中国40年可再生能源经验报告：政策、成就与经验教训（英）-世界银行VIP专享VIP免费

下载本文档

阅读 493
格式 pdf
大小 2.72 MB
约136页
2023-04-18
收藏
点赞(0)
海报
举报

China: 40-Year Experience

in Renewable Energy

Development

Policies, Achievements, and Lessons Learned

Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure Authorized

Photo credits. Front Cover: Christophe de Gouvello

Policies, Achievements, and Lessons Learned

China: 40-Year Experience

in Renewable Energy

Development

/136

下载本文档

文本预览下载提示常见问题

China:40-YearExperienceinRenewableEnergyDevelopmentPolicies,Achievements,andLessonsLearnedPublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorizedbPhotocredits.FrontCover:ChristophedeGouvelloPolicies,Achievements,andLessonsLearnedChina:40-YearExperienceinRenewableEnergyDevelopment©2021InternationalBankforReconstructionandDevelopment/TheWorldBank1818HStreetNWWashingtonDC20433Telephone:202-473-1000Internet:www.worldbank.orgThisworkisaproductofthestaffofTheWorldBankwithexternalcontributions.Thefindings,interpretations,andconclusionsexpressedbyWorldBankStafforexternalcontributorsinthisworkdonotreflecttheviewsofTheWorldBank,itsBoardofExecutiveDirectors,orthegovernmentstheyrepresent.TheWorldBankdoesnotguaranteetheaccuracyofthedataincludedinthiswork.RightsandPermissionsThematerialinthisworkissubjecttocopyright.BecauseTheWorldBankencouragesdisseminationofitsknowledge,thisworkmaybereproduced,inwholeorinpart,fornoncommercialpurposesaslongasfullattributiontothisworkisgiven.Attribution—Pleasecitetheworkasfollows:Ch.deGouvello(co-ord.),N.Berrah,LIJufeng,Y.Song,etal.,2021.China:40-YearExperienceinRenewableEnergyDevelopment.Policies,Achievements,andLessonsLearned.TheWorldBank,Washington,DC.AllqueriesonrightsandlicensesshouldbeaddressedtothePublishingandKnowledgeDivision,TheWorldBank,1818HStreetNW,Washington,DC20433,USA;fax:202-522-2625;e-mail:pubrights@worldbank.orgIAbbreviations..............................................................................................................................................IIIPreface..........................................................................................................................................................VAcknowledgments.....................................................................................................................................VIIChapter1.Introduction................................................................................................................................1A.FromLaggertoLeader..........................................................................................................................2B.TheLongJourney..................................................................................................................................6C.StructureoftheReport..........................................................................................................................7Part1:TheQuestforSustainability..........................................................................................................13Chapter2.TheEarlyYears(Stage1:Upto1994)...................................................................................15A.ModestREDevelopment.....................................................................................................................17B.EstablishmentoftheRenewableEnergyManagementSystem..........................................................20C.MajorREPoliciesofStage1...............................................................................................................21D.BuildingaStudyandResearchBase..................................................................................................22E.LessonsLearned................................................................................................................................23Chapter3.TheTakeoff(Stage2:1995–2005).........................................................................................25A.AchievementsinStage2.....................................................................................................................27B.PoliciesPavingtheWaytoREDevelopment......................................................................................27C.InternationalCooperation....................................................................................................................29D.ImplementationofMajorNationwideResourcesAssessmentsandPrograms.................................31E.LessonsLearned.................................................................................................................................33Chapter4.FromLaggertoLeader(Stage3:2006–2017)......................................................................35A.REDevelopmentBoom......................................................................................................................37B.StrengtheningthePolicyFramework..................................................................................................38C.InternationalCooperation....................................................................................................................45D.KeyProjects.........................................................................................................................................46E.LessonsLearned................................................................................................................................47Chapter5.TheWayForward(Stage4:2018toPresent).......................................................................49A.RisingConcernsaboutSustainabilityofREDevelopment..................................................................51B.TowardNewConsumptionandSupplyModels..................................................................................54C.IncreasedMarketOrientation..............................................................................................................54TABLEOFCONTENTSIID.CompletingandRationalizingtheLegalFramework...........................................................................57E.Buildingthe‘Green,Low-carbon,Secure,andEfficient’EnergySystem...........................................58F.LessonsLearned.................................................................................................................................59G.TheWayForward:TheChallengesAheadtoImplementthe‘EnergyRevolution’..............................60Part2:Thedevelopmentofthefourmainrenewableenergyindustries............................................63Chapter6.WindIndustry..........................................................................................................................65A.TheAchievementsoftheWindIndustry..............................................................................................68B.TheInfancy.........................................................................................................................................70C.TheTakeoff(1995–2005)......................................................................................................................72D.TheBoomoftheWindIndustry(2006–2017)......................................................................................74E.CommercializationDevelopmentStage(2018toPresent)..................................................................77F.BuildingtheImplementationCapacity................................................................................................78G.LessonsLearned.................................................................................................................................81Chapter7.SolarPVIndustry....................................................................................................................83A.AchievementsoftheSolarPVIndustry..............................................................................................86B.TheInfancy(before2000)...................................................................................................................89C.TheRiseofPrivateSector(2001to2010)..........................................................................................90D.MassiveExpansion(2011–2017).........................................................................................................92E.BacktotheFundamentals(2018toPresent).....................................................................................94F.BuildingaSolarPVImplementationCapacity.....................................................................................94G.LessonsLearned.................................................................................................................................97Chapter8.Hydropower.............................................................................................................................99A.TheAchievementoftheHydropowerIndustry...................................................................................101B.TheReconstruction(1949–1977)........................................................................................................102C.LearningandCatchingUpwithHydropowerLeaders(1978–2000)...................................................103D.AccesstoLeadershipStatus(2001toPresent)................................................................................105E.LessonsLearned.................................................................................................................................107Chapter9.TheBiomassEnergyIndustry.............................................................................................109A.TheAchievementsoftheBiomassEnergyIndustry..........................................................................112B.TheEarlyYears(upto1994)..............................................................................................................113C.TheDiversificationStage(1995–2005).............................................................................................114D.TheCatch-UpStage(2006toPresent).............................................................................................117E.LessonsLearned..............................................................................................................................121IIIAbbreviationsABCAgriculturalBankofChinaAPACAsia-PacificASEANAssociationofSoutheastAsianNationsBOSBalanceofSystemCCICEDChinaCouncilforInternationalCooperationonEnvironmentandDevelopmentCDMCleanDevelopmentMechanismCFBCirculatingFluidizedBedCHPCombinedHeatandPowerCIGSCopperIndiumGalliumSelenideCIWRHRChinaInstituteofWaterResourcesandHydropowerResearchCMAChinaMeteorologicalAdministrationCNCACertificationandAccreditationAdministrationofthePeople’sRepublicofChinaCNRECChinaNationalRenewableEnergyCenterCODChemicalOxygenDemandCPCCommunistPartyofChinaCPIAChinaPhotovoltaicIndustryAssociationCRESPChinaRenewableEnergyScale-UpProgramCSICChinaShipbuildingIndustryCompanyCSPConcentratedSolarPowerCWEAChineseWindEnergyAssociationEMCAChinaAssociationofEnergyManagementCompaniesESCOEnergySavingServicesCompanyFiTFeed-InTariffFYPFive-YearPlanGDPGrossDomesticProductGEFGlobalEnvironmentFacilityGHGGreenhouseGasGIZGermanAgencyforInternationalCooperation(DeutscheGesellschaftfürInternationaleZusammenarbeit)HJTHeterojunctionTechnologyHVDCHigh-VoltageDirectCurrentICSHPInternationalSmallHydropowerCenterIECInternationalElectrotechnicalCommissionIFCInternationalFinanceCorporationIPPIndependentPowerProducerMoAMinistryofAgricultureMoALFMinistryofAgriculture,Livestock,andFisheriesIVMoARAMinistryofAgricultureandRuralAffairsMoFMinistryofFinanceMoIITMinistryofIndustryandInformationTechnologyMoSTMinistryofScienceandTechnologyMoWREMinistryofWaterResourcesandElectricityMSWMunicipalSolidWasteNDCNationallyDeterminedContributionNDRCNationalDevelopmentandReformCommissionNEANationalEnergyAdministrationNECNationalEconomicCommissionNPBNationalPriceBureauNPCNationalPeople’sCongressNSTCNationalScienceandTechnologyCommissionPERCPassivatedEmitterandRearCellPPAPowerPurchaseAgreementPVPhotovoltaicR&DResearchandDevelopmentRERenewableEnergyREDPRenewableEnergyDevelopmentProjectRPSRenewablePortfolioStandardsSDGsSustainableDevelopmentGoalsSEMISemiconductorEquipmentandMaterialsInternationalSETCStateEconomicandTradeCommissionSEZSpecialEconomicZoneSMEsSmallandMediumEnterprisesSOEState-OwnedEnterpriseSPCStatePlanningCommissionUASBUp-flowAnaerobicSludgeBedUNDPUnitedNationsDevelopmentProgrammeUNESCOUnitedNationsEducational,Scientific,andCulturalOrganizationUNIDOUnitedNationsIndustrialDevelopmentVATValueAddedTaxWEDWindEnergyDevelopmentWTOWorldTradeOrganizationVPrefaceThejourneythatChinastartedafewdecadesagotodeveloprenewableenergy(RE)ledtoimpressiveresults.Inlessthan40years,Chinahasmovedfromalaggertoagloballeaderstatus.Whiletheenergydemandhassteadilygrownatanunprecedentedpace,frequentlyatadouble-digitgrowthrate,theshareofrenewableinthetotalprimaryenergyconsumptionrampedupfrom4percentin1980toabout13.1percentin2019,deliveringconsiderablebenefitsintermsofavoidinglocalpollutionandglobalgreenhousegas(GHG)emissions.TheinstalledcapacityofREpowergenerationincreasedfromslightlymorethan20gigawatts(GW)in1980,mostlyfromhydropower,tonearly795GWin2019,thelargestcapacityintheworld,accountingformorethan31percentoftheglobalinstalledcapacity.ItsurpassedthecombinedcapacityinstalledintheUnitedStates,Brazil,andGermanyby44percent.1By2019,installedhydropowercapacityhadreachedmorethan358GW,followedbywindwith210GW,solarwith204GW,andotherscombiningfor22GW.Thetotalaccountedfor39.5percentofChina’sgenerationcapacity,withhydrototaling17.8percent,wind10.4percent,solar10.2percent,andothertechnologies(mainlybiomass)slightlymorethan1.1percent.Intermsofenergygenerated,renewablesaccountedforabout27.9percentofthecountry’stotalpowergenerationin2019.WiththesupportoftheChina-WorldBankPartnershipFacility,ateamcomposedofChineseexpertsandWorldBankenergyspecialists,directedbytheWorldBank-ChinaEnergyUnitcoordination,exploredtheconsiderableexperiencethatChinahasaccumulatedoverthelast40years.Indoingso,itlookedforthelessonsthatcouldbelearnedfromthatexperienceandthensharedwithotherdevelopingcountriesengagedinthesamechallengeoframpinguptheirownproductionandconsumptionofrenewableenergy.Thisreport,preparedbytheWorldBank,thereforepresentsthefindingsthattheWorldBankfoundthemostinterestingandrelevantfordisseminationtoothercountrieswhereitalsosupportsthedevelopmentofrenewableenergy.WhiletheChineseexperienceiscountryspecificinmanyaspects,still,thediversityofcontexts,intermsofbothnaturalresourcesregionalendowmentandeconomicdevelopment,andthemultiplesuccessivestagesofdevelopmentoftherenewableindustryChinawentthrough,regardingthemanufacturingandtheprojectindustries,offermultipleopportunitiesforsmallerdevelopingcountriestoidentifysimilaritieswiththeirownpresentchallenges.ThepurposeofthisreportisthustounveilthemostvaluableaspectsoftheChineseexperiencealongthatlongjourneythatcanbeusefultodaytootherdevelopingcountries,particularlywithrespecttopolicydesignandimplementation.Tofacilitatetheidentificationofandtheaccesstothelessonsthatarethemostrelevanttoeachofthesecountries,theteamorganizedthedevelopmentofrenewablesinChinainsuccessivestages.ThesestagescanvaryfromoneREsourcetotheother,andthustheoverallanalysisofREpoliciesinChinainthefourlastdecades(Chapters3to5)iscomplementedbyfourchaptersfocusingspecificallyonthefourmajorREsources:hydropower,windenergy,solarphotovoltaic(PV),andbiomass(Chapters6to9).Thisreportoffersseverallevelsofreading.Chapter1offerstheoverallviewofthislongjourney‘fromlaggertoleader’andguidesthereaderintotherestofthereport.Thisintroductioncanbereadasanexecutivesummary.Then,dependingonthemaininterestofthereader,eitherfortheoverallnationalrenewablepolicyframeworkorformoretechnology-specificlessons,heorshecandelveintothecorrespondingtwosetsofchapters.1Source:RenewableEnergyStatistics2019,IRENA.VIStillthebreadthoftheundertakingwasconsiderable,coveringfourindustriesthathavebecomeworldleaders,overanexceptionallylongperiodoffourdecades,sincetheverybirthoftheseindustriesinChina.Thus,thereisadelicatebalancebetweengranularityandconcisenesstocontainingthesizeofthisreporttoaround100pages.Inmanycases,enteringintomoregranulardetails,wouldhaveinflatedthetextwithmoreChinesecontext-specificadditions,whichmighthavedilutedtherelevanceofthereportforanaudiencelookingforlessonsthatcouldbetranslatedintotheirowncontexts.Therefore,thehopeoftheWorldBankandtheChineseexpertswhoworkedarduouslyonthisreport,manyofwhomhavedirectlyparticipatedinthejourneyofseveraldecades,isthatthisreporthasproducedenoughvalueforpractitionersengagedindevelopingrenewableenergyinothercountriestopursueadirectSouth-SouthknowledgeexchangewithChinesecounterpartsandthusfurtherlearnfromthem,includingbyestablishingafruitfulcooperation.TheWorldBankhasbeensupportingthissuccessfuldevelopmentoftherenewableenergiesinChinasincethebeginning,financingprojectsandproducinganalyticalworkstosupportitsChinesecounterpartsinshapingandrevisingsuccessivepoliciesandprograms.Multipleassessmentsofthesesupports,notonlybytheinternalassessmentdepartmentoftheWorldBankbut,moreimportantlybytheChineseauthoritiesthemselves,haveconfirmedthecatalyticalroleofthepartnership.Therefore,thismainreportisaccompaniedbyaseparatepaper,2whichfocusesmoreonthispartnershipalongthesameperiod.Thiscompanionpaperwillhopefullyalsoinspireandprovideideastopractitioners,fromtheWorldBankitselfandotherinternationalcooperationinstitutionsworkingonrenewableenergyinothercountriesaswellastheirnationalcounterparts,todeveloptheirownpartnershipsfortfurtherdevelopmentofrenewableenergyacrossthedevelopingworld.JieTangPracticeManagerEnergyandExtractivesGlobalPracticeEastAsiaandPacificRegion2RenewableEnergyDevelopmentinChina:A40-yearChina-WorldBankPartnership.VIIAcknowledgmentsThisreportwaspreparedbytheWorldBankwithfinancingfromtheChina-WorldBankPartnershipFacility(CWPF).ItwasproducedbyateamofChineseandinternationalexpertsledbyChristophedeGouvello,CoordinatoroftheWorldBank-ChinaEnergyTeam,andYanqinSong,WorldBankSeniorEnergySpecialist.ThemaininternationalexpertandinternationalcontributorwasNoureddineBerrah,whoworkedformorethan30yearswiththeWorldBankandtheChinaenergysectorauthoritiesonthedevelopmentoftheChinaenergysectorandinparticularonthedevelopmentofrenewableenergyinChina.TheChineseexpertsteamconsistedofMr.LIJufeng,FirstDirectorandChairmanofAcademicCommitteeofNationalCenterforClimateChangeStrategyandInternationalCooperation(NCSC);Mr.WANGWeiquan,SecretaryGeneral,Energy&EnvironmentCommitteeofChinaEnergyResearchSociety;Ms.LiDan,ExecutiveSecretaryGeneral,ChineseRenewableEnergyIndustriesAssociation(CREIA);Mr.YUANXiaoyang,ProjectSpecialist,ChineseRenewableEnergyIndustriesAssociation;Ms.WANGQian,ProjectSpecialist,ChineseRenewableEnergyIndustriesAssociation;Ms.MALifang,PolicyResearchDirector,ChineseRenewableEnergyIndustriesAssociation;Mr.YUYang,ProjectSpecialist,ChineseRenewableEnergyIndustriesAssociation.TheteamwouldliketothankthewholeWorldBank-ChinaEnergyTeamforthesupportprovided,inparticularNaHan,TeamAssistantandZijingNiu,WorldBankconsultantforknowledgemanagementandcoordinationunderCWPF.Thetaskteamwouldalsoliketoexpressitsthankstothepeer-reviewersGabrielaElizondoAzuela,WorldBankGlobalLeadCleanEnergy,andDejanR.Ostojic,WorldBankLeadEnergySpecialist.1Chapter1.IntroductionKeyMessagesChinaleapfroggedfromalaggardtoaleaderinrenewableenergy(RE)developmentinlessthanfourdecades:(a)installedREpowergenerationcapacityincreasedfromabout20GWin1980tonearly795GWin2019,thelargestcapacityintheworld,accountingformorethan31percentoftheglobalREgenerationinstalledcapacityand(b)totalcommercialrenewableenergyutilizationincreasedfromabout24milliontonsofcoalequivalent(tce)in1980,about4percentofthetotalprimaryenergyconsumption,to637milliontcein2019,about13.1percentofthecountry’sprimaryenergyconsumption.Upto2017,China’sREdevelopmentcanbedividedintothreestages,markedbytwomajorpolicies:•Thefirststagetitled‘TheEarlyYears’extendsupto1994,theyearoftheadoptionofChina’s‘Agenda21’,whichidentifiedREasanindependentenergysubsector.Thismarkedanuptickinhydropowerdevelopment,reaching49GW,andduringthisstage,Chinainitiatedseveralinternationalcooperationandpilotprojectsforwindandsolar,reaching29MWofwindand5MWofsolarphotovoltaic(PV).TheuseofREbegantoextendfromruralareastotheentireenergysysteminChina.Thenon-powerREutilizationalsoincreasedsignificantlywiththeinstallationof2.9millionm2ofsolarheatersandthe1.3billionm2ofbiogasproductionperyear.Mainlessonsfromthisperiod:balancetop-downwithdecentralizedapproach,engagevolunteersfromthelocalpopulation,establishstrongresearchanddevelopment(R&D)institutionstobuildknowledgebaseandprovidedecision-makerswithsoundobjectiveinformation,ensuredemonstrationpilotsbeforescale-up,learnfrominternationalexperience,andseekcooperation.•Thesecondstagetitled‘TheTakeoff’coverstheperiodfrom1995totheadoptionofthe‘RenewableEnergyLaw’inDecember2005.Duringthisstage,Chinamovedfromsmallandmodestdemonstrationprojects,especiallywind,tocommercialprojectssupportedbybilateralandmultilateralinstitutionstointroduceadvancedtechnologiesandindustrybestpracticesinprojectpreparationandoperationandbuildtechnicalcapacity.Duringthatstage,REpowerinstalledcapacityincreasedsignificantly,exceptforPV,reaching117GWofhydropower,2GWofbiomass,1.26GWofwind,and70MWonlyofPV.Non-powerREutilizationalsoincreasednoticeablywiththeinstallationof80millionm2ofsolarheaters,theequivalentof2milliontceperyearofgeothermalheating,andproductionof8billionm3ofbiogasperyear.Mainlessonsfromthisperiod:strongcommitmentandsubsidizationarenecessary,butnotsufficient,conditionsforlarge-scaleREdevelopment;clearmid-andlong-termambitiousgoalsareprerequisitestodevelopsustainableREdevelopment;asoundbidevaluationmethodologyisessentialtothesuccessofcompetition;andcontinuedinternationalcooperationisimportanttoimproveknowledgeandbuildcapacity.2•Thethirdstagetitled‘FromLaggertoLeader’covers2006to2017.AftertheissuanceoftheRenewableEnergyLaw,ChinacommittedtoambitiousREdevelopmenttargets,whichwerealwaysachievedorsurpassed,exceptforbiomass.DuringsuccessiveFive-YearPlans(FYPs)(2006to2020),thedevelopmentwassupportedbyseveralpoliciesandfiscalandfinancialincentives,whichincludedfeed-intariffs,stateandprovincialcapitalsubsidies,andspecificinitiativessuchasthe‘TopRunner’and‘GoldenSun’PVprograms.ThesepropelledChinatoaleadingpositioninREdevelopmentandreachby2017hydropowerof341GW,windpowerof164GW,andsolarPVof130GW.Mainlessonsfromthisperiod:feed-intariffsareeffectiveinbuildingcapacitybutcouldleadtoinacceptablelevelsofsubsidiesincaseofadramaticdropofactualinvestmentcosts;aggressiveREdevelopmentprogramscanleadtoinefficiency,includingcurtailment;andfastdevelopmentallowedChinatoquicklydevelopagloballycompetitivewindandPVindustry.Theperiodfrom2018topresentistitled‘TheWayForward’.MajorchangeshavebeenundertakenbythegovernmenttoaddresstheballooningsubsidiesstemmingfromthemomentousincreaseincapacityandelectricityproductionofwindatthebeginningofthethirdstagefollowedbyPVasthepricesbegantodecreaseinthelate2000s.Itisexpectedthat(a)thedevelopmentofrenewableenergywillbemoremarketorientedandtheauctionapproachwillbestreamlinedandregulated;(b)renewableenergywouldbedeployedatafasterpacefollowingtheissuanceoftheQuotaPolicyin2019,imposingREobligationsondistributorsandlargeconsumers(Chineseversionofrenewableportfoliostandards[RPS]);(c)theemergenceofbatteryandothermeansofpowerstorageandtheirdecreasingcostswouldmakeintermittenttechnologies,mainlyPV,moreprominentinChina’senergygrowth;and(d)theenactmentofthenewEnergyLaw,underconsultation,wouldaddresstheinconsistenciesamongthedifferentlawsgoverningthesectorandadaptthelegalframeworkforafuturecharacterizedbytheincreaseddominanceofRE.1.Chinamadeimpressiveprogressindevelopingrenewableenergytoprovideaccesstocleanenergyandelectricitytoitspredominantlyruralpopulationbeforetheeconomicboomthatfollowedthe‘opendoorpolicy’,3byimprovingenergysupplytotheeconomyasthecountryindustrializedandurbanizedatanextremelyfastpaceandfinallybyfightingdebilitatinglocalpollutionandmitigatingtheimpactofclimatechange.Throughthatjourney,Chinahasaccumulatedaconsiderableamountofexperienceandlearnedmanylessons.Itsevolutionfromalow-incometoamiddle-highincomecountryanditswidegeographicaldiversitybroughtaboutextensivechallenges,manyofwhicharesimilartothosefacingawiderangeofdevelopingcountrieswhoarewillingtofurtherrelyonrenewableenergytoaddresstheirownenergyneeds.ThisreportattemptstopresenttheChineserichanddiversifiedexperienceanddrawthelessonslearnedthatmightinformdecision-makinginthesecountries.A.FromLaggertoLeader2.ThetotalcommercialREutilizationincreasedfromabout24milliontcein1980,about4percentofthetotalprimaryenergyconsumption,mainlyfromsmallhydropowerandbiogas,to637milliontcein2019,about13.1percentofthecountry’sprimaryenergyconsumption(seeFigure1.1).Thisprogresscontributedtoachievingthe15percentofnon-fossilfuel(nuclearandRE)shareintheprimaryenergyconsumptiontargetsetfor2020bythemiddleofthe13thFYP(2016–2020),morethanoneyearaheadofschedule.3InChina'smoderneconomichistory,theopendoorpolicyreferstothenewpolicyannouncedbyDengXiaopinginDecember1978to‘openthedoor’toforeignbusinessesthatwantedtosetupinChina.Specialeconomiczones(SEZs)weresetupin1980toattractforeigndirectinvestment,whichwasdeemednecessarytomodernizeChina'sindustryandboostitseconomy.3Figure1.1:CommercialRenewableEnergyUtilizationandShareofPrimaryEnergyConsumption0510150200400600800198019851990199520002005201020152019ShareofCommercialREUtilizationinTotalPrimaryEnergyConsumption(%)CommercialUtilization(milliontce)OthersBiogasBioFuelOtherREPowerSolarPVWindpowerHydropowerSource:Studyteam4.3.TheinstalledcapacityofREpowergenerationincreasedfromslightlymorethan20GW5in1980tonearly795GWin2019,thelargestcapacityintheworld,accountingformorethan31percentoftheglobalinstalledcapacity.ItsurpassedthecombinedcapacityinstalledintheUnitedStates,Brazil,andGermanyby44percent.64.Hydropowerplants,largeandsmall,amountedto20GWin1980,about30percentofChina’sinstalledpowergenerationcapacity.By2019,installedhydropowercapacityhadreachedmorethan358GW,followedbywindwith210GW,solarwith204GW,andotherscombiningfor22GW.Thetotalaccountedfor39.5percentofChina’sgenerationcapacity,withhydrototaling17.8percent,wind10.4percent,solar10.2percent,andothertechnologies(mainlybiomass)slightlymorethan1.1percent(seeFigure1.2).4BasedonChinaEnergyStatisticalYearbook2018,ChinaRenewableEnergyDataBook2012and2019.The2019dataofbiofuelandbiogasarenotpublishedyet.5ThisimportantnumberisindicativeoftheeffortsdeployedbyChinatodevelopREtoprovideitshugeruralpopulationwithmodernenergy.However,itremainsmodestcomparedtothesizeofthepopulation,andtheinstalledcapacitypercapitaatthetimewasabout20.4W.6Source:RenewableEnergyStatistics2019,IRENA.4Figure1.2:REInstalledCapacityandShareinTotalInstalledCapacityinChina0510152025303540450100200300400500600700800900198019851990199520002005201020152019HydropowerWindpowerSolarPVOtherREPowerShareofREintotalpowerinstalledcapacityInstalledRECapacity(GW)ShareofREinChina'sPowerInstalledCapacity(%)Source:Studyteam.75.REpowergenerationincreasedfrom58terawatt-hours(TWh)in1980,mainlyfromhydropower,to2,042TWhin2019,whenitaccountedforabout27.9percentofthecountry’stotalpowergeneration.In2019,hydropoweraccountedfor17.8percentofChina’spowergeneration,followedbywindfor5.5percent,solarfor3.1percent,andothertechnologiescombiningfor1.5percent(seeFigure1.3).In2018,itexceededthecombinedREpowergenerationoftheUnitedStates,Brazil,andCanadabyabout15percent.87BasedonChinaElectricityCouncil’sStatisticalListofPowerBasicData.8Source:RenewableEnergyStatistics2019,IRENA.5Figure1.3:REPowerGenerationandShareinTotalPowerGenerationinChina05101520253002004006008001000120014001600180020002200198019851990199520002005201020152019HydropowerWindpowerSolarPVOtherREPowerPowerGeneration(TWh)ShareofREinChina'stotalPowerGeneration(%)Source:Studyteam.96.Moreover,China’sREinvestment(excludinglargehydro)soaredin2017toUS$147.2billion,onlyslightlylowerthancombinedinvestmentsinEurope,theUnitedStates,andotherAsia-Pacific(APAC)countries.AlthoughChina’sREinvestmentdroppedtoUS$83.4billionin2019,itremainedthelargestREinvestmentintheworld(seeFigure1.4).Figure1.4:REInvestmentinSelectedCountriesandRegions0204060801001201401602004200520062007200820092010201120122013201420152016201720182019UnitedStatesEuropeChinaIndiaAPAC(excl.China&India)BrazilREInvestment(US$,billions)Source:Thestudyteam,basedondatafromFrankfurtSchoolandUNEP(UnitedNationsEnvironmentProgramme)Center/BNEF.GlobalTrendsinRenewableEnergyInvestment(2020and2019.7.REdevelopmentbroughtaboutsignificantsocial,economic,andenvironmentalbenefits:•By2016,thecountry’sentirepopulationhadaccesstoelectricity.Inrecentyears,‘PVpovertyalleviation’programsincreasedtheannualincomeof4.15millionpoorhouseholdsbyatleastCNY3,000(equivalenttoUS$435).China’sREindustryiscurrentlyamongthegloballeaders,especiallyinwindandsolarPV,providingabout5millionjobs.9ChinaElectricityCouncil’sStatisticalListofPowerBasicData.6•Itcontributedsignificantlytocurbingthemomentousairpollutionoftheearly2010sandmitigatingclimatechangeimpactsbyavoidingannualSO2emissionsof2.24milliontons,ashemissionsof224milliontons,andCO2emissionsof1.53billiontonsin2018.10B.TheLongJourney8.China’sREdevelopmentcanbedividedintothreestagesmarkedbytwomajormilestones(Figure1.5),whichhelpidentifysuccessivechallengesandpoliciesundertakentoaddressthemandthusrelevantlessonsforothercountriesfacingchallengesthataresimilartotheonesChinafacedandaddressedateachofthesestages.(a)China’s‘Agenda21’,adoptedin1994,identifiedREasanindependentenergysubsector11andoneofChina’smaindevelopmentanchorsforthefirsttime.ThismarkedthebeginningofChina’splannedimplementationanddevelopmentofemergingRE,mainlywindpowerandsolar.(b)Theissuanceofthe2005RenewableEnergyLawestablishedfivebasicmeasurestopromotethedevelopmentofnon-hydroREinChina:•Theannouncementofambitiousoverall,andlatertechnology-specific,REtargetsforthemediumandlongtermwhichprovidedclearsignalstodevelopers,investors,andothermarketplayersabouttheexpectedgrowthoftheREmarket•Thelegalrequirementthatallpowergridcompaniespurchasethefullamountofon-gridREelectricityandeaseaccessofREelectricitytothepowersystems•Theassurancethatthe‘on-gridprices’ofREelectricitywouldprovideinvestorsanddevelopersadequatereturnsoninvestmentforthedevelopmentandutilizationofRE.ThepricesweredifferentiatedbyregionandevolvedovertimetosustaintheunprecedenteddevelopmentofREinthecountry.12•ThesurchargeleviedoneachkWhofelectricityconsumptionthatsharedthefinancialburdenamongallelectricityconsumersandsupportedpilotandR&Dprojects•TheestablishmentofaSpecialFund,13fundedbyconsumerfeesandstatebudget,toprovidesubsidiesthatmadeREelectricitymoreattractivetoinvestors.10TheavoidedemissionswerecalculatedcomparingtheactualemissionstoahypotheticalcasewhereREconsumptionisreplacedbystandardcoalconsumption(commercialREconsumptionintcetimesstandardcoal’semissionfactors).Source:ChineseAcademyofEngineering,RenewableEnergyLawImplementationAssessmentReport2018.11BeforetheadoptionofAgenda21,REdevelopedwassupervisedbyruralenergydepartmentsatdifferentadministrativelevels.12“ThesuccessofChina'srenewableenergydrivefullyillustratestheeffectivenessofChina’son-gridtariffsubsidies.Theadvantageoftheon-gridtariffpolicy-throughwhichthegovernmentcanmakerenewableenergyproductionmorecompetitiveandattractivetobusinessesandinvestors-isthatitanchorstherevenueofpowergenerationthroughouttheentirelifecycle.Inthisway,itconveysaclearpricesignaltoinvestors,andcaneffectivelysupporttheearlystagesofrenewableenergydevelopment.”Source:Boquiang,Lin.2018.“ChinaIsaRenewableEnergyChampion.ButIt’sTimeforaNewApproach”,ChinaCenterforEnergyEconomicsResearch,WorldEconomicForum.May22,2018.13Before2010,theSpecialFund,managedbytheMinistryofFinance(MoF),wasfullyendowedbybudgetresourcesanddedicatedtodemonstrationprojects,R&Dprograms,resourceevaluationprojects,standarddevelopmentprojects,andremoteareaelectrificationpro-jects,andconsumerfeestocompensateREdevelopersforcostsnotcoveredinelectricitypriceswerecollectedandallocatedbytheNationalDevelopmentandReformCommission(NDRC).After2010,consumerfeeswerealsoincorporatedintheREFundtounifythemanagementofREfinancialresources.However,themanagementofthetwosourcesoffundsremainedseparate.7(c)The‘Noticeonmattersrelatedtophotovoltaicpowergeneration’in2018wasissuedfollowingtheunprecedenteddecreaseinthecostofPVsystems.ItinitiatedanewerainChina’sREdevelopmentcharacterizedbythephasingoutofsubsidies,increasedmarketorientation,andincreasedefficiencyofPVinstalledcapacities.Figure1.5:MajorRenewableEnergyInstalledCapacityandMilestones0100200300400500600700800900HydropowerWindpowerSolarPV2005:EnactmentoftheRenewableEnergyLaw2006:REBoomStage3Stage2Stage11994:Agenda21upgradedREfromadivisionofruralenergytoanindependentenergysubsectorInstalledCapacity(GW)Source:Studyteam.C.StructureoftheReport9.ThisreportwaspreparedbytheWorldBankenergyteambasedonacomprehensivedatacollectionandextensiveanalyticalworkbyseniorChineseconsultants.ItisdedicatedtotheevolutionofREdevelopmentinChinaparallelingthetripletransition—fromcommand-and-controltoincreasedmarketorientation,fromaruraltoanurbansociety,andfromamedium-size,deficientenergysectortothelargestenergysectorintheworld.10.Thereportconsistsoftwoparts.Part1comprisesChapters2to4whicharededicatedtothethreestagesofREdevelopmentandthemainevents,policies,andtriggersthatledtothedeploymentofREtechnologiesatalargescaleandChapter5whichhighlightstheinitiativesandpoliciestoaddresstheproblemsthatemergedattheendofthethirdstageandputREdevelopmentonasustainablepath.Part2coveringChapter6to9focusesonthefourmaintechnologies—biomass,hydropower,wind,andsolarenergy—detailingthetechnicalpoliciesandregulationsthatledtothedevelopmentofcompetitiveindustriesthataccompanied,promoted,andfacilitatedtheimportantcontributionoftheseREsourcesinmeetingthecountry’sprimaryenergyneeds.11.ThetwopartsassesstheREdevelopmentinChinafromtwodifferentbutintertwinedperspectives:•Ontheonehand,thecommitmentofChina’sdecision-makerstodeveloppoliciesandinitiatebilateralandmultilateralinternationalcooperationprogramsthat(a)attheoutset,mostlybenefittedstate-ownedenterprises(SOEs)andledtomomentousscale-upofwindandhydropowerthattriggeredandsustainedthedevelopmentofREmanufacturing—alltheSOEswerepartiallyortotallyreformed8throughlistingindomesticandinternationalmarkets;(b)allowedthereturnofChineseentrepreneursandallowedthemtocreateprivatelyownedcompaniesthattriggeredthedevelopmentofsolid,innovative,andtechnologicallyadvancedcompaniesthatcreatedthebackboneofthecountry’sPVmanufacturing;and(c)providedadhocanddifferentiatedsupporttobiomass,especiallybiogasandbiofuels.•Ontheotherhand,thequalityimprovementandcostreductionsachievedbytheindustryforeachofthefourmainREtechnologiestriggeredgovernmentpoliciesandsupportthatextendedthemarketofthetechnologiesandcontributedtoacceleratingthegrowthofREutilization.12.ThetwopartstelltheinterlinkedstoriesthatpropelledChinatotheforefrontofREdevelopmentandmanufacturing.Part1:TheQuestforSustainability13.Part1isdedicatedtothedevelopmentanduseofRE,whichinthefirststageevolvedfromsmallhydropowerandbiomass(mainlybiogasandfirewood)focusingpredominantlyontheruralpopulationuntiltheearly1980stolargehydropowertoeasepowershortagesthatconstrainedtheeconomicboomfollowingthe‘opendoorpolicy’.Duringthesecondstage,thegovernmentfocusedontestingemergingwindandsolartechnologies,improvingthedesignandmanagementoflargehydropowerprojects,andbuildinginstitutionstoexpandtheuseofrenewableenergy.TheenactmentoftheRenewableEnergyLawin2005openedthedoorfortheunprecedentboomofwindandsolartechnologiesduringthethirdstage.Finally,inthenextstageofREdevelopment,theChinesegovernmentfocusedonmeasurestophaseoutsubsidiesandincreasethemarketorientationoftheREsubsectortoprogressivelyandaggressivelyincreasetheshareofREintheenergy.14.Chapter2focusesonthefirststage(upto1994)duringwhichChinamanagedtomaintainaquasi-energyautarkyandfacedacuteinsufficiencyofenergysupply,especiallyinruralareas.Thisledtoincreaseddeforestationandindoorpollutionstemmingfromtheextensiveuseofcoalandwood.Toaddresstheseissues,ChinamainlyfocuseditseffortsondevelopingREtoaddresstheenergyneedsofruralareasandbuildthefoundationformoreambitiousREdevelopment.Thedevelopmentofrenewableresourceswaslimited,exceptforhydropower,giventhesizeandthepopulationofthecountry.Bytheendof1994,•Hydropower,windpower,andsolarPVamountedto49GW,29MW,and5MW,respectively,whichislessthan25percent(forhydropower)andlessthan0.1percent(forwindandsolar)oftotalinstalledgenerationcapacityand•Atotalof5.4millionbiogasdigestersproducedabout1.3billionm3ofgasannually,and2.3millionm2ofwaterheaterswereinstallednationwide.Thegovernmentfocusedoncoordinatingtheeffortsoftheconcernedministriesandestablishingresearchandtechnicalinstitutestopromoteandsupportthedevelopmentofrenewableenergy.15.Chapter3examinesthesecondstageofREdevelopment(1995–2005).Duringthisperiod,thedevelopmentofREwaspromotedasanessentialpartofimprovingenergysecurity,environmentalprotection,andsustainabledevelopment.Inlinewiththe‘Agenda21’,theuseofREbegantoextendfromruralareastotheentireenergysysteminChina,anditsdevelopmentwasemphasizedforthefirsttimeinthe10thFYP(2001to2005).Byendof2005,9•REpowerinstalledcapacityincreasedto117GWhydropower,2,000MWbiomass,1,270MWwind,and70MWsolarPV.•Non-powerREutilizationalsoincreasedsignificantlywiththeinstallationof80millionm2ofsolarheaters,2milliontceofgeothermalheatingperyear,and8billionm3ofbiogasproduction.16.Majornewplayersemergedasthe1995ElectricityLawtransformedincumbentnationalandprovincialpowerutilitiesfrommonopolyholderstosinglebuyersandallowedtheentryofnonutilitygeneratorstoeasethefinancialconstraintsfacingthepowersector.ThismainlyfavoredthedevelopmentofhydropowerduringthisstagebutopenedthedoortofuturedevelopmentofwindandPVbases.WindpowertookoffowingtoaseriesofdemonstrationprogramssupportedbytheStateEconomicandTradeCommission(SETC)andStatePlanningCommission(SPC),nowtheNDRC,andafterChinaratifiedtheKyotoProtocolandcommittedtoitsdevelopmentatthe2004BonnRenewableEnergyConference,thusgeneratinganadditionalmomentumforREdevelopment.TheSPClaunchedaprogramof‘supplyingpowertotownships’,whichpromotedREtoaddresspowersupplyproblemsandprovideaccesstoelectricityinruralareas.17.Duringthisstage,internationalaidandcooperationalsobegantoextendfromdemonstrationtocommercialprojectsandintroductionofindustrybestpractice.Forexample,in2004,theFujianprovincialgovernmentrequestedaWorldBankloantodeveloponeofthefirst100MWcommercialwindfarmsinPingtan.Theprojectwasbasedonafullyearofresourceassessment,state-of-the-artdesignandmicrositing,anddetailedpreparatoryworksbeforeconstruction.Theequipmentwasprocuredthroughinternationalcompetitivebiddingthatledtouseofforeignturbines,withsubcontractingoftheconstructionofthefoundationandmanyassemblyactivitiestoChinesecompaniestoreducetheprojectcost.18.Chapter4focusesonthethirdstage(2006–2017)andthedevelopmentofrenewablesourcesaftertheissuanceoftheRenewableEnergyLaw.Chinaembarkedonmomentousscale-upofhydropower,wind,andsolarandby2017•Hydropowercapacityreachedabout341GW,windpowercapacityabout164GW,PVcapacity130GW,andbiomasscapacityabout15GWand•Biogasproductionincreasedtoabout14.5billionm3,andbioethanolproductionamountedtomorethan2.6milliontons.REheatingalsoincreasedwiththeinstallationof478millionm2ofsolarheatersandgeothermalheatingsystemsdisplacing20milliontceofcoaluseperyear.19.ThisunpresentedsurgestemmedfromthecommitmenttoambitiousREdevelopmenttargetsthat,withtheexceptionofbiomasspower,werealwaysachievedorsurpassed.Inthe11th,12th,and13thFYPs,thedevelopmentwassupportedbyseveralpoliciesandprovisionoffiscalandfinancialincentives,whichincludedfeed-intariffsforseveralREtechnologies,stateandprovincialcapitalsubsidies,andspecificinitiativessuchasthe‘TopRunner’and‘GoldenSun’PVprograms.Toaddressqualityandoperational/curtailmentissues,14China(a)adjustedpoliciesandincentivestoovercometheresistanceofincumbentutilitiesthroughtheadoptionofqualitystandardsandimprovedgridcodestoreducedisturbancesonthegrid;(b)steppedupR&DtoadaptturbinestoChina’swindcharacteristicsandbringtheirqualityuptointernationalstandards;and(c)builtcapacityinthedesignandoperationofwindandsolarbases.As14Onshorewindenergyresourcesandsolarenergyresourcesaremostlylocatedinthe‘ThreeNorth’area,farfromloadcenters.ThefastdevelopmentofwindpowerandsolarPVinthearearesultedinseriousproblemsofwindpowerevacuationandsystembalancingbecauselocalelectricitymarketswereincapableofabsorbingallgeneratedelectricity.Deliveringelectricitytotheloadcenterineastandsouthcoastalareasisarequisitetoaddresstheissue.However,duetotransmissioncapacityconstraintsandfiscaldisincentives,electricitygeneratedinthe‘ThreeNorth’areawascurtailed.10REgenerationincreaseddramatically,amajorchallengeemergedinthisstageassubsidiesballooned,surpassingtheamountcollectedfromconsumerstosupportREdevelopmentandimposingahugeburdenonthestatebudget.15FollowingthequalityimprovementandsignificantcostreductionofwindandPV,theNationalEnergyAdministration(NEA)initiatedseveralpilotwindandPVauctions,whichresultedinlowerpricesthanthebenchmarkpriceissuedbytheNDRC.20.Chapter5assessesthemajorchangesundertakenorconsideredbythegovernmenttograduallyeliminatesubsidiesasmanufacturingpricescontinuetodecreaseandauctionbecametheprimarymethodtosetRE-basedpowergenerationprices.Itisexpectedthat(a)thedevelopmentofrenewableenergywillbemoremarketorientedandtheauctionapproachwillbestreamlinedandregulated;(b)renewableenergywouldbedeployedatafasterpacefollowingtheissuanceofthequotapolicyin2019,imposingREobligationsondistributorsandlargeconsumers;(c)theemergenceofbatteryandothermeansofenergystorageandtheirdecreasingcostswouldmakeintermittenttechnologies,mainlyPV,moreprominentinChina’senergygrowth;and(d)theenactmentoftheEnergyLaw,underpreparation,wouldaddresstheinconsistenciesamongthedifferentlawsgoverningthesectorandadaptthelegalframeworkforafuturecharacterizedbytheincreaseddominanceofRE.Part2:TheTechnologicalandIndustrialRELeapForward21.Part2isdedicatedtothetechnologicalandindustrialdevelopmentthatpropelledChina’sREmanufacturingindustry,especiallywindandPV,toleadershipstatus.Itdescribesthemajorinstitutionsinvolvedandthepoliciesandstandardsissuedtobringequipmentqualitytorecognizedinternationalstandards.22.Chapter6describesthedevelopmentofthehydropowerindustry.TheearlyyearsofREdevelopmentwerenotconducivetomanufacturinglargehydropowerturbines.However,severalcompaniesatdifferentadministrativelevelsmanufacturedsmallturbines(from0.5to5MW)thatinmostcasesdidnotmeetinternationalstandardsbutmettheneedofruralelectrificationefforts.WiththeSovietUnion’stechnicalassistance,Chinagraduallydevelopedhydropowerstandards,whichbenefittedthenascentindustry.Bythe1970s,Chinahadmasteredthemanufacturingofseveralhundredmegawattsturbinesandmanagedtomeettheneedsoflargerprojectsinitiatedduringthedecade.Aftertheopendoorpolicy,Chinalaunchedseverallargepilothydropowerprojectsincollaborationwithforeignpartners.ThesecontributedsignificantlytothedevelopmentoftheChinesepowerindustry.Technologytransfer;improveddesign,construction,andmanagementoflargeprojects;andthedevelopmentofqualitystandardsimprovedChina’shydropowerandlaidthebaseforitsstrengthinashorttime:Forexample,thefirstunitoftheThreeGorgesProject—UnitNo.2withaninstalledcapacityof700MW,waspurchasedthroughinternationalbidding.TheequipmentwassuppliedbyVGS,amultinationalgroup,thatconsistingofVoith,SiemensandGeneralElectric,andtheinstallationwascarriedoutbytheEighthBureauofChinaHydropower.While8unitsoutofthetotal12unitsoftheRightBankPowerStationareproducedbyChinesemanufactures.23.In2018,China’sdomestichydropowerindustryhadamanufacturingcapabilityofover30GWbutitsproductionwaslimitedto7.6GWasdomesticandinternationaldemandsignificantlydecreased.16Currently,twoofthelargestChinesecompanieshavethecapabilitytomanufacture1GWhydraulicturbines,350MWpumpedstorageunitswith500meterlevelheads,andotherequipment.China’sdamengineeringandtechnologyperformance,acquiredfromtheconstructionofmorethan100,000large-scaledams,islargelyrecognized,especiallyinundergroundengineering,flooddischarge,andearthquakeprevention.15China’srenewablesurchargewasCNY0.015perkWhin2012androsetoCNY0.019perkWhin2016.TherewasasurplusofCNY15billionintheaccountofChina's‘renewableenergysubsidy’in2012,butby2018ithadturnedintoalargedeficitofabout230billionyuan.Source:EnergyResearchInstituteofNDRC16Source:ChinaSocietyforHydropowerandChinaElectricityCouncil.1124.Chapter7introducestheexperienceandlessonsofthemodernutilizationofbiomassinChina.Chinahasalonghistoryofbiomassenergyutilization,mainlyhouseholdbiogas,whichwasusedtomeettheenergydemandinruralareas.However,before1980,thedevelopmentofChina’sbiomassutilizationexperiencedupsanddownsbroughtaboutbylowtechnicalcapabilities.Morethan10millionhouseholdbiogasdigestersweredecommissionedandremovedfewyearsaftertheywerebuilt.Followingtheopendoorpolicy,Chinaembarkedonalargeprogramtoprovidecleanenergyaccesstoitsdominantruralpopulationandsoughtcooperationfromseveralmulti-andbilateralinstitutions.Useofbiomassenergyincreasedrapidly.Biogasplayedamajorroleinmeetingtheruralpopulation’senergyneedsandthedesignandmanufacturingofanaerobicdigestionequipmentgrewrapidly.About8,700largeandmediumbiogasprojects(morethan500m3biogasperday)havebeenundertakeninChinawithlocalequipment.25.Biomasspowergenerationalsogrewexponentially,especiallyaftertheenactmentoftheRenewableEnergyLaw.Multiplepowerprojectsrelatedtodirectcombustionofagriculturalresiduesandforestrybiomasspowerprojectsandmunicipalsolidwaste(MSW)incinerationpowerprojectswerelaunched.Manyfacedteethingproblemsbecauseoflow-qualityequipment,andinitialbiomasspowertargetsweretheonlyonesthathavenotbeenachievedintheREpowersector.Subsequently,thesupplychainimprovedandbytheendof2018,18GWofbiomasspowerunits,designedandmanufacturedinChina,weresatisfactorilyoperating.Sincethe2017promulgationoftheWinterCleanHeatingPlaninNorthernChina(2017–2021),biomassheatinghasregainedpopularity,boostingthedevelopmentofChina’sbiomassindustry.Bytheendof2018,China’sbiomasstechnologyandmanufacturinghadimprovedandwasabletomeettheneedsofincreasedbiomassuse.About49,000biomasspatentshadbeensubmittedforapproval,thethermalefficiencyofMSWincineratorandsteamturbinehadreached85and35percent,respectively,andbioethanolfuelproductionamountedtonearly3milliontons,usedinmorethan15provinces.26.Chapter8focusesonthedevelopmentofthewindpowerindustry.Until1994,theindustrywasnascentandfragmentedasalargenumberofcompanieswerecreatedatthestate,provincial,andevenloweradministrativelevelstomanufacturemicroandsmallturbinesunder250kW.Themanufacturingindustrybenefittedfromaseriesofnationalengineeringprograms,internationalcooperation,andmultipleinternationalprojectsthatsetthefoundationoftheindustry.Italsobenefittedfromtheaccumulationofknowledgestemmingfromscientificprograms,technologytransferfromleadingforeignmanufacturersinvolvedinearlylargewindprojects,theestablishmentofjointventureswithrecognizedmanufacturers,theacquisitionofinternationalcompaniesholdinglicensesoflargewindturbines,andbilateralandmultilateralcooperationprograms.27.TheindustryexpandedasthemarketdevelopedandmajorSOEsandprivatecompaniesgraduallybeganmanufacturinglargerturbinesfrom1to5MWtomeetthemomentousdemandthatfollowedthelaunchoftheconcessionandwindbaseprograms.17AreportpublishedjointlybytheNEAandtheWorldBanknotedthattheincreaseininstalledcapacityhasbeenaccompaniedbysignificantdevelopmentoftheChineseindustry,whichaccountedforabout62percentofthetotalmarketshare(cumulativeupto2008):(a)fivelarge-scaledomesticfirmsmanufacturingturbinescertifiedbytheInternationalElectrotechnicalCommission(IEC),(b)fivejointventurefirmsmanufacturinginChina,and(c)morethan10domesticfirmswithprototypetestingunderway.28.ThestrengthofthewindindustrylaidasolidfoundationforthedevelopmentofoffshorewindpowerinChina.The100MWShanghaiDonghaiBridgedemonstrationwindpowerproject,launchedin2010,wasChina’sfirstattemptindevelopingoffshorewind.TheequipmentproviderwasaChinesecompany,17Source:NationalEnergyAdministrationandWorldBank.2010.China-MeetingtheChallengesofOffshoreandLarge-ScaleWindPower.12listedontheShanghaistockmarket,thatassembledtheturbinesfromdifferentparts(nacelles,blades,tower,andsoon)procuredfrombothpubliclyandprivatelyownedChinesemanufacturers.Bytheendof2013,17testprojectshadbeenundertakenfromshallowwatertointertidalzones,testing1to5MWoffshorewindturbinestocorrosionandtyphoonresistance.In2018,atthe80MWXinghuaBayoffshorewindfarm,allturbinesrangingfrom5to6.7MWandmanufacturedbysevenSOEsandChineseandforeignprivatecompaniessuccessfullywithstoodthestrongtyphoon‘Maria’,demonstratingthequalityandsoundnessofChina’soffshorewindpowerequipmentanditssuitabilitytotheChinesewindregime.29.Tobringequipmentqualitytointernationalstandards,Chinainitiatedseveralcooperationprogramswithwindstandardinstitutions,especiallytheIEC.Thisstimulatedtechnologicalandindustrialprogressandledtosignificantcostreductionandqualityimprovement,whichinturnledtoincreaseddevelopmentofwind.30.Chapter9focusesonthedevelopmentofthePVindustry.ThemanufacturingofPVsystemswasinitiatedasdemandincreasedduetogovernmenteffortstoprovideelectricityaccesstopoorremoteareasandnomadicpopulations,mainlyinthenorthwestregionofthecountry.SeveraltechnicalinstituteswereincorporatedandbeganmanufacturingPVsystems.Privateenterprisesandjointventureshavealsoenteredthemarket.SevensolarcellproductionlineswereinstalledincooperationwiththeUnitedStates,Canada,andothercountriesandtheannualproductioncapacityofsolarcellsreached4.5MWbytheendof1994.But,atthattime,noeffortsweredeployedforR&D.AsclimatechangeconcernsemergedandinstallationofPVsystemsincreasedindevelopedcountriesandinChina,thePVindustrydevelopedatafastpacetoreachaproductioncapacityof1GWbytheendof2007withspecialfocusonimprovedquality,internationalcertificationofthesystems,andissuanceofstandardsonparwithdevelopedcountries.Chinacontributedtothedecreaseofsystemcostsandpricesandbecameoneoftheglobalindustryleadersintheindustry;currentlysixofthetoptenPVmanufacturingcompaniesareChinese.13Part1:TheQuestforSustainabilityChapter2:TheEarlyYears(Upto1994)Chapter3:TheTakeoff(1995–2005)Chapter4:FromLaggertoLeader(2006–2017)Chapter5:TheWayForward(2018toPresent)15Chapter2.TheEarlyYears(Stage1:Upto1994)KeyMessagesDuringthe1960sand1970s,hydropower,mainlysmall,andbiogascontributedsignificantlytoimprovingcleanenergysupplytotheruralpopulation,whichaccountedformorethan80percentofthetotal.MajoreffortsdeployedaftertheopendoorpolicyledtosignificantprogressinresearchanddemonstrationprojectsinlinewithChina’sprudentandgradualapproachtotestpoliciesanddevelopmentapproachesbeforedeployingthematalargescale.AfterChina’sopeningtotheworld,itshydropowerindustrysoughtandbenefittedimmenselyfromextensivecooperationwithandtechnicalandfinancialsupportfrommulti-andbilateralinstitutions.By1994,hydropowercapacityreached49GW.TheWorldBankLubuge(Yunan)andErtan(Sichuan)andtheAsianDevelopmentBankLingjintan(Hunan)hydropowerprojectsareillustrativecases.Regardingotherrenewables,installedcapacitystartedtoincreasemodestly;windpoweramountedto26MWandsolarPVstartedtobedeployedinremoteandnomadicareaswithabout5MWinstalledcapacity.Theseresultswereachievedthroughtheestablishmentofa‘RenewableEnergyManagementSystem’anda‘StudyandResearchBase’,leadingtoacoordinatedandcomprehensiveREdevelopment,anaccumulationofknowledge,andthebuildingofastrongconstructionandoperationcapacity.IttookChinafouryearstoupgradeitsRenewableEnergyManagementSystemfromasingleHydropowerManagementDepartmenttoacomprehensiveRenewableEnergyManagementDepartmentaffiliatedwiththenationaleconomicauthority.•In1982,thegovernmentestablishedtheDepartmentofRuralElectricityintheMinistryofWaterResourcesandElectricity(MoWRE)tomanageandplanthedevelopmentofruralhydropower.•In1984,thegovernmentestablishedtheRuralEnergyLeadingGrouptocoordinateseveralnationalministriesandcommissions.•In1986,thegovernmentestablishedtheRuralEnergyManagementDivisionundertheNationalEconomicCommission(NEC),nowtheNEA’sDepartmentofNewEnergyandRenewableEnergy,asapermanentagencytopromoteruralenergypilotdemonstrations,technologyimprovementanddeployment,andindustrialmanufacturing.Tobuildastrongknowledgeandresearchbase,theChinesegovernmentcreatedseveralresearchinstitutestostudyandidentifychallengesrelatedtodevelopmentofChina’senergysectorwithspecialfocusonrenewableenergy.Inthefieldofscientificresearch,theStateScientificandTechnologicalCommission(nowtheMinistryofScienceandTechnology[MoST])beganprovidingsupporttoR&DprogramsrelatingtoREscienceandtechnologiesin1981.TheStateHigh-TechDevelopmentPlanprovidedastableandlong-termresearchenvironmentforthedevelopmentofadvancedREtechnologies.16ThreemajorpoliciescontributedtotheREachievementsinthisfirststage:(a)The‘NoticeonOpinionsonStrengtheningRuralEnergyConstruction’wasissuedin1986bytheNEC,toguidethedevelopmentofrenewableenergyandbuildthefoundationforthedevelopmentandutilizationofREatalargerscale:long-termplanning;internationalcooperationtoaccessstate-of-the-artknowledge;trainandstrengthenhumanresources;andpilot,test,anddemonstrate.(b)The‘NoticeonActivelySupportingRuralEnergyDevelopmentLoans’wasissuedin1986byseveralministries.ItentrustedlocalgovernmentswithprovidingfinancialsupporttoruralREdevelopmentthroughprovincialloansprovidedbytheAgriculturalBankofChina(ABC)andfinancialsupportfromprovincialbudgetsand/orcollectionoflocalfees/surcharges.(c)The‘NoticeonSeveralRegulationsonthePriceofSmallHydropower’wasissuedin1986bytheNEC,MinistryofAgriculture,Livestock,andFisheries(MoALF),andtheNationalPriceBureau(NPB),whichpromotedthelocalself-relianceprinciplefor‘self-construction,self-management,self-operation,andself-utilization’ofsmallhydropowerprojects.Thelessonslearnedduringthisperiodcanbesummarizedasfollows:(a)adequateplanning,decentralizedapproaches,andengagementofthelocalpopulationcouldleadtosuccessfuloutcomes;(b)establishmentofstrongresearchandstudyinstitutionsisessentialtobuildaknowledgebase;(c)pilotanddemonstrationprojectsareessentialtoassessnewtechnologiesbeforelarge-scaledevelopment;and(d)learningfrominternationalexperiencesandseekingcooperationwithmoreadvancedcountriesareparamounttoimprovingoutcomesbyfacilitatingknowledge,technologytransfer,andaccesstoadvancedmanagementsystems.30.REdevelopmentfocusedfirstonmeetingtheruralpopulation’sneedsforcleanenergyanditsexpansionandwaslargelyintegratedwithruraldevelopment,withtheexceptionoflargepowerprojects.However,followingtheopeningoftheChineseeconomytotheworld,energyshortages,especiallyinadequatepowersupply,constrainedthedevelopmentofemerginglargeindustriesandthrivingbusinesses.Subsequently,RE,particularlyhydropower,significantlycontributedtoeasingtheenergyandpowershortagesthatslowedthepaceofeconomicgrowthafterthelaunchoffar-reachingreforms.31.FormerUSSecretaryofStateHenryKissinger,citingSunTzu,notedthat“Chinaseeksitsobjectivesbycarefulstudy,patience,andtheaccumulationofnuances.”18ThisobservationwasvalidatedbyChina’sapproachduringthefirststagethatlaidthefoundationfortheREboomsexperiencedinthesecondandthirdstages.TheapproachcarefullyandmethodicallybuiltastrongbaseforthedevelopmentofRE,allowingforthestudy,research,andtestingoftechnologiesandmodernmanagementandconstructionmethodsbeforeadoptingthem.32.China’sapproachtochangehasalwaysbeenpragmaticandgradualandillustratedbytheChinesesaying,“Crossingtheriverbyfeelingthestones.”BeforethedeploymentofREtechnologiesatalargescale,severaldemonstrationandpilotprojectswereundertakenwhichallowedthecountrytobuildaleadingREindustry.Chinaalsosetupanewinstitutionalframework,calledtheRenewableEnergyManagementSystem,designedandadoptedaseriesofcoordinatedpoliciesfocusingfirstonruralareas,andbuiltaStudyandResearchBase.Beforedetailingbelowthesedifferentelementswhichcharacterizethefirststage,wearebrieflypresentingthemainresultsofREdevelopment.18Kissinger,HenryA.2005.“China:ContainmentWon’tWork.”WashingtonPost.June13,2015.17A.ModestREDevelopment33.Thedevelopmentofsmallhydropower,biogas,andthedeploymentofefficientstovesand,toalesserextent,windandPVcontributedsignificantlytoincreasingenergysupplytoruralareas.Bytheendofthefirststage,•Morethanhalfofruralhouseholdsusedbiomassenergy-savingstoves,whichcansaveone-thirdtohalfoffuelconsumption.•5.4millionbiogasdigesterswerebuiltnationwidetoproduce1.3billionm3ofbiogasannually.•60,000smallhydropowerstations,amountingtoabout16GW,wereconstructedandmostofthemweremanagedatthecountyorprefecturelevel.34.WhiledevelopmentofwindandPVwasstillverymodest,hydropowerandbiogasdevelopmentcontributedsignificantlytoimprovingcleanenergysupplyinthe1960sand1970s.Majoreffortsdeployedaftertheopendoorpolicy,especiallyduringthreeFYPs,19coveringtheendofthefirststage,ledto•SignificantprogressinresearchanddemonstrationprojectsinlinewithChina’sprudentandgradualapproachtotestpoliciesanddevelopmentapproachesbeforedeployingthematalargescaleand•AgoodfoundationforREdevelopmentandutilizationatalargerscale.35.By1994,China’sREcapacityincreasedrelativelymodestlyasdetailedbelow:•Hydropowerinstalledcapacityreached49GW,20two-thirdsofwhichwasderivedfromlargehydropower.•Windpowerinstalledcapacityamountedto26MWandsolarPVstartedtobedeployedinremoteandnomadicareaswithabout5MWinstalledcapacity.36.TheseresultswereachievedthroughtheestablishmentoftheRenewableEnergyManagementSystemandaStudyandResearchBase,leadingtoaccumulationofknowledgeandcapacity.37.Fourmainsuccessfulpilotanddemonstrationprojectswereundertakenduringthisfirststagewithregardtobiomass,hydropower,wind,andcomprehensiveuseofREtechnologies.Thesepilotanddemonstrationprojectsfocusedon(a)testingnewtechnologiesandmodernmanagementmethodsand(b)assessingsuccessfulforeignexperiencesandadaptingthemtoChineseconditions.TheygenerallyresultedincapacitybuildingandaccumulationofexperiencebytheChinesepersonnelinvolvedinREdevelopment.Theyalsoprovidedobjectiveassessmentstoallowdecision-makerstomakeinformeddecisionsaboutdeploymentoftechnologiesandneededtechnologytransfer.Thesefourspilotsandprogramswerethefollowing:19Sixth,seventh,andeighthFYPs(1981–1995).20ThesizablenumbersofREachievementsinthischapterarecharacterizedasmodestbecauseofChina’spopulationandsize.Percapitanumbersaremodest(seefootnote2).18(a)Learningfromtheunsuccessfuldevelopmentofbiogasduringthe1960sand1970sthatdamagedthereputationofdigestersamongruralhouseholds,21theMinistriesofWaterResourcesandAgriculturecooperatedtolaunchpilotprojectsin1983forcomprehensiveruralenergyplanningandthedevelopmentoflocalenergysystemstoprovidecleanerenergytoruralpopulationin100counties(extendedto200countiesin1991).Thesepilotprogramsweresuccessfulandreplicatedinothercountiesandcontributedtothedeploymentofsmallhydropowerin1,500countieswhichprovidedcleanerenergyforcookingandheatingandincreasedaccesstoelectricity.Bytheendof1994,87percentoftheruralpopulationhadbasicaccesstoelectricity.Thesepilotprogramsalsoimprovedprojectdesigns,constructionmethods,andequipmentproductionofsmallhydropowerunits,efficientstoves,andbiogasdigesters.(b)Duringthethreedecadesprecedingtheopendoorpolicyinthe1980s,severallarge-scalehydropowerspecialprojectswerelaunchedandcontributedto(i)strengtheninghydropowerstationdesign,construction,andequipmentmanufacturingand(ii)buildingthetechnicalandengineeringcapacityofpersonnelinvolvedintheseprojects.However,theseprojectssufferedfrominsufficientgovernmentfinancingandexperiencedextendedconstructionperiodsduetoinefficientuseofresourcesandinadequateprojectmanagement.AfterChina’sopeningtotheworld,itshydropowerindustrysoughtandbenefittedfromextensivesupportprovidedbytheinternationalcommunity,includingdevelopedcountriessuchastheEuropeanUnion,Japan,Australia,andCanadaandinternationalorganizationssuchastheUnitedNationsDevelopmentProgramme(UNDP),GlobalEnvironmentFacility(GEF),andWorldBank.TheYunnanLubugehydropowerproject,thefirstWorldBankloantoChina,andtheErtanhydropowerproject,thelargestinChinainthetwentiethcentury,areillustrativeofsuchanapproach(seeBox2.1andBox2.2).(c)Theestablishmentofdemonstrationwindpowertestfarms.TheBadalingtestfarm(4to50kW)inBeijingMunicipalityandthePingtanfarm(55to200kW)inFujianallowedtheassessmentofthestrengthsandweaknessesofturbinesdesignedbydomesticresearchinstitutionsandstrengtheningofconstructionandoperationcapabilitiesofconcernedparties.21Inthe1960s,Chinalaunchedanimportantprogramtomeetruralenergyneedswithbiogasinashorttimeandinstalledalargenumberofdigesters,whichallhadtobescrappedafterfewyearsofoperationandsomeevenbeforecommissioning.Inthe1970s,historyrepeateditselfandChinainstalled7milliondigestersinruralhouseholdsbut3millionfailedtooperateadequately.Thesefailuresaremostlycausedbylowqualityofthedigesters;duetotheshortageofcement,manydigesterswerebuiltwiththeso-called‘three-in-onesoil’(clay,lime,andbigsand)insteadofcement.Asaconsequence,thesebiogasdigesterswouldlastonlyforafewyears.https://pubs.iied.org/sites/default/files/pdfs/migrate/16553CIIED.pdf(XIAZuzhang).19Box2.1:The600MWLubugeHydropowerProjectIn1984,Chinasignedthe‘AgreementontheuseofaUS$154millionloanfromtheWorldBankfortheLubugeHydropowerStation’.Inlinewiththisagreement,Chinaconductedaninternationaltenderfortheconstructionoftherequireddiversiontunnel.TheJapanesecompany,whichwonthebid,completedtheprojectinOctober1986,fivemonthsaheadoftheexpectedschedule,basedonpriorChineseexperience.The‘project-basedschedulemanagement’methodsurprisedChineseexpertsandVicePremierLiPengdemandedthatconstructioncompaniesstarttrialimplementationofadvancedforeignmanagementmethods.WiththesupportoftheWorldBank,theLubugeprojectalsoraisedgrantsfromtheGovernmentsofNorway,Australia,andCanadatopurchaseadvancedequipment,hireconsultingteamstoassisttheChineseprojectteam,andconducttheoreticalandon-the-jobandin-projectdesignandmanagement.ThesuccessoftheLubugeprojectledtofurtheruseofforeignloansandadvancedprojectmanagementmethodsforfiveother1,000MW+hydropowerprojectsinthelate1980sandearly1990sthatsignificantlycontributedtoreducepowershortages.Box2.2:The3,300MWErtanHydropowerProjectTheErtanHydropowerStationwasthelargeststationbuiltinChinainthetwentiethcentury.Itstotalinstalledcapacityis3.3GW(6×550MW),withanannualaveragegenerationcapacityof17TWh.The240-meter-highconcretedouble-curvedarchdamranksfirstinAsiaandthirdintheworld.ThetotalinvestmentoftheprojectisUS$3.2billion,outofwhichUS$780millionIBRDloan,US$150millionguarantee,andIDAUS$2.5millionarefromtheWorldBankGroup;theNorwegiangovernmentalsoprovidedaUS$5milliongrant.Chineseexpertscommentedinmanypublicationsthattheprojectintroducedinternationalbestpracticeofprojectdesign,construction,andmanagement.Itpromotedthereformofcorporatemanagementsystems,strengthenedtheprotectionoftheecologicalenvironmentinhydropowerconstruction,andsuccessfullyimplementedlarge-scaleresettlement.Italsotriggeredthepowersectorreform.•ItwasthefirstprojectthatfullyalignedwithinternationalcompetitivebiddingandintroducedmodernandcomputerizedprojectconstructionmanagementtoachievefullcompliancewithInternationalFederationofConsultingEngineers(FIDIC)terms(Norwegiangrantfinancedthetrainingprogramandallowedtransferofsoftwareforpowersystemoptimization).Expertsfrom47countrieshaveparticipatedintheconstructionoftheprojectandforthefirsttimeinChina,apanelofinternationalexpertswasestablishedto(a)arbitrateincasesofdisputesbetweentheprojectownerandparticipatingforeigncompanies,whichwereparticipatingforthefirsttimeintheconstructionofanhydropowerprojectinChina,and(b)supervisetheimplementationoftheenvironmentalandresettlementplans.•In1998,itwasgrantedthe‘NationalHonorableCollectiveforFloodFighting’awardandinJune2006,itbecameoneofthefirst10constructionprojectstowintheawardofthe‘NationalEnvironmentFriendlyProject’,thehighestenvironmentalprotectionawardinChina.•TheprojectstartedthelongprocessofcorporatizationandcommercializationofErtanHydropowerDevelopmentCompany(EHDC)tobecomeoneofthelargesthydropowerdevelopersandindependentpowerproducers(IPPs)operatinginthesinglepowerschemeandcurrentlyinamoremarket-orientedenvironmentbasedoncontractsandrulesandfromoldstylegovernmentcontroltomodernlight-handedregulation.20TheinternationalcooperationleftErtanHydropower(nowYalongJiangCompany)withlong-lastingbenefitsacrossthesector.AccordingtoWuShiyong,DeputyGeneralManagerofYalongJiangCompany,experiencesgainedfromthedevelopmentofErtanwerefullyusedinthedevelopmentofsubsequenthydropowerprojectsbyYalongJiangCompany,suchastheXiluoduHydropowerProjectwiththedamheightof285.5mandtheJinpingHydropowerProjectwiththedamheightof305m,thehighestarchdamintheworld.(d)ChinaandGermanyinitiatedtheBeijingDaxingNewEnergyDemonstrationVillagein1980.Theprojectisoneofthefirstscientificandtechnologicalcooperationagreementsbetweenthetwocountries.ThisdemonstrationvillagefocusedoncomprehensiveuseofREtechnologies,suchassolarthermalutilization,solarPV,solarhouses,andbiogas,amongothers,tomeetsocialenergyneeds.ItsucceededinshowingthepotentialcontributionofREpotentialtomeetChina’sfast-growingenergyneeds.ItalsocontributedtosettingthepaceforthedevelopmentofsolarwaterheatersandPVapplicationsinChina.B.EstablishmentoftheRenewableEnergyManagementSystem38.Inthe1970sandespeciallythe1980s,afterthelaunchoftheopendoorpolicy,China’sruralenergyshortagesexacerbatedastheruraleconomyboomed.Thiseconomicexpansioncausedanincreaseinincomes,whichinturnledtoanimprovementintheruralpopulation’slivingconditions.Tomeettheruralpopulation’sincreasingmodernenergyneeds,theChinesegovernmentestablishedseveraldepartmentstomanageandboostruralenergydevelopment.Sincemodernruralenergywasdominatedbyrenewableenergyatthattime,thisalsolaidthefoundationforwhatcanbecalledtheChina’sRenewableEnergyManagementSystemasdescribedinthefollowingparagraphs.39.In1982,theDepartmentofRuralElectricity(农村电力司)wasestablishedundertheMoWRE,tomanageandplanthedevelopmentofruralhydropower.ItwasChina’sfirststate-leveldepartmenttofocusonthemanagementofoneofChina’sREtechnologiesandcontinuestosuperviseittodate.40.In1984,theStateCouncilestablishedtheRuralEnergyLeadingGroup(农村能源领导小组).ThisgroupcoordinatedtheeffortsoftheMinistryofAgriculture(MoA),theSPC,theNationalScienceandTechnologyCommission(NSTC),andtheMoWRE.Thegrouphasbeentaskedwithconsolidatingruralenergydevelopmentplans,issuingguidelinesandpoliciesforruralenergydevelopment,andsupervisingtheirimplementation.41.OneofthemajorachievementsoftheRuralEnergyLeadingGroupistheestablishmentoftheRuralEnergyManagementDivision(农村能源管理处)undertheNECasapermanentagencybytheStateCouncilin1986.TheRuralEnergyManagementDivisionwasentrustedwiththepromotionofruralenergypilotdemonstrations,technologyimprovementanddeployment,industrialmanufacturing,andotheroperationaltasks.TheestablishmentofthedivisionmarkedthebeginningofChina’scomprehensivedeploymentofrenewableenergyatalargerscale.ThisdivisionisthepredecessorofthecurrentNEA’sDepartmentofNewEnergyandRenewableEnergy.42.IttookChinafouryearstoupgradeitsRenewableEnergyManagementSystemfromasingleHydropowerManagementDepartmenttoacomprehensiveRenewableEnergyManagementDepartmentaffiliatedwiththenationaleconomicauthority.Althoughthisgroupfacedvariouschallengesinitsdailyoperation,itmanagedtocoordinateandrationalizethevariousdepartments’effortsandprovidedanimpetusfor21thesetupofguidelinesthatledtoaflexibleapproachtoREdevelopment.Thisapproachwasbeneficialinsofarasitisadaptabletouniquelocalconditionsandtakeadvantageofthesynergyandcomplementarityofvarioustechnologiestoachieveanoptimaluseofresourcesandmaximizeeconomicbenefits.43.Until1994,theRenewableEnergyManagementSystemledtheeffortstodeveloppoliciesthatpromotedthedevelopmentofsmallhydropowerandbiogasinruralareasandlatervariablerenewableenergy,especiallywindandPV,inChina.C.MajorREPoliciesofStage144.Althoughthepoliciesformulatedatthefirststagemainlytargetedhydropowerandbiomass,theycanbeseenasthedemonstrationpolicies,whichbuiltthefoundationforseveralimportantREmeasuresthatwereeventuallyexpandedtothewholerenewableenergysector.ThreemajorpoliciesweredevelopedduringthisearlystageofREdevelopment.