focus:Market
World leader: Is margins has put pressure on other
China’s renewable
energy revolution
I
S INNOVATION or ecosystem the best route to
success? Today, China is the world’s largest renew-
able energy market, with more installed wind than
anywhere else (41.8GW at the end of 2010); and has
the world’s largest solar manufacturing industry.
The wind sector shows the scale of
China’s commitment – in 2004 there
was less than 1GW of installed wind in
China, but by the end of 2010 there was
nearly 45GW. While solar installations
at the end of 2010 stood at only 860MW
(the country seeing solar as a manufac-
turing export game, to the annoyance
of others, see page 41) China has actu-
ally announced plans to increase solar
capacity 20-fold by 2020, to 20GW.
Changhua Wu, Greater China
Director, The Climate Group says,
“China’s need...to shift its current
energy structure and mix away from
...fossil-based energy...towards low
carbon and clean energy [is driving
growth]. [And] the Government has
put together a whole landscape of [fis-
cal] policies that support its efforts to
translate [such] ambition into reality.”
Aggressive policies
China is an Annex II signatory
to the Kyoto Protocol, with no legal
requirement to cut emissions, but it
has implemented policies and regula-
tions to address growing environ-
mental issues and promote cleantech
markets.
16 November/December 2011 | Renewable Energy Focus
Policy • Legislation • Market analysis
China’s robust approach
to developing a renew-
able energy industry
putting its rivlas to
shame?
It has closed polluting factories,
implemented efficiency standards, set
renewables targets and is even trial-
ling carbon trading in a number of
cities and provinces before a national
roll-out. In its 12th Five-Year Plan,
policymakers called for non-fossil
fuel energy production to reach (and
stay above) 11% cent of total energy
production by 2015 (15% by 2020), and
aims for a reduction in CO2 emissions
of 17%, by 2015. This is in addition to
its pledge to cut emissions intensity by
40%-45%, by 2020 (from 2005 levels).
According to Paul Go, Ernst &
Young cleantech leader, Greater
China, China’s success illustrates
what is necessary to build an indus-
try: “Central Government policy sup-
port; SOEs that dominate the heavy
industries; and a vibrant capital mar-
ket (both capital market for IPO and
PE/VC investors) to provide finance.”
But while the rapid and effective
growth of the renewables industry
seems like a great success story, it has
had consequences elsewhere. The price
of solar panels globally has fallen 75%
(40% in 2011 alone) in part due to a
glut in global supply. This collapse in
manufacturers and problems have
arisen with perceptions of how China’s
industrial growth has been achieved.
In October 2011 the Coalition
for American Solar Manufactur-
ing (CASM), a group of 7 U.S. solar
manufacturers led by SolarWorld
America Inc (a subsidiary of Ger-
many’s SolarWorld AG), petitioned
the U.S. Government to provide relief
from what it described as “China’s
illegal trade practices”.
The row has quickly escalated.
The Chinese Ministry of Commerce
issued a statement that the U.S.
should beware of introducing protec-
tionist measures (one of the calls by
the Coalition was for 100% import
tariffs). It stated that China’s policies
met World Trade Organisation rules,
and were designed to address climate
change and energy security, pointing
out that the U.S. had adopted similar
policies to drive growth in its own
renewable industries (for more infor-
mation on the dispute see news analysis
on page 41).
How to fund clean energy
It seems that at the heart of this
dispute lies fierce disagreement about
how we are meant, as a global society,
to address global challenges. In a situa-
tion where the requirements of manu-
facturing policy, job creation, energy
security and climate change may be at
odds, how should the greater benefit be
decided?
If China’s solar manufacturing
supports wider global deployment,
greater scale up, and lower cost of
solar, many argue this is a good thing
(including the Coalition for Affordable
Solar Energy, CASE, which is lobbying
back hard against CASM); in actual
fact could it be said that the current
argument simply reflects the fact that
China has been more effective in its
employment of subsidy, regulation and
legislation to drive the development of
its renewables industry?
Both the U.S. and China have
devoted significant funds to the
development of the renewables
industry, but China has vastly sur-
passed the U.S. in investment. China
saw US$49 billion invested in 2010,
making it by far the largest source
 About: Felicia Jackson is an editor and freelance journalist specialising in issues
surrounding industry and environment, on topics ranging from technology, policy, investment
and sustainability. Author of ‘Conquering Carbon’, she writes for a number of specialist business
magazines on issues surrounding the transition to a low carbon economy.

