The ten sites under evaluation by the project have been incorporated into the Government program for evaluating 30 new, high potential (100 MW or more) wind sites by 2005 for near-term development. The Government plans to use the assessments in pursuing commercialization by competitive bidding. Sites characterized by the project represent at least 1,000 MW of the 4,000 MW targeted by the Government for development by 2010. • Nationwide adoption of wind resource measurement methods: In order to increase the bankability of projects, the Government will adopt the project’s field installation and data acquisition procedures and protocols for the 20 additional sites it is planning to evaluate by 2005. U

U

U

U

24

Project training in wind data acquisition.

Industrial-Scale Biogas: The project has supported three industrial-scale biogas pilots and associated business development activities, aiming to promote greater utilization of the potential represented by China’s growing resource base of organic discharge from livestock farms and manufacturing facilities. Achievements include: • Multiplier effects for biogas project development: Business development workshops held in association with the project’s three pilot plants have included breakout sessions for business discussions between developers and end users. These sessions have resulted directly in the development of at least 34 more new biogas plants, with additional multiplier effects expected. Now that project activities have shown biogas to be more than a means of environmental compliance in China, the financial sector has also begun to be active in the industry. • Increased capacity of biogas developers: As a result of the project, biogas engineering companies are pursuing more commercial project development strategies and have improved their business development skills. One developer, for example, has indicated that project activities have resulted in substantial expansion of its business, including projects abroad. U

U

U

U

Project co-financed pilot biogas project: two-stage aerobic digestion at the Jiuchang Distillery in Qingdao, Shandong Province

Solar Water Heaters: Addressing the challenges presented by the highly variable quality of 25

products in China’s solar water heater market place, the project has provided direct support to the Government in the areas of standards, testing, and certification. • Completion of China’s solar water heater standards framework: Each of the four solar water heater standards resulting from project support received final approval in October 2003, completing China’s standards framework for solar water heater component and system testing. • Accreditation of two solar water heater test centers: Two of three solar water heater test centers established with project support have received Government accreditation. • Industry enthusiasm for solar water heater standards: The effectiveness of efforts to involve industry in the development of a standards, testing, and certification regime for solar water heaters is evidenced in the strong enthusiasm industry has expressed for the new standards. U

U

U

U

U

U

Hybrid Village Power: Through the development of two hybrid (e.g. wind-PV-diesel) village power pilots, the project aims to address issues of sustainability of village power systems. It also aims to provide China with a practical model for operation and management of systems and for promoting poverty alleviation through electrification. In the near future, the project will provide direct support to the Government’s rural renewable electrification programs through: (1) the training of village power system operating companies; (2) the creation of a database on systems installed and lessons learned in the Government’s Township Electrification Program; and (3) the training of expert teams responsible for developing the Government’s planned Village Electrification Program in three pilot provinces. Achievements to date include: • Development of new model for village power operating companies: The project has given rise to the only operating company in China that manages multiple renewable village power installations. The project’s RESCO (Renewable Energy Service Company) manages five systems associated with the project’s pilot in Xinjiang and manages another five systems associated with the Government’s Township Electrification Program. • Initial successes in productive applications of village power: Hybrid electrification at pilot sites in Xinjiang has stimulated small-scale enterprises in tourism, gem polishing, weaving, and electronics repair, as well as expansion of the local hospital’s capabilities. Such productive applications of village power increase income for the operating company, thus raising the potential for system sustainability (e.g. purchase of new battery packs when needed). In addition, productive applications can have poverty alleviation benefits. • Popularity of Village Power Project Development Guidebook: Now in its second printing, this book prepared by the project has not only been well received in China, but is also being used as a guide in other countries. U

U

U

U

U

U

Bagasse Cogeneration: The project aims to demonstrate the potential in China’s sugar mills for cogeneration of heat and power (and sale of electricity to the grid) by burning fibrous processing wastes. A pilot project is being constructed in Guitang, Guangxi Province. Workshops and study tours aim to build capacity for bagasse cogeneration in China and promote associated business development. Business Development and Financing: The project has held a series of training programs and workshops on business development and financing for renewable energy. These activities have sought to enhance the business skills of managers and entrepreneurs and to raise awareness and 26

understanding of renewable energy among the financial community. Policy: In addition to direct support of government programs and strategic planning in the market sectors of biogas, solar water heaters, grid-connected wind, and village power, the project is also providing cross-sector policy support to the Chinese Government in the formulation of its Promotion Law for Renewable Energy Development and Utilization.

Project co-financed hybrid village power system in Bulunkou, Kezhou, Xinjiang

Chinese Renewable Energy Industries Association (CREIA): The project has supported establishment of CREIA, one of the first completely business-led associations in China. CREIA offers a wide range of services and support, including web-based services; networking, training events, and study tours for industry; and policy support for Government. This fall, CREIA will launch its web-based Investment Opportunity Facility (IOF) to promote business development and financing for renewable energy companies and projects in China. Achievements include: • Growth in CREIA’s membership: From an informal base of about 60 companies in 2000, CREIA has grown to a membership of 160 companies and individuals. Companies are attracted by the business development opportunities, information channels, and consultation offered. • Financial self-sufficiency of CREIA: In a short time, the association has achieved financial self-sufficiency. In addition to a growing paid membership base, CREIA has been successful in landing contract work with a number of domestic and international organizations. • Growing recognition of CREIA by international renewable energy community: CREIA has developed a reputation as the premier channel between China’s renewable energy companies and businesses and organizations in the rest of the world. Reflecting this, CREIA has been U

U

U

U

U

U

27

chosen as the East Asian Secretariat of the Renewable Energy and Energy Efficiency Partnership (REEEP). • CREIA’s securing of China’s first “Emission Reduction Purchase Agreement”: CREIA secured this agreement (signed with the Dutch Government) under the United Nations Framework Convention for Climate Change’s (UNFCCC) Clean Development Mechanism (CDM) framework for one of its member companies and is well-positioned to play a leading role in CDM project development in China. U

U

Project Management Office Contact Information: Wang Zhongying ([email protected]) William Wallace ([email protected]) Wu Haiou ([email protected]) HTU

UTH

HTU

HTU

UTH

UTH

Tel. 86-10-6800-2617/18/19 Fax: 86-10-6800-2674 Website: www.ccre.com.cn Address: A2107, Wuhua Plaza, A4 Chegongzhuang Dajie; Xicheng District; Beijing 100044 HTU

28

UTH

Project for the Expansion and Improvement of Solar Water Heating Technology in China Background Solar thermal energy has been used widely in China in the form of solar water heaters; and the nation has a good foundation both in the development of the solar water heater industry and in the commercialization of its products. At present, over 1,000 factories and dealers produce and sell solar water heaters in China; and China is a leading country worldwide both in the scale and in the high level of commercialization of its solar water heater sector. Solar water heaters in China are mainly for household use. The ideal building-integrated solar water heater system, which would be easy to install, elegant, practical, and serve directly as the roof or wall of the building with which it is integrated, is not yet being produced in China. In addition, because solar water heating equipment is generally bought by consumers after they have bought their homes, problems and safety issues often arise during installation. In fact, such factors have become barriers to the use of solar water heaters. Finally, some cities have already started to restrict the installation of solar water heaters, so as to avoid what is perceived as a negative impact on the visual environment. In order to promote the rapid upgrading and technical improvement of solar water heater products, to overcome problems in installation and use, to expand the use of solar water heaters, and reduce the consumption of fossil fuels, the project Expansion and Improvement of Solar Water Heating Technology in China was launched in January 2002. The project is supported by the United Nationals Foundation (UNF) and the United Nations International Partner Fund (UNFIP). The duration of the project is three years. The National Development and Reform Commission (NDRC) represents the Government of China in implementing the project. The UNF has provided US $1,832,400 to support the project; and the Chinese Government and other relevant domestic organizations are providing US $9,600,000 of in-kind co-financing.