•The‘NoticeonOpinionsonStrengtheningRuralEnergyConstruction’wasissuedin1986bytheNECtoguidethedevelopmentofrenewableenergyinthefirststage.Itmainly(a)requiredthepreparationoflong-termruralenergydevelopmentplans,(b)initiatedstudiestoformulatetechnicalandeconomicregulationforruralenergy,(c)promotedthestrengtheningofruralenergytechnologyR&Dofdemonstrationprojects,(c)initiatedthedevelopmentofruralenergyindustries,and(d)improvedthecapacityofstaffinvolvedinallstagesofthedeploymentofREtechnologies.Itsimplementationpromotedtheestablishmentofruralenergymanagementinstitutionsatalladministrativelevelsandimprovedtheefficiencyofruralenergymanagementandutilization.Moreover,itraisedtheruralpopulation’sawarenessabouttheuseofREandenvironmentalprotection.•The‘NoticeonActivelySupportingRuralEnergyDevelopmentLoans’wasissuedin1986bytheMinistryofAgriculture,Livestock,andFisheries(currentlyrenamedtheMinistryofAgricultureandRuralAffairs[MoARA),SPC,andABC.ItentrustedlocalgovernmentswithprovidingfinancialsupporttoruralREdevelopmentthroughprovincialloansprovidedbytheABCandfinancialsupportfromprovincialbudgetsand/orcollectionoflocalfees/surcharges,allowedbythenotice.TheREtechnologieseligibleforsupportincludedbiogasdigesters,PVsystems,energy-savingstoves,geothermalutilization,andbiomassgasification.Thisnoticeprecededthe2005RenewableEnergyLaw,whichcreatedacompensationsystembasedonsharingfinancialcostsofREdevelopmentamongallelectricityconsumers,preferentialloansfromsatebanks,andstatebudget.ItalsolaunchedthedecentralizeddevelopmentmodelofrenewableenergyinChina,whichisbasedonmeetingthenationalREtargetsthroughobligationsonprovincesandultimatelyonlocalenterprisesandconsumers.Thedecentralizeddevelopmentmodelreliesgreatlyonlocalgovernments,localprivateinitiatives,andtheengagementofcitizens.Itsuccessfullypromotedtherapiddevelopmentofrenewableenergy,especiallysmallhydropoweratthisstagewithoutburdeningthestrainedstatebudget.•The‘NoticeonSeveralRegulationsonthePriceofSmallHydropower’,issuedin1986bytheNEC,MoALF,andNPB,promotedthelocalself-relianceprinciplefor‘self-construction,self-management,self-operation,andself-utilization’ofsmallhydropowerprojects.Itsetafloorpriceandentrustedlocalgovernmentstoregulateelectricitypricestoadaptthemtolocalconditionsandprovidedevelopersreasonableprofits.Thisisoneofthefirstattemptstodepartfromuniformpricingsystemsbasedontariffsimposedbyhigheradministrativelevelsandthefirstattemptatdeterminingdifferentialprice22byregion,whichalsowasoneofthebasicpricingmeasuresadoptedinthefuture2005RenewableEnergyLaw.ItgreatlycontributedtothedevelopmentofREinruralcounties.D.BuildingaStudyandResearchBase45.The1973oilcrisisraisedconcernsinseveralcountriesaboutenergysecurityandmanynationsbegantoattachimportancetolocalenergysupply,increasingfocusonREresources.InChina,severalenergyresearchinstituteswereestablishedinthe1970sand1980s,themostimportantofwhichincludetheEnergyResearchInstituteoftheChineseAcademyofSciences(nowaffiliateswiththeNDRC),theInternationalSmallHydropowerCenter(Hangzhou),theChengduBiogasResearchInstitute,theGuangzhouInstituteofNaturalEnergy,theBeijingEnergyResearchInstitute,theGansuSolarEnergyResearchInstitute,andtheLiaoningEnergyResearchInstitute.TheseinstitutesweretaskedwithstudyingandidentifyingfuturechallengesfacingthedevelopmentofChina’senergysectorwithspecialfocusonREissues.Internationalorganizationshelpedestablishandmanagetheseinstitutionsintheearlyyears.Forexample,UNDPandUnitedNationsIndustrialDevelopment(UNIDO)supportedtheestablishmentoftheHangzhouInternationalSmallHydropowerCenter(ICSHP)22andtheGuangzhouInstituteofNaturalEnergy.46.Theresearchandworkobjectivesoftheseinstitutionsincluded,butwerenotlimitedto,thefollowingaspects:•StudyingthepathandmeasuresrelatedtothedevelopmentoftheREindustryinChinaandabroadtoallowthegovernmenttomakeinformeddecisionsaboutREdevelopmentandtoformulatemid-andlong-termdevelopmentplansandindustrialpolicies•Carryingoutresearchprogramstoimproveenergyefficiencyandproductionprocesses•DisseminatinginformationonthecommercializationofrenewableenergyandprovidingtechnicalconsultingservicesforREcompanies•Establishingcooperationprogramswithrecognizedinternationalinstitutions,organizations,andcountriestodeveloppolicyinformationexchangeandtechnologytransfer.47.Inthefieldofscientificresearch,theStateScientificandTechnologicalCommission(nowtheMoST)beganprovidingsupporttoR&DprogramsrelatingtoREscienceandtechnologiesduringthe6thFYP(1981–1985).TheStateHigh-TechDevelopmentPlan(alsoknownas863program)providedastableandlong-termresearchenvironmentforthedevelopmentofadvancedREtechnologies.23Althoughnoworld-leadingresultshaveyetbeenachievedatthisstage,theseprogramstrainedagenerationofhigh-levelscientificandtechnologicaltalentsandlaidthefoundationforthemomentousdevelopmentofrenewableenergyinthenextstages:•TheChinaNationalShipbuildingCorporationfactoryundertookaresearchprogramon100Wwindturbinesduringthe6thFYP(1981–1985),whichresultedinthedevelopmentofthefirstwindpower22TheICSHPwaspromotedfiveyearsafteritsestablishmenttoaUNIDO-affiliatedinstitutiontopromotesmallhydropowerdevelopmentindevelopingcountriesandSouth-Southcooperationfor‘thesocial,economic,andenvironmentaldevelopmentofruralareas’.Theinsti-tutefocusesonresearchandinformationexchangeonsmallhydropowerdevelopmentandprovidestrainingandadviceandencouragesSouth-South‘horizontalinvestmentflows’.23The‘NationalBasicResearchProgramofChina(973Program)’wasthethirdprogramlaunchedin1997.23productsbasedonnationaldesignstandardsandspecificationsandindicatedChina’sambitionstodevelopR&Dandcompletethemanufacturingofmodernwindturbines.•TheBeijingSolarEnergyResearchInstitutedevelopedthecopper-aluminumvacuumtubeheatcollectorundertheUNDPinternationaltechnicalcooperationprojectwithCanadaandGermanyduringthe7thFYP(1986–1990).TheprogramexploredadevelopmentpathforabsorbingadvancedforeigntechnologiesandgreatlypromotedtheutilizationandwidespreaddisseminationofsolarwaterheatersinChina.E.LessonsLearned48.SeverallessonslearnedduringthisstageareworthconsideringbycountriesstrugglingtomeettheSustainableDevelopmentGoals(SDGs),especiallySDG7aimingat“ensuringaccesstoaffordable,reliable,sustainable,andmodernenergyforall.”•Theapproachesadoptedtodeploybiogasatalargescaleduringthe1960sand70snotonlyfailedtomeettheirobjectivesbut,moreimportantly,underminedthecredibilityofthetechnologyamongtheruralpopulation.Therefore,beforescalingup,conductingbottom-uppilotstodemonstratethetechnicalfeasibility,implementationsupportingsystem,aswellasfinancialmechanismisimportanttoavoidlargescalefailure.•Adequateplanning,decentralizedapproaches,andengagementofthelocalpopulationcouldleadtosuccessfuloutcomes.Thedeploymentofsmallhydropoweratalargescaletoprovideaccesstoelectricityfortheruralpopulationin1,500countieswasfinancedlocallyandbenefitedfromvoluntaryparticipationintheconstructionandthecollectionoffeesandsurchargesbornebythepopulation.Decision-makingrelatedtopricesofelectricitygeneratedbythesmallhydropowerstationshasbeendelegatedtothelocalgovernmentandfullyacceptedbylocalcommunities.•Theestablishmentofstrongresearchandstudyinstitutionsisessentialtobuildaknowledgebase,overcometechnicalhurdles,andprovidedecision-makerstheneededinformationtomakeinformeddecisions.•Pilotanddemonstrationprojectsareuseful,andevennecessary,toassessnewtechnologiesbeforelarge-scaledevelopment.•Learningfrominternationalexperiencesandseekingcooperationwithmoreadvancedcountriesareparamounttoimprovingoutcomesbyfacilitatingknowledge,technologytransfer,andaccesstoadvancedmanagementsystems.49.Theselessonsareessentialtobuildthefoundationandenabletheenvironmentfortheeffectivedeploymentofrenewableenergyatalargescale.However,theyneedtobecomplementedbytheremovalofmarket,institutional,andlegislativebarrierstoallowforthefast-trackdevelopmentofrenewableenergy.25Chapter3.TheTakeoff(Stage2:1995–2005)KeyMessagesChinacommittedtodevelopREsourcestohelpalleviateacuteenergyshortages,easegrowingenergysecurityconcerns,andmitigatelocalandenvironmentalimpact.By2005,thetotalamountofREdevelopmentandutilizationreached166milliontce,accountingforabout7.5percentofthetotalprimaryenergyconsumption:(a)theinstalledcapacityofhydropowerreached117GW,includingabout7GWofpumpedstorage;(b)annualutilizationofbiogasreachedabout8billionm3,providingcleanerfuelfornearly70millionruralpeople;(c)totalinstalledcapacityofbiomasspowergenerationamountedtoabout2GW;(d)morethan60grid-connectedwindfarmswerecommissioned,withatotalinstalledcapacityof1.26GW;(e)totalcapacityofPVpowergenerationreached70MW;(f)totalnumberofinstalledsolarwaterheaterscovered80millionm2;and(g)geothermaldeployedforheatingreplacedabout2milliontceofcoalperyear.ThesurgeinREdevelopmentexperiencedduringthisstagewastriggeredbytheissuanceoftheElectricityLawin1995,whichcontributedsignificantlytoopeningthesectortoREinvestors.ItwasfollowedbytheNewEnergyandRenewableEnergyDevelopmentPlan(2001–2015),whichsupportedthedevelopmentoftheknowledgebaseandtheassessmentofresources,guidedthelocalizationofREmanufacturing,andfinally,establishedtechnologyandmarketdevelopmentgoalsaswellastargetsforREconsumptionlevelandpertechnology.The10thFYP(2001–2005)fornewenergyandREindustrywasissuedin2001andfocused,forthefirsttime,onREdevelopmentseparately.Theplanfocusedon(a)researchactivitiesanddevelopmentofadequatepolicies;(b)promotionoftechnologicalprogressandimprovementofequipmentquality;(c)implementationofdemonstrationprojects;(d)developmentandregulationofthemarket;(e)awareness,training,andinformationdissemination;and(f)internationalcooperation.Furthermore,theplansetquantitativeREtargets,oneforoveralldevelopmentandaspecifictargetforeachtechnology.Alltargetswereachievedandsurpassed,exceptthatofbiomasspower.AstheimplementationoftheKyotoProtocolprogressed,ChinaintensifieditscooperationwiththecountriesattheforefrontofREdevelopmentandwassupportedfurtherbyseveralcountries,suchasDenmark,Germany,theUnitedKingdom,Japan,andCanada,andbymultilateralorganizations,suchastheWorldBank,GEF,andUNDP.TwoWorldBank/GEFprojectsinparticularcontributedtolayingthegroundforPVandwinddevelopmentatalargescale:•TheChinaRenewableEnergyDevelopmentProject(REDP)wasdevelopedbytheSETCtosupportwindpowerthroughaUS$13millionwindpowerinvestmentloanandaUS$27millionGEFgranttodevelopPVmarketsinnorthwesternprovinces.Itessentiallysupportedpublicandprivateintegratorstoimprovethequalityoftheirproducts,developPVtechnicalstandards,andimprovequalitycontrolandtestingcapacity.26•TheChinaRenewableEnergyScale-UpProgramPhaseI(CRESPI),initiatedin2000,establishedalong-termthree-phasecooperationprogramtosustainREdevelopment.Itsfirstphasecontributedto(a)developingalegal,regulatory,andinstitutionalenvironmentconducivetolarge-scale,renewable-basedelectricitygeneration;(b)financingsomeofthefirstlargewindandbiomassprojects;(c)improvingthelocalequipmentanddesignsthroughtechnicalstandards.REresourceswerethoroughlyassessed.Regardinghydropower,morethan12GWofhydropowerstationswerecommissionedduringthe10thFYP(2001–2005)and80GWstartedconstruction.Regardingwindenergy,theconcessionprogram,launchedbytheSPCin2002,initiatedthedevelopmentoflargewindfarmsandultimatelyledtoGWwindbases,mainlyinnorthandnorthwesternChina.Thelessonslearnedareasfollows:(a)Strongcommitmentandsubsidizationarenottheonlyprerequisitesforlarge-scaleREdevelopment.Successfulandsustainedprogramsalsorequireastablepolicyandregulatoryframework,availabilityofskilledpersonnel,andclearmid-andlong-termambitiousgoals.(b)Asoundbidevaluationmethodologyisessentialtothesuccessofcompetitionevaluation,bidcriteriashouldnotover-relyonpricing,andmulticriteriaevaluationshouldalsoensurethestrengthofthefinancialstandingofthebiddingcompanies,thesoundnessoftechnicalcharacteristics,andappropriatefinancialreturnsbasedonproposedbidprices.50.“Fromtheearly1980stothemid-1990s,Chinamanagedtoachievehigheconomicgrowthwithnearself-sufficiencyinenergysupply.However,duringthesecondhalfofthe1990s,Chinagraduallyemergedasanetimporterofenergy,andby2005,itsdependenceonoilimportshadsoaredtoabout45percentofconsumption.”24Toaddressthegrowingsenseofenergydependencyandfuelitshighlygrowingeconomy,Chinareliedheavilyondomesticcoal,whichled,bytheearly2000s,toseriousenvironmentpollutionandincreasedGHGemissions.Aftercompletingtherequiredinternalprocedures,ChinaapprovedtheKyotoProtocol,whichitsignedin1998.Thisopenedthedoortothedevelopmentofrenewableenergyasapotentialoptiontohelpalleviateacuteenergyshortages,easegrowingenergysecurityconcerns,andmitigateenvironmentalimpacts,especiallytomeetgrowingruralenergydemandinasustainableway.However,deploymentofrenewableenergyatalargescalewashinderedbythefollowing:•Lackofanationalstrategyandlackofmid-andlong-termplans,prerequisitestodevelopmentactivitiesina‘commandandcontrol’economy•Lackoftheappropriatelegalframework•Lackofexpertiseandknow-howaboutRE,laggingbehindGermany,theUnitedStates,Demark,andtheUnitedKingdomandthusstilldependingonothercountries’expertise•InadequateincentivestopromoteinvestmentsinREdevelopmentinanenvironmentcharacterizedbyscarcityofcapitalatthenationalandloweradministrativelevels•Nascentmarketsandweakindustrializationbase.24Berrah,Noureddine,etal.2006.SustainableEnergyinChina:TheClosingWindowofOpportunity.WorldBank.2751.Toaddresstheseissues,Chinainitiatedthepreparationofmid-andlong-termplanningprocedures,enactedanElectricityLawthatabolishedthemonopolyonelectricitygeneration,thusopeningthedoortoindependentRE-basedgeneration,andactivelycooperatedwithothercountries,inparticularwithintheKyotoProtocolframeworktocreateanenablingenvironmentforthetakeoffofdevelopmentofrenewableenergy.A.AchievementsinStage252.During1995–2005,renewableenergyinChinadevelopedrapidly.Significantprogresshasbeenmadeintheutilizationofhydropower,biogas,bioliquidfuel,windpower,andsolarenergy.Theroleofrenewableenergy,especiallyhydropower,madearemarkablecontributiontothecountry’senergysupply.By2005,thetotalamountofREdevelopmentandutilization(excludingthetraditionalwayofusingbiomassenergy)reached166milliontce,accountingforabout7.5percentofthetotalprimaryenergyconsumption,includingthefollowing:•Theinstalledcapacityofhydropowerreached117GW(includingabout7GWofpumpedstoragepowerstations),accountingfor23percentofthetotalinstalledcapacityofpowergeneration.In2005,electricitygenerationamountedtoabout395TWh,accountingfor16percentofthetotalelectricitygeneration.•Morethan18millionhouseholdbiogasdigestershadbeeninstalled,andabout1,500large-scalelivestockandpoultryfarmbiogasprojectshavebeencompleted.Theannualutilizationofbiogasreachedabout8billionm3,providingcleanerfuelfornearly70millionruralpeople.ThetotalinstalledcapacityofbiomasspowergenerationinChinaamountedtoabout2GW,including1,700MWofbagassepowergenerationcapacity,200MWofMSWpowergenerationcapacity,andabout100MWofpowergenerationcapacityfueledbygasifiedagriculturalandforestrywastes,suchasricehuskandbiogas.Productionofbioethanolslightlyexceeded1milliontonsandutilizationofbiodieselamountedtoabout500,000tons.•Morethan60grid-connectedwindfarmswerecommissioned,withatotalinstalledcapacityof1,260MW,layingthefoundationforthelarge-scaledevelopmentofwindpower.Inaddition,therewereabout250,000smallindependentlyoperatedwindturbinesinremoteareas,withatotalcapacityofabout50MW.•ThetotalcapacityofPVpowergenerationreached70MW.Non-grid-connectedPVstationswerebuiltin12countiesandmorethan700towns,andmorethan500,000householdPVsystemswereinstalledtoprovideaccesstoelectricitytopoorpopulationinremoteareas.•Thetotalnumberofinstalledsolarwaterheaterscovered80millionm2.•Thegeothermaldeployedforheatingwasabout2milliontce.B.PoliciesPavingtheWaytoREDevelopment53.Duringthisstage,thegovernmentformulatedaseriesofpoliciessettingatotaltargetforREdevelopmentanddefiningkeytasksrequiredtoachieveit:scientificR&D,improvedmarketaccess,safeguardmeasures,28andsoon.Thesetop-downpoliciesformedafirst-levellayerpromotingandregulatingREdevelopmentinthecountry.Themainpoliciesandmeasuresformulatedduringthisstagecanbepresentedunderthreebroadcategories:(a)energysectoronlypoliciesandmeasures,whichincludesinparticulartheElectricityLawandtheNewEnergyandRenewableEnergyDevelopmentPlan;(b)energy-relatedpoliciesthatarepartofbroadernationalpoliciesandplanning,inparticularunderthe10thFYP;and(c)energy-relateddomesticpoliciesthatarerelatedtointernationalcoordinationtomitigateclimatechange,inparticularChina’sAgenda21andtheKyotoProtocol:•TheElectricityLaw.ThefirstElectricityLawinChina,approvedin1995,brokethemonopolyofstate-ownedutilitiesinthesectorandformalizedthediversified,includingprivate,ownershipofpowergenerationassets.Itopenedthedoorforbadlyneededfinancingsourcesatthetimetomeetthehugeinvestmentneedtoalleviateshortagesandpowerthefast-growingeconomy.Itguaranteedandpromotedthedevelopmentofelectricpowerindustry;safeguardedthelegitimaterightsandinterestsofelectricpowerinvestors,operators,andusers;andensuredthesafeoperationofelectricpower.ThelawcontributedsignificantlytoopeningthesectortoREinvestorsandthefastdevelopmentofREpowergeneration.•TheNewEnergyandRenewableEnergyDevelopmentPlan,issuedin2000,servedasalong-termroadmapforREdevelopment.Itincludedageneralplanandsubsidiarytechnologyplansencompassingsolar,wind,geothermal,andbiomass.Theplancoveredthreeperiods:2000–2005,2006–2010,and2011–2015.Itincludedguidingprinciplesandbasicknowledge,resources,technologyandmarket,developmentgoals,localizationofREmanufacturing,expectedbenefit,constraintsandobstaclesassessment,andfinally,policyandimplementation.Theindustrialdevelopmentgoalsweresetbasedondetailedanalysesandevaluationoffouraspects:resources,localtechnicalknowledgeandgapwithadvancedcountries,marketdevelopmentanddemandpotential,andavailabilityofskilledpersonnelineachREtechnology.Itsguidingprincipleswerereflectedinthe10thFYPleadingtotheendofthesecondstageofREdevelopment.•The10thFYP(2001–2005)fornewenergyandrenewableenergyindustrywasissuedin2001andfocused,forthefirsttime,onREdevelopmentseparately.TheplanstressedthefollowingactionstoensuresustainableREdevelopment:(a)researchactivitiesanddevelopmentofadequatepolicies;(b)promotionoftechnologicalprogressandimprovementofequipmentquality;(c)implementationofdemonstrationprojects;(d)developmentandregulationofthemarket;(e)launchofawarenessandinformationdisseminationactivitiesandtraining;and(f)widelycarryoutinternationalcommunicationandcooperation.TheplansetquantitativeREtargets,ageneraloneforoveralldevelopmentandaspecificoneforeachtechnology(Seetable3.1).Table3.1:RETargetsandAchievedRateinthe10thFYPforNewandRenewableEnergyTechnology20002005Target2005AnnualGrowthRate(%)AchievedRate(%)PowergenerationHydropower(GW)79.351001106.7110Windpower(MW)3401,2001,26030105Windpower(offgrid)(MW)150-25011n.a.SolarPV(MW)19537030132Biomasspower(MW)1,700-2,0003n.a.GasBiogas(billionm3)3.54818200Ruralhouseholdbiogas(thousandhouseholds)8,50010,00018,00016180Heating29Technology20002005Target2005AnnualGrowthRate(%)AchievedRate(%)Solarwaterheater(millionm2)26638025127Geothermalandothers(1,000tceperyear)1,2002,00011n.a.FuelFuelethanol(1,000tceperyear)--1,020-n.a.Biodiesel(1,000tceperyear)--50-n.a.Totalutilization(milliontceperyear)1201361666.70122Source:10thFYPfornewandrenewableenergyand11thFYPforREdevelopment.•Itwasplannedthatby2005(a)thedevelopmentandutilizationofnewenergyandrenewableenergywouldreach13milliontcefrom12milliontcein2000;(b)theannualproductioncapacityofsolarheaterswouldreach11millionm2,withanaccumulatedinstallationofabout64millionm2;(c)theproductioncapacityofPVcellsnationwidewouldreach15MWandthecumulativeinstalledcapacitywouldamountto53MW;(d)thegenerationinstalledcapacityofwindpowerwouldreach1,200MW,andtheequipmentmanufacturingcapacitywouldreachabout150to200MW;(e)thegeothermalheatedareawouldreach20millionm2;and(f)biogasutilizationwouldreach2billionm3.•China’sAgenda21.ThisimportantpolicywasapprovedbytheStateCouncilin1994todefineChina’soverallstrategyandactionplantosolveenvironmentalanddevelopmentproblems.TheSPC(laterNDRC)andtheStateScienceandTechnologyCommission(laterMoST)followedupwiththedevelopmentofa‘priorityplan’toputthepolicyintopractice.The‘priorityplan’identifiedthepriorityprojectstobeincludedinthemid-andlong-termnationaleconomicplanstoimplementtheAgenda21policy.REdevelopmentandutilizationprojectswereincludedinthefirstbatchofpriorityprojects,includingtestanddemonstrationprojectsinthreeareas:thermalutilizationofsolarenergyandPVpowergeneration,large-scalewindturbinesforpowergeneration,andutilizationofbiomass.ThesuccessfulimplementationoftheseprojectscontributedtoextendingknowledgeonandcommercializingkeyREtechnologies,whichcontributedtoreducinggreenhousegas(GHG)emissions,improvingenvironment,increasingthesupplyofreliableandcleanenergy,andpromotingsustainabledevelopment.•ApprovaloftheKyotoProtocol.TheratificationoftheKyotoProtocol,almostfouryearsaftersigningit,indicated,accordingtoaministerialannouncement,“China’spositivestancetowardsinternationalenvironmentalcooperationandworldsustainabledevelopment.”’ItopenedthedoortoincreasedcooperationwithcountriesleadingREdevelopmentatthetimeandledtothedeclarationofChina’scommitmenttoREdevelopmentinthe2004REBonnConference.DevelopersshowedgreaterinterestsinREprojectsastheirfinancialreturnsbecamemoreattractivewiththeadditionalbenefitsfromsalesofGHGemissionsthroughtheCleanDevelopmentMechanism(CDM).C.InternationalCooperation54.ChinacontinuedandintensifiedtheinternationalprogramwiththecountriesattheforefrontofREdevelopment.AstheimplementationoftheKyotoProtocolprogressed,China’srenewableenergywasfurthersupportedbyseveralcountries,suchasDenmark,Germany,theUnitedKingdom,Japan,andCanada,andbymultilateralorganizations,suchastheWorldBank,GEF,andUNDP.Chinabenefittedfromnumerousbilateralandmultilateralinternationalcooperationandexchangeswithprogramsandacquiredtechnological,financial,training,andothersupport.CounterpartsalsooccasionallygainedfromtheChineseexperienceandsuccessfulprogramsweredisseminatedbymultilateralinstitutionstoother30developingcountriesinthecontextofSouth-Southcooperation.Someoftheinternationalprogramsaredetailedasfollows:•TheREDPwasdevelopedbytheSETCandtheWorldBanktosupportwindpowerthroughfirstaUS$13millionwindpowerinvestmentloanandaUS$27millionGEFgranttodevelopPVmarketsinnorthwesternprovinces.TheimpactoftheprojectwasconsiderableasalloutputswereachievedorsurpassedandtheprojecthelpedestablishasustainablePVmarketinthetargetedprovinces.Technicalstandardsdevelopedbytheprojectwerestrictlyenforced:74componentmanufacturersinvolvedintheprojectmetthemand18companiesofferedPVsystemsthatmetinternationalstandards.ThetestingcapacitydevelopedundertheprojectcontributedgreatlytothequalityofPVequipmentandintegratorsweresupportedtodevelopbetter-qualityandnovelproducts.TheprojectPVstandardswereadoptedasnationalstandardsbeforethecountryoptedforinternationalstandards.