The Global Need for Clean Energy in China

Since the 1980’s, when China’s government introduced policies to reform and open-up the economy, China has powered ahead at a consistent 8% annual growth rate. This now massive economy is energy intensive and China’s generating capacity in 2006 grew a staggering 20.3% from 2005 to reach 622,000MW, second only to the USA. Although China is already the world’s largest producer of renewable energy, via its extensive hydro-electric program, by far the largest basic energy source is coal, which fuels 70% of all electric power. Indeed the latest figures show that the proportion of coal fired generation on the system increased 2.15% from 2005 to 2006 with the proportion of hydro-electric generation capacity reducing 2.03% over the same period further highlighting the continued preference and ease of using polluting fossil fuels on the system. Clearly there is a global need for clean energy in China to correct this trend as quickly as possible and reduce the use of fossil fuels and the resulting pollution. Fortunately the Government of China is improving the policy framework to address this which is leading to a massive opportunity for investment, technology and knowledge transfer in the clean energy sector.

China is the world’s largest producer and consumer of coal with annual coal output of 2.325 billion tonnes in 2006. Pollution from coal mining, processing and coal fired power generation in China is the world’s single most serious environmental issue and it is estimated that environmental degradation costs China 2 – 3% of its GDP. Eight of world’s ten most polluted cities are in China.

Low overall energy efficiency on the supply side compounds pollution problems. The demand side consumes many times more electricity per unit of GDP than developed economies. The challenge of reconciling surging energy demand, reducing dependence on coal and protecting the environment is the global issue at the forefront of China’s energy policy.

Support for Clean Energy from China’s Government

The issue of making China’s energy mix cleaner is well recognised and of growing concern. In recent years the government has put in place ambitious programs to rapidly develop natural gas supply and utilisation, promote renewable energy and waste-to-energy, build more nuclear power, as well as to acquire overseas LNG supplies.

Since ClearWorld Energy was founded in 2003, there has been considerable progress by the Government of China in putting in place the policy and legal framework to support clean energy to 2020 and beyond. Notably the Renewable Energy Law was introduced in January 2006 and the Clean Development Mechanism (CDM) Regulations went into effect from June 2004. Indeed this support has lead to much increased growth rates in installed capacity of clean energy in China. Also in energy efficiency the 11th five year plan included targets to reduce energy consumption per unit of gross domestic product by 20% to 2010 and a new Energy Law is under drafting to consolidate the regulations for the different aspects of clean energy and its role in the broader energy mix. Key drivers of this policy focus are:

• to secure the energy that China needs to grow its economy
• to ensure future energy security by leveraging a balanced array of (mainly) indigenous energy sources
• to mitigate environmental degradation and climate change.

However as the Chinese economy still grows at a double digit pace and coal is still the energy source of choice, it is likely that even with the ambitious targets of 15% of total primary energy from renewables by 2020, coal will still account for 70% of the primary energy mix for some time to come. There is therefore an urgent need to work with the Government and stakeholders at all levels to at least implement the target for clean energy and at best improve upon it. This will require the application of technology, investment and innovative commercial structures – all areas that ClearWorld Energy has demonstrable track record.

Renewable Energy in China

In 2006 total primary energy consumption reached 2.22 bilion tce an increase of 10% per annum since the founding of ClearWorld Energy in 2003.

This could reach 3 billion tons by 2020, which seems conservative at today’s growth rates.The installed generation capacity could reach 900+ GW by 2020.

RE can play a key role, current target of 15% of primary energy in 2020. Market size and some of the proposed 2020 targets can be seen in the Table below: