The report was launched at a major event co-sponsored by the Center for American Progress and Apollo Alliance on March 4th (conference agenda here) in which I spoke on a panel, walking through the main elements of the report.  The report was picked up by the New York Times.com, which featured a few nice quotes from me.

I re-post the chapter on China below (look at the full report for an equally thorough examination of Germany’s and Spain’s policies).  The first part of the chapter looks at China’s accomplishments thus far across the clean energy value chain of innovation, manufacturing, deployment, exports and job creation.  The second part takes a closer look at the policy tools, using the three-pillar framework of market creation, financing and infrastructure that I have previously articulated in a conference at RETECH 2010 last month (but also take note in that lecture that I point out that the fourth and fifth pillars of information transparency and international collaboration will be important for China’s future development of its clean energy economy).   Here’s the China section:

CHINA

China is commonly viewed as pursuing an uncompromising economic growth model without consideration for the environment or public health. But China’s leaders fully grasp climate change’s threat to the country’s water and food security and the strategic economic and energy security benefits provided by deploying clean-energy solutions at a massive scale.

China’s GDP in 2008 was $4.3 trillion-less than one-third that of the United States in absolute terms and just 7 percent of U.S. GDP in per capita terms. China’s economy comprises three primary sectors: industry, services, and agriculture. Industry makes up the largest share of china’s GDP at 48.6 percent. Services follow close behind at 40.1 percent, and agriculture is third at 11.3 Percent. China’s strong manufacturing and industry sectors, aided by what some believe to be a deliberately undervalued currency, drive its robust global trading position and resulted in a global trade surplus of more than $400 billion in 2008.

China eclipsed Germany in 2009 as the world’s largest exporter. But the economic downturn that began in 2008 caused a temporary but dramatic dip in its exports. This dip prompted China to seriously consider rebalancing its growth with increased domestic consumption. This rebalancing would also diminish China’s global trade surplus.

Clean-energy deployment in China China boasts the most installed renewable electricity capacity of any country in the world. At the end of 2008, its 76 GW of installed capacity of renewable electricity-which excludes large hydropower for environmental impact reasons-was nearly twice the amount installed in the United States. While the European Union is aiming to produce 20 percent of its energy from renewable sources by 2020, and the U.S. Congress considers adopting a 20 percent renewable electricity standard by the same year, China produced fully 16 percent of its electricity from hydropower and wind power alone by the end of 2009-numbers that will certainly increase over the next decade.

In fact, nonfossil fuel sources are expected to account for as much as 30 percent of China’s overall power supply by 2020. The country expects to meet a big portion of this new market by building seven wind megabases of at least 10 GW each strategically sited across the country.

China’s leaders fully grasp climate change’s threat to the country’s water and food security and the strategic economic and energy security benefits provided by deploying clean-energy solutions at a
massive scale.

Wind power is definitely China’s current favorite in its renewable energy race. The country possesses more than 20 GW of wind capacity, which gives it the third-largest installed wind power fleet behind the United States and Germany. Solar PV, in contrast, accounts for only about 0.3 GW of installed capacity, compared to a total installed capacity-renewable or nonrenewable-just over 800 GW. The solar sector, however, is poised to grow exponentially to a targeted 20 GW by 2020 as a result of new major incentives announced in 2009 for domestic deployment.  One caveat worth pointing out: Installed capacity, especially in China’s case, is not necessarily the best way to measure the success of a country’s renewable energy development.  As many as one-third of China’s wind farms are not connected to the transmission grid due to the lack of incentives for grid companies to build out transmission lines to interconnect with clean-energy projects in remote areas. At the same time, the capacity factors of domestically made wind turbines-typically in the 20 to 30 percent range-are generally inferior to those of leading foreign-made turbines, which are above 30 percent.

The good news is that policymakers recognize these problems and have introduced new measures to address them. They have clarified rules and offered incentives that require grid companies to connect to renewable energy projects, and they have removed domestic content requirements to allow increased penetration of foreign-made wind turbines into the Chinese wind market.

CHINA’S ACHIEVEMENTS ACROSS THE CLEAN-ENERGY VALUE CHAIN

Clean-energy innovation

“We should see scientific and technological innovation as an important pillar and make
greater effort to develop new industries of strategic importance. Science and technology is
a powerful engine of economic growth . . . We will make China a country of innovation. . .
We will accelerate the development of a low-carbon economy and green economy so as to
gain an advantageous position in the international industrial competition.”
- China’s Premier Wen Jiabao at the World Economic Forum, September 10, 2009.

Innovation and R&D have not been traditional strengths of Chinese industry, which is better known for its ruthless efficiency in cost cutting and manufacturing productivity.  However, the central government views science and technology as key drivers of social progress as China develops a more modern economy. Fostering “indigenous innovation” is a long-term strategy of China’s economic planners.

The Medium-to-Long-Term Science and Technology National Plan, unveiled in 2006, established the Chinese government’s strategic role in innovation activities through 2020. The plan includes tangible benchmarks such as achieving global top-five rankings in patents generated and citations in international science publications. It also identifies five more general targeted growth industries with top priority given to technologies relating to “energy, water resources, and environmental protection.”

Even more specifically, the Ministry of Science and Technology, or MOST, has identified three priority clean-energy technologies to target with policies and investment for the five-year period ending in 2010: energy-saving technologies, 2-3 MW wind turbines, and high-voltage electricity transmission technologies.
China’s most noteworthy government-funded clean-energy R&D initiatives include:

• Key Technology R&D Program: This is China’s first national R&D program to support innovation in a broad range of socioeconomic sectors including environmental pollution control and efficient resource utilization for energy and water. Over the five-year period of 2001 to 2005 almost $1 billion in funds have been invested programwide, making it the third-largest source of national government R&D funding over that period-just behind the 863 Program (discussed below) and the National Natural Science Fund.

• 863 Program: The 863 Program is more formally known as the State High-Tech Development Plan, and it is the most well-funded government innovation program, receiving some $3 billion from 2001 to 2005. Managed by MOST, the 863 Program was created in March 1986-hence the name-to stimulate development of a wide range of technological fields. China’s current national Five-Year Plan-2006 to 2010-identifies
energy technologies as a focus area of the 863 Program, and it further identifies hydrogen and fuel cells, energy efficiency, clean coal, and renewable energy as targeted beneficiaries of some $172 million in funding.

• 973 Program: This program is also known as the National Basic Research Program and focuses on more fundamental basic research. It complements the 863 Program, whose focus is more on the commercialization of high-technology applications. Sustainable development and energy have been key areas of the 973 Program since its founding at the third meeting of the National Science and Technology Committee in 1997. Between 1998 and 2008 the program funded 382 projects for a total investment of $1.3 billion-with 30 percent of the funding going toward energy and resource protection projects.

The absolute dollar amount invested through these programs is not by itself impressive given the scale of investment needed to truly transform China to a clean energy economy, and it isn’t clear after-in some cases-more than two decades of existence that these programs are yielding the hoped-for results. What is clear, however, is China’s long-term commitment to innovation through sustained programmatic funding rather than an ad hoc approach such as providing funding through legislation that is subject to annual unpredictable appropriations. As an example, China announced in December 2009 the establishment of 16 new energy R&D centers that will work in key sectors such as nuclear power, wind power, high-efficiency power generation and transmission, and facility materials.

But innovation does not originate in a vacuum. One of the historical features of China’s technology innovation is the role of foreign technology in the innovation chain. To achieve its goals of indigenous innovation, China’s government has adopted a model of “import/assimilate/re-innovation.” Thus, the early stages of all technology development include heavy reliance on foreign technologies.

These technology transfer opportunities sometimes result from intergovernmental cooperation-as was the case with energy conservation technologies made available to China through the auspices of the Japanese Green Aid Plan to China between 1992 and 2003.  They can also result from purely commercial negotiations, as in the case of Goldwind, a Chinese wind company that acquired much of its intellectual property and know-how by licensing foreign technologies and ultimately outright acquiring a German wind company. Goldwind was virtually unheard of two years ago. Now it has gone public and is the
eighth largest wind turbine manufacturer in the world.

Today, China continues to increase its R&D capacity by welcoming international expertise. Applied Materials, the world’s biggest supplier of solar manufacturing equipment, is opening a new major R& D facility in China and is relocating its chief technology officer from Silicon Valley to China. Applied Materials’s move follows on the heels of DuPont, another American company that expanded its solar R&D facilities in Shanghai last summer. The relocation of innovation activities to where the manufacturing and market are growing makes sense because of the synergistic benefits of co-locating activities from different
links of the value chain. But it also represents a potential threat to American innovation because clean-energy manufacturing activities and the clean-energy market are growing
more rapidly abroad.

Clean-energy manufacturing

China’s reputation as the “factory of the world” holds true in the clean-energy technology sector. It is currently the world’s leading supplier of solar PV panels and solar hot water heaters, and until recently more than 90 percent of Chinese-made solar PV panels were shipped overseas for export markets. Altogether, China produces a third of the world’s solar panels. Almost all of these are exported to countries or regions with strong incentives for solar deployment, especially Germany, Spain, and California. China had just 0.3 megawatts of installed solar PV capacity at the end of 2009. In the same year, however, two major policies-the Solar Roofs Program and Golden Sun Program-were adopted to spur the domestic market, which will further support the solar manufacturing sector. Suntech, China’s largest solar manufacturer
with an annual production capacity of 1 GW, is poised to overtake Germany’s Q-Cells as the world’s largest manufacturer of silicon-based solar panels. Its domestic competitors, Yingli and Trina, are also among the world’s largest solar PV producers. All three are publicly traded global companies that are listed on the New York Stock Exchange or NASDAQ.

The wind manufacturing sector has grown as well, tracking the domestic wind power market’s growth. China had few major wind manufacturers just five or six years ago, but it was home to 70 of these firms by the end of 2008.84 China’s top three wind turbine makers have combined annual production capacities of 4 GW, and total annual manufacturing capacity by Chinese makers may reach as high as 20 GW by 2010.
This upward trend is the result of a concerted and comprehensive policy to develop China’s domestic capacity to manufacture wind components for its own burgeoning wind energy market. The domestic market is vast. In 2007, China set a national target of 10 GW and 30 GW of installed wind capacity for 2010 and 2020, respectively. By the end of 2009 approximately 20 GW were already installed. As a result, China’s National Development and Reform Commission is reportedly revising these targets to 35 GW by 2011 and 150 GW by 2020-truly staggering numbers by international standards.