•CRESPI.In2000,TheChinesegovernment,theWorldBank,andtheGEFcooperatedtoprepareCRESPIandlauncheditsimplementationinNovember2005.Thefirstphaseoftheprogramfocusedonsupporting(a)thedevelopmentofalegal,regulatory,andinstitutionalenvironmentconducivetolarge-scale,renewable-basedelectricitygenerationand(b)thedemonstrationofearlysuccessinlarge-scale,REdevelopmentwithparticipatinglocaldevelopersinJiangsu,Zhejiang,Fujian,andInnerMongoliaAutonomousRegion.CRESPhasmadesignificantcontributionstothelegal,regulatory,andpolicyframeworkforscalinguprenewableenergyinChinaandcatalyzedgovernmentinvestmentinandsupporttoREdevelopmentatalargescaleduringthe11thFYP.Theoutputs,outcomes,andachievementsofCRESParecategorizedinthefollowingthreekeypillars:(a)CRESPplayedanessentialroleintherapidgrowthandqualityimprovementofthedomesticwindand,toalessextent,biomassmanufacturingindustry,throughcost-sharedsubgrantsandestablishmentofstandards,testing,andcertificationfacilities;(b)CRESPalsosupportedthedevelopmentofeightwindturbinestandardsbasedonbestinternationalpractice;and(c)CRESPhascontributedtolarge-scaleREinvestmentsbysupportingtwo100MWwindfarmsinFujianandInnerMongolia,a25MWbiomasspowerplantinJiangsu,and6newand10existingsmallhydropowerplantswithatotalinstalledcapacityof24MW.Theinvestmentsfocusedonquality,efficiency,andsustainabilityofthebuiltinfrastructurewhenmanyofREprojectswerebelowparinChinaandexhibitedlowcapacityfactorsand/ortechnicalproblemsthathamperedtheirconnectiontothegrid.Equipmentimprovements,adequatedesigns,andtechnicalstandardsdevelopedunderCRESPandfinancedbyGEFgrantsweredisseminatedandprofitednumeroussimilarprojectsinChina.•Otherinternationalcooperationprograms.ThedevelopmentofrenewableenergyinChinawasalsosupportedbyseveralbilateralcooperationprogramsduringthisstage,includingwiththeNetherlandsfortheXinjiangSilkRoadBrightnessProgram(2002–2007),GermanyforSino-Germanfinancialcooperationprogramonsolarenergyinwesternarea(KFWProgram,2003–2004),GermanyfortheTechnicalAssistanceforRenewableEnergy(2002–2004),CanadafortheSolarElectrificationPrograminRemoteAreas(2002–2005),andJapanfortheGreenEnergyCooperationPlan(1998–2002).TheseprogramsenabledbetterassimilationofREtechnologies,increasedawarenessandbuiltconsensusamongChineseexperts,andimprovedtheirunderstandingofdeterminantsofsuccessfulexperiences.Theycontributedtocreateanenablingenvironmentandlaidasolidfoundationforthelarge-scaleapplicationofrenewableenergyinwesternChina.Furthermore,manypeopleweretrainedundertheseprojectsandprograms,includinggovernmentofficials,entrepreneurs,technicians,scholars,andsoon.TheyformedthecoreofREchampionsandallofthemcontinuetoplayanimportantroleinREdevelopmentinChina.31D.ImplementationofMajorNationwideResourcesAssessmentsandPrograms55.Someimportantactivitieswerecarriedout,beforeundertakingorinparallelwiththeinvestmentprojects,tobetterassesstheresourcesandincreasethenumberofskilledpersonnelinengineering,construction,andoperationoflarge-scaleprojects.Somemajorprojectsandprogramswereundertakentoacquireknowledgeonconstructiontechniquesandnovelmanagementmethods,throughcooperationactivitieswithmoreadvancedcountriesduringthefirststage,andcontinuedtobenefitfrominternationalcooperationduringthissecondstage.56.Themajorresourceassessmentandpilot/testprojectscarriedoutduringthesecondstageincludethefollowing:•Reevaluationofwaterresources.During2001–2003,theNationalLeadingGroupOfficeonWaterResourcesReevaluationundertookacomprehensivereevaluationofpotentialhydropowerresourcesandpublishedtheresultsinNovember2005.Thetheoreticalhydropowercapacitypotentialwasestimatedatabout700GWandtheenergygenerationpotentialatabout6,200TWhperyear.Thetechnicallyexploitableinstalledcapacitypotentialwasestimatedatabout540GWandtheannualenergygenerationpotentialat2,470TWh.Finally,theeconomicallyexploitablepotentialinstalledcapacitywasestimatedatabout400GW,withanannualenergygenerationpotentialof1,760TWh.Thisreevaluationguidedtherapiddevelopmentofhydropowerduringthisandfuturestages.•Windenergyresourceevaluation.Theimportanceofproperwindresourceassessmentisparamountforidentifyingbothareasofinteresttodevelopwindenergyandforproject-specificneeds.In2003,Chinainitiatedasystematicandorganizednationalmeasurementprogramtoprepareforthelarge-scaledeploymentofwindpower.Theregionalresourceandpatternevaluationwasmainlybasedonmeteorologicaldata.Itwascombinedwithterraincharacteristics,landform,traffic,andgridconditionstodeterminewindfarmsites.Accordingtotheevaluationresultsofwindenergyresourcesduring2004and2005,thepotentialwindpowercapacitywasestimatedatthattimeatabout300GW.Thisevaluationandmoresophisticatedonescarriedoutduringthenextstageswereinstrumentalinplanninganddevelopingwindpowerassets.•Bioethanolpilotprojects.Chinainitiatedethanolpilotactivitiesin2000.Fourpilotprojectswerecarriedouttoproduceabout1milliontonsofethanol,tobemainlyblendedwithgasolineandcurrentlyusedinHeilongjiang,Jilin,Liaoning,Henan,andAnhuiprovincesand27citiesinHebei,Shandong,Jiangsu,andHubeiprovinces.Thepilotethanolprojectsvitalizedthedevelopmentofbioenergy,promotedcleanerandlow-carbontransportationfuel,andcouldcontributetoreducingoilimports.57.Themajorprojectsandprogramscompletedduringthisstageincludethefollowing:•Largehydropower.Thelargehydropowerstationsputintooperationduringthe10thFYP(2001–2005)includedtheunitsoftheleftbankoftheThreeGorgesProjectamountingto9.8GWinHubeiProvince,the1,350MWDachaoshanhydropowerstationinYunnanProvince,andthe1,500MWGongboxiahydropowerstationinQinghaiProvince.Severallarge-scalehydropowerprojectswerealsostarted,includingtheLancangRiverpowerstationandtheXiaowanhydropowerstationtotaling4,200MWinYunnanProvinceandthe4,200MWLongtanhydropowerstationontheHongshuiRiverinGuangxiProvince.Thetotalcapacityofhydropowerprojectsunderconstructionduringthis32stagewasabout80GW.Theconstructionoftheselarge-scaleprojectseasedthepowershortagesandcontributedtoamorereliablepowersupply.Theyconsolidatedtheexperienceandadvancedconstructionmethodsoftheearlycooperationprogramswithadvancedcountriesandprovidedexperiencetoalargepoolofhydropowerexperts.Theseledtonoticeablecostreductionthatallowedafasterdevelopmentofhydropowerinthecountryandbuiltthebaseforfutureexportsofengineeringservices.•Ruralbiogasdevelopment.From2003to2005,theNationalDebtFund25investedCNY1billionannuallytopromotebiogas.Ruralbiogasconstructiongainedmomentumandbegantodeveloprapidly.Bytheendof2005,18millionhouseholdsreliedpartlyonbiogastomeettheircookingneedsandmorethan700biogasprojectsweredevelopedinlarge-scalefarms.Thedevelopmentofbiogasbecameanimportantcomponentofruraldevelopmentandecologicalprotection.Theprogramswerebasedonlocalexpertise,manufacturing,andoperation.Technicalinstitutesgraduallyimprovedthedesignandmanufacturingascompetitionincreasedinathrivingmarket.Developersaccumulatedvastexperienceinconstructionandtrainingcentersbuiltlocalworkers’skillsandcapacity.TheseactionslaidasolidfoundationfortheChinesebiogasindustry.•Substitutingsmallhydropowerforfossilfuel.In2003,thegovernmentinitiatedaprogramtosubstitutesmallhydropowerforfossilfuelstoaddressfossilfuelshortagesandreducelocalpollutioninruralareasofthemid-andupstreamoftheYangtzeandtheYellowRivers.Theprogramwasimplementedin26countiesandcitieslocatedinSichuan,Guizhou,Yunnan,andShanxiProvincesandGuangxiZhuangAutonomousRegion.Bytheendof2005,theprogrambenefited200,000people,avoided160,000tonsoffirewoodconsumption,andallowedtransformationof20,000haoffarmlandintoforestandtheprotectionof104,000haofforest.•Powersupplytotownshipsprogram.In2002,theChinesegovernmentlaunchedthe‘PowerSupplytoTownshipsProgram’toprovideisolatedruralpopulationwithaccesstoRE-basedelectricity.Off-gridsolarPVpowerstations,wind-solarhybridpowerstations,andsmallhydropowerstationswerebuilttomeettheelectricitydemandoffarmersandherdsmenlivinginremoteareas.TheprogramcoveredawideareawithinashortperiodanddemonstratedREtechnologyadvantagetomeetelectricityneedsofdisperseddemandatlowercostthangridextensions.TheprogramplayedanimportantroleinpromotingthedevelopmentofChina’sPVindustry.SeveralcompaniesactivelyparticipatedintheprogramandtheproductioncapacityofthePVcellsincreasedfrom4MWin1997to67MWin2004,andtheproductioncapacityofPVmodulesincreasedfromalmost0to150MWin2004.Moreimportantly,thequalityofthesystemsgreatlyimproved.AlloftheselaidasolidfoundationfortherapiddevelopmentofChina’sPVindustry.Theprogramprovidedauniqueopportunitytotrainandconsolidatetheexperienceofalltechnical,construction,andpersonnelinvolved.•Windconcessionprogram.In2002,theSPC(currentlyNDRC)launcheda‘concessionprogram’todeveloplarge-scalewindfarms.Theprogramwasfullydrivenbythegovernmentassiteandsizeselection,capacity,engineeringandtechnicalspecifications,andconstructionconditionsweredefinedinthecallsforbids.Theconcessionrightsweregrantedtocompanieswithprovenoperationandmanagementexperiencethatproposethelowestofftakeprice.Theprojectcompanywouldberesponsibleofthemaintenanceandoperationofthewindfarmaccordingtostrictconcessionconditionsspelledoutintheagreementsignedwiththegovernment.Thecompanywasgrantedapowerpurchaseagreement(PPA)tosellthegeneratedelectricitytothegridcompanyatthebid25TheNationalDebtFundreferstotheSpecialFinancialFundestablishedin1998bytheCentralGovernmentandendowedbytheissuanceoflong-termnationalbondsmainlyforinfrastructuredevelopment.33price.Ifthebidpricewashigherthanthebenchmarkpriceforcoal-firedgeneratedelectricity,thepricegapwillbepassedthroughtoendusersbypowergridcompanies.During2003–2005,threeconcessiontenderswereconducted:(a)In2003,theNDRCcalledforbidsforthefirsttwo100MWwindfarms,theGuangdongHuilaiwindpowerprojectandtheJiangsuRudongwindpowerproject,totesttheprocurementprocedure.Sixenterprisesparticipatedinthebiddingforthetwoprojects.Theconcessionsweregrantedtothebidders‘offeringthelowestpricewiththehighestproportionoflocalcontent’.TheproposedpricesofthewinningbidswereCNY0.4355perkWh(US¢5.26perkWh)andCNY0.5013perkWh(US¢6.06perkWh),respectively.(b)In2004,theNDRCexpandedthescalewithatotalinstalledcapacityof650MW,includingthe150MWJiangsuRudongPhaseIIwindpowerproject,the100MWInnerMongoliaHuitengxilewindpowerproject,the200MWJilinTongyuPhaseIwindpowerproject,andthe200MWJilinTongyuPhaseIIwindpowerproject.Fiveenterprisesparticipatedinthebiddingforthesefourprojects.Theevaluationwasconductedaccordingtothesameprincipleandthethreewinningbidsoffered,respectively,CNY0.382perkWh(US¢4.62perkWh),CNY0.509perkWh(US¢6.15perkWh),andCNY0.519perkWh(US¢6.27perkWh).(c)In2005,athirdroundofbidstoconstructthreewindfarmstotaling450MW:the200MWJiangsuDongtaiwindpowerproject,the100MWGansuAnxiwindpowerproject,andthe150MWShandongJimowindpowerproject.Tenenterprisesparticipatedinthebiddingforthesethreeprojects.Theevaluationmethodologywaschangedandincludedseveraltechnicalandfinancialcriteria,includingthebiddingpricewitha40percentweigh,toensurethetechnicalandfinancialsoundnessoftheproject.Thebidderswiththehighestscoresweregrantedtheconcessions.Thepricesofferedbythewinningbidderswere,respectively,CNY0.4618perkWh(US¢5.64perkWh)andCNY0.4877perkWh(US¢5.95perkWh).E.LessonsLearned58.Fourlessonscanbedrawnfromexperiencesgainedduringthisstage.ThefirsttwoillustrateChina’sadherencetothemostimportantdriversofsuccessfulREdevelopmentpolicies:strongpoliticalcommitment,enablingpolicieswithclearandambitioustargetstoattractinvestors,andadequateincentivestoaddressmarketfailuretoreflectlocalandglobalenvironmentalbenefitsinenergyandelectricityprices.Thethirdonestressesthatrelianceonadequatemarket-orientedprocessesandcompetitionareessentialtoefficientimplementationofREpolicies.Finally,thesustainabilityofREdevelopmentrequiresstate-of-the-artknowledgeandstrongcapacityalongthechainofRFdevelopment.Chineseexperienceclearlyindicatesthatrelianceoninternationalcooperationisessentialtoleapfrogtothemostadvancedknowledgeandtechnology.•Strongcommitmentandsubsidizationarenecessary,butnotsufficient,conditionsforlarge-scaleREdevelopment.Onlyhydropowerandsolarwaterheatersdevelopedsignificantlyduringthisstageastheyalsobenefitedfromadequateknowledgeofthecharacteristicsoftheresources,cleardevelopmenttargets,well-proventechnologies,andavailabilityofskilledpersonnelalongthedevelopmentchainofthetwotechnologies.Othertechnologiesstruggledbecauseofthestillhighcostsoftheemergingtechnologies,lackofastablepolicyandregulatoryframeworkandlimitedavailabilityofskilledpersonnel.Theyevensufferedfromthefragmentedandvolatilesubsidizationmechanisms.34•Clearmid-andlong-termambitiousgoalsareprerequisitestodevelopsustainableREdevelopment.Thedevelopmentofcleartargetsintheearly2000sdidnotsignificantlybenefitwindandPVexpansionduringthisstageasmarketdevelopmenttakestimeanddevelopersenternewbusinessesprudently.However,thegovernmentcanrelyonspecialprogramstotestanddemonstratethetechnologiesandbuildaskilledforcetoprepareforthelarge-scaledevelopment.•Soundbidevaluationmethodologyisessentialtothesuccessofcompetition.ThefirsttwoconcessionbiddingroundsinChinaweresuccessfulastheyindicatedtheChinesegovernmentwillingnesstopromotewindpoweranddemonstratedtheinterestofdevelopersinundertakinglarge-scalewindpowerprojects.However,relianceonapredominantlyprice-basedbiddingmechanismeventuallyledtoseriousshortcomings,includingdelaysandwinningbiddersfailingtodeliver.Maincausesincludethefollowing:(a)certainwinnersdidnotmanagetoraisedebttofinancetheprojectsbecausetheydidnothavestrongfinancialstandingand/orproposedpricesdidnotmeettheexpectationoffinanciersand(b)asbidderswerenotrequiredtodosoaspartofthebiddingqualificationprocess,theydidnotplanaheadtoarrangefortimelydeliveryofequipmenttoimplementtheprojectinaccordancewiththeconcessionschedule.Multicriteriaevaluationstoensurethestrengthofthefinancialstandingofthebiddingcompanies,thesoundnessoftechnicalcharacteristics,andappropriatefinancialreturnsbasedonproposedbidpricesareparamounttothesuccessandtimelycompletionoftheprojects.Forexample,theInnerMongoliaHuitengxilewindfarmprojectwasdelayedbyaboutfouryears.ItfinallygotfinancedbytheWorldBankaftersecuringCDMextrarevenuestoimprovethefinancialreturnoftheproject.•Continuedinternationalcooperationisimportanttoimproveknowledgeandbuildcapacity.AsshowninSectionC,Chinaengagedinseveralbilateralandmultilateralprogramstoaccessstate-of-the-artpolicyandtechnicalknowledgeandtrainastrongcoreofREexperts,whoarestillinvolvedinpolicydevelopmentandprojectimplementation.Chinaavoidedthe‘reinventingthewheel’syndromeandmanagedtocatchupwithmostadvancedcountriesinlessthantwodecadesandembarkedonambitiousR&Dandinnovationprograms.35Chapter4.FromLaggertoLeader(Stage3:2006–2017)KeyMessagesTheadoptionoftheRenewableEnergyLawwasindicativeofChina’scommitmenttoREdevelopmentandtointernalizingenvironmentalbenefitsinpricing.TheRenewableEnergyLawwasfollowedbypoliciesandregulations,especiallyfeed-intariffsforwindin2009andPVin2014,thatsetambitiousdevelopmenttargetsandprovidedawiderangeofincentivestoincreaseinvestmentandbuildasizablemarket.ThisledtoaboomofREdevelopment,makingChinatheworldleaderbytheendof2017.Duringthisstage(2005–2017),theinstalledREpowercapacityincreasedby16timesreaching638GW,accountingforalmost37percentofthetotalinstalledpowergenerationcapacity,andthetotalREpowergenerationamountedtoabout1,699TWh,morethanfourtimesthe2005generation,accountingforalmost26percentofthetotalpowergeneration.Thisboomistheresultoffiveedictsofthelaw:(a)ambitioustechnology-specificmedium-andlong-termtargets,(b)legalobligationonpowergridcompaniestoeaseaccessofREelectricitytothetransmissionsystemsandtopurchasethefullamountoftheon-gridREelectricity,(c)assurancethatREofftakepricesandothercompensationswouldprovideadequatereturnstoinvestorsanddevelopers,and(e)additionofasurchargeoneachkWhconsumedtofinanceaSpecialFundtoprovidesubsidies.TheRenewableEnergyLawwasfollowedbyaseriesoffiscalincentivesatthenationalandprovinciallevels,inparticularvalueaddedtax(VAT)andlandusetaxexemptions,aswellasaccesstopreferentialloans.Otherearliernon-energy-sector-specificpoliciesalsobenefittedthedevelopmentoftheREmarketandindustryatthisstage,namely,theChinaCompanyLawissued(1994),whichallowedthecreationofpublicandprivatecompanies;the‘ElectricityLaw’(1995),whichallowednewentrantsinthepowergenerationsubsectorandmandatedsingle-buyerutilitiestotakeofftheirgeneration;andtheStateCouncil’sElectricPowerSectorReformDecreeNo.5(2002)thatledtotheseparationofgenerationfromtransmissionanddistributionandthecreationofREgenerationcompanies.Thisstagealsosawtheemergenceofclimatechangeandairpollutionpolicies,whichunderlinedtheroleofREdevelopmenttoprotectthelocalandglobalenvironment.ThisincludestheNationalPlanonClimateChange(2014–2020),whichsetaseriesoftargets,includingincreasingtheshareofnon-fossilfuelsinprimaryenergyconsumptionto15percentby2020,achievingCO2emissionspeakingby2030orbefore,andloweringCO2emissionspergrossdomesticproduct(GDP)unitby60–65percentfromthe2005level.Withrespecttolocalpollution,theStateCouncilissued,onSeptember10,2013,the‘ActionPlanforthePreventionandControlofAirPollution’followedbythelaunchofPresidentXi‘EnergyRevolution’in2014,whichdefinedaseriesofguidingprinciplestopromoteanddeploy‘greenandlowcarbon’technologiesonbothsupplyanddemandsides,mobilizingmarketmechanismsandinternationalcooperation.36Theseprincipleswerereflectedinensuingministerialpoliciesandregulationstopromotecleanheatingandincreasingtheshareoflowcarbonenergyinindustrialenergyconsumptionfrom10.9percentin2015to15percentin2020.Duringthisstage,withthesupportofinternationalcooperation,theassessmentofREresourceswasgreatlyimproved.Largewindpowerbaseswerebuiltwithcapacitiesrangingfrom7to36GW,thuscreatingalargemarketforwindpowerinChina,enablingthedevelopmentofwindturbinemanufacturing.Largegovernmentprogramswerealsolaunchedtopromotethetechnologicalprogressandlarge-scaledevelopmentofsolarPV,includingtheGoldenSundemonstrationprojectandtheTopRunnerProjectlaunchedrespectivelyin2009and2015.Thetwomainlessonslearnedduringthisstageareasfollows:(a)AggressiveanduncoordinatedREdevelopmentprogramscanbeeffectiveindeployingREatahighscalebutcanleadtosubstantialinefficiencies,includingahighlevelofcurtailment.In2012,theUnitedStatesgeneratedthesamewind-basedelectricitygenerationasChinawithhalfofthecapacity.Chinahassinceundertakenmanycorrectivemeasurestobettercoordinatewindbasedevelopmentandgriddevelopment,allowingthecapacityfactorofexistingwindassetstoincrease.(b)Feed-intariffsareeffectiveinbuildingcapacitybutcanleadtoballooningsubsidiestounsustainablevolumeincaseofadropofinvestmentcosts.Bytheendof2017,theaccumulateddeficitoftheSpecialFundhadreachedmorethanUS$14billion.ThefastdevelopmentallowedChinatoquicklydevelopastrong-performingandgloballycompetitivewindandsolarPVindustrieswhosebenefitsmighthavecompensatedfortheunderperformanceofcapacitytodate.59.DuringthefirstandsecondstagesofRE,Chinacraftedsoundpolicies,builtastrongtechnologicalbase,andassembledthetalentpooltoembarkonamoreaggressivedevelopmentofwindandPV.However,manyconditionsrequiredforlarge-scaledevelopmenthadstillnotbeenmetinthemid-1990s:•Policyontheroleofrenewableenergyinthefuturemixwasnotclearlydefined.•Theenvironmentalbenefitswerenotreflectedinthepricingsystemandthesubsidiesdeemednecessarytoaddressthismarketfailurewerenotyetinplace.•Themarketsizewaslimitedanddeveloperslackedexperienceinlarge-scaleprojectconstructionandoperation.•ThepotentialandcharacteristicsofREresourceswerenotyetconfirmed.60.Toaddresstheseissuesunderthisnextstage,followingtheassessmentofthepotentialandcharacteristicsofREresources,ChinaadoptedaRenewableEnergyLawthatclarifiedthestatusoftheroleofrenewableenergyandsetambitiousdevelopmenttargets.Thelawwasfollowedbytheimplementationofpoliciesandregulationsthatprovidedawiderangeofincentivestoincreaseinvestmentandbuildasizablemarket,namely,feed-intariffsforwindin2009andPVin2014.ThemanufacturingindustrywasstrengthenedthroughinternationalcooperationprogramswithmoreadvancedcountiesandlaterwiththedevelopmentofastrongerdomesticR&Dbase,whichbecamecapableofinnovation.These37measuresputREdevelopmentonafasttrackandChinawaspropelledtoaleadershippositioninthefield.A.REDevelopmentBoom61.Duringthisstage,theproportionofREintheenergymixincreasedconstantly,makingasignificantdentincoal’slong-reigningsupremacyandcontributingtotheexpansionofChina’sindustrialbaseandeconomicdevelopment.Bytheendof2017,ChinawastheworldleaderinREdevelopment:•Duringthisstage(2005–2017),theinstalledREpowercapacityincreasedby16timesreaching638GW,accountingforalmost37percentofthetotalinstalledpowergenerationcapacity.ThetotalREpowergenerationamountedtoabout1,699TWh,morethanfourtimesthe2005generation,accountingforalmost26percentofthetotalpowergeneration:(a)thecumulativeinstalledwindcapacityincreasedfrom1GWto164GW,includingabout3GWinoffshorewindpowerwitharecordannualcapacityincreaseofmorethan34GWin2015(seeFigure4.1),andthesingleunitcapacityofwindturbinereachedmorethan6MW;(b)thecumulativeinstalledPVcapacitygrewfrom70MWtoslightlymorethan130GW,including30GWofdistributedPVpower;(c)thecumulativeinstalledhydrocapacityalmosttripledfrom117GWtomore344GW,including29GWofpumpstorage;(d)thecumulativeinstalledbiomasscapacityreachedincreased7.5timesfrom2GWto15GW,including7GWofstraw-firedpower,7GWinMSWincinerationpower,andabout450MWinbiogaspower;and(e)thecumulativeinstalledsolarthermalpowercapacityreached24MW,geothermalpowerreached27MW,geothermalheatedareaamountedto650millionm2,andbioethanolandbiodieselconsumptionsreached2.6milliontonsand600,000tons,respectively.Figure4.1:ChinaOn-GridWindPowerInstalledCapacity-60-40-20020406080100120140-100-50050100150200250annualaddedcapacity(GW)accumulativecapacity(GW)annualaddedcapacitygrowthrateInstalledcapccity(GW)AnnualAddedCapacityGrowthRate(%)Source:Studyteam.26•CommercialREutilizationamountedto540milliontce(morethanthreetimeshigherthantheutilizationin2005)andaccountedfor12percentofthenationalprimaryenergyconsumption(about60percenthigherthanthesharein2005).26RenewableEnergyDataBookpublishedbytheChinaNationalRenewableEnergyCenter(CNERC),2019.38B.StrengtheningthePolicyFramework62.OnFebruary28,2005,theStandingCommitteeoftheNationalPeople’sCongress(NPC)adoptedtheRenewableEnergyLawofthePeople’sRepublicofChina(referredtoas‘RenewableEnergyLaw’),whichofficiallytookeffectonJanuary1,2006,andwasamendedonDecember26,2009.Thelawincludedfivekeyinstitutionalarrangements:27•Theannouncementofambitiousoverall,andlatertechnology-specific,REtargetsforthemediumandlongterm,providingclearsignalstodevelopers,investors,andothermarketplayersabouttheexpectedsizeoftheREmarket.•Thelegalobligationonallpowergridcompaniestopurchasethefullamountoftheon-gridREelectricityandeaseaccessofREelectricitytothetransmissionsystems.•Theassurancethatthe‘on-gridprice’28ofREelectricitywouldprovideinvestorsanddevelopersadequatereturnoninvestmentsforthedevelopmentandutilizationofRE.Thepricesweredifferentiatedbyregionandevolvedovertime(seeFigure4.2andFigure4.3)butsupportedtheunprecedenteddevelopmentexperienceinthecountry.