Project Objectives The project has the following objectives: • • •

• •

Widen the use of solar water heaters in residential buildings, thereby reducing the consumption of coal and emission of greenhouse gases. Cultivate a group of engineers and architects that understand the integration of buildings and solar water heaters through capacity building activities. Promote the design and spread of high quality, attractive, building-integrated solar water heaters; increase the market share of solar water heaters; and improve market quality by supporting technical progress in the solar water heater manufacturing sector. Promote sound market development by supporting the formulation and implementation of policies and standards regarding the use of solar water heaters on residential buildings. Raise the level of understanding of home buyers, real estate developers, and city planners of solar water heaters and solar water heater – building integration through carrying out 29

dissemination activities.

Project Activities •

•

•

•

The project is developing ten pilot building-integrated solar water heater residential complexes in the seven provinces or provincial-level municipalities of Beijng, Tianjin, Shanghai, Shandong, Anhui, Yunnan, and Guangxi. These pilots demonstrate solar water heater – building integration under different climatic conditions. Already, pilot projects have been completed over a total building area of 78,900 square meters; and 158,200 more square meters are under construction. The project has provided technical support to a number of potential solar water heater – building integration retrofit projects. An expert group organized by the project visited more than 20 organizations that had applied to be retrofit pilots as a part of the UNF project. The experts evaluated the design of their potential projects and provided technical support. Four of these projects have been selected for addition retrofit design work, which is currently underway. The project is working to draw up the national standard Technical Code for Civil Building Solar Water Heater Systems. The initial draft has been developed; and it is planned that the draft to be submitted for government approval will be completed in December of 2004, after which the proposed standard will be submitted to the Ministry of Construction (MOC) to be authorized, published, and implemented. The project is preparing Guidebook for the Design and Use of Solar Water Heaters for dissemination to solar water heater manufacturers, architects, and developers. The publishing and distribution of the guidebook is targeted for October of 2004. 30

•

• • •

Market research and policy studies are being conducted, so as to provide input for government decision-making and for the drafting of China’s Promotion Law for Renewable Energy Development and Utilization. Reports completed to date include: “Research on the Situation of Solar Water Heater Integration with Buildings”, “Research on Incentive Policies for Promoting the Development of the Solar Water Heater Industry in China”, “Investigation of the Training Needs of the Solar Water Heater Industry”, and “Research on Targets for Technical Improvements in Solar Water Heaters.” The project is organizing study tours both in China and overseas for the study of advanced experience in solar water heater – building integration. Based on the standard and design guidebook prepared by the project, training materials will also be prepared as a part of the project; and training will subsequently be conducted. Dissemination activities are being carried out as a part of the project, including informational dissemination meetings and workshops. All types of avenues are being used to introduce the social, economic, and environmental benefits of solar water heaters and solar water heater – building integration.

Project Achievements The project has been effective in gaining acknowledgement that building-integration is the necessary path forward for the development of the solar water heater industry. Specific achievements are given below in each of the areas of policy, the market, and technology.

Policy and Related Mechanisms U

• •

The technical code for the use of solar water heater systems in civil construction has been listed in China’s national standards plan. China’s National R&D Program has arranged for research on the special topic on solar water 31

• •

heater – building integration. Four local governments have issued documents and regulations to promote the use of solar water heaters in buildings. In order to promote the widespread use of solar water heaters in buildings, the Solar Energy Building Committee of the Solar Energy Society has been established.

Market • The benefits of solar water heaters have become widely known. As an example, in the city of Kunming, Yunnan Province, it is difficult to sell real estate projects that do not integrate solar water heaters. • Over 20 real estate developers, over ten building design institutes, and over 50 architects have taken part in relevant project activities to date. • As a direct result of the project, over 1,000 families are enjoying the benefits of building-integrated solar water heaters. U

Technology • Companies involved in the study of advanced international experience through study tours have begun to benefit from these experiences. • China has begun to research, develop, and manufacture solar water heater products that meet the requirements of the international market; and the pace of product upgrading has increased. U

Residential buildings integrating solar water heater is in Yunnan Province

Project Management Office Contact Information: Address: 1416 Guohong Mansion, A 11, Muxidi Beili, Xicheng District, Beijing 100038, China 32

Tel: Fax: Email: HTU

+86-10-63908480, 63908482 +86-10-63908468 r [email protected] UTH

33