The leadership of local, city, and provincial governments in creating low-carbon development zones has been another catalyst for clean-energy technology manufacturing. In these regions, clean-energy industries are the backbone of economic development, creating jobs through innovation, manufacturing, and assembly activities. There are many examples of publicly supported low-carbon economic clusters, including Baoding in Hebei province, Tianjin municipality, Wuhan city in Hubei province, and the “solar belt” of cities found throughout Jiangsu province. Growing academic and real world evidence demonstrate
that this type of cluster-based approach to economic development can lead to higher rates of innovation and entrepreneurship and better wages.

A closer look at China’s wind power sector provides a useful illustration of its manufacturing policy at work. It adopted several measures in recent years to promote a manufacturing  nfrastructure of wind energy components that has transformed the sector from one heavily dependent on foreign technology to one where China is becoming increasingly self-reliant and ultimately export oriented. The government enacted targeted policies to promote the domestic manufacture of wind technologies, including:

• A mandatory requirement that all wind power projects have 70 percent of the equipment manufactured domestically (This requirement has recently been lifted to address
international concerns of trade protectionism, but has nonetheless served its purpose.)
• A tariff and value-added tax rebate on imports of parts and raw materials used in manufacturing wind turbines
• The elimination of tariff-free importation of wind turbines less than 2.5 megawatts in capacity
• Strong market demand created by ambitious national targets for installed wind capacity supported by robust financial and tax incentives, as described above

Clean-energy exports and jobs

As Chinese investment in innovation begins to bear fruit, the “Made in China” label is slowly losing any stigma of inferior quality. Chinese clean-energy hardware is increasingly receiving warm reviews. At the same time, the Chinese commitment to manufacturing, stimulated by a market both at home and abroad, is becoming a job creation engine throughout the country.

The poster child for China’s clean-energy exports is undoubtedly its solar sector. As mentioned earlier, Chinese solar PV panels account for 30 percent of the world’s global production, with almost all of that-until recently-targeting overseas markets. Top Chinese solar manufacturers have established sales offices in lucrative European markets as well as targeted American markets like California. China’s Suntech has gone one step further by announcing it will open a manufacturing facility in Arizona with an annual capacity of 30 MW-able to fully serve 8 percent of the United States’ solar market.

China’s large domestic demand for wind power means that most manufactured turbines are installed in China. But with Chinese manufacturers rapidly increasing their annual production capacities, there are now concerns of wind manufacturing overcapacity. So Chinese wind firms such as Sinovel, Goldwind, and A-Power are now starting to flex their global muscles by aggressively seeking overseas markets for their wares.  The relatively more mature hydropower sector is becoming a strategic export sector as well.

State-owned Sinohydro is building hydropower dams in other developing countries such as Cambodia, Laos, Ecuador, and Botswana. China’s technology leadership position in advanced coal combustion, electric vehicles, and high-speed rail are also starting to win orders from overseas.

Employment in the Chinese renewable energy sector reportedly numbered 1.12 million by the end of 2008, with that figure increasing by 100,000 a year. A recent report by the Global Climate Network concluded that by 2020 the fulfillment of China’s domestic renewable energy targets will lead to an additional 1 million new jobs in hydropower, between 670,000 and 1 million jobs in wind power, and between 860,000 and 880,000 jobs in solar PV. Together, these three sectors alone could create up to 2.88 million jobs by 2020 solely by meeting domestic demand. Any concerted clean-energy export strategy will lead to even
more new jobs in China’s clean-energy industries.

CLEAN-ENERGY POLICY TOOLS

Expanding markets and driving demand
Recently, China announced that it would reduce its carbon dioxide emissions as a proportion of each unit of GDP produced by 40 to 45 percent of 2005 levels by 2020. But this is just the latest in a vast array of national-level, clean-energy targets that China has set for itself.

All the countries discussed in this report engage in some level of national economic development planning, but China does so to an extreme. It develops its future economic growth strategies through a series of five-year plans. Its current five-year plan (2006-2010) contains the country’s most ambitious environmental targets to date, including reducing energy consumption per unit of GDP by 20 percent from 2005 levels. Each provincial level jurisdiction must meet a share of the national energy intensity target, and provincial governors are promoted in part based on their fulfillment of these goals.

In support of this five-year target, the Medium- and Long-Term Energy Conservation Plan released in 2004 sets extensive targets for energy and resource efficiency across two dozen specific industrial sectors and equipment types and identifies 10 priority energy conservation projects in coal, petroleum, buildings, lighting, transportation, and other areas. These energy conservation targets have attracted major government and private sector investment, and preliminary studies indicate that China will achieve or come close to achieving most of its energy conservation goals.

One major national energy conservation program that sets energy efficiency standards for the top 1,000 energy consuming enterprises in China achieved its stated goal of reducing energy use by 100 million tons of coal equivalent two years ahead of its 2010 target date. In the process of fulfilling this target, some $7.3 billion in energy efficiency technologies and measures was invested in 2007, and another $13.2 billion was invested in 2008.

The Medium- and Long-Term Development Plan for Renewable Energy sets out medium (2010) and long-term (2020) targets for renewable energy. China aims to generate 15 percent of its primary energy from nonfossil fuel sources by 2020. While it is unclear whether this share includes nuclear power-various government investments indicate that it probably does-the hydropower, wind, and solar sectors are expected to benefit as well.

A range of complementary policies support these national goals. The Renewable Energy Law of 2006 requires grid companies to purchase electricity from renewable sources, and other policy initiatives require those companies to clarify how the additional costs of producing and connecting renewable energy is to be shared across all power consumers.

Similar policies require power generators to supply a certain percentage of their power from renewable energy sources. In a program called the mandated market share, or MMS, power generators with an
installed capacity of more than 5 GW must produce 3 percent of their electricity from nonhydro renewable sources by 2010 and 8 percent by 2020. Because the MMS is binding, it is more similar to the “renewable portfolio standard” common in the European Union and the United States than the 2020 nonfossil fuel target.

All these national standards and policies were not driven by climate change considerations, but by a national focus on domestic energy security. But with climate change rising in importance in its socioeconomic agenda, and armed with a new goal to reduce carbon intensity, China is poised to enact new domestic legislation that curbs the growth of carbon emissions and will spur further growth of China’s clean-energy industries.

China is also embarking on a gradual yet indispensible initiative to reform energy prices. Traditionally, energy prices have been artificially suppressed to promote universal access to electricity and fuel. But the environmental and public health consequences of unfettered fossil fuel use have proven unsustainable. Through a combination of easing price controls, taxation, differential pricing, and standards setting, oil and coal have been made steadily more expensive for consumers, thereby increasing the competitiveness of traditionally more expensive nonfossil fuel counterparts.

A good illustration of these policies’ impact on consumption is the evolution of transportation fuel and energy-efficient vehicle use by Chinese consumers. In 2008 Chinese authorities doubled the tax rate on engines above 4 liters from 20 percent to 40 percent while lowering the tax rate from 3 percent to just 1 percent for cars with engines less than 1 liter.  These tax policies were combined with an automobile fuel economy standard that is one-third higher than the United States, the linking of gasoline prices to global crude oil prices, and the implementation of China’s first gasoline taxes in 2009. The result: In the first three quarters of 2009, cars with engine sizes of less than 1.6 liters accounted for 70 percent of new car sales-up from 62 percent for all of 2008. And in its efforts to manage its heavy reliance on coal, China is now beginning to address the pricing of electricity by, for instance, recently raising electricity rates for nonresidential customers.
Financing research, development, and deployment

The Chinese government understands that creating a new clean energy economy requires a decisive and strategic mobilization of finance for innovation, infrastructure, manufacturing, and deployment. Government investments are made through various channels, including state-owned investment vehicles and financial institutions, economic stimulus programs, and financial and tax policies.

Central government leadership has certainly recognized that “scientific development” requires a public investment in clean-energy technologies. The aforementioned 863, 973, and Key Technologies R&D Programs represent significant public investment in cleanenergy innovation. And China has employed a comprehensive suite of government policies to grow the low-carbon energy sector.

A look at the range of policies promoting China’s wind sector is instructive:

• Concession programs. Through a bidding process, renewable energy developers are awarded project concessions at a preferential tariff rate
• Feed-in tariffs. In the wind sectors, concession programs have evolved to feed-in tariffs ranging from $0.07 to $0.09 per kilowatt-hour, depending on the region. Solar concessions, which started this year, are similarly moving to a feed-in tariff system
• Carbon markets. The clean development mechanism under the Kyoto Protocol has been instrumental to the wind sector’s growth. Carbon credits generated under the CDM enable returns on investment, which make wind projects attractive to broad private sector participants
• Mandatory grid connection and electricity purchase. Grid operators are required to build transmission lines that connect renewable energy sites and purchase electricity generated from these sites. This requirement is supplemented by a subsidy to grid operators-varying by distance-for the build out of transmission lines
• Cost sharing. The national government set up a renewable energy fund by levying a 0.015 to 0.03 cents per kwh surcharge on all electricity users. The funds are disbursed periodically to renewable energy developers as a financial incentive. From 2006 through 2008, some $320 million was channeled to renewable energy developers under the costsharing
program
• Mandated market share. Power generators with an installed capacity of more than five gigagwatts must produce three percent of their electricity from non-hydro renewable sources by 2010 and eight percent by 2020
• VAT reduction. Wind power generators are entitled to a 50 percent discount on their value-added taxes

On top of these national-level incentives additional carrots are dangled at the provincial and local levels in the form of added tariffs, tax breaks, and favorable land pricing, among others.

State-owned enterprises are another critical driver of clean-energy deployment. China’s Power Investment-are all major investors in renewable energy projects. They accounted for 55 percent of all domestic installed wind capacity as of the end of 2008.