•ThesurchargeaddedtoeachkWhsharedtheburdenamongelectricityconsumers.Beginningin2006,allcategoriesofcustomers,exceptelectricityforagriculturalproduction,arechargedCNY0.001perkWh(equivalenttoUS¢0.0125perkWh)in2006.ThechargewasincreasedtoCNY0.019perkWh(equivalenttoUS¢0.29perkWh)in2016.Thechargeamountedtoabout0.25percentoftotalelectricitypricein2006andto3.96percentfrom2016forresidents,0.14percentin2006and2.24percentfrom2016forgeneralindustrialandcommercialconsumers,and0.18percentin2006and2.9percentfrom2016forthelarge-scaleindustry.29However,thefeeforresidentsandconsumerswithcaptivepowerplantsisnotfullyleviedinpractice.•TheestablishmentofaSpecialFundfundedbyconsumerfeesandstatebudgettomakeREelectricitymoreattractivetoinvestors.CustomerfeesaremainlyusedtocoverREincrementalfinancialcostsandstatebudgetfundsarededicatedtosupportdemonstrationprojects,R&Dprograms,resourceassessment,andelectrificationprojectsinremoteareas.63.TheRenewableEnergyLawalsointroducedpreferentialtaxandfundingpolicies.Inaddition,thelawentrustedrelevantgovernmentdepartmentswiththeissuanceandimplementationofrulesandregulations.•ThecompetitivenessofwindandsolarenergyconsistentlyincreasedduringthisstageastheinstallationcostofwindturbinesandPVsystemsdecreasedsignificantly.Regardingwind,thiswasinpartbecausetheoperationalefficiencyofwindfarmsimprovedconsiderablywiththedevelopmentofhigh-precisionwindpatternpredictionmodels.ThesegainswerereflectedintheslightreductioninwindandPVfeed-inpricesinallfourwindandPVclasses(seeFigures4.2and4.3).27WhilethisreportfocusesonlyonlawsandpoliciesdirectlyrelatedtoREdevelopment,itshouldbenotedthatsuchdevelopmentwouldnothavebeenpossiblewithoutimportantreformsandlawssuchasthe‘CompanyLaw’(1994),the‘PowerLaw’(1995),the‘StateCouncilDecreeNo.5’(2002)thatseparatedpowergenerationfromtransmissionanddistribution28OnJanuary1,2006,whentheRenewableEnergyLawwasimplemented,thefeed-intariffdidnotexist.Theon-gridpriceherereferstothepriceofelectricitysoldbythepowerplanttothegrid,whichwasapprovedbytheNDRConacase-by-casebasis.Theon-gridpricereplacedfeed-intariffsforbiomassin2006,forwindin2009,andforsolarPVin2014.29Theelectricitypricesaredifferentindifferentcitiesandregions.Beijingelectricitypriceshavebeenusedaboveasanexample.39Figure4.2:Feed-InTariffforOnshoreWindPower300.610.610.60.580.560.540.540.520.50.510.490.470.20.30.40.50.60.7200920152016IVIIIIIIFeed-Intariffforwindpower(CNY/kWh)Source:Studyteam.64.Before2009,thepriceofwindkWhwassetcompetitivelyafterseveralroundsofconcessionbidding.Before2014,thepriceforsolarPV-generatedkWhwasapprovedonacase-by-casebasis.AsthepriceofPV-generatedelectricitydecreasedfromCNY4perkWhin2008toCNY1.15perkWhin2011,ChineseauthoritiespublishedaPVfeed-intarifftostimulatePVgrowthin2014.ThePVdevelopersrushedtotakeadvantageofthecashwindfallasPVsystemcostsfelldramatically.ThePVfeed-intariffwasadjustedslightlyin2015and2016(seeFigure4.2),buttoolittleandtoolatetocontaintherush,whichputaheavyburdenontheREFundasdiscussedinthenextchapter.Figure4.3:Feed-InTariffforSolarPVElectricity1.000.980.850.950.880.750.900.800.650.00.30.60.91.2201420162017IIIIIIFedInTariffforSolarPower(Yuan/kWh)Source:Studyteam.Note:Seefootnote33.30ThewindresourcesweredividedinfourclasseswithqualityofresourcesdecliningfromClassItoClassIV.Windresourcesareevaluatedatthecitylevelandoneprovincemayincludemorethanoneclassofwindresources.TheNDRCsethigherfeed-intariffsforlowerresourceclassestoincreasetheattractivenessofwinddevelopment.ThesameapproachwasfollowedforPV.4065.Sincethepromulgationandimplementationoftherenewableenergylawin2006,therelevantcentralgovernmentdepartmentshaveissuedmultiplepoliciesandnoticesrelatingtoREstrategicplanning,regulation,pricing,andsoon.AllprovincialandautonomousregiongovernmentshavealsoformulatedspecialREdevelopmentorenergyplansintegratingrenewableenergy.Thisopenedthedoorforthelarge-scale,diversifieddevelopmentandutilizationofrenewableenergyandledtounprecedentedmarketexpansion.Thecostofrenewableenergy,especiallywindandPV,droppedsignificantlywhilethequalityandreliabilityoftheequipmentincreased.ThescaleoftheChinesemarketandlow-costproductioncapacityofPVcellsandmodulesledtoanaccelerationofthecostreductiongloballyandaquickincreaseofChina’sshareofglobalmarketfrom2006onward(seeFigure4.4).Toalesserextent,asimilarimpactoftheChinawindenergyindustrydevelopmentwasobservedontheevolutionoftheglobalpriceofwindturbines.Moreover,theindustrialsystemgraduallyimproved,formingasolidfoundationforsustainingREdevelopmentinthecountryandparticipatingintheglobalREmarket.66.In2007,theNDRCissuedtheMedium-andLong-TermDevelopmentPlanforRenewableEnergyindicatingthatREdevelopmentinChinaduringfrom2007–2020wouldrelyonhydro,biomass,wind,andsolarenergy.Itstressedtheneednotonlytoacceleratethedevelopmentofsolarpowerbutalsotoencouragesolarheatutilization.Theplanlaidoutguidingprinciples,mainmeasures,focusareas,andsafeguardmeasuresand,mostimportantly,setthespecifictargetofachievinga15percentREshareintheprimaryenergyconsumptionby2020.Thisestablishedthefoundationfortheformulationofthe11th,12th,and13thFYPs:•Thenational11thFYP,preparedbeforethecreationoftheNEAonAugust8,2008,defined,forthefirsttime,specificgoalsandtargetsnotonlyfortheoverallREdevelopmentbutalsoforalltechnologiesdefinedintheRenewableEnergyLaw.41Figure4.4:JointEvolutionofGlobalPVPriceandChina’sShareofGlobalPVMarketSource:Studyteam,basedonBloombergNewEnergyFinance,Maycock,BatteryUniversity,MIT.•Duringthepreparationofthe12thFYP,theNEAformulatedfourspecialplansforhydropower,windpower,solar,andbiomassenergy,toaccelerateREdevelopmentasallofthesetechnologiesweregainingmomentuminChinaandglobally.The12thFYPwentbeyondnationalgoalsandtargetsandpromoteddecentralizeddevelopmentthrough‘NewEnergyCities’andgreencountypilots.Italsopromoted,forthefirsttime,thedevelopmentofemergingREsuchasgeothermalenergyandoceanenergy.•Attheoutsetofthe13thFYP,China’sREdevelopmentwasatitspeak.Duringthisstage,thismomentous,andsometimeshasty,developmentledtosubsidyamountsthatheavilyburdenedthenationalbudgetandthreatenedthesector’ssustainability.The13thFYPattempted,forthefirsttime,tocoordinatethedevelopmentofthepowergridandhugewindandsolarbasesinthenorthwesternregions.MostofitsREtargetshavebeen,orarenearly,achieved.67.TheRenewableEnergyLawdeviseddiversifiedincentivestoboostthedevelopmentofrenewableenergy.•Fiscalincentives.Windpower,PV,andotherrenewableenergyequipmentbenefittedfromVATandincometaxdeductions(seeTable4.1).The2008‘NoticeoftheMinistryofFinanceandtheStateAdministrationofTaxationontheComprehensiveUtilizationofResourcesandOtherProducts’andfollow-upprovisionsissuedin2015aswellasthe2014‘NoticeontheTaxPolicyforNon-grainBasedFuelEthanol’providedsignificantVATreductionstowind,PV,andbiomasspowergenerationas42wellasbiomassheatingandbiofuels.Taxincomedeductionsorexemptionswereappliedonlytoemergingadvancedtechnologiesandproductsortoinfrastructureprojectsinpoorand/orregionswithoutaccesstoelectricityandcleanenergy.Fewbiomasspowergenerationprojectswereeligibleforthelatterpolicies.Table4.1:SummaryofRETaxDeduction31CategoryStandardTaxRateDeductionRateVATFrom17%to13%SolarPVandwindpowerare50%exemptedfromVAT.31Biomasspowergenerationandbiomassheatingbenefittedfroma100percentrebateonVAT.Non-grainbioethanolhas100%VATexemption.Biodieselhad100%VATexemptionin2008,whichwasreducedto70%in2015Incometax25%REpowergenerationprojectsareexemptedfromincometaxinthefirstthreeyearsandpayonlyhalffromthefourthtothesixthyear.Non-grainbioethanolisexemptedfromincometax.LandusetaxCNY0.6–30perm2(equivalenttoUS$0.09–4.5perm2)Hydropowerstationsandtransmissionlinesareexemptedfromlandusetax.Non-hydroREpowerplantsareexemptedfromlandusetaxiftheprojectisbuiltonunusedlandsuchastheGobidesertandgrassland.•Landusetaxexemptions.In2013,theInnerMongoliaAutonomousRegiontemporarilyexemptedelectricpowerlineslinkingwindandhydropowerprojectstothegridfromlandusetaxesaslongastheydidnotalterthefarmingandhusbandrypatternsoftheland.In2017,theLetteroftheNationalEnergyAdministrationonSolicitingOpinionsontheNoticeonReducingTaxBurdensonEnterprisesintheRenewableEnergySectorproposedthatREpowergenerationshouldbeexemptedfromfarmlandoccupancy,landuse,andothertaxesonthealterationofthepurposesofconcernedlanduses.The2015“OpinionsoftheMinistryofLandandResources,NationalDevelopmentandReformCommission,MinistryofScienceandTechnology,MinistryofIndustryandInformationTechnology,MinistryofHousingandUrban-RuralDevelopment,andMinistryofCommerceonLandUseforSupportingtheDevelopmentofNewIndustriesandNewBusinessTypesandPromotingMassEntrepreneurshipandInnovation”prescribedthatunusedlandsuchastheGobidesertandwastelandsleasedtodevelopPVandwindpowerprojectscouldstillbedeclared,ifthelandsurfaceisnotchanged,asunused/unchangedlandintheannualnationallandchangesurvey,andthereforenotbesubjecttolandusetaxes.However,ifthelandwastobepermanentlyoccupieditwouldberegardedasusedlandandsubjecttolandacquisitionrulesandtaxationaccordingtoprevalentlegalandregulatoryprocedures.•Preferentialloanpolicy.The2016“OpinionsoftheNationalDevelopmentandReformCommissionandtheStateCouncilLeadingGroupOfficeofPovertyAlleviationandDevelopmentonImplementingPovertyAlleviationWorkthroughPVPowerGeneration”instructedthetwomajordevelopmentbanks,theChinaDevelopmentBankandAgriculturalDevelopmentBankofChina,toprovidepreferentialloansforPVpoverty-alleviationprojects.TheloaninterestwouldbeadjusteddownwardstoacertainextentfollowingtheCentralBank’sguidance.•Otherpolicies.WhilethisreportfocusesonlyonthenationallawsandpoliciesdirectlyrelatedtoREdevelopment,manyothernationalmacroeconomicandsectorallawsandpoliciesandprovincialandloweradministrative-levelincentivescontributedtothedeploymentofREatsuchalargescale.Someexamplesareprovidedbelow,althoughitiswellbeyondthepresentreport’s31SolarPVVATexemptiondiscontinuedin2019.43scopetoprovideacomprehensivereviewofallthelawsandpoliciesthatmadesuchsuccessfuldevelopmentpossible:oTheChinaCompanyLawissuedin1994andthenamendedseveraltimesstatesthat“TheCompanyLawofthePeople’sRepublicofChinahasbeenenactedinordertostandardizetheorganizationandactivitiesofcompanies,protectthelawfulrightsandinterestsofcompanies,shareholdersandcreditors,safeguardthesocialandeconomicorderandpromotethedevelopmentofthesocialistmarketeconomy.”ThisallowedthecreationofpublicandprivatecompaniesthatdevelopedREprojects.The“ElectricityLaw”(1995)allowednewentrantsinthepowergenerationsubsectorandmandatedsingle-buyerutilitiestotakeofftheirgeneration.TheStateCouncil’sElectricPowerSectorReformDecreeNo.5(2002)ledyearslatertotheseparationofgenerationfromtransmissionanddistributionandthecreationofmanycompanies,suchasEHDCandtheThreeGorgesCompanythatcontributedgreatlytothedevelopmentofhydropowerandlargestate-ownedgenerationcompanies,whichenabledtherapiddevelopmentofREpossible.oManyprovincesalsoissuedvariousincentivepoliciesatdifferentstagestopromotethedevelopmentofrenewableenergies.Forinstance,Beijingissuedasolarenergypromotionpolicyin2009andadistributedsolarPVpromotionpolicyin2014,whichincludeddetaileddevelopmenttargets,technicalrequirementstomeetqualitystandardsandcomplementstothenationalincentivestosupportREdevelopment.FordistributedsolarPV,thepolicyaddedaninstallationsubsidyofCNY1.0(US$0.16)perWthatwouldbeprovidedforthreeconsecutiveyears,subjecttothesystemperforminginaccordancetotherequiredqualityspecifications.68.REdevelopmenthasalsobenefittedfrompoliciesthatemphasizedtheroleofREdevelopmenttomitigateclimatechangeimpactsandcontributetopollutionpreventionandcontrol,includingcleanheatinginthenorthernregion,industrialtransformation,andgreenmanufacturing:•TakingintoaccountChina’svulnerabilitytotheadverseeffectsofclimatechange,theNDRCissuedtheNationalPlanonClimateChange(2014–2020)in2014.Theplan,whichemphasizedtherapid,diversified,andsustaineddevelopmentofnon-fossilfuelstoincreasetheirshareinprimaryenergyconsumptionto15percentby2020,wasoneofthefirstmajoractionstoaddressthecontrolofgreenhousegasemissions.Theplanstressedtheneedto(a)develophydropowerinanorderlyandscientificwayandcreatepumpedstoragepowerstationstoeaseintegrationofvariableREtechnologiesintothegrid;(b)vigorouslydevelopwindpowerandacceleratethecompletionoftheeightgigawatt-windpowerbases32plannedinNorthChina,NortheastChina,andNorthwestChina;(c)initiatethedevelopmentofoffshorewindfarms;(d)promotethediversifiedutilizationofsolarenergybydevelopinglarge-scalePVpowerstations,carryingoutdemonstrationprojectsof‘NewEnergyCities’andmicro-gridsystemsbasedonrenewableenergy,andacceleratetheimplementationofbuildingintegratedPV(BIPV)projects;(e)prioritizeandacceleratebiomass-basedprojectsincludingcombinedheatandpower(CHP)biogas,MSWincinerationpower,landfillgaspower,andtheindustrializationofwoodpellets;and(f)improvethedevelopmentandutilizationofotherREsourcessuchasgeothermalenergyandoceanenergy.Inaddition,theplanencouragedlargeenergyconsumerstorelyonREtoreducetheircarbonfootprintsandproposedtoundertakelowcarbonprovinceandcitypilotstodevelopdiversifieddecentralizedREapplications.InJune2015,ChinaissueditstheNationallyDeterminedContribution(NDC)specifyingthat“Basedonitsnationalcircumstances,developmentstage,sustainabledevelopmentstrategyandinternational32Thegigawattwindpowerbasesarelarge-scalewindareasdevotedbythegovernmentforwindpowerdevelopmentandprovidedwithappropriateconditions,suchasspecialpowertransmissioncorridor.44responsibility.”Chinacommitstothefollowingactionsby2030:(a)achievingthepeakingofCO2emissionsandmakingbesteffortstopeakearlier;(b)loweringCO2emissionsperunitofGDPby60–65percentfromthe2005level;(c)increasingtheshareofnon-fossilfuelsinprimaryenergyconsumptiontoaround20percent;and(d)increasingthe2005foreststockvolumebyaround4.5billionm3.•OnSeptember10,2013,theStateCouncilissuedthe‘ActionPlanforthePreventionandControlofAirPollution’asmostofthecountrywasplaguedbydisastrousincreaseoflocalpollutantsstemmingfromunbridleduseofcoal.Theactionplanalsostressedtheneedtofurtherdiversifythedevelopmentofrenewableenergy.•Asconcernsaboutlocalpollutionwerebroughttotheattentionofthehighestdecision-makinglevel,PresidentXilaunchedthe‘EnergyRevolution’in2014to(a)changeenergyconsumptionpatternsbycurbingunreasonableenergyconsumptionandfurtheringChina’ssuccessfulenergyefficiencyconservationefforts;(b)diversifyenergysupplysourcesbystrengtheningenergytransmissionanddistributionnetworksandpromotingenergystorage;(c)promoteinnovationanddeploy‘greenandlowcarbon’technologiesandadoptgreenerandmoreeffectiveindustryandbusinessmodels;(d)buildcompetitiveenergymarketstoallowtheformationofenergypricesthatwouldensureefficientsupplyandoptimaluseofresources;(e)completeandimprovethelegalsystemgoverningtheenergysector;and(f)effectivelystrengthenandtransparentlyuseinternationalcooperationandresourcestoachieveenergysecurityandsustainabledevelopmentoftheenergysector.33ToachievetheEnergyRevolutionobjectivesandmeetChina’sclimatechangecommitmenttopeakcarbonemissionsbefore2030,decision-makersatdifferentadministrativelevelsareemphasizingtheneedforfurtheringREdevelopment,rethinkingcurrentpoliciesandregulationmechanisms,adjustingexistingenergysupplyandconsumptionmodels,andfosteringinnovationandprovidinga‘greenandlowcarbon’developmentmodel.•Bytheendof2017,10ministriesandcommissions,includingtheNDRC,NEA,andMoF,issuedthe‘PlanforCleanHeatinginWinterintheNorthernRegion(2017–2021)’.Theplanrequiredthatthenorthernregionmaximizescleanenergyuseforheatinginwinter.Selectionofappropriateheatsourceswastobeadaptedtolocalconditionsandcouldincludegeothermal,biomass-basedcleanheating.Italsosetstrictenvironmentalstandardsandrequirementsforbiomass-basedheatingandpromotedsolarandelectricheatinginareaswithlarge-scalewindandPVpowergenerationpotentials.•Theindustrialsectorremainsthelargestenergyconsumer.InJune2016,theMinistryofIndustryandInformationTechnology(MoIIT)issuedtheGreenDevelopmentPlanfortheIndustrialSector(2016–2020)toacceleratethegreentransitionoftheindustrialsector.Accordingtotheplan,theshareofgreenandlowcarbonenergyinindustrialenergyconsumptionwouldbeincreasedfrom10.9percentin2015to15percentin2020.ItproposedtovigorouslysubstitutefossilfuelswithgreenandlowcarbonREinlargeindustrialcomplexesandindustrialparks.69.ThesepoliciesprovideddirectandindirectsupportforREdevelopmentandthecreationofamassivemarketforalltechnologiesbyinitiatingdemonstrationandpilotprojects,settingambitiousquantifiedtargets,andprovidingclearincentivestodevelopersandmarketplayers.33Thisdescriptionislimitedtotheaspectsdirectlyrelatedtotheenergysector.45C.InternationalCooperation70.Chinaintensifiedinternationalcooperationactivitieswithmulti-andbilateralinstitutions.ThefollowingexamplesillustratetheeffortsdeployedbytheChinesegovernmenttoexchangeandshareknowledgetopromoteREdevelopment,inparticulartolearnfrominternationalexperiencewithrespecttopoliciesandinstitutionaldevelopmenttoscaleupinvestmentinRE:•CRESPIIaimstomoveREdevelopmentinChinafromthequantitativescale-upinPhaseItosustainedgrowthunderPhaseII,withafocusonefficiencyimprovement,smoothgridintegration,andcostreduction.CRESPIIhasprovidedsubstantialsupporttoanintegratedapproachofREplanningduringthepreparationofthe13thFYP.Inadditiontosupportingpolicy,regulatory,andtechnicalsolutionsforREgridintegration,CRESPIIhasalsosupportedthegovernmentinaddressingemergingREpricingandsubsidyissuesstemmingfromtheimportantdropinRE,especiallyPV,pricestoreducetheimportantdeficitoftheREFund.Furthermore,CRESPIIcontinuestopromotetechnologyimprovementforcutting-edgeREtechnologiessuchasoffshorewindandconcentratedsolarpower(CSP)toimprovequality,reducecost,andbuildcapacity•TheSinoDenmarkWindEnergyDevelopment(WED)ProgramwasofficiallylaunchedinJune2006.TheDanishgovernmentprovidedaEUR6milliongranttofinanceactivitiestobeundertakenbytheprojectoverafour-yearimplementationperiod.ItmainlyprovidedcapacitybuildingandknowledgetransferinthefieldofwindenergyinHeilongjiang,Jilin,andLiaoningProvinces.TheSinoDanishwindenergydevelopmentprojectisthefirstSinoforeigngovernmentcooperationprojectdedicatedsolelytowindenergydevelopment.ItintroducedDenmark’sleadingtechnologyandmanagementexperienceinthefieldofwindpowertoChina’swindpowerindustryandadaptedthemtoChineseconditions.•TheSinoDenmarkRenewableEnergyDevelopment(RED)ProgramisthelargestcooperationprojectinthefieldofrenewableenergybetweenChinaandDenmark.Itstartedinearly2009andendedin2014.ThegoalwastoimprovetheinstitutionalcapacityoftheChinesegovernmentindevelopingREanddealingwithclimatechangeandtostudyandformulateacleanenergydevelopmentstrategyandimplementationroadmap.Afterfiveyearsofimplementation,theprojecthassuccessfullycompletedtheexpectedobjectivesandestablishedanationalREdecision-makinginstitution—theCNREC.Sinceitsestablishmentin2012,theCNREChascompletedthepreparationofthe12thFYPforREdevelopmentandChina’s2050SustainableEnergyDevelopmentStrategy.•SinoDanishbiomassCDMprovincialcapacity-buildingproject.AcooperationagreementwasofficiallysignedinDecember2006.Thethree-yearprojectbudgetwasfundedbyaDanishgrantamountingtoDKK9.6million(aboutUS$1.43million).Theprojectincluded7subprojectsatthenationalleveland10subprojectsattheprovinciallevel.TheimplementationoftheprojectimprovedChina’stechnologicalcapacityinbiomassenergydevelopmentandutilization.•TheCDMandcarbontradingundertheKyotoProtocolweremajorfinancingsourcesintheearlydaysofREdevelopmentinChina.Severalenterprisesimprovedthefinancialreturnsoftheirprojectsbysellingtheiremissionreductionstotheprogram.ThismadeseveralREdevelopmentprojects,fundedlocallyorbymultilateralbanks,possible.•China-USREpartnership.Amemorandumofcooperationwassignedduringthe2009visitoftheUSPresidenttoChinatoestablishaChina-USREpartnershiptocombatclimatechange.Thetwo46countries“embracedavisionofwide-scaledeploymentofrenewableenergyincludingwind,solarandadvancedbio-fuels,withamodernelectricgrid,andagreedtoworktogethertomakethatvisionpossible.”34Foursessionsof‘ChinaUSRenewableEnergyIndustryForum’wereheldin2010,2011,2013,and2015.Theseallowed(a)theestablishmentoftheChinaVariable-GenerationGroup(CVIG)andPhotovoltaicQualityAssurance(PVQA)workinggroups,whichundertookseveralresearchandcooperationactivities;(b)thecooperationonQinghaiconcentratedsolarpowergeneration(CSP)demonstration;and(c)thepreparationofseveralreportsonREgridconnection,distributedpowerandmicro-grid,and‘NewEnergyCities’.ThepartnershippromotedmutualunderstandingandincreasedcooperationbetweentheREindustriesofthetwocountries.D.KeyProjects71.Tomeetboomingmarketneeds,severalinitiativeswereundertakenforthemomentousdevelopmentofwindfirstandthensolarinthelatteryearsofthethirdstage.Theyincludedimprovingtheassessmentofwindresources;planningforthedevelopmentofgigawattwindbases,whichwerefacingspecificandunprecedentrisks;anddevelopingspecificprogramstopromotetheboomofPVdevelopment.•Improvedthequalityofwindenergyandsolarresources.TheChinaMeteorologicalAdministration(CMA)launchedanewroundofwindenergyresourceassessmentin2014,basedontheresultsofthe‘NationalWindEnergyResourcesDetailedInvestigationandEvaluation’releasedin2010.Measurementswerecollectedfromnearly1,000windmastsandwereusedtoimprovesimulationresults.The‘ChinaWindEnergyandSolarResourcesAnnualCommuniques’,publishedbytheCMAsince2014,providedupdatedinformationanddetailedanalysesaboutChina’swindandsolarresourcesannuallyandguidedthedevelopmentofsolarPVandwindpowerstations.ThisnotonlyraisedtheefficiencyofpowerstationsbutalsoprovidedrecognizedbenefitstodistributedsolarPVanddecentralizedwindpowerprojectsasthepublisheddatacontributedtobettersiteselection.•Biomassresourcesevaluation.In2010,theMoAbeganinvestigatingandevaluatingstrawresourcesinChina.In2009,China’stheoreticalcropstrawresourcesamountedto820milliontons(airdriedand15percentmoisturecontent,roughly410milliontce),including(a)205milliontonsofricestraw(roughly107milliontce),accountingfor25percentofthetotaltheoreticalcropstrawresources;(b)150milliontonsofwheatstraw(roughly80milliontce),accountingfor18percentofthetotal;(c)265milliontonsofcornstraw(roughly140milliontce),accountingforabout32percentofthetotal;(d)about26milliontonsofcottonstraw(roughly13milliontce),accountingfor3.2percentofthetotal;(e)37milliontonsofoilcropresidues(mainlygrapeandpeanut,roughly19milliontce),accountingforabout5percentofthetotal;(f)about27milliontonsofbeanstalk(roughly14milliontce),accountingforslightlymorethan3percentofthetotal;(g)22milliontonsofsweetpotatostraw(roughly11milliontce),accountingforalmost3percentofthetotal;and(h)about87milliontonsofotherstrawandresidues(roughly46milliontce),accountingforabout11percentofthetotal.However,despitethecomprehensiveassessmentandevaluationoftheresources,littlereliabledataabouttheirlocationanduseareavailable,hinderingtheoptimaluseoftheresources.•Developmentoflargewindbases.In2009,Chinastartedthepreparatoryworkforlargewindfarmsandplannedtobuildsevenwindpowerbasesinsixprovincesandregions:Anearly36GWbaseinJiuquanGansuProvince;a20GWbaseinHamiXinjiangAutonomousRegion;a20GWbaseinWesternMongoliaanda30GWbaseinEasternMongolia;a10GWbaseinthecoastal34FactSheet:U.S.