Market

of, and destination for, clean energy

investment globally. Global energy demand increases by one-third from 2010 to 2035, with China & India
Yet it was only in 2009 that China accounting for 50% of the growth.
overtook the U.S. globally in terms Source: World Energy Outlook New Policies Scenario, November 2011
of overall clean energy finance and
investment - during that year China
invested US$34.8bn in renewables, a
figure US$16bn higher than the U.S.
Both countries added a signifi-
cant element of ‘green’ to stimulus
funding agreed at the height of the
2008-2009 financial crisis. China’s
renewables benefited from the
US$46.8 billion ‘green stimulus’ pack-
age, predominantly focused around
energy efficiency, clean vehicles, grid
infrastructure and other clean energy
technology.
In the U.S., ‘green stimulus fund-
ing’ was included as part of the
US$35.2 billion Americ an Recov-
ery and Reinvestment Act, targeting
energy efficiency, renewable energy
deployment, transportation and smart
grid technology. One benefit was to Company Country of Origin Production Capacity in MW, 2010
allow developers of projects to receive 1. Suntech Power China 1,800
cash grants equal to 30% of their
2. First Solar U.S. 1,400
project’s overall CAPEX.
So the issue is not that the subsi- 3. Yingli Green Energy China 1,061
dies are being given per so, but where 4. Trina Solar China 1,060
they are being directed and at what
level? 5. Canadian Solar Canada 803
According to the China Green- 6. Hanwha SolarOne China 798
tech Initiative, the China Develop-
7. Q-Cells Germany 474
ment Bank, a state-run Institution
dedicated to strategic infrastructure 8. REC Norway 412
development, offered credit lines in 9. LDK Solar China 361
2010 worth US$ 43.6 billion to Chinese
10. SHARP Solar Japan 210
renewable energy manufacturing
Source: China Greentech initiative analysis
companies. Solar panel producers
LDK Solar, Suntech, Yingli and Global top ten solar manufacturers
Trina Solar as well as wind-turbine
makers Sinovel and Goldwind, each
received the largest loans, amounting
to US$6.5 billion on average.
Loan guarantees worth US$32.5
billion were extended to the solar
industry alone. These were intended
[there is a] difference in
to support increased production
capacity, expanding overseas opera-
approach between the U.S. and
tions. By the end of 2011, China’s solar
PV manufacturers are expected to
China. The U.S. market has taken the
reach up to 35GW of PV cell manu-
facturing capacity, most of which will
approach of focusing on innovation,
be destined for export.
In the U.S., Solyndra, that most
and market commercialisation of the
notable of recent failures, received
a total of US$535 million of loan
best new technology, where it does
guarantees from the U.S. Department have a significant advantage.