China Investment Corporation, or CIC, a recently formed state wealth fund with $300 billion of managed assets, is now making major investments in Chinese clean-energy companies.
In November 2009, it announced investments of $400 million in China Longyuan Power, China’s largest wind energy generator, and $700 million in GCL-Poly, a diversified energy company specializing in cogeneration, wind, and polysilicon production. In the same month CIC also invested $1.6 billion in AES, a U.S.-headquartered global utility with one of the largest foreign operations in China, including investments in hydro and wind power projects.

The China Energy Conservation Investment Corporation, a state holding company in operation since 1988, invests widely across a broad range of energy conservation, pollution control, and renewable energy businesses. Partnering with Suntech, the CECIC recently completed China’s first 10 megawatt solar PV power plant project in Ningxia Autonomous Region. CECIC now has more than 90 subsidiaries and employs more than 20,000 workers. By 2012 it plans to reach $15 billion in total assets, $7 billion in total revenue, and $750 million in total profits. In the same time frame, the company projects an annual energy conservation capacity of 4.25 million tons of coal equivalent and annual reduction of carbon dioxide of 12 million tons. It also aims to install 1.4 GW of grid-connected solar power capacity and is now beginning to set its sights on overseas utility-scale solar projects in Europe in alliance with several other Chinese companies.

Building physical and economic infrastructure

China’s government announced a $586 billion economic stimulus plan in November 2008. Some $100 billion of this will be allocated to infrastructure, particularly to the country’s
rail and transmission grid systems. These systems will serve as the backbone to China’s emerging clean energy economy. China, like the United States, must modernize its national grid infrastructure to accelerate its uptake of renewable energy. It is an emerging world leader in ultrahigh-voltage, or UHV, transmission technology, with more than 100 domestic manufacturers and suppliers participating in the manufacture and supply of UHV equipment.   A transmission line from Shanxi to Hubei boasts the highest capacity in the world and is able to transmit 1,000 kilovolts over 400 miles. The State Grid Corporation will invest $44 billion through 2012 and $88 billion through 2020 in building UHV transmission lines.  And in the coming months, China will unveil new plans to build an extensive smart grid by 2020.

But its infrastructure investments are not confined to the power sector. As American economic history shows, transportation links are the backbone of a nation’s economy.  Cars will probably remain out of reach For the majority of Chinese households for the foreseeable future despite the country’s rapidly growing automotive market, which is now the biggest in the world. Mass transit-particularly intracity subways and long-distance, high-speed rail-will remain the mobility solution of choice for many Chinese.  Recognizing this, China is embarking on the largest railway expansion in history and plans to spend almost $300 billion expanding its railway network from 48,000 miles today to 75,000 miles in 2020.105 Of this, 8,000 miles will be comprised of high-speed rail. The 800 mile Beijing-Shanghai line is under construction and will reduce travel time between those destinations by nearly two-thirds-from 14 to 5 hours-when it opens in 2011. This will attract an estimated 220,000 daily passengers and should dramatically offset air
travel between the metropolises.

China is second in the world in electrified railways with a reported 16,000 miles. This figure accounts for an impressive 32 percent of China’s total railways, and electrified rail is responsible for 50 percent of overall passenger and cargo volume.107 What’s more, China is poised to have the world’s largest network for intracity urban rail transit. Eleven cities currently have urban rail routes totaling 520 miles, and by 2015 approximately 1,300 miles of railway lines will be laid and operational in 19 cities.

China is proving to be a quick learner of international best practices, too. It has adapted successful policies from Europe such as clean-energy standards and feed-in tariffs to the Chinese situation while creating unique policies of its own, thereby creating the market signals and channeling the finance necessary to spur long-term innovation and deploy
clean-energy installations on a mass scale.

The following is the prepared outline on which I based my remarks on, in case you find it onerous to sit through the video presentation:

I.                    Basic Facts - first thing to highlight is the opacity of it all.

a.       Central vs provincial contributions:  Of 4 trillion yuan ($586 bill) total, 1.18 is from central government while the rest is from sub-national govt and private sector.  OECD says 600 bn yuan is from sub-national govt while rest is from private sector (and most of this is from bank loans to private sector).  This is last bit is significant as we shall discuss in a bit.

b.      Change in allocations: from Nov ‘08 to March ‘09 - not clear what implications are for “green”

i.      Sustainable development share decreases from 350 bn yuan (9%) to 210 bn yuan (5%)

ii.      Infrastructure decreases from 1.8 tr yuan (45%) to 1.5 tr yuan (38%)

iii.      Technology advances and industry restructuring increases from 160 bn yuan (4%) to 370 bn yuan (9%).

c.       How much new versus repackaged is also a source of uncertainty.

II.                 There have been bullish estimates of the “greenness” of China’s stimulus package.

a.       What do we know?

i.      About $220 billion to infrastructure, which is gird, rail, highways, bridges.  Some estimates peg grid and rail allocations to roughly $100 billion.

ii.      By end Aug ‘09, some nearly 1,000 miles of rail, sewage treatment capacity of 5.18 million tons/day, waste disposal capacity of 16,000 tons/day, energy-saving capacity of 6.69 million tons of standard coal (4 million cars per yr), 131 million tons of water-saving capacity

iii.      Also ecological restoration, BUT nothing for renewables.

iv.      The real stimulus story is not the $586 billion package, but the monetary stimulus, some $1.5 trillion in 2009.  Cf. China GDP of 4.5 trillion.  In fact, some suggestion (OECD) that much of $586 billion was not fiscal, but from bank loans (as much as 4 - 1.18 - 0.6 = 2.2 trillion yuan)

III.               All that Glitters is Not Green

a.       Many of the bullish analyses include all rail and grid investments

b.      Competing sectors of highway construction, earthquake reconstruction, and other developments - how green were these?  PLUS Oversight of large infrastructure projects for pocket-lining.

c.       Green passage vs. curbing of “shuang gao” projects

d.      Overcapacity

e.       Push for consumption-based growth.  Cash-4-clunkers/appliances.

f.        Latest economic numbers, 10.7% Q4 yoy GDP growth, may seem robust, but it is all driven by fixed asset investment and industrial production.

g.       Sustainable?  With all the bank lending, some analysts fear a day of reckoning and suspect official debt to GDP ratio of 20% is a gross underestimate.   More like 50%.  à reigning in of monetary policy, increase in bank reserve ratios à what implications for green projects?

IV.              Lessons

a.       Going green is not just about fiscal or monetary policy

b.       Just as crucial for rebalancing or restructuring the economy, which is what every Party official is saying needs to happen, is getting the prices right, …The root cause of the structural imbalance is distorted incentive structures, especially depressed factor costs. Until more decisive steps are taken to liberalise factor markets, adjusting economic structure could remain on the top of policy agenda every year for a very long time.

c.       Lesson for America is clear.  ARRA provides us with a good green jumpstart, but it does not take us to the promise land.  We need a comprehensive approach instead of temporary measures.  We need to get factor costs right, and in the U.S. context, among other things, that means putting a price on carbon.

V.                 But China’s investment in Green is Serious

a.       National energy conservation and renewable energy targets.  Compliance with China’s new goal to reduce carbon dioxide emissions per unit of economic output by 45 percent requires an annual investment of $30 billion for a decade, according to analysis by Renmin University.

b.      Market creation policies drive manufacturing prowess and now emerging, innovation activities.  863 program, New Scientist article on Chinese scientific journal articles, increasing # patents

c.       Lots of investments outside of stimulus package, especially in renewable energy and nuclear.

d.      Bank loans have been a huge boon.  How much of these are going to wind projects and other green energy projects?

e.       Debate about repackaging highlights the long-term strategy that China was embarking on anyways.

f.        State-owned eneterprises are vehicles of clean energy investments: CECIC, or the China Energy Conservation Investment Corp (going big on solar partnering with Suntech at home and seeks to build projects in Europe), 180 or so subsidiaries and more than 11000 employees.

i.      But challenge is to provide better financial support for SMEs to participate in the clean energy sector - they are better job creators and better represent the entrepreneurial spirit, but have not benifited as much from stimulus package or bank lending (those funds, some complain, tend to go through the more established govt-backed channels of large SOEs)

g.       Long-anticipated new energy development plan in the works, some $440 to 660 billion over 10 years according to some reports last year.  Given short term discussion of too much credit and inflation fears, and concerns of industrial overcapacity, I am not sure we will see a new energy fiscal or monetary package coached in stimulus package terms.  Planners will have to be more strategic.

Picture Credit: Green, Lean Ideas

Julian L. Wong RETECH 2010 Presentation from Julian L. Wong on Vimeo.

This speech in fact serves as a preview of an upcoming report by my colleagues and I that takes this three pillar approach to analyze the clean energy policies of Germany, Spain and China, and makes the case that these countries are taking a comprehensive approach towards developing their clean energy industries, whereas all the United States has is a series of patchy and heterogeneous state action (e.g. state renewable energy standards) or federal action that is limited in duration (e.g. short-term renewable energy tax credits, or one-time green stimulus spending).  Its a wake-up call to the United States, really.  And while this is a rather U.S.-centric perspective, the fact of the matter is, in the context of getting a global climate deal done, the chances of the rest of the world stepping up their commitments is greatly enhanced if the United States gets its act together first.  Watch for the report!

The show was clearly motivated by the recent New York Times front page story by Keith Bradsher on the same topic, and to a lesser extent, the series of op-eds by New York Times columnist Tom Friedman (see here, here and here).  But really, this has been the story of this blog for the two over years of its existence.  China is serious about green technologies, but more importantly, as I point out in my interview, what distinguishes China from the United States is its long-term planning, with the Medium and Long Term Development Plan for Renewable Energy, with national targets for each renewable energy technology type for 2010 and 2020, being a case-in-point.  Such national targets send clear signals to the market that the government is committed to this new low-carbon industry for the long haul, thus stimulating private and provincial investment.

This discussion dove tails nicely with a presentation I made at RETECH 2010 last Thursday (Feb 4) in Washington D.C–that China is adopting comprehensive clean energy policy, not just in manufacturing, as we’ve all come to understand as China’s strength in the clean energy technology sector, but also in clean tech innovation and deployment.  I’ll post the outline to my presentation at RETECH in a separate post (tomorrow, when I’m finally back in the office  after being locked at home dealing with the D.C area’s biggest snow storm in history).

Stay tuned!