-ChinaRenewableEnergyPartnershipNovember17,2009.https://china.usc.edu/fact-sheet-us-china-renewable-energy-partnership-november-17-200947andnorthernareasofHebei;a10GWbaseinJiangsu(including7GWinintertidalareas);anda23GWbaseinwesternJilin(mainlyinSongyuan,Baicheng,andothercities).In2012,twomorebaseswereadded:15GWinHeilongjiangand15GWinShandong.Theselarge-scalebasescreatedahugemarketforwindpowerinChinaandprincipallycontributedtothedevelopmentofwindturbinemanufacturingandtheensuingtechnologicalandindustrialprogress.Itcontributedtotheachievementofmedium-andlong-term3percenttargetcontributionofnon-hydropowerrenewableenergyinthepowersupply.However,thisprogresscameatacost,aslowefficiencybroughtaboutbyineffectivedesignandwakeeffect35andimportantcurtailmentsintheearlyyearsofoperation,whichthegovernmentbegantoaddressattheendofthisstage.•TheGoldenSundemonstrationprojectwasdevelopedbytheMoF,MoST,andNEAin2009.Itsgoalwastopromotethetechnologicalprogressandlarge-scaledevelopmentofsolarPVandacceleratethedeploymentofemergingandinnovativePVapplicationsaswellassupportdemonstrationapplicationsofsolarPVinvariousfieldstoexpandthePVmarketandspurthemanufacturingofbetter-qualityequipmentandencourageinnovation.Theprogramprovidedsubsidiesamountingto(a)50percentoftotalinvestmentcosts,includingrelatedtransmissionanddistributioncosts,toeligiblePVpowerstationsprojectsand(b)70percentofthetotalinvestmentcoststoeligibleoff-gridprojectsinremoteand/orpoorareas,especiallythosewithoutaccesstoelectricity.Thedemonstrationschemewasimplementedduring2009–2013andsupportedthreetypesofprojects:(a)222powergenerationprojectsontheusersideconnectedtothegrid,(b)18solarPVprojectsinareaswithoutelectricity,and(c)35largegrid-connectedsolarPVfarms.TheimplementationoftheseprojectsdevelopedasignificantmarketforChina’ssolarPVpower.Itattractedalargenumberofdevelopersandenergyservicescompanies(ESCOs)andcontributedtothedevelopmentofathrivingPVmanufacturingindustry.•TheTopRunnerProjectwaslaunchedbytheNEAin2015tosupportthedeploymentofemergingandmoresophisticatedPVtechnologiestoreducetheircost.TheTopRunnerProjectwasdesignedtosupportexperimentalandinnovativePVdemonstrationprojectsandacceleratethedeploymentofthemostpromisingones.Thisultimatelyreducedinvestmentcostsandacceleratedtheadoptionoftechnicalbreakthroughsandinnovationbythefast-growingmarket.Theprogramwasphasedinover2015–2017.Itledtotheinstallationof1GWin2015,5.5GW(in5supportedbases)in2016,and6.5GW(in13supportedbases)in2017.Moreimportantly,theprogramallowedPVmanufacturingenterprisestosignificantlyimproveandintroduceadvancedmanufacturingtechnologiesandexpandtheirproductioncapabilitiesofstate-of-the-artandhigh-qualitysystems.Further,theaverageofbidpricesproposedbythebasedeveloperswasCNY0.2perkWh,20percentlowerthanthePVfeed-intariffatthetime.Theprogram’saveragepriceprovidedearlysignalsaboutthehighlevelofthePVfeed-intariffandcontributedtotheslightrevisionspresentedinparagraph62.Itshouldhavealsobeenconsideredasanearlywarningaboutthefinancialproblemsdiscussedinthenextchapter.E.LessonsLearned72.SeverallessonslearnedduringthisstagearebeingconsideredforChina’sfutureREdevelopmentandforcountriesembarkingonambitiousREdevelopmentprograms:35Thewakeeffectistheaggregatedinfluenceontheenergyproductionofthewindfarm,whichresultsfromthechangesinwindspeedcausedbytheimpactoftheturbinesoneachother.Source:WindEnergy:TheFacts.https://www.wind-energy-the-facts.org/wake-ef-fect-7.html.48•AggressiveanduncoordinatedREdevelopmentprogramscouldbedisruptive,lessthanoptimallyefficient,andcapturedbyvestedinterests.Thehastylaunchofthewindconcessionprogramfocusedmainlyonbuildingcapacityfastwithanadministrativelycappedpriceandmanagedtoincreasewindpowercapacityatanunprecedentedandunmatchedlevel.However,itcameatacostas,in2012,theUSgeneratedthesamewind-basedelectricitygenerationasChinawithhalfofthecapacity(seeFigure4.3).TheprogramwascapturedbyfinanciallyandpoliticallypowerfulSOEsthatmanagedtorenegotiatetheirbiddingpriceswithgovernmententitiestosecurehigherlevelsofsubsidies.ItmusthoweverbenotedthatsinceChinaundertookmanycorrectivemeasurestoreducewakeeffect,improvetheprogram’sdesign,andbettercoordinatewindbasedevelopmentandgridextensionandreinforcement.Theseledtoincreasedcapacityfactorofexistingwindassets.Inaddition,thefastdevelopmentallowedChinatoquicklydevelopastrong-performingandgloballycompetitivewindindustrywhosebenefitsmighthavecompensatedfortheunderperformanceofwindcapacitytodate.Figure4.3:WindCapacityandElectricityGenerationinChinaandtheUnitedStatesSource:Image_TsinghuaUniversity/HarvardUniversity.Fairley,Peter.2016.“WhyChina’sWindEnergyUnderperforms.”IEEESpectrum.May23,2016.•Feed-intariffsareeffectiveinbuildingcapacitybutcouldleadtoinacceptablelevelsofsubsidiesincaseofadramaticdropofactualinvestmentcosts.Windpowerfeed-intariffsworkedwellinGermanyandChinaasbothcountriesquicklydevelopedasizableshareofwindpowercapacitycomparedtotheirtotalpowercapacities.InGermany,feed-intariffdevelopedwithoutdisruptionaswindpowercostdecreasedgraduallyandslowlyovertime.However,inChina,thefeed-inPVtariffpromptedarushtobuildcapacityasfastaspossibletotakeadvantageofthehighon-gridpriceastheinstallationcostofPVsystemsquicklybeganfreefalling.AlthoughsmallprivateenterprisesandESCOscontributedtotheexplosivegrowth,itwasmainlyledbypowerfulandfinanciallypowerfulSOEs.TheRESpecialFundthenfailedtocompensatedeveloperstimely,witharrearsextendingtothreeyearsinsomecases.Bytheendof2017,theaccumulateddeficitoftheSpecialFundhadreachedmorethanUS$14billion.Thefirstcasualtieswerethesmallcompaniesthatborrowedexcessivelyanddidnotmanagetomeettheirdebtbecauseofthedelayedcompensationpayments.China,alongwithmanyothercountries,abandonedfeed-intariffsandembarkedonauctionprogramstosustainitsREdevelopmentprogram,asdiscussedinChapter5.49Chapter5.TheWayForward(Stage4:2018toPresent)KeyMessagesBytheendof2020,theshareofChina’scommercialrenewableenergyamountedtoabout13.6percentofthenationalprimaryenergyconsumption,comparedto4percentin1980andabout6.5percentin2005.Thenon-hydroREinstalledcapacityincreasedto564GWandthepowergenerationincreasedto860TWh,bothalmost300timeshigherthanthe2005capacityandgeneration.Thesuccessachievedisundeniableandstaggeringasmostofthetargetsofthe13thFYPwereextensivelyexceeded.However,attheendofthethirdstage,severalissuesemergedthreateningthesustainabilityofREdevelopment,mainly(a)lowefficiencyofexistingwindandPVassetsevidencedbyverylowcapacityfactors,(b)ballooningsubsidiesasfeed-intariffsremainedhighdespiteasignificantdecreaseofwindpowerequipmentanddecreaseinPVsystemcosts,and(c)lackofinterprovincialpowertradingleadingprovincestodeveloptheirownsitesevenwithpoorresourcestomeetREprovincialtargets.Themeasurestakenbydecision-makersatthehighestlevelduringthefirstthreeyearsofthefourthstageindicatethatfutureREdevelopmentwouldrelymoreonmarket-orientedanddecentralizedapproachestoimprovecost-effectivenessandputthecountryonagreenerandsustainablepath.In2017,threeyearsafterthelaunchofthe‘EnergyRevolution’,theNDRCandNEApublishedthe‘EnergyProductionandConsumptionRevolutionStrategy(2016–2030)’toguideallgovernmentdepartmentsandthewholesocietytoaligntheirpracticeswiththeprinciplesofthe‘EnergyRevolution’strategy,includingthefollowing:•Formingaunifiedandopenenergymarketwithorderlycompetition.Themarketwillplaythedecisiveroleinallocatingresourcesandpriceformation.•Establishing,improving,andcompletingthelegalframeworkgoverningtheenergysector,especiallybydevelopinganEnergyLaw.Thenewlegalsystemwouldbalancetheinterestsofallparties,strengthenenergyregulationsandsupervision,overrideobsoletelawsandregulationslaggingbehindtherapiddevelopmentofthesector,andremoveloopholesandinconsistenciesthatplaguedREdevelopment.•Buildingthenew‘green,low-carbon,secure,andefficient’energysystem.By2030,non-fossilenergyshareinprimaryenergyconsumptiontargetwillincreasefrom20percentin2030to50percentin2050.SeveralroundsofwindandPVauctionswereinitiatedbytheNDRCandNEAandresultedinbiddingpricessignificantlylowerthan‘feedintariffs’.TheauctionproceduresandselectioncriteriaimprovedasexperienceaccumulatedanditwasdecidedthatfuturewindandPVpowercapacitieswillbeprocuredthroughauctions.50In2019,theNPCcarriedoutthe‘PerformanceEvaluationoftheRenewableEnergyLaw’.TheevaluationgroupsuggestedrevisingtheRenewableEnergyLawtoadaptitsprovisionstocurrentmarketconditions;clarifythelegalresponsibilitiesofpowergrid,oil,gas,heat,andotherenterprises;andsetminimumefficiencystandardsforREassets.OnApril10,2020,anewdraftwasswiftlypreparedandcirculatedbytheNEAtosolicitopinionsofallconcernedinstitutions.ThedraftEnergyLawthathasbeendisclosedforpublicconsultationismoreexplicitaboutChina’sambitionandcommitmenttoensurehealthyandsustainableREdevelopment,including(a)givingaprominentroletoREintheenergystructureandadjustingandoptimizingtheenergyindustryandconsumptionstructuretoalignthemwiththeEnergyRevolutionprinciples;(b)allocating,forthefirsttime,REproductionandconsumptiontargetstoprovincesinthemid-andlong-termsocialandeconomicdevelopmentplans;(c)aligningenergydevelopmentwiththecountry’sclimatechangecommitmentsandlocalpollutionreductionobjectives;and(d)stressingthatproducersandconsumershavetheobligationtocontributetothecountry’sobjectivesrelatingtolocalpollutionandGHGemissionreductionobjectivesandthatproducershavetheobligationtoreduceemissionsandenvironmentalimpactduringconstructionandproduction.Severallessonslearnedduringthisstage,onwhichtheChineseauthoritieshavebeentakingactions,canbeusefulreferencesforothercountriestryingtobuildawell-functioningREmarket:(a)abruptpolicyandregulatorychangesareconducivetomarketturmoil,(b)uncleardelineationofregulationresponsibilitiesamonggovernmentagenciesanduncoordinatedexerciseoftheseresponsibilitiescanderailtheimplementationofsoundpolicies,and(c)auctionsbasedonlyonpriceleadtounfaircompetitionandfailuretodeliver.73.Bytheendof2020,theshareofChina’scommercialrenewableenergyamountedtoabout13.6percentofthenationalprimaryenergyconsumption,comparedto4percentin1980andabout6.5percentin2005.Thenon-hydroREinstalledcapacityincreasedto564GWandthepowergenerationincreasedto860TWh,bothalmost300timeshigherthanthe2005capacityandgeneration.74.Hydropower,windpower,andsolarPVhavebecomethemainpowersourcesinsomeregions.Solarthermalutilization,geothermalenergy,andbiomasshavebecomeimportantsubstitutesandsupplementsforurbanandruralcleanheatingandcleanfuel.36ThistremendousgrowthelevatedtheroleofthenewRE(PVandwind)fromcomplementarypowersourcestotraditionalonesandtheybegandisplacingcoalpowerplants.Asanexample,120GWofnewcoalpowerplantswerecancelledin2017andcoalovercapacitybecameaseriousprobleminmanyprovinces.Anationaldebateensuedaboutthelong-termprospectofREdevelopment.75.Themomentousgrowthwasmainlydrivenbyatop-downapproachandnationalandprovincialpoliciesmandatingREuseandsupportedbysubsidiesmainlyfromtheREFundandspecialnationalandprovincialprograms.However,severalissuesalsoemerged,mainly(a)lowefficiencyofexistingwindandPVassetsevidencedbyverylowcapacityfactors(seeFigure5.1);(b)ballooningsubsidiesasfeed-intariffsremainedhighdespiteasignificantdecreaseofwindpowerequipmentandsubstantialdecreaseinPVsystemcosts37;and(c)lackofinter-provincialpowertradingleadingprovincestodeveloptheirownsitesevenwithpoorresourcestomeetREprovincialtargets.76.ThischapterisdedicatedtothepoliciesandinitiativesundertakenbyChineseauthoritiestoaddresstheseissuesandmovetowardahigherREpenetrationintheenergymixby36Useofethanolgasolineiscurrentlymandatoryinmorethan15provincesinChina.37RecentlythegridparityhasgraduallybeenintroducedforPVandwind.51•AssertingthepriorityofREdevelopmentanddefiningmoreambitiousREdevelopmenttargetsinanewstrategybackedbyfirst-orderlegalinstruments,whichwouldcontributetomobilizingthewholesocietytoactivelypromoteREdevelopmentandweakeneffortsbyvestedintereststocontainit;•IncreasingtheflexibilityofthepowersystemtomakeitabletoabsorbahighshareofintermittentRE;•Revisingandcompletingcurrentpoliciesgoverningtheenergysectortopromotemoremarket-orientedanddecentralizedREdevelopment;and•Rethinkingexistingenergysupplyandconsumptionmodelstorealizemoreefficientallocationofresources.77.Themeasurestakenbydecision-makersatthehighestlevelduringthefirstthreeyearsofthefourthstageindicatethatfutureREdevelopmentwouldrelymoreonmarket-orientedanddecentralizedapproachestoimprovecost-effectivenessandensureasustainableandincreasedshareofallREformstoputthecountryonagreenerandsustainablepath.A.RisingConcernsaboutSustainabilityofREDevelopment78.ThehighlycentralizedandregulatedpricingapproachledtolackofcompetitionandincreasedmarketpowerofpowerfulSOEsinChina’senergysystem,includingnon-hydroREdevelopment.Moreimportantly,thecurrentprevailingandslowlyevolvingpolicysystemduringthethirdstageofREdevelopmentlaggedbehindthefast-growingnon-hydropowermarket,thesweepingtechnologicaladvances,especiallypowerstorage,andfastdecreasingREprices,especiallyPVsystems.TheseledtorisingconcernsaboutthesustainabilityofREdevelopmentandprompteddecision-makerstotwingovernmentcommitmenttoscaleupREdevelopmentwithclearobjectivestodeliverelectricityataminimumcostandundertakeswiftchangestoaddressthefollowingissues:•Unbalanceddevelopmentamongvarioussubsectors.Duetogreaterpolicyfocusandfinancialsupport,theactualinstalledcapacityofPVachievedthedoubleofboththe11thand12thFYPs’target,whileforwind,theactualinstalledcapacityachievedthedoubleofthe12thFYP’starget,andthe13thFYPtarget(2016to2020)wasreachedtwoyearsaheadofschedule.Ontheotherhand,thebiogas,REheating,andfueldevelopmentlaggedbehindinalmostallFYPs,by20–70percent(seeTable5.1).Table5.1:REDevelopmentFYPTargetsandCompletionbytheEndof202011thFYP(2006–2010)12thFYP(2011–2015)13thFYP(2016–2020)Target(a)Completion(b)CompletionRate(%)(b/a100%)Target(a)Completion(b)CompletionRate(%)(b/a100%)Target(a)Completion(2020)(b)CompletionRate(%)(b/a100%)PowergenerationTotalinstalledcapacity(GW)205.8253.36123424502.02118710934.64131Hydropower(GW)190216.06114290319.54110380370.169752Windpower(GW)1031310100129129210281.53133SolarPV(GW)0.30.82672143.18206105253.43241Biomasspower(GW)5.55.51001310.3791529.52196Totalgeneration(TWh)7107611071200138011519002214116GasBiogas(billionm3)19147422198680.1281.6HeatingSolarwaterheater(millionm2)150168112400440110800n.a.n.a.Geothermal(milliontceperyear)n.a.4.6n.a.154.63140n.a.n.a.FuelBiomasspelletfuel(milliontons)13300108801518120Bioethanol(milliontons)31.86042.1534375Biodiesel(milliontons)0.20.525010.8802150TotalcommercialRE(milliontce)250255102400436109578n.a.n.a.Source:Studyteam.38Note:n.a.meansdataarenotpublishedyet.The2018dataofREgas,heating,andfuelhavebeenusedasthealternative.•Seriousinter-provincialtradebarriers.China’sREgenerationlocationsarefarfrompowerloadcenter.Chinaoverproduced27.7TWhofwindpowerin2018,mainlyinInnerMongoliaandXinjiang,andatthesametime,provincesinEastChinahavestruggledtomeettheirREobligations,eventuallydevelopingREwiththeirown,sometimespoorresource.Sotradeisessentialtooptimalandcost-effectiveuseofthecountry’sREresources.However,concernedlocalauthoritiesfocusondevelopingtheirownresources,whicharesometimesinadequateandlesscompetitivethanimportsofREelectricity,becauseofdistortedfiscalincentivesandlocalvestedinterest.39REelectricitytradecouldfostercompetitionandleadtofurtherREdevelopmentatalowercostforthenation.A2010WorldBankstudyfoundthatmeetingthe2020nationaltarget(atthattime)couldbeachievedwithouttradebuttheimpactonthegenerationcostwouldbesignificantlyhigheranddifferentiatedamongprovinces.40Thisconclusionbecamemorerelevantduringthe12thand13thFYPsasPVpricescontinuedtodecreasesignificantly.•VerylowcapacityfactorsofREassets(seeFigure5.2).Thegenerousnationalfeed-intariffsandothercompensationsatprovincialandloweradministrativelevelstriggereda‘goldrush’,andwind(andlatersolar)developersandwindturbine(andlaterPVsystems)manufacturers,mainlySOEs,engagedinbuildingwind(andlatersolar)capacityfarbeyondthe11thand12thFYPtargets.Thewindcapacityexceededthe11thFYPtargetby210percent,andthesolarcapacityexceededthe11th,12th,and13thFYPtargetsby167,106,and94percentrespectively(attheendof2019)(SeeTable5.1).Duringtheearlydevelopmentyears,Chinesewindfarmshadlowercapacityfactorsthancomparablewindfarmsindevelopedcountriesbecauseofunproventurbinesandthedevelopmentofsiteswithoutconfirmationofresourcesandpropermicro-sitingstudiesordevelopmentofsiteswithmediocrewindresourcesinsomeprovincestomeettheirmandatorytargets.Morealarming,3811th,12th,and13thFYPsforREdevelopment,andtheChinaElectricityCouncil’sStatisticalListofPowerBasicData39TheVATcollectedbylocalgovernmentsisstillmostlybasedonelectricitygeneratedbyprovincialassetsratherthanfinalelectri-cityconsumptionasinmoreadvancedcountriesandprovidesfiscalincentivestodeveloplocalREresourcesevenathigherprices.Furthermore,provincialREdevelopersareshieldedfrommorecompetitiveREsourcesinbetterendowedprovinces.40WorldBank.2010.“China’sEnvisagedRenewableEnergyTarget:TheGreatLeapForward”WorldBankUnpublishedPolicyNote.53historyrepeateditselfduringthelastdecadeofsolarPVdevelopment.In2019,thedevelopmentofsiteswithoutconfirmationofresourcesandpropermicro-sitingstudiesordevelopmentofsiteswithmediocresolarresourcescontributedtotheverylowefficiencyofPVassets.InstalledsolarPVcapacityamountedto9.2percentofthetotalpowerinstalledcapacity,butitsshareinthetotalelectricitygenerationaccountedforonly2.5percentofthetotalgeneration(seeFigure1.2andFigure1.3).ThecapacityfactorofPVinChinawas,onaverage,about42percentofthePVcapacityfactorobservedintheUnitedStatesbetween2014and2017.Thelowcapacityfactorsstemnotonlyfromtechnicalissues,suchaspoordesignandresources,butalsofromexternalbarriers:(a)inadequateoperationalflexibilityofpowersystemstoaccommodatethevariabilityoffast-growingwindandPVgenerationwithoutelectricitystorage;(b)disconnectbetweenearlypolicyframeworksandfast-growingmarketsandtechnologieswhichleadstolocalgovernmentpreventingREpowergenerationbeyondwhatisguaranteedbythepolicy;and(c)restrictionofinter-provincetradethatledtodevelopmentofsiteswithpoorREresourcesinsomeprovincestomeettargetsassignedtothembythegovernment.•ContinuedhighsubsidizationdespitesignificantpricedecreasesofwindandPVtechnologies.Althoughthefeed-intariffwasslightlyupdatedin2016and2017,itdidnotreflectthefastcostdropand,asaresult,subsidiesballoonedtoanunacceptablelevelanddeveloperspocketedhigherprofits.ThiswindfallledtoachaoticrushtosolarPVdevelopmentandthelargedeficitoftheREcompensationfund(seeChapter4,paragraph62).Figure5.1:CapacityFactorsinChinabyCategories00.10.20.30.40.50.60.70.80.91200520062007200820092010201120122013201420152016201720182019OverallHydropowerThermalPowerNuclearPowerWindPowerSolarPowerCaoacityFactorSource:Studyteam.41•Pushbackoffossilfuelvestedinterests.WiththeincreasedREshareintheprimaryenergyconsumption,vestedinterests,consistingmainlyofmonopoly,monopsony,andmarketpowerholders,beganlabellingthepolicy-drivenREgrowthas‘unfaircompetition’.Thecriticismexacerbatedastheenergyconsumptiongrowthbegantotaperanditbecameobviousthatbyachievingthenationaltargetof20percentnon-fossilshare42intheprimaryenergyconsumptionby2030,renewableenergywouldgraduallyandsignificantlyreducefossilfuelgrowth.ThisissueisnotspecifictoChinaandfossilfuellobbyistsareactiveinmostcountries.China’s‘EnergyRevolution’isanattemptto41BasedonChinaEnergyStatisticalYearbooks2014to201942Althoughnonfossilenergyincludesnuclearenergyandrenewableenergy,becausenuclearenergywillnotgrowrapidlywithintheexpectedrange,thetargetofnonfossilenergyismainlybornebyrenewableenergy.54developinnovation,newindustryandbusinessmodels,anddevelopmentopportunitiestolessentheseworriesandpreparethecountryfora‘greenandlowcarbonfuture’(seeChapter4,paragraph66,thirdbullet).B.TowardNewConsumptionandSupplyModels79.In2017,threeyearsafterthelaunchofthe‘EnergyRevolution’,theNDRCandNEApublishedthe‘EnergyProductionandConsumptionRevolutionStrategy(2016–2030)’toguideallgovernmentdepartmentsandthewholesocietytoaligntheirpracticeswiththeprinciplesofthe‘EnergyRevolution’strategy.Thisstrategyencompassesallaspectsofenergysupplyandconsumptionwithspecialfocusonthefollowing:•Formingaunifiedandopenenergymarketwithorderlycompetition.Themarketwillplaythedecisiveroleinallocatingresourcesandpriceformation.Thegovernmentwillreduceitsinterventioninenergymarketsandfocusonplanningandregulation.•Establishing,improving,andcompletingthelegalframeworkgoverningtheenergysector,especiallybydevelopinganEnergyLaw.Thenewlegalsystemwouldbalancetheinterestsofallparties,strengthenenergyregulationsandsupervision,overrideobsoletelawsandregulationslaggingbehindtherapiddevelopmentofthesector,andremoveloopholesandinconsistenciesthatplaguedREdevelopment.•Buildingthenew‘green,low-carbon,secure,andefficient’energysystem,optimizingtheenergymix,andensuringthattheenergydemandincreaseismainlymetbycleanenergy.43By2030,non-fossilenergywillaccountfor20percentofprimaryenergyconsumptionandfor50percentby2050.80.Governmentagenciesbegandemonstrationactivitiesanddevelopedpoliciestoalignthedevelopmentoftheenergysector,especiallythenon-hydropowerRE,withtheprinciplesofthe‘EnergyRevolution’asdetailedinthethreefollowingsections.C.IncreasedMarketOrientation81.AswindandPVdevelopmentpeakedby2015andtheRECompensationFund’sdeficitworsened,Chineseauthoritieslaunchedseveralpilotauctionstoshiftawayfromthefeed-intariff(FiT)policy(seeBox5.1):•From2015to2017,theNEAlaunchedthreeauctionroundstodevelop13GWofsolarPVinnineprovinces:44•ThewindauctionswereinitiatedonNovember11,2018,andwereconductedbytheprovincialgovernments.InApril2018,theNEArequestedthatprovincialgovernmentspublishtheirauctionproceduresforreviewbeforetheysubmittheprojectstobeauctionedforapproval.Following43Cleanenergyincludesnonfossilfuelenergyandnaturalgas.44TherearethirteenPVfront-runnerbasesapprovedbyNEA,includingtenapplicationTopRunnerbasesandthreetechnologyTopRunnerbases.Theapplicantsfor“TopRunnerbases”areratedinfivemajoraspects:enterprise’sinvestmentcapability,trackrecord,technolo-gysophistication,technicalproposalandtarifflevel.Thelatter,applyingforonlythesecondandthirdroundauctionsandaccountedfor35percentofthetotalscore.UnpublishedPresentation:“ResearchandFormulationofPilotPlanforRenewableEnergy(WindpowerandPhotovoltaic)ProjectAuction.ChinaRenewableEnergyEngineeringInstitute(水电水利规划设计总院).55properprocedures,GuangdonglaunchedthefirstprovincialwindauctioninNovember2018.Gansupublished45thefirstauctionresultsinDecember2018.ThelowestpriceproposedwasCNY0.35perkWh(equivalenttoUS$0.053perkWh),whichwas30percentlowerthantheFiT.TheaveragepriceofwinnersinthesameauctionroundwasCNY0.44perkWh(equivalenttoUS$0.066perkWh),whichwas10percentlowerthantheFiT.Box5.1:WindandSolarPVAuctionsinChinaThemomentousgrowthofwindpowergenerationfollowedbyPVduringthesecondandthirdstagesofREdevelopmententailedcompensationsubsidiesthatoutweighedtheamountavailableintheREFundbyaboutUS$14billion.SeveralChineseministerialdepartmentsexpressedinterestinREauctionstoaddresstheissueandstartedsomewindauctionsasearlyas2003.TheWorldBankbegansupportingtheseeffortsby(a)arrangingforofficialsfromtheNEAandtheNDRCPricingDepartmenttoattendaninternationalworkshoponREauctionand(b)organizingaworkshopinBeijingwiththesupportoftheInternationalRenewableEnergyAgency(IRENA)andtheparticipationofexpertsfromGermany,India,andtheUnitedStates.BasedonChina’sownpilotprojectsandinternationalbestpractices,ChinagraduallydevelopeditsownwindandPVauctionschemes.FiveroundsofwindauctionwereorganizedbytheNEAbetween2003and2009.Inthefirsttworounds,theselectioncriteriawerelimitedmainlytotheofftakepriceandlocalizationcontent.Manywinnersoftheseroundsfailedtosecurefinancingand/ordidnothavethetechnicalandengineeringcapacitytoimplementtheprojects.Followingtheseexperiences,theNEAbeganworkingwithREexpertstodesignauctionschemes,preparetenderingdocumentsincludingpenaltiesforauctionwinnerswhofailedtobuildtheirproject,developstandardizedlong-termPPAs,andsoon.Thesemeasuresbothensuredthequalityofthebidandconsiderablyreducedtheofftakeprices.Duringthelastyears,offtakepricesofwindelectricitysignificantlydecreasedtoreachCNY0.29perkWh(US$0.045perkWh),about45percentlowerthantheaverageFiT.Giventheincreasinglylargernumberofauctions,inApril2018,theNEAdecidedtodecentralizewindauctionsprocessestolocalgovernmentsandrequestedthatprovincialgovernmentspublishtheirauctionproceduresundertheguidanceandwiththesupportofindependentexperts.Allfutureprocurementofonshorewindprojectswillbecarriedoutthroughauctionswithoutsubsidies.Basedonthewindexperience,theNEAbeganorganizingPVauctionsatthecentrallevelwiththeassistanceofChineseexpertsfollowingtheproceduresandusingthedocumentationdevelopedforwind.Theprogressachievedtodateissignificant.Threeroundsofauctionswerecompletedinninedifferentprovincesfortheinstallationsof13GWofPVgenerationcapacity:(a)Thefirstroundincluded1GWinShanxiProvincewithspecialfocusonthetechnicalqualificationofthebiddersandtheefficiencyoftheinstallations.ThetechnicallysoundandefficientbidswereallowedtobenefitfromthePVFiT(CNY0.95perkWh,equivalenttoUS$0.14perkWh).