November/December 2011 | Renewable Energy Focus 17

 Market
Is the [current] argument actually not
[ just a reflection of] the fact that
China has been more effective in its
employment of subsidy, regulation and
legislation to drive the development
of its renewables industry?
of Energy representing, according to
Sheeraz Haji, chief executive of the
Cleantech Group, 3.4% of the DoE’s
solar portfolio.
Compared to China, Solyndra (and
arguably U.S. companies in general)
can be seen as being at a disadvantage:
China is providing tens of billions of
dollars in low-cost loans to Chinese
solar companies, while the DoE’s entire
solar portfolio is about US$16 billion.
China is banking on the expansion
of proven crystalline technologies
to bulk out its manufacturing and
capture market share, while the U.S.
is, to a degree, focused on new, and yet
unproven technologies, in a bid to try
and unearth the next transformational
technology.
Political and economic
differences
And that is the difference in
approach between the U.S. and China.
The U.S. market focuses on innova-
tion, and market commercialisation
of the best new technology, where it
does have a significant advantage. Its
long history of financing innovation,
through Silicon Valley and its vibrant
venture capital culture, combined with
strong commercial links with universi-
ties and many grants and programmes
targeting innovation - make technol-
ogy development a key strength for the
US renewables industry.
But the U.S. has been hindered by
a lack of consistent, clear and con-
tinuous policy intended to support
private investment into the sector.
There is not even an effective Federal
policy framework for reducing emis-
sions, although around 30 States have
Renewable Energy Portfolio Standards,
which many have already surpassed.
Being good at innovation but
politically moribund can throw up
18 November/December 2011 | Renewable Energy Focus
roadblocks in the development of an
industry which seeks to transform
the status quo, upsetting entrenched
interests. There is also significantly
higher support for the fossil fuel
industry than renewables in terms of
subsidies, but renewables attracts far
higher levels of political ire.
In China, however, once the decision
has been made, both policy and the
economy are directed to achieve that
goal. And China wants to build a com-
plete ecosystem for renewables (across
the supply chain). Innovation can come
later. As Dominic FitzPatrick, Head
of Renewable Energy, Taylor Wessing
says, the key to understanding China’s
renewables lies in understanding the
difference between the domestic and
international markets: “You can build
a wind farm, or you can build an indus-
try and a wind farm.”
In China, around 90% of wind,
and around 100% of solar projects to
date have been implemented by SOE’s
such as Huaneng, Datang, Guodian,
Huadian and China Power Invest-
ment Group. So not only are these
producers driven by renewables quotas,
they are also closely linked to overall
Government targets on emissions and
efficiency. To date, there has been little
opportunity in China for foreign inves-
tors, and lack of market access is part
of the CASM’s compliant.
Innovate to compete
Yet could this be about to change?
New domestic solar targets and the
launch of a solar FiT are likely to
impact the Chinese renewable energy
market structure.
China has built a renewable energy
manufacturing base by manufacturing
at scale and at low cost, with limited
emphasis on technological innovation.
But as domestic competition ramps
up, Chinese companies are likely to
look to acquire innovation (either
through acquisition or licence) in
order to maintain their domestic edge.
Taylor Wessing, in a recent survey
and analysis on the impact of China
on the renewable industry in Europe,
Enter the Dragon, reports that 70%
of China’s renewable companies are
planning to invest in Europe in the
next 18 months.
Changhua Wu says that there are
opportunities everywhere in China,
throughout the value chain. He says,
“China has been strong in manufac-
turing technologies, but relatively
weak in management, services, and
innovation. But with clear and strong
policy support, huge opportunities
exist today in China in technology
innovation, generation, transmission
and distribution, as well as services
and management that are required to
support the whole system.”
There is little doubt that achieving
the scale of what China plans could
radically transform global energy
markets. The most recent World
Energy Outlook from the IEA warned
that without further action by 2017,
all CO2 emissions allowed (if we are
to keep CO2e ppm below 450) will be
locked in by existing power plants.
This suggests that it might be time
to look for a more global solution and
stop focusing on specific elements of
the supply chain in specific regions.
While there is no way of telling
how the current trade dispute will
pan out, it does seem that the com-
plaint is more about the effectiveness
of China’s actions. China has used
subsidy and legislation to develop
a renewables industry rapidly, and
crucially in a different way to the U.S.
It has provided a consistent message
from central Government, as well as
funds and supportive legislation to
back up the move to lower carbon.
The view of China in the West is
that it lags on climate and environ-
ment, yet China took this criticism
knowing full well it was decisively act-
ing on its need to shift to a lower car-
bon basis for security, economic, health
and other reasons. As FitzPatrick
concludes, “China has been looking at
the issue in a more holistic way.”
e: Felicia.Jackson@REF.contributor.com