Updated Feb 9

The “new energy super ministry” announced last week is neither new, nor a super ministry.  Let’s discuss.

First, the raw facts.

On January 22, the State Council announced the formation of the National Energy Commission, whose purpose would be to:

To study and formulate national energy development strategy, to consider the major issues of energy security and energy development, to coordinate domestic energy development and important matters of international cooperation. (”负责研究拟订国家能源发展战略，审议能源安全和能源发展中的重大问题，统筹协调国内能源开发和能源国际合作的重大事项。”)

The NEC consists of 23 members made up of:

Director: Premier Wen Jiabao
Vice-Director: Li Keqiang, Vice Premier of the State Council
Members:
You Quan, Deputy Secretary-General of the State Council
Zhu Zhixin, Director of the Central Finance Office
Yang Jiechi, Minister of Foreign Affairs
Zhang Ping, Director of National Development and Reform Commission
Wan Gang, Minister of Science and Technology
Li Yizhong, Minister of Industrial and Information Technology
Geng Huichang, Minister of Security
Xie Xuren, Minister of FinanceXu Shaoshi , Minister of Land and Resources
Zhou Shengxian, Minister of Environmental Protection
Li Shenglin, Minister of Transport Minister
Chen Lei, Minister of Water Resources Minister
Chen Deming, Minister of Commerce
Zhou Xiaochuan, Governor of the People’s Bank of China
Li Rongrong, Director of SASAC
Xiao Jie, Secretary of the State Administration of Taxation
Luo Lin, Secretary of the Safety Supervision Bureau
Liu Mingkang, Chairman of China Banking Regulatory Commission
Wang Xudong, Chairman of State Electricity Regulatory Commission
Zhang Qinsheng, Deputy Chief of General Staff
Zhang Guobao, Deputy Director of the National Development and Reform Commission, and Director of the National Energy Administration (NEA).

While Premier Wen Jiabao and Vice Premier Li Keqiang are titular leaders of the NEC, Zhang Ping, Director of the NDRC, will be in charge of the day-to-day management of the NEC, with Zhang Guobao, Zhang Ping’s deputy at the NDRC and director of the NEA, second-in-charge.

Now, let’s really discuss.

Is the NEC new?  When I fist saw the announcement, I had to do a double-take, because I was pretty sure such an institution was in existence.   Turns out, I was right, but not quite for the right reason.

What I was thinking about was the National Climate Change Leading Group, an inter-ministry group organized in 2007 along similar lines to specifically address the climate change issue (see page 6 of this).  The NEC is clearly something distinct from this, but there are some notable differences.  For instance, the National Bureau of Statistics, represented in the NCCLG, is not in the NEC.  This is quite a glaring omission-if there is one thing that Chinese energy governance needs to urgently reform, it is the way they collect, process and report energy data.  That omission is puzzling to me.

The NEC, it turns out, is not exactly new–it was already almost two years in the making.  In March 2008, in the wake of the big bureaucracy reshuffle (see previous post “Bureaucratic Streamlining and Rule of Law“), the State Council already authorized the formation of the NEC (Chinese only).  In that circular, it was made clear that the NEA would carry out the specific work of the NEC (”具体工作由国家能源局承担”), thus suggesting that the NEA would subordinate to the authority of the NEC.

In fact, the NEC was born at the same time as the NEA (at one point also referred to as the National Energy Bureau, or NEB), and it was a bit unclear back then what the relationship of the NEC was to the NEA.  But I think Erica Downs of Brookings got it right when she formulated the following chart:

In essence, the NEA now finds itself in the awkward position of serving two distinct masters, the NDRC, where it officially sits, and the NEC, for which it is not carrying out the “specific work” for.  Perhaps this may not turn out to be a big deal, both the NDRC and NEA seem to be the driving forces of the NEC with Zhang Ping (of the NDRC) and Zhang Guobao (of the NEA, which sits in the NDRC), as the hands-on managers of the NEC.   It will be interesting to see how this arrangement works out.

In fact, the NEC was formed to replace what used to be the National Energy Leading Group, which was established in 2005 to serve as an advisory and coordination body under the State Council and was also then headed by Premier Wen.  It is observed (Chinese only) that unlike the NELG, the membership of the NEC includes representation from the Ministry of Transport, Ministry of Water Resources, and some less obvious stakeholders such as the central bank, the State Administration of Taxation, the Chinese Banking Regulatory Commission and others.  Indeed, some 19 different agencies are represented in the NEC to 13 in the NELG.  This suggests the State Council’s more comprehensive engagement on energy policy then every before.

It seems more likely than not that playing the role of a coordinator for the nearly two dozen or so agencies and bureaus that have a direct or indirect role in influencing the energy sector will be a primary function.  A Chinese op-ed likens energy management in China to the chaotic drama of the Three Kingdoms-energy prices are set by the NDRC, but the wholesale of refined oil products are overseen by the Ministry of Commerce, even while the state-owned oil companies are supervised by SASAC, the State-owned Assets and Supervision Commission of the State Council.  (Of course as the membership of the NEC shows, much more than three agencies have a say on  different aspects of energy policy in China.)

In an interview with media (Chinese only), Zhang Guobao, director of the NEA, confirms as much-high-level guidance and coordination  is what the NEC is all about, and that the “routine work” of the NEC will in fact be carried out by the NEA.  Li Junfeng, deputy director of the Energy Research Institute, the energy think tank under NDRC, makes very similar observations (Chinese only).

If coordination is all its doing, and if the heavy lifting continues to be carried out by the NDRC and NEA, then the NEC is hardly a “super ministry” as China Daily would have you believe.  There is still a lot that the NEC by itself has no power to do.  It is worth pointing out that the all-powerful NDRC, a true super ministry, still retains the authority to price energy through its Pricing Bureau.  But at least one report is suggesting that the NEC will take on the ambitious task of formulating a twenty-year plan for energy development.  This would be consistent with the first part of the stated mission of the NEC, but the opacity of how the NELG and NCCLG have worked in the past provide little clues as to how effectively the NEC will work.  If the NEC is truly tasked to undertake long-term energy planning, and does so in way that is truly collaborative among its diverse members, what may result is a robust, integrated energy plan.

It will be interesting to see if the NEC, or any future unified Ministry of Energy, of which the NEC is most likely a pre-cursor to, makes any headway in overcoming the web of “competing interests” and “splintered institutions” governing China’s energy use that Ed Cunningham describes in his influential 2007 essay.   The NEC does begin to being these competing interests and splintered institutions to the same table, but there is little so far to make one believe that coordination alone will quell the turf battles between energy stakeholders that have gone on for decades.

As Erica Downs said to me, this could all turn out to be “old wine in a new bottle.”  We’ll just have to see how all this pans out.

UPDATE(Feb 9): Since putting up this post, I’ve had some fruitful exchanges with the China energy community and gleaned new perspectives that I would like to share. The first interesting aspect is the subtle shift in the mandate of the NEC vis-a-vis the NELG. We’ve pointed out the mission of the NEC above. The NELG’s mandate seems quite similar:

To research the nation’s energy development strategy and planning; to research energy development and conservation, energy security and emergency response, international energy cooperation and other major policies, and provide recommendations to the State Council.(”研究国家能源发展战略和规划；研究能源开发与节约、能源安全与应急、能源对外合作等重大政策，向国务院提出建议”)

Hard to say if the omission of concepts like “energy conservation” and “emergency response” in the mandate of the NEC is meaningful or not.  On the one hand, it doesn’t seem like both those issues are any less pressing now compared to 2005–if anything they are more urgent.  But as Damien Ma of the Eurasia Group told me, “if there’s one thing that’s certain about the Chinese, subtle language shifts can sometimes become titanic shifts in policy orientation.”

Another interesting aspect is the role of the state-owned energy companies (like Sinopec, PetroChina, CNOOC, etc.)…or lack thereof. The State Council makes explicit that the NELG could invite the large energy companies to participate in meetings (”领导小组可根据需要请…大型能源及相关企业主要负责人列席会议”). Such language is missing in the announcement of the NEC. Now one might argue that the state-owned energy companies are represented by proxy by Li Rongrong, the director of SASAC, which is the sole shareholder of these state-owned energy companies. But that was also true of the NELG, in which Li Rongrong was also at the table, in addition to having the explicit authority to call in specific representatives of the national energy companies. Is this a sign of the gradual marginalization of the national energy companies from the energy policy making sphere? This would be a very interesting development indeed, for in times past, these national energy companies have been very influential in shaping energy policy direction. I quote again Erica Downs:

These firms are powerful and relatively autonomous actors. Their influence stems from their full and vice ministerial ranking, membership of key executives in the Central Committee of the Chinese Communist Party (CCP), industry expertise, internationally listed subsidiaries, and profitability. More often than not, it is China’s energy firms that initiate major energy projects and policies, such as the West-East Gas Pipeline and the acquisition of foreign energy assets, that are later embraced by the government. Yet energy companies sometimes advance corporate interests at the expense of national ones. For example, oil and power generating companies have periodically reduced their output to pressure the government to raise state-set prices of refined products and electricity, which have not kept pace with market prices of crude oil and coal. Similarly, China’s national oil companies have ignored guidance from the central government about where they should invest overseas. China National Petroleum Corp. (CNPC) acquired more assets in Sudan even after NDRC in 2007 excluded Sudan from a list of countries in which Chinese oil companies were encouraged to invest.

And finally, it is worth taking a closer look at specific personalities. Vice Premier Li Keqiang’s increasing prominence in energy policy and national affairs is underscored by his Vice-directorship here. It is worth noting that he led the largest Chinese delegation ever at the recently concluded World Economic Forum in Davos, Switzerland. Li is commonly believed to be next in line to succeed Premier Wen, or even President Hu. Zhang Guobao, once believed to be heading into retirement, sees his leadership role at the NEA enhanced, at least for now, with this new deputy position for the day-to-day management of the NEC, suggesting we’ll see a lot more of Zhang in Chinese energy policy in the days ahead.