(b)Thesecondbatchofauctionswascarriedouttoacquire5.5GWofPVgenerationcapacityinShanxi,InnerMongolia,Shandong,Anhui,andHebei.TheaveragepriceoftheseauctionswasaboutCNY0.21perkWh(US$0.031perkWh)lowerthantheFiT.45BothGuangdangandGansuauctionsareratedinfivemajoraspects:enterprisecapabilities,theadvancementofequipment,declaredelectricityprices,preliminarywork,accessandconsumptionconditions.GuangdongalsoratedtheintelligentandO&Msolutionsofprojects.56(c)Thethirdroundofauctionsinvolvedtheacquisitionof6.5GWofPVgenerationcapacityinShanxi,Shaanxi,Hebei,Jilin,Jiangsu,Qinghai,InnerMongolia,andJiangxi.ThelowestpriceachievedinthisroundofauctionswasCNY0.31perkWh(US$0.046perkWh)inQinghaithisyear,abouthalfthecurrentPVFiT.Itisexpectedthatthefuturelarge-scalegrid-connectedsolarPVinvestmentswillbeacquiredthroughthesolarPVauctionscheme,withoutsubsidy,toreduceofftakepricesandtheburdenontheREsubsidyfund.82.Duetotheinvestmentoverheatingandballooningsubsidy,in2018,theNDRC,MoF,andNEAissuedthe‘NoticeonMattersRelatedtoPhotovoltaicPowerGeneration’thatstoppedtheapprovaloftheinvestmentplanofutility-scalesolarPVprojects.Asaconsequenceofthepolicyandregulatorychanges,China’sREinvestmentdropped38percenttoUS$88.5billionin201846andannualaddedcapacityofsolarPVdecreasedby17percent.SomeREcompanies,mostlysmallandmediumenterprises(SMEs)andsomeleadingcompanies,havebeenoverlyoptimisticandinvestedheavilytobenefitfromtheFiTwindfall.Theyincreasedtheirdebtratioinsomecasestomorethan85percentandthen,assubsidiesdried-up,theywereleftwithstrandedassetsinhundredsofpowerstations.Theirfinancialsituationsdeteriorated,whichledsometodeclarebankruptcy.4783.Toaddressthesituation,concernedChineseinstitutionsissuedseveralpoliciestoremedythediresituationandincreasemarketorientationofthewindandsolarPVdevelopmentinalessabruptmanner.In2019,theNDRCandNEAissuedthe‘NoticeonMattersRelatedtotheConstructionofWindpowerandPhotovoltaicPowerGenerationProjects’togivemarketplayersatwo-yearrelieftoprepareforthecancellationofnationalonshorewindandPVsubsidiesbeginningin2022andmoremarket-orientedprocurementprocesseswithoutdisruption.Thenoticechangedtheprojectapprovalprocessasfollows:•Projectsthatdonotrequiresubsidiesweregiventhepriorityforconstructionapprovalandgridaccess.•Projectsthatrequiresubsidieswouldcompeteforatotalamountofsubsidiesdeterminedbythegovernmentbeforelaunchingauctions,andthegovernmentfirstdeterminesthetotalamountofavailablesubsidiesbeforelaunchingauctions.Technically,forsolarPV,eligiblebidsarerankedfromthelowestsubsidyrequestedtothehighest.Approvalsareprovidedtoprojectsrequestingthelowestsubsidiesuptothetotalamountofavailablesubsidies.Windpowerstillfollowstheauctionproceduresestablishedbytheprovinces,buttheweightofelectricitypricesintheevaluationsystem48cannotbelessthan40percent.84.In2019,theNDRCandNEAjointlyissuedthe‘NoticeontheEstablishmentandImprovementofaRenewableEnergyPowerConsumptionGuaranteeMechanism’closetobutfarmorecomplicatedthantheRPSmechanismthathasbeensuccessfulinpromotingREdevelopmentinmanycountries.Inanutshell,accordingtothenotice,theNDRCandNEAwillissueannuallyanREobligation(REshareinthetotalpowerconsumption)foreachprovinceandentrustprovincialauthoritiestodeveloptheirownactionplansandpassthroughtheprovincialobligationtogridcompanies,distributors,largeconsumers,andsoon.ManyprovincesdidnotyetissuetheregulationsonhowtotransitfromthecurrentsystemputtingREobligationsonsupplierstothemoremarket-orientedbutoverlycomplicatedsystemdevelopedbythenotice.46Source:FrankfurtSchoolandUNEPCenter/BNEF2019,22.47ThissituationillustratesWarrenBuffett’sfamousquote“Youonlyfindoutwhoisswimmingnakedwhenthetidegoesout.”Source:Berkshire'sCorporateAnnualReport2001.https://www.berkshirehathaway.com/2001ar/2001letter.html48Theevaluationsystemscoredthetechnicalstrengthandfinancialstrengthofthebiddingenterprise,compliancewithenvironmentalandsocialregulationandtheelectricitypriceofthegeneratedelectricity.5785.In2015,theCommunistPartyofChina(CPC)CentralCommitteeandtheStateCouncilissuedthe‘SeveralOpinionsonFurtherDeepeningPowerSystemReform’stressingtheneedfor(a)improvingthemarket-basedtradingsystem,(b)liberalizingelectricitypricestopromotepricingreform,and(c)promotingthedevelopmentandutilizationofnewandrenewableenergy.Followingtheopinions,theNDRCandNEAissuednumeroussupportingpoliciestopromotetheestablishmentofspotpowermarketsineightselectedpilotregions,leavingtheauthorityfordesigningthemarketstoprovincialauthorities.Discussionoftheimplementationofpowersectorcompetitivemarketsisbeyondthescopeofthereport.However,itmustbenotedthatasexperiencedinmanycountries,thepubliclyavailableskimpyinformationindicatesthatthedesignsdevelopedcouldbemoreconducivetoenvironmentalprotectionandsustainabledevelopment,andREcharacteristicscouldbemorereflectedinmarketdesigns.D.CompletingandRationalizingtheLegalFramework86.In2019,theNPCcarriedoutthe‘PerformanceEvaluationoftheRenewableEnergyLaw’.Theevaluationgroupconductedfieldworkinsixprovinces,entrusted12ProvincialPeople’sCongressestoevaluatetheperformanceatprovinciallevels,andaskedtheNDRC,NEA,MoF,andotherconcerneddepartmentstoreportontheimplementationofthelaw.Attheconclusionofthisperformanceevaluation,theNPCrequiredthefollowing:•RelevantdepartmentsoftheStateCouncilshouldenhancethecoordinationbetweenRE,fossilfuel,powergrid,andlandusedevelopmentduringthepreparationofthe14thFYP(2021–2025)andfuturemid-andlong-termplans.Thiswouldensureconsistencyoftheobjectivesandtheiralignmentwiththecountry’sclimatechangecommitmentsandavoidloopholesthatcouldbeusedbyvestedintereststoderailREdevelopment.ThedepartmentsshouldalsoimprovetheefficiencyofexistingassetsandestablishanevaluationsystemofenergydevelopmentbasedonREutilizationandanREtradingmechanismtobreaktheinter-provincialbarriers.•TheNDRC,MoF,andNEAcovertheREFunddeficitbystrengtheningfeecollection,establishingelectricitycompetitivemarkets,ensuringasustainableandhealthydevelopmentofREassets,andincreasingfinancialsupporttoprivateenterprises.87.Moreimportantly,theevaluationgroupsuggestedrevisingtheRenewableEnergyLawtoadaptitsprovisionstocurrentmarketconditions,clarifythelegalresponsibilitiesofpowergrid,oil,gas,heat,andotherenterprises,andsetminimumefficiencystandardsforREassets.88.SomeofthesuggestionsproposedbytheevaluationgrouparebeyondthescopeoftheRenewableEnergyLaw.Therefore,effortsweredeployedtorevivethediscussionofthe2017draftEnergyLawsubmittedfordiscussionbytheformerLegislativeAffairsOfficeoftheStateCounciltoaddresstheissuesflaggedbytheevaluationgroup.OnApril10,2020,anewdraftwasswiftlypreparedandcirculatedbytheNEAtosolicitopinionsofallconcernedinstitutions.ThenextstepsincludesubmittingthelatestdrafttotheExecutiveMeetingoftheStateCouncilforapprovalandinitiatingthelegislativeprocessofitsapprovalbytheNPC.89.ThedraftEnergyLawthathasbeendisclosedforpublicconsultationismoreexplicitaboutChina’sambitionandcommitmenttoensurehealthyandsustainableREdevelopment,including•GivingaprominentroletoREintheenergystructureandadjustingandoptimizingtheenergyindustryandconsumptionstructuretoalignthemwiththeEnergyRevolutionprinciples;58•Allocating,forthefirsttime,REproductionandconsumptiontargetstoprovincesinthemid-andlong-termsocialandeconomicdevelopmentplans;•Aligningenergydevelopmentwiththecountry’sclimatechangecommitmentsandlocalpollutionreductionobjectives;and•Stressingthatproducersandconsumershavetheobligationtocontributetothecountry’sobjectivesrelatingtolocalpollutionandGHGemissionreductionobjectivesandthatproducershavetheobligationtoreduceemissionsandenvironmentalimpactduringconstructionandproduction.E.Buildingthe‘Green,Low-carbon,Secure,andEfficient’EnergySystem90.Chinasetthetargettoincreasetheshareofnon-fossilfuelsto50percentofitsprimaryenergyconsumptionby2050.WhileREpenetrationgrewtomorethan12percentofthetotalprimaryenergyconsumption,currenttrendsseemtobechallengingtoachievethe2060ambitioustargetofnetcarbonneutrality.TheEnergyRevolutionstrategyfocusesonbringingabouttransformationalchangesinenergysupplyandconsumptiontomeetthechallengesaheadofdecarbonizationoftheenergysystembythefollowing:•TappingthesynergiesbetweenwindpowerandotherREtechnologiesdevelopment.Improve(a)thedispatchingforcost-efficientrenewablestodisplaceinefficientandemissions-intensivecoalpowerplants;(b)theintegrationandoptimizationofcomplementaryREtechnologies,suchaswind,solar,largehydropower,andpumpedstorageplants;and(b)theabilityofregionalandprovincialgridcompaniestoaccommodatelargerintegrationofREtechnologieswithoutdisruptions,reducecurtailments,andimprovetheefficiencyofexistingwindandPVassets.•EnhancingtheflexibilityofthegridtoaccommodatehighREpenetrationthroughincreasedcoal-firedpowerplantcapabilitytofollowload49anddeployingenergystorage,strengtheningpowergridconstruction.•PromotingmoreopportunitiesforREusage,suchasREpower,biomass,andgeothermalforheatinginNorthChina,REpowerforhydrogenproduct,REforchargingstationsofelectricvehicles,promotinguseofbiofuel,andsoon.•Improvethedigitizationofthepowersystemtakingadvantageofnewgenerationandenhancedcomputingcapabilitytechnologiestomonitor,dispatch,andpredictthepowergenerationcapacityofallpowerstations.Forexample,withthehelpofthedigitizationofthepowersystem,QinghaiProvincesettheworldrecordinJune2019whenitused100percentofRE-generatedpowerfor15consecutivedays.Thedigitizationalsoledtomanypromisingoperationalaspects(seeBox5.2).49In2018,theNDRCandNEAannouncedthat,bytheendof2020,a220GWthermalpowerplantwithimprovedflexibilitycanprovide46GWspaceforpeak-shaving.59Box5.2:QinghaiNewEnergyDataInnovationPlatformQinghaiislocatedinthenorthwestofChina,withatotalareaof720,000km2andanaverageelevationof3,000m.Qinghaihasgoodsolarenergyandhydropowerresources.In2018,REpowerstationsgeneratedabout80percentofthetotalpowergeneration.However,duetoitsvastterrainandharshclimate,themaintenanceandmanagementofREpowerstationsinremoteareasconstitutesamajorchallenge.InJanuary2018,theQinghailaunchedaNewEnergyDataInnovationPlatform,developedbyHuawei,KunlunDataandGoldWind,togreatlyaddressthischallenge.AlmostalldatarelatedtoQinghai’sREpowerplantswereconsolidatedintheplatform.Thedataincludedallaspectsoftheoperationoftheplants:efficiency,operatingstatus,andotherinformationrelatedtoeachwindturbine,solarsystem,andhydraulicturbine.Theplatformledtopromisingresults:(a)powerplantsavailabilityincreasedbecauseofpreventivemaintenanceandreducedtheneedforoperationandmaintenancepersonnelby80percentonaverage;(b)thelinkbetweentheplatformandmeteorologicaldataimprovedtheaccuracyofthethree-day-aheadandhourlygenerationforecasts;and(c)incomeofPVpovertyalleviationprojects(seeChapter6fordetails)canbedeterminedonlineandissueddirectlytoeachhousehold’sbankcard.TheimprovedoperationbroughtaboutbytheplatformandincreasedaccuracyofgenerationforecastsenhancedthedispatchofREplantsandtheuseoftheinterregionaltransmissionnetworkcapacity.F.LessonsLearned91.Severallessonslearnedduringthisstagecanbeusefulreferencesforcountriestryingtobuildawell-functioningREmarket:•Abruptpolicychangesareconducivetomarketturmoil.The2018‘NoticeonMattersRelatedtoPhotovoltaicPowerGeneration’effectivelycurbedtheuncontrolleddevelopmentofPVdeployment.However,thepolicyshiftledtoamajordisruptionofthePVmarket.Manyprojectsunderconstructionweresuspendedandcompaniesthatborrowedheavilytodeveloptheprojectsdefaultedwhentheyweredeniedsubsidypaymentsthattheyhadexpectedundertheprevailingregulations.CapitalquicklyfledtheREmarket,causingthePVstockstoplummetandaffectingwindpowerstocks.AssuranceofpolicyclarityandpredictabilityisparamounttoeffectiveREdeployment.•Uncleardelineationofregulationresponsibilitiesamonggovernmentagenciesanduncoordinatedexerciseoftheseresponsibilitiescanderailtheimplementationofsoundpolicies.InChina,auctionsofREprojectsrequireinputsfromtheNDRC,NEA,andMoF.Uncoordinatedinitiativesofthethreepowerfulinstitutionscanleadtoconfusionandunintendednegativeeffectsontheprocess.In2019,whentheauctionpolicywasissued,someprovincesandenterpriseswereabletoquicklyadjusttheirinvestmentstrategyandsucceededunderthenewpolicyenvironment,otherscouldnotadaptquicklyenoughduetoinsufficienttimeandinformationforthepreparationofthebidsfortheauction,somecompaniesfailingtosubmitmaterialsintime,leadingtomixedresults.Thewindauctionsforthesameyearweresuccessfulbecauserequestedprovinceswereentrustedtoformulatetheirownauctionpoliciesfor2019andcarryouttheauctionprocessaccordingtonationalrulesandregulationspublishedinMay2018.60•Auctionsbasedonlyonpricecanbedeceiving.In2019,solarPVauctionsexperiencedsimilarproblemsencounteredduringthefirstandsecondbiddingroundsofwindconcession(seeparagraph58),andsomePVcompaniesproposedlowerpricesbutcouldnotdeliveraccordingly.50G.TheWayForward:TheChallengesAheadtoImplementthe‘EnergyRevolution’92.ChinapledgedinSeptember2020topeakitscarbonemissionby2030andachievecarbonneutralityby2060.Carbonemissionfromenergyproductionanduseamountstoabout85percentoftotalcarbonemissioninChina,42percentofwhichcomesfromthepowersector,mostlyduetocoalcombustion.Therefore,achievingthepledgewillrelymainlyonactionstobetakenintheenergysector,particularlyinthepowersector.93.DespitetheimpressivedevelopmentofallsourcesofREdescribedinformerchapters,theshareofREinthetotalprimaryenergyconsumptionincreasedfromabout4percentin1980toabout13.6percentin2020.Morespecifically,regardingthepowersector,theshareofRE-basedpowergenerationincreasedfromaround19percentin1980to27.8percentin2019.Coalremainsthedominantenergysourcebothattheoverallenergysectorlevelandatthepowersystemlevel.94.AchievingnetcarbonneutralitywillrequireREtolargelyreplacecoal.AstudybyTsinghuaUniversityindicatesthattheshareofnon-fossilfuelgenerationshouldbemorethan90percentby2050tofulfillChina’spledgeofcarbonneutralityby2060.51Anincreasingnumberofsubsectors(forexample,transport,manufacturing,andbuildings)willhavetoswitchfromdirectcombustionoffossilfuelstousingelectricity,increasingtheimportanceofachievingearlynetcarbonneutralityinthepowersector.Therefore,despiteimpressiveabsolutegrowthoverthetwolastdecades,thewayforwardcannotbethecontinuationofthesametrend.Amajoracceleration,an‘EnergyRevolution’,ascalledforbyleaders,includingPresidentXiJinpingandembodiedintheEnergySupplyandConsumptionRevolutionStrategy(2016–203052),isneededforelevatingtheroleofREfromsecondarytomainsources.95.ThegrowthoftheREcapacitycannotbeanymoreafractionofthetotalsystemcapacitygrowth,withcoal-basedpowergenerationcontinuingtoalsogrowinabsoluteterms.Toachievecarbonneutrality,RE-basedpowergenerationwilleventuallyhavetodisplacemassivelycoal-basedgeneration,leadingtoearlyretirementofmanycoalpowerplantsandtheflexibilizationofothers.Overtherecentyears,thefastdevelopmentofsolarPVandwindenergyhasturnedtheseenergysourcescompetitive,meetinganessentialconditionforsubstitutingmassivelycoal.However,thecurrentstructureandregulatoryframeworkstilllargelymirrorstheoldinefficientcentralizedmodelandfavorstoomuchlocalincumbentcoal-basedgenerators,maintainingahighriskoffutureREcurtailmentincaseoffurtheracceleratingtheirscaling-up.96.The‘EnergyRevolution’willrequireaparadigmshift,fromacentralizedpowersystemmodel,centeredonlargedispatchablegenerationplants,toanewnormofflexibleintegrationofavarietyofresourcesthatareintermittentanddecentralized.LikeotherpowersystemsintheWorld,theChinesepowersystemisstillcomposedoflargelyunidirectionalnetworks,plannedandoptimizedtoevacuatelargevolumesofpowerfromgiantanddispatchablepowerplantstowardpredictableconsumerloads.50SinaFinance.2020.“NanCunhui:ItIsRecommendedtoExtendtheGridConnectionNodeofthe2019PVAuctionProjectsforThreeMonths.”http://finance.sina.com.cn/jjxw/2020-05-21/doc-iirczymk2863702.shtml51ChinaLowCarbonDevelopmentStrategyandTransitionPathwayStudy,October2020,TsinghuaUniversity.52ReleasedbytheNationalDevelopmentandReformCommissionandNationalEnergyAgencyin201761Insuchamodel,boththelocationsoflargecentralpowerplantsandthehigh-voltagetransmissiongridsaredeterminedinaccordancewiththelocationoflargeconsumptioncenters.However,PVandwind,asnon-dispatchableandpotentiallydecentralizedpowersources,presentachallengetothistraditionalmodelathighlevelsofpenetration.Sincetheinjectionofnon-dispatchablepowerfromrenewablesneedstobeaccommodatedatanytimeandatamultitudeofpointsofthesystem,includingbehindthemeter,thewholesystemwillhavetobecomefarmoreflexibleandtheroleofitspartsredefined.Itwillhavetomanagemultidirectionalflowsofenergy,regulateawiderrangeofservices,includingreservecapacity,storage,andotherancillaryservices,andrealignincentivesandcompensationstoturnsuchnewfunctionseconomicallyviable.97.Chinaisattheforefrontoftheenergyrevolution,anditsexperiencewillbeusefultomanyothercountries.ChinabeingnowaleaderoftheREindustry,itspowersectorisfacingchallengesthatothercountriesmightfaceafewyearslater,inparticularthecountrieswhichhaveahighshareofcoalintheirpowermixandarewillingtoscaleuptheshareofRE.98.Increasingtheflexibilityofthepowersystemandeventuallyphasingoutcoal-basedgenerationinChinarequirescombiningarangeofsolutions,includingthescale-upofsystemicinnovativetechnologies.Incrementalandgame-changingsolutionstoincreaseflexibilityinclude(a)improvingjointplanningofREdevelopmentandtransmission;(b)increasingthermalplantscyclingtoadjustfastertotheinjectionofnon-dispatchablerenewableenergy;(c)improvingshortday-aheadvariableREforecastingtoreduceuncertainties;(d)developingdemandresponsetoincreaseitsmanageability,53and(e)adoptingtechnologieslikeutility-scalebatterystorage,distributedRE,andthedevelopmentofnewusesofelectricitynearbytheREsources.Thesetechnologiesaresometimesmentionedas‘disruptive’becausetheyleadtoaradicalchangeinthewaythepowersystemisoperated,fromcentralizedandunidirectionaltodecentralizedandmultidirectionaldispatchandnetworksmanagement,supportedbyintensiveuseofdigitalization.ThisisechoedbytheInternationalEnergyAgency’sChinaPowerSystemTransformationStudy,whichalsoconcludedthatpowersystemflexibilityisthemostimportantcornerstoneofatransformedpowersystemwithhighsharesofvariableRes.99.Enablinglegalandpolicyenvironmentsarerequiredtoremovethemarketbarriersfortheapplicationoftheseadvancedtechnologiesandmeasures.MostoftheadvancedtechnologiesareemergingREapplications,andtherearestillgapsinthelegalandpolicyenvironmentandintechnicalspecifications,costarestillhigh,severalenvironmentalandsocialissuesremainandbusinessmodelsarestilltoberoad-tested.Therefore,buildinganenablinglegalandpolicyenvironmentisstillrequiredforthesetechnologiestobeabletoaccessthemarkets,alongwiththeestablishmentofthetechnicalandenvironmentalstandards,transparentoperationrules,andlimitingpotentialmarketpowertoencouragetheparticipationofSMEs.100.ImmaturemarketsofinnovativeEnergyRevolutiontechnologiesrequirefinancialsolutionstoleverageprivateresources.Manyoftheabovementionedinnovative,disruptivesolutionshaveonlyrecentlyorarestillabouttoreachingcommercialstage.Asaconsequence,availabilityofcapitalisstilllimitedand,withrespectofdebtfinancing,theirriskprofileisstilllessattractivethanconventionalsolutionsfromthefinanciers’perspective.Asaconsequence,greenenergyinvestmentisfacingashortageoffinancing.AlthoughChinahasmaderemarkablestridesinexpandingthevolumeofgreencreditandgreenbonds,thegreeninvestmentgapremainssubstantial.EstimatesbytheChinaCouncilforInternationalCooperationonEnvironmentandDevelopment(CCICED)indicatethatuntil2030,betweenCNY2.3trillion(US$320billion)andCNY7.2trillion(US$1trillion)peryearwouldbeneededtoaddressclimateand53SeveralDemandResponsepilotsarecurrentlyon-goinginJiangsuprovince,Beijing,ShanghaiandFoshan(StateGrid,2017:file:///C:/Users/wb218222/Downloads/S3-7.pdf)62environmentalchallenges.54However,duetoincreasinglypressingfiscalconstraints,thepublicsectorcanonlycontributeupto15percentofthefundingneeded,leavingasignificantandincreasinggapofroughlyUS$270billionperyearthatneedstobecoveredbyprivateinvestment.Therefore,thescale-upofEnergyRevolutionsolutionsrequiresinnovative‘greenfinance’solutionstokick-startbusinessandleveragenewfinancialresources.101.InterprovincialtransmissionandtradeofRE-basedelectricityneedstobefurtherdeveloped,tocountertheprevailing‘provincialism’.TransmissionbottleneckslimitinterprovincepowerexchangefromRE-resource-richprovincestohigh-demandprovinces,thusrestrictingthecontributionofREtothenationalenergymatrix.Around70percentofChina’scurrentPVandwindcapacityislocatedintheNorthandWestwhereenergydemandislow,farfromthemorepopulous,industrializedloadcentersoftheEastandSouth.Toimprovethechannelingofgrowingvolumesbetweentheseregions,themaingridcompaniesneedtofurtherupgradetransmissioncapacityatkeylocationstoeliminatetransmissionbottleneckandplanadditionaltrans-provincialandtrans-regionaltransmissioncorridors,inparticularacceleratingtheresearchandapplicationofhigh-voltagedirectcurrent(HVDC)transmissiontechnologies.Inadditiontothelackoftