Renewable Energy Law Powering the Growth of the Chinese Renewable Energy Markets
In a significant move to
enhance energy security and protect the environment, the Chinese Government
is stepping up efforts to accelerate the development of renewable energy,
so as to lift the share of high quality and clean energies in the total
energy mix. The Renewable Energy Law, which came into effect on January 1,
2006, is a decisive move in this direction and requires power grid
operators to purchase resources from registered renewable energy producers.
This apart, there have been a series of incentive policies, ranging from
tax incentives to subsidies, to stimulate investments, further enlivening
opportunities in the growing Chinese renewable energy markets.
New analysis from Frost & Sullivan
Chinese Renewable Energy Markets, reveals that revenues in this market
totaled $6.9 billion in 2006, and is likely to reach $17.9 billion in 2013.
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"China's landmark renewable energy law is likely to be a major driver
for the growth of the Chinese renewable energy markets, echoing the
governments target of boosting China's renewable energy capacity to 16.0
percent by 2020, an increase of 8.5 percent from 2006," notes Frost &
Sullivan Research Analyst Linda Yan. "The law also sets the stage for the
widespread development of renewable energy in China, particularly for
commercial-scale electricity generation facilities."
The ruling stipulates two forms of renewables pricing: a Government-set
price and a Government-'guided' price. For biomass power, the Government
sets the price based on the provincial or local on-grid price of
desulfurized coal, in addition to a Government subsidy of $0.03 (0.25 yuan)
per kilowatt-hour. This subsidy would not be available once a biomass
project has been in operation for 15 years. For all renewable power
projects approved after 2010, the subsidy provided per kilowatt-hour
generated would decrease at an annual rate of 2.0 percent.
Among the market segments, solar PV is likely to be among the fastest
growing renewable energy sources in China until 2013, with its growth
exceeding even that of wind power. The biomass power industry has great
revenue potential, not only because of sufficient Government funding but
also due to the adequate availability of feedstock fuels. Small hydropower
is also undergoing a period of resurgence, but being a mature technology,
developments will be slower when compared to other market segments.
Moving to the challenges, China's wind and biomass industries are not
nearly as developed as their western counterparts, which means less
experience in installing, maintaining, and servicing renewable facilities.
This also means that there are only a few investors with sufficient
knowledge of developing products, assembling business plans, designing
financing packages, and so on.
"The lack of independent technologies is likely to be a key restraint
for the growth of the Chinese renewable energy markets," says Yan. "Key
components or high technology-involved equipment are imported and relying
on imported equipment limits the types of transactions and the number of
companies that are able to compete in the market."
Overall, energy supplies derived from renewable energy sources are
currently undergoing a phase of expansion in China and are likely to play a
much greater role in the Chinese energy supply in the long term. However,
they will certainly not replace conventional generation technologies in
short term mainly because of its high costs for power generation.
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