An interesting piece (hat tip to Joe Narus) by John Garnaut of the Sydney Morning Herald concludes that the make up of the NEC demonstrates that President Hu is consolidating his power as the NEC is now stacked with many of Hu’s liberally-oriented allies (like Li Kequang and “Li’s underling You Quan, leaders of the National Development and Reform Commission who work easily with Hu (Zhang Ping and Zhang Guobao) as well as market-oriented policy makers like Zhou Xiaochuan (head of the central bank) and Liu Mingkang (the banking regulator)”), at the expense of members of former President Jiang Zemin’s Shanghai-clique such as Huang Ju, who vice-director of the NELG but has since passed away. It is also pointed out that Xie Zhenhua, vice-minister of the NDRC and the chief international climate change negotiator is a glaring omission and perhaps at least partially a rebuke for his “finger-pointing outburst at Obama behind closed doors at Copenhagen.” Garnaut’s SMH article is worth reading in full.

Picture Credit:  HowStuffWorks

Let’s kick off with this pretty cool video created by ClimateWorks:

Now, onto recent developments:

Going Big with the Stars and Stripes

Google-backed eSolar, a three-year old Californian solar start-up, has signed an agreement to provide technology and assistance to Penglai  Electric, a privately-owned Chinese electrical power equipment manufacturer, to  build a series of solar thermal power plants totaling at least 2 gigawatts over the next 10 years (see pictured right example of an eSolar installation).   The first project, a 92-megawatt solar power plant, will be built this year and located in the 66-square-mile Shaanxi New Energy and Industrial Park in Yulin city, Shaanxi province of Northern China. The region has become a hot spot for renewable energy, with the 2,000-megawatt First Solar project planned 60 miles to the north in Inner Mongolia.  China Huadian Engineering Co. will lead the construction process.  At completion, China Shaanxi Yulin Huayang New Energy Co. will own and operate the first 92 MW plant.   According to Todd Woody, eSolar already manufactures its heliostat arrays in China, and under the terms of the agreement with Penglai it will also build its power plant receivers there.  The solar thermal power plants, using technology distinct from photovoltaics which currently dominate China’s solar power market, will consist of mirrors and lenses to concentrate the sun rays to power a steam turbine.  eSolar’s technologies, in particular,  boasts ease of transportation and installment, modularity, scalability, redundancy, and resilience against wind tear.

This announcement mark the first large-scale commercial effort to develop CSP in China, something that has been on somewhat of a slow track for two main reasons; (1) Limits of water availability: How eSolar and its Chinese partners deal with the issue of the water-energy nexus (I precisely highlighted concentrated solar thermal as a technology that would run up to limits of water availability in a previous post, “Charting China’s Water Future: Closing China’s water availbility gap results in $21 billion in net savings“) since typical CSP designs require significant amounts of water for cooling turbines, and the sunny desert regions of Inner Mongolia, as we all know, is not exactly abundant in water; and (2) a policy emphasis on solar photovoltaics over CSP stemmed from the desire to absorb excess solar photovoltaic panel production capacity caused by several reasons (see below in “Too Much of a Good Thing”).

Just 60 miles north of the eSolar project, in Ordos City, Inner Mongolia, another landmark solar project was announced exactly four months earlier to the day.  Arizona-based First Solar, the world’s leading manufacturer of thin-film PV  modules, signed an MOU with the Chinese government to build a 2 gigawatt solar PV plant.  The solar project in Ordos will be built over a multi-year period. Phase 1 would be a 30 megawatt demonstration project that would begin construction by June 1, 2010. Phases 2 and 3  would be 100and 870 megawatts, respectively, completed in 2014, while Phase 4 would be1,000 megawatts completed by 2019.  This announcement was significant because it marked the first time a foreign company was invited to participate in such a high profile solar project, and came at a time when the China was coming under fire for being overly protective of its renewable energy (particularly wind) industry.

Best Solar, in conjunction with China Guangdong Nuclear Energy Development and Enfinity NV, won the right to operate the Dunhuang project with a tender of RMB 1.09/kWh.  Jiangsu-based thin film and crystal solar module provider Best Solar President Fang Peng said he expects to make 8% internal rate of return from its 10MW solar energy project in Dunhuang, Gansu province.  Some Chinese solar executives, however, think such a tariff might not be high enough to support the development of the PV market in areas other than the most highly irradiated regions such as Tibet.  A range of 1.5 to 1.8 yuan per kwh is more reasonable (Chinese only), they suggest.

Provincial-Level Initiatives

Suntech’s CEO expects 500 MW to be installed in China in 2010.  And Jiangsu province, where Suntech is headquartered and which is also dubbed the California of China when it comes to progressive clean energy policy, is going to be a big part of this equation.  A while back, we said Jiangsu was poised to announce provincial incentives to stimulate the industry without having much details on hand (see previous post “Jiangsu Kicks Off Domestic Solar Market Race with Provincial Subsidies“).   Since then, the full details of the JIangu’s three-year solar PV development plan, officially called 《江苏省光伏发电推进意见》, Chinese only, have been released.  Under the plan, Jiangsu aims to install 400 MW of solar PV (consisting of 260 MW of roof-top projects, 10 MW of building-integrated PV projects, and 130 MW of ground-mounted PV projects) by 2011.  To put this capacity figure in context, the official national target for solar power (including solar thermal power such as CSP, which is a distinct technology from PV) capacity by 2010 is 300 MW, so Jiangsu is clearly blazing ahead.   To support this deployment, a generous feed-in tariff for the next three years is provided along the following scale (in yuan/kwh):

Year    Ground-mounted    Roof-top    Building-integrated PV
2009            2.15                     3.7                  4.3
2010            1.7                       3.0                  3.5
2011            1.4                       2.4                  2.9

The eventual goal of encouraging mass deployment is to spur innovation and achieve economies-of-scale that drive costs down to 1 yuan/kwh.

According to the plan, JIangsu also sets its sights to ramp up its already-strong solar manufacturing base to 10 gigawatts of capacity for components, and 3.5 gigawatts of PV cells by 2011.  The development plan doesn’t shy away from picking winners and losers–or at least picking winners–naming specific cities and companies and their share of the provincial target.  Suntech, based in Wuxi city, is mentioned most often.  Suntech, in particular, will be a key driver of solar innovation as it establishes important R&D centers in the province.  Other key provisions in the Jiangsu solar development plan include those on standards-setting and human resource development.

Beijing has also adopted its own solar development plan called 《北京市加快太阳能开发利用促进产业发展指导意见》 (Chinese only) as of the beginning of this year.  By 2012, it aims to have established 700 million square meteres of solar thermal water heaters, 70 megawatts of solar power generation, solar manufacturing output of 20 billion yuan ($2.93 billion), and the formation of testing centers for PV and solar thermal heating applications.   BY 2020, Beijing wants solar water heating to cover 11 million square meters, to install 300 megawatts of solar power, and to achieve national leadership in the solar value chain.  To this end, It is dedicating a total of 1.44 billion yuan (about $210 million), consisting of 160 million yuan of central government money, 980 million yuan of municipal money, and 300 million yuan in district and county money.   in investments across its various municipal departments.  A focal point of the three-year development plan are the six “Golden Sunshine” projects (六大“金色阳光”工程) (Chinese only), which consist of:

1.  20 megawatt solar PV  roof-top project–Beijing will supplement projects that qualify for the the national solar roofs program (see previous post: “Dawn of a New Era: The Gansu Solar Concession and Landmark Solar Roofs Program“) with additional financial incentives of 1yuan/watt per year for three years.
2.  50 megawatt solar power generation project–By 2012, achieve an installed capacity of 50 megawatts of PV.  Hearteningly, land use will be a major consideration, with an emphasis on the use of otherwise degraded land as well as large-scale agricultural facilities to strategically deploy solar installations.
3.  Solar campus project–install by 2012 in 50% of all primary and secondary schools solar water heating, solar-powered lights, grid-connected PV, solar energy science classrooms and other projects, also to educate students on the value of renewable energy.
4.  Solar energy hot water project–among other things, will provide a subsidy of 200 yuan per square meter for the installation of solar hot water systems.
5.  Rural solar project–the promotion of solar energy use in rural communities
6.  Solar lights park landscaping prject–all city parks and 30 percent of district parks will be equipped with solar lights by 2012.

See also here (again, Chinese only, sorry), for even more details on the Golden Sunshine projects.  In addition to these deployment projects, Beijing wants to be a leader further upstream the solar value chain–in R&D.

Ningxia Autonomous Region, which is highly rural, has also been aggressive in the solar space.  In 2009, it installed 50 MW of PV,  produced  600 and 1,700 tons of monocrystalline and polycrystalline, respectively, and established a solar panel manufacturing capacity of 20 MW.   Just days ago, it announced the opening of a new 40 MW grid-connected PV power station (Chinese only) developed by a consortium of 5 companies, including the CECIC, described in more detail below.

And thanks to cooperation with Germany, remote villages of Qinghai province are also benefiting from

…56 independently operating photovoltaic and photovoltaic-diesel hybrid power stations with a gross installed capacity of 1,539.4 KW, including 454.4 KW of solar power and 1,085 KW of diesel power. The project enabled 3,680 families of 10,400 farmers and herdsmen to use electricity in their daily life and also guaranteed power supply for 34 temples, 13 villagers’ committees, two police stations, two schools and clinics in Hainan, Haibei, Huangnan and Yushu Tibetan autonomous prefectures, and the Mongolian-Tibetan Autonomous Prefecture of Haixi…The project cost 92.4 million yuan (13.5 million U.S. dollars), including 64 million yuan from the German government and 28 million yuan from the Qinghai provincial government and 400,000 yuan provided by a German free training…

Too Much of a Good Thing?

If one wanted to trace back the steps and causes for the Chinese government’s sudden interest in promoting domestic deployment of solar, one of the key factor must certainly be the need to absorb excess capacity of domestically manufactured PV modules, especially in the wake of a collapse of overseas demand as the global economy slowed and key European markets (noticeable Germany and Spain) started reducing their own domestic financial incentives for solar deployment.  In essence, as I argued in a policy brief in China Security last year, a solar industry bailout would be a good excuse to start creating a domestic solar market in China.  Overcapacity is also happening further up the value chain the production of polysilicon, the raw ingredient to silicon-based PV modules (see also graphic, right).  The crimp in demand for solar panels abroad, plus a collapse in polysilicon costs (to the range of $50 to $70 per kilogram today, dramatically down from its peak of almost $500 per kg)  as a result of this oversupply, has brought down the prices of solar modules by roughly 40%.  This situation has provoked a response by the NDRC to pour some cold water on the overheated polysilicon sector, among other industries (including wind energy components).  Still, that is not stopping China Investment Corporation, the $300 billion Chinese sovereign wealth fund, from making an investment into GCL Poly Energy, which first focused on co- and poly-generation thermal combustion plants across China when it first went public a few years ago, but now is in the business of polysilicon production after a recent acquisition.  Surely CIC, now a savvy energy investor, must see something in GCL’s business that makes it interesting.

Over the Slump?

If the bellweather Chinese solar companies are any indication, the solar industry, hemorrhaging in for at least the first half of 2009, seem to be on the road to recovery.  At the beginning of the third quarter, HSBC already suggested that the solar sector had turned a corner.  Suntech, Yingli, Trina and LDK Solar subsequently reported bullish financial results for that quarter.  The good times, in fact, appear to be back for a sustained period of time as Reuters has reported that Suntech are basically in a “sold out” situation through at least the second quarter of this year, and that the “solar majors” (as I will call them) are all ramping up capacity again to cater for more diversified demand, particularly from Japan, which recently rejuvenated its domestic market with new incentives after discontinuing them in 2005.  Suntech, for instance, is expanding capacity by opening a new facility in Suzhou city (Chinese only) in Jiangsu province, near its Wuxi city headquarters.

Suntech, for its part, is extending its dominance in the crystalline-PV sector.  At home in China, it announced in November that it expects to develop one-fifth of the 91 MW of PV projects recently announced as beneficiaries of the national Solar Roofs program, a PV subsidy program announced last March (see previous post: “Dawn of a New Era: The Gansu Solar Concession and Landmark Solar Roofs Program“).  That’s some serious market share for a country and sector with such serious competition.

Coming to America

Suntech not doing too shabbily abroad as well.  In fact, it has already secured 10 percent of the market share of California, also known as the Golden State and that accounts for 40 percent of the U.S. solar market.  Suntech’s domestic competitor, Yingli Green Energy, based in Baoding, Hebei, has been even more impressive, capturing an astonishing 27 percent of the California market.

Separately, Suntech announced plans to establish a modest 30 megawatt manufacturing facility in Arizona, the first solar manufacturing site in the United States by a Chinese firm, that would employ up to 75 people.  Politically, this is important as it came at a time when China was accused of “stealing green jobs” from the United States through unfair practices (whether rightly or wrongly).  From a pure life-cycle energy  economics analysis point of view, it may also be the right thing to do, especially as oil prices rise and increase the cost of shipping.

ENN, a private diversified alternative energy company headquartered in Hebei province, is partnering with Duke Energy of North Carolina, USA to develop solar PV projects in the United States.  The projects will be of two varieties–utility-scale solar power plants and commercial distributed generation (e.g. rooftop).  This solar partnership is the latest in a series of arrangements between ENN and Duke to work together on exploring and developing a series new clean energy technologies, including cleaner combustion of  coal and CO2-absorbing algae biofuels.

Emerging Giant

State-owned China Energy Conservation Investment Corporation, or CECIC, is an emerging solar project developer.  In fact, by some accounts, it was as of the end of third quarter last year China’s largest investor and operator of solar projects totaling 1.1 GW  in capacity.  In September, it completed contruction of China’s first 10 MW solar PV power plant (the first phaseof a 50 MW project) in Ningxia Automous Region together with Suntech.  CECIC has since cemented its relationship with Suntech by entering into a 5-year partnership in which CECIC will be responsible for project investment and development while Suntech supplies the solar products, system design and technical support. Suntech and CECIC plan to focus on the development of large scale on-grid projects, urban BIPV projects, rural off-grid projects, and wind-solar hybrid projects.  Separately, CECIC is reportedly building Asia’s largest grid-connected BIPV project (6.5 MW in Shanghai) amongst other deals. Typically focused on domestic projects, CECIC, with a growing confidence, now has ambitions to build solar projects overseas in Germany, Spain and Italy.

More Eagles visit the Dragon’s Lair

Mid-last year, Evergreen Solar, a U.S. company that is the pioneer of “string ribbon” wafer technology, is shifting some of its wafer and cell manufacturing operations from Massachusetts, USA to Wuhan in Hubei province.   Production in Wuhan at about 100 MW capacity will commence by mid-2010 and be ramped up to 500 MW bY the end of 2012.   Evergreen hopes its strategic move into China can help to bring down production costs to $1/watt by the end of 2012. Evergreen’s efforts sees it partnering with a local PV manufacturer, Jiawei Solar (Wuhan) Co., which will be a subcontractor, and the Wuhan Donghu New Technology Development Zone Management Committee, part of the Wuhan city government, which will provide financial incentives. More details of the arrangement can be found here.

Applied Materials, the world’s leading supplier of solar manufacturing equipment, opened last October the world’s largest non-governmental solar R&D center in Xi’an, Shaanxi, a big coal province.  This bold move had some scratching their heads, but for Applied Materials, the following logic was compelling enough:

We’re doing R&D in China because they’re becoming a big market whose needs are different from those in the U.S.,” says Mark Pinto, Applied Materials’ CTO. Going forward, he says, “energy will become the biggest business for the company,” and China, not the U.S., “will be the biggest solar market in the world.

Dupont also announced plans to expand its R&D work in Shanghai and build a new thin-film manufacturing facility in Shenzhen city, Guangdong province.

Last month, I had the unique opportunity to gather with some of the top U.S-based thinkers on Chinese energy and climate policy.  Participants hailed from World Resources Institute’s ChinaFAQs group of experts.  Since it was a closed door session, I can’t spill everything that was discussed, but I did get permission to share what I thought was the most fascinating segment of the day’s programs.  Mark Levine and Lynn Price of Lawrence Berkeley National Labs’ China Energy Group, presented a fascinating array of findings on how China is progressing on its energy conservation goals in its current five-year plan (2006 to 2010).  The study, conducted by LBNL’s China Energy Group (in collaboration with Tsinghua University and McKinsey) analyzed China’s efforts in seven energy conservation programs–the Ten Key Projects, Enforcement of New Buildings Energy Standards, Building Retrofits, Top-1000 Energy-Consuming Enterprises, Structural Adjustments, Small Plant Closures, and Appliance Standards.  A recent article in Science Daily also covered LBNL’s work in this study.

Lynn explained in an exclusive interview with The Green Leap Forward, the motivations for conducting such a study:

LBNL’s China Energy Group focuses on end-use energy demand, so we are always interested to learn more about the details behind the overall numbers. During this Five-Year Plan, China has been reporting remarkable progress in reducing energy use per unit of economic growth, but the question in our minds was how were they achieving this? With this project, we set out to really understand the end-use policies and programs that China established and how they were or were not contributing to the overall reduction in energy intensity.

The following slides, which are informative and comprehensive, were what was used in Mark and Lynn’s presentation.  I highly recommend going through them in entirety.

LBNL’s findings is summed up best by Mark, lead author of the study and founder of the China Energy Group, who told The Green Leap Forward , also in an exclusive interview:

Overall, China has achieved a remarkable turnaround in reducing demand growth. In 2006, most observers felt that China’s 2010 target was virtually impossible to achieve. They appear now to be on the road to success in meeting the target.

Indeed, a quick summary of the team’s findings (see slide 10) shows that five of the seven energy conservation programs listed above were on course to meet their targets.  Echoed Lynn:

While we were able to offer advice on how to improve some of the programs based on international experience, overall we were surprised to learn of the breadth, depth, and success of the energy-efficiency programs that China has established in a very short period of time.

One of the more interesting findings are with respect to new buildings (see slide 14), where it was found that, at least in cities, compliance by 2008 of new buildings in the the design phase is up to 98 percent, and those during the enforcement phase (i.e. already built) was at about 81 percent.  “China has put into place a system that gives the proper incentives to the design institutes and builders which appears to be quite effective,” the LBNL researchers conclude.   The program to retrofit existing buildings for efficiency has been less successful, and together with structural adjustment, represents the two (of the seven) programs that are not on track to meet their 2010 targets. (Speaking of meeting targets, one program has since fully met  its 2010 goal is the Top 1000 Enterprises program, as reported here).

The recommendations (starting on slide 23) by LNBL are also valuable, with one in particular worth highlighting:

Establish an independent institution similar to the U.S. Energy Information Administration to systematically collect and analyze data focused on end-use energy consumption.

This addresses the perplexing nature of energy data in China, which Mark and his team believed to be largely consistent and accurate from the big-picture point of view, but difficult to untangle once one started to dig a little deeper.  We’ll have more to say on energy data and transparency on this blog in the months to come.

A full report by LBNL based on these findings will be published sometime next month, so look out for it on LBNL China Energy Group’s webpage.

Related Posts:
The Top 1000 Energy-Consuming Enterprises Program
Putting China’s Coal Power Sector in its Proper Perspective
China Climate Progress Report 2009

There has been a wave of water price hikes across various cities and regions across China over the past year.  Most recently, Beijing raised residential water rates by 8 percent, as we blogged about yesterday.  But there have also been proposed or implemented water price increases earlier this year in Shanghai, Lanzhou (Gansu province) and certain cities in Heilongjiang, and others, despite fears of inflation.   Getting the prices right, many seem to agree, is an important ingredient in managing scarcity so that water is allocated to their higher value use.   And as we noted yesterday as well, higher water rates encourages new investment in water supply and treatment infrastructure.  But how one goes about getting these prices right is a topic of debate because a pure-economics approach is either met with the concern that the lower-income folks are disproportionately affected, or opposed by those who take the absolute position that is a public good.   Differential pricing–where users who use less water pay a lower rate, any heavier users pay a higher rate–is generally considered fair, but such a tiered water pricing structure has been slow to catch on because of the practical difficulty of drawing the boundaries of price levels that would be considered fair by the general public (I suspect thought that with electricity price reforms recently announced that will adopt such progressive tiered pricing structures, we should see more of this in water in the future).

McKinsey, by now almost everyone’s favorite climate number cruncher, released a report last month called Charting Our Water Future: Economic Frameworks to Inform Decision-Making, in which it unveiled its Water Availability Cost Curve, analogous to its not famous carbon abatement cost curve.  The report focuses on the four ‘BASIC’ countries (Brazil, South Africa, India and China) and aims to accomplish three things:  First, to paint the supply-demand picture for water from now till 2020; second to present its economic analysis of a menu of options to enhance water availability to make up for water supply deficit; and third to explore the implementation challenges of sustainable water management policy through the lenses of institutions and stakeholders.  The report is a very interesting read, but thick.  The Green Leap Forward has reviewed it and if you are specifically interested in the China bits, you are in luck, because that it is just those bits that rest of this blog post will summarize…

China’s Water Supply Deficit

Simply put, China’s water demand will outgrow supply in the next two decades.  By 2030, China will experience a water supply deficit of 25 percent (see chart below).

Click image to enlarge.  Source:  Charting Our Water Future, McKinsey

China’s Water Demand

• Agriculture will remain the dominant sector for water demand,   Agriculture accounts for 65% of demand today. Flood irrigation remains the main irrigation approach, over more water-efficient techniques such as sprinkler and drip-irrigation.
• But it is the industrial and urban sectors that accounts for most of the demand growth over the next two decades.  Agricultural water demand will decline to 50 percent of overall demand in 2030 as industrial and urban demand grows nearly five times as fast (2.7 and 2.9 percent per year) as fast as agricultural demand growth.
• With respect to industrial demand growth, thermal power is the biggest culprit.  By 2030, thermal power alone will result in 82 billion cubic meters of water demand, a whole 10 percent of China’s projected entire aggregate water demand of 818b m3, and 31 percent of the whole industrial sector’s demand of 265b m3.
• With respect to municipal and domestic demand growth, I would have guessed that this would be driven by the massive wave of rural-urban migration over the next two decades, but McKinsey attributes this more to a rapidly growing middle-class, from 4 percent of the population in 2005 to 56 percent in 2030, leading to increased water consumption.
• Only 38 percent of municipal water is treated, far below what is acceptable.  While a much higher proportion of industrial effluent–91 percent– is treated, the release of metals, cehmicals and other toxins into the water supply remain a big problem (see point on “Quality versus Quantity” below).

China’s Water Supply

• By 2030, China’s water supply will reach 619b m3, significantly short of aggregate demand of 818b m3–a deficit of 25 percent.  Eight of 10 major water basins will experience water shortages.
• China has a rich base of renewable water at 3,507b m3, but unfortunately only 565b m3 is accessible and reliable today.
• Because of the vast geographical expanse and diverse conditions, local availabilities matter (see map above).  While aggregate availability of renewable water today may cover aggregate water demand (555b m3), a more fine-grained look at China’s ten water basins reveals geographic disparities, and shortages.  As we discussed before (see previous post “Chinese Water Torture“), the story of water resource distribution in China is a tale of two regions–the water-rich south versus the water-scarce north.  This has served as the impetus behind the construction of the ambtious south-to-north water diversion project that will transfer some 22 billion cubic meters of water by 2030 from the Yangtze basin to the Hai-Huai-Huang basins, representing some 8 percent of water supply in these northern basins.
• Quality versus Quantity.  Pollution changes the assessment of available water.  Because the quality of some water is so low that it cannot be considered supply, the “quality-adjusted” supply is thus lower than the quantity-only supply, exacerbating water availability deficit.  For instance, some 21 percent of surface water nationwide is unsuitable in quality for even agriculture; in the Hai river basin, that proportion is 50 percent.

A Water Availability Cost Curve for China

The report identifies 55 levers to close the water availability gap of 201b m3 by 2030.  This would require an annual investment of $7.8b, but ultimately result in an aggregate net savings of $21.7b.  These findings are pictorially represented in the water availability cost curve below:

Click image to enlarge.  Source: Charting Our Water Future, McKinsey

Some key observations:

• Most of the savings (the vertical bars that are in the negative cost territory), some $24 billion, come from industrial efficiency measures, e.g. thermal power, wastewater reuse, pulp and paper, textiles and steel.
• But as discussed above, just as geography matters in the water supply scenario, a basin-by-basin approach will have to be taken to assess the most cost-effective levers, particular for supply-side solutions.
• In any case, meeting growing water demand fueled by industrialization and urbanization will require a balanced portfolio of levers–agricultural, supply, municipal and industrial.
• The water-energy nexus, discussed below, presents additional challenges in water management.

Water-Energy Nexus

The McKinsey report discussed something dear to my heart - the water-energy nexus.  It highlights a handful of “watergy” solutions, including:

• Ultra-supercritical processes for thermal combustion of coal: boosts plant efficiency, reduces energy costs $3.9 billion, lowers water-cooling needs, reduces water withdrawals and saves $8.20 per cubic meter.
• Coke dry-quenching: an industrial process to recover waste heat in the form of steam in a waste-heat boiler, resulting in water savings and steam generation for electricity production, as well as cost savings of $3.40 per cubic meter of incremental water availability.
• Renewable energy technologies such as wind, water and hydropower offer not only opportunities in the energy sector due to their lower carbon footprint, but also for water management because of their lower water footprint.  Coal-to-liquids, not a renewable energy source although certainly considered “alternative”, have generally fallen out of favor in recent years with many proposed projects never seeing the light of day precisely because of water concerns.  Concentrated solar thermal, or CSP, though a renewable energy technology, is also placed in an awkward position because of high water use in cooling processes (although at some point, air-cooling technologies can help ameliorate this concern).  This partially accounts for why China has favored solar photovoltaic projects over CSP (although there are other strong reasons such as the need to bail out the PV manufacturing sector that at one point was mired in a overcapacity situation).

All in all, the McKinsey report a terrific read.  And if you are a keen investor sensing that the dire water predicament in China spells an opportunity, you might want to read this equities research report by DBS that does a great job of covering the individual companies, many of them form my home state of Singapore, that are taking advantage of policy trends in China’s water sector (including healthy allocations to water inrastructure from the economic stimulus package) to build viable businesses.

Avalanche

Northern China was swept with a harsh cold snap that over northern China over the weekend.  Beijing, for its part, experienced its largest snowfall in six decades, a lowest temperatures in four decades (at minus 16 degrees Centigrade!!!).  The cold surge has created an unwelcome spike in energy demand at a time where energy demand is already taking on an upward trend as the national economy shows signs of recovering lost ground.  The heavy snow has also disrupted food transportation logistics, creating a squeeze in vegetable supply in urban centers and upward pressure on food prices.  The only consolation out of this white mess is that Beijing meteorological authorities have publicly acknowledged that climate change may be the cause of such extreme weather events, providing further testimony that the Chinese bureaucracy really “gets it” when it comes to the urgency of the climate issue.

Renewables

The Standing Committee of the National People’s Congress has approved an amendment to the Renewable Energy Law of 2006 that clarifies rules, already in existence in the original 2006 law, that require grid companies to purchase all the power produced by renewable energy generators. Power enterprises refusing to buy power produced by renewable energy generators would be fined up to an amount double that of the economic loss of the renewable energy company. The amended law also clarifies how renewable energy projects will be financed by requiring the government to set up a special fund to be managed by the State Council for renewable energy research, financing of rural clean energy projects, building of independent power systems in remote areas and islands, and building of information networks to exploit renewable energy.  A good Chinese piece that elaborates on the nuances of the amendments can be found here.  The full text of the amended renewable energy law in Chinese is available here.

The National Development and Reform Commission (NDRC) has released a detailed list of renewable energy projects receiving government subsidies in the first half of 2009.

China has climbed up the wind installation rankings one position surpassing Spain.  After adding about 8 GW of installed capacity in 2009, its approximately 20 GW now ranks it third in the world (Chinese only) behind the United States and Germany.

Seambiotic, an Israeli developer and grower of marine microalgae for the nutraceuticals and biofuel industries using flue gas from electric power plants, has partnered with two subsidiaries of China Guodian Corporation to establish a Chinese joint venture for the commercial cultivation of microalgae.  The first of several commercial farms will be 12 hectares in size and is expected to cost $10 million.  The farm will be situated in Penglai, utilizing carbon dioxide from the Penglai power station; it is planned to become operational during 2010.

Water Woes

Beijing residential water prices will be hiked from 3.7 RMB/cubic meter to 4 RMB/cubic meter, while water resource fees and sewage treatment fees will rise by 0.16 and 0.14 RMB respectively.  In the past month, two important reports on water have been released.  One by McKinsey earlier this month that looks at .  Another report by Hong Kong-based Civic Exchange looks at the water security challenges of the Pearl River Delta region, and warns thats water solutions must move away from supply-side only management to “total water management.”

Shifting away from water supply to the other end of the pipe–water treatment–the situation is not better.  A senior official from the NDRC recently observed that one in four Chinese cities and seven out of 10 counties are without a sewage-treatment plant; not a good predicament when you are both the world’s biggest discharger of wastewater as well as the one with the fastest-growing discharge levels.  Low fees for water treatment that do not create the incentives for investment in water treatment facilities is cited as the reason:

The residential wastewater treatment fee in 36 major cities was only 0.7 yuan per cubic meter, on average, as of 2008, less than the national average cost of 1.1 yuan, not including the cost for pipe construction and sludge disposal, according to Cao Changqing, head of the NDRC’s Department of Pricing. He suggested that the situation has restricted the development of the wastewater-treatment industry.

A diesel spill from a rupture pipeline belonging to state-owned China National  Petroleum Corp contaminated two tributaries to the Yellow River.  Besides affecting drinking water supply, it disrupted hydropower production as well.

Island Protection

An island protection law is in the cards.  The Standing Committee of the National People’s Congress endorsed a law that will protect coastal ecosystems of China’s 17,000 islands and small isles by limiting coastal reclamation to quarry stone or sand, construction projects, tree felling, tourism activities and activities that threaten coral reefs. The State Oceanic Administration would be in charge of implementing and enforcing this law.

Macro-Policies

Alternative energy will be listed as a “key industry” listed in the Twelfth Five-Year Plan (2011 to 2015) for economic development, according to an official from the Ministry of Industry and Information Technology.  In addition, the following six areas will serve as focal points of environmental protection expenditures by the central government in the Twelfth Five-year plan, according to Assistant Finance Minister Zhu Guangyao:

1.  industrial restructuring, elimination of backward production capacity, particularly the closure of small cement plants, small paper mills, small steel plants high-polluting enterprises.
2. Supporting enterprises to carry out greater efforts in energy-saving and pollution control.
3.  Supporting the development of new and renewable energy, including in rural areas the use of biogas and biomass energy.
4.  Strengthening the construction of ecological economy, especially the “three rivers” and “three lakes” of pollution control projects.5.  Speeding up the construction of pollution monitoring center, including monitoring mechanisms, monitoring systems, strengthening of capacity-building.
6.  Promoting grasslands and the ecological environment restoration.

Notably, Mr. Zhu referenced environmental taxation as an important source of revenue to finance these efforts, although he acknowleged that the implementation of such taxes  is still some time off.

The National Bureau of Statistics revised China’s 2008 GDP growth by 0.6 percentage points to 9.6 percent.  One of the implications of such a revision is that is that energy intensity (i.e. energy consumed per unit of GDP produced) reductions declined by 5.2 percent, significantly more than the previously-reported 4.6 percent.  This increases the odds that China will hit is 2010 target of a 20 percent reduction in energy intensity from 2005 levels.

Autos

The central government is mulling new government procurement policies to increase the proportion of Chinese-made vehicles purchased by governments to more than half.  While a cynic may deem this to be no more than a protectionist move, this in effect represents a positive gain for overall fleet fuel efficiency given that domestic makers tend to make smaller, more efficient cars.

But how much of an environmental gain to efficient cars get when the absolute numbers of cars just go up, up and up.  Case in point–Beijing, which now reportedly has  4 million cars.   To put that figure in context, consider that:

It wasn’t until 1997 that the number of vehicles finally reached 1 million.  Then it took five years to hit the 2-million mark in 2003 – two years after China’s accession to the World Trade Organization. Four years later, it hit 3 million. Now, after just two short years, the number has breached 4 million.

Meanwhile, Chana Auto has apparently released China’s first pure-electric vehicle.

http://www.china5e.com/show.php?contentid=67042

Rail

The rapacious growth in automobiles call for an urgent need for public mass transit–Cities are responding, with 22 of them just garnering approval to build subway lines for a total investment of 882 billion yuan ($129 billion).

The world’s fastest land journey (peaking at 394 km/h) openeed, linking Wuhan to Guangdong with 1068 km of high speed rail.

Trees

As part of its commitments to combat climate change, China pledged to  China’s domestic forestry activities have often been lauded.  In recent months, they announced they would increase forest coverage by another 40 million hectares by 2020.  They also claim that tree-planiting efforts from 1980 to 2005 have resulted in a sequestration of carbon dioxide emissions equivalent to 5 billion tons, and have reportedly met their national 20 percent forest coverage by 2010 target ahead of schedule.  But what is often glossed over in this litany of domestic successes is the culpability of China’s timber industry for illegal logging overseas.e

China’s State Forestry Administration will initiate a pilot project with a group of companies to verify whether its timber products have been logged legally. The new system, once established, will verify imports from China’s major timber importing countries that include Russia, countries in Africa and Southeast Asia, as well as those in South America.

Coal

A new record for efficiency in the thermal combustion of coal has been established, with Shanghai WaiGaoQiao Power Company  claiming that its largest plant in Shanghai achieved an efficiency of 282 grams of coal combuster per kilowatt-hour of power produced (Chinese only), beating the previous record set in 2008 of 287 g/kwh.  To put these numbers in context, the national average is 339 g/kwh, and the world average is 330 g/kwh, while some of the more advances ultra-supercritical power plants achieve an efficiency of 300 g/kwh.

In another move to enhance coal security, China appears to have lowered import tariffs on coal.  Not exactly a move that will facilitate a move away from a coal-dominated energy structure.  However, this would be somewhat offset by a 5 to 10% increase in domestic coal prices (Chinese only) as part of the NDRC’s ongoing efforts to phase in electricity price reform.

LNG

A $40 billion LNG supply deal between Australia’s Woodside and PetroChina fell through as a deadline to reach agreement on further cooperation came and went without agreement.  This setback was offset by the opening of a Central Asia-China natural gas pipeline.  But China still wants more LNG, remarked (Chinese only) Zhang Guobao, chief of the National Energy Administration.

Grid

China’s State Grid will invest at least 200 billion yuan ($29.4 billion) in 2010 alone (Chinese only) on building out grid infrastructure.  Over the next twenty years, State Grid may invest 400 billion yuan ($59 billion) (Chinese only) as part of its three-stage plan to build national smart grid. Meanwhile, China continues to make world-leading advances in the high voltage transmission sector.  A 1300 km high voltage DC transmission grid wire from Yunnan to Guangdong provinces in Southern China was successfully stepped up from 0 to 800kv (Chinese only) by China Southern Grid Company.

Over the course of 2009, the State Grid company completed 11successful tests on 1,000 kv ultra-high voltage AC lines (Chinese only) for a total “live time” of 143 days.

The State Grid is in talks with Duke Energy of North Carolina to team up to build high voltage transmission lines in the United States.

Energy Tragedies

The ugly side of energy development continues to plague China.   There are a few more coal mining disasters to report–the ones I came across are in Shanxi, Yunnan and Hunan.  In Guangdong, a battery plant was shut after it was found that 40 children in surrounding areas had high levels of lead in their blood.  Remarkably, a battery plant in Jiangsu province was also closed when 51 children were found with excessive blood lead levels.

Photo Credit:  Xinhua via People’s Daily

Let’s kick off the new year with yet another Top Ten list, taking a look back at the best blog posts on GLF in 2009.  Last time, we attempted to select the top five posts of 2008 but ended up with seven or eight.  So for 2009, we’ll attempt to broaden the selection to the Top Ten.  As before, the selection is non-scientific and based on a combination of tracked page views (thank you, Google Analytics!) and the author’s favorites.  Unlike the last time, which was in no particular order, I have attempted to rank this list in order of significance:

1.  Eco-infrastructure: Letting Nature Do the Work (Feb 27).  Almost a white paper that explores lots of theoretical concepts and culminates in a set of 9 principles of what eco-communities (notice I avoid the phrase “eco-cities”) should embody.  This post stood out as my most fun to write (I love bridging the theoretical to pracitcal), but also turned out to be the single most visited post that was published in 2009.  (Of course, this metric is not perfect as it discriminates against posts that go up later in the year, and hence have less expsoure–this is why the Top Ten ranking is not based purely on number of hits.)

2.  China’s Climate Progress by the Numbers (Jun 4).  This piece, which reads like a glorified edition of Green Hops providing a comprehensive overview of many of China’s national clean energy policies, help put me on the map, so to speak, in the DC China climate/energy policy community.

3.  China in Copenhagen Series (Dec).  Not so much a single post,  but a collection of detailed posts, most of it written by guest bloggers Angel Hsu and her team from Yale University who were on the ground in Copenhagen tracking the Chinese delegation.   Their almost daily coverage and in depth discussion of the nuances of the Chinese climate position sent GLF daily hits soaring to record heights in December.  Thank you Angel and company!

4.  China to adopt “binding” goal to reduce CO2 emissions per unit GDP by 40 to 45% of 2005 levels by 2020 (Nov 26).  In terms of content, the title says it all.  I am particularly proud of this 3,300 word post because I managed to get this up within hours of the announcement, which accounted for it being one of the most visited posts for the year.

5.  Safety is your responsibility and MINE: The Heilongjiang coal mine disaster in context (Nov 25).  This tragedy, the largest in two years, underscores the point that China continues to pay a heavy price for their reliance on coal.

6.  Deconstructing China’s Energy Intensity–A Lesson in Fuzzy Math (Aug 11).  This guest post by John Romankiewicz took a critical look at the numbers behind China’s energy intensity performance over the recent years…with some very interesting and original findings.

7.  China’s New Water Efficiency Targets (and Implications for Food and Energy) (Feb 17).  On the food-water-energy nexus, one of my favorite issues that I will hopefully be writing more about soon.

8.  How Did China Fare in Copenhagen? A Critical Analysis by Someone Not in the Room (Dec 23).  A post-mortem of how China did in the Copenhagen climate negotiations.  In a word–well, which is not necessarily great news for global climate cooperation.  This is kind of part of the whole “China in Copenhagen” series in #3 as well, but I set it apart as its own because this consists entirely of GLF’s original analysis, which sets itself apart from the other posts in the series that came mostly from guest bloggers.

9.  Dawn of a New Era: The Gansu Solar Concession and Landmark Solar Roofs Program (Mar 27).  This post described new incentive policies that marked the beginning of a new era on the Chinese solar industry.  After years of manufacturing solar photovoltaic panels almost exclusively for overseas markets, China is now getting serious about deploying them domestically.  The hot interest in China’s solar industry led to high score on the blog counter for this particular post, and others like it, such as this and this.

10.  Announcements of U.S.-China Cooperation Create a Path to Copenhagen Success (Nov 22).  This list would not be complete without a the story on how a new chapter in US-China relations has been written through clean energy and climate change cooperation.  I wrote a few blog posts on this, and have chosen this one for highlighting cooperation on transparency that few other commentators picked up, even though it was another earlier post (”Obama and Hu announce comprehensive strategy for clean energy and climate change collaboration,” Nov 17) on clean energy technology cooperation that garnered one of the highest hits of the year.

I am really looking forward to the upcoming year as 2010 may prove to be bigger than ever.  First, the Copenhagen Accord needs to be implemented and a new legally binding treaty can hopefully be hammered out over the next 11.5 months culminating in COP16 in Mexico City.  US-China cooperation on clean energy will continue evolve as both leaderships place high priority on them.  We also expect to see new clean energy development targets formalized (thought the new targets are by now largely known), and perhaps announcements on new spending (remember that 3 trillion yuan expecatation that never materialized this past year?).  We also expect to see more developments on transparency and accountability–the topic is hot and the rest of the world is demanding that China steps up on this front–and I am confident that it will try.   Finally,  as I have forecasted before, water issues, both in terms of quality and quantity (or lack thereof) will continue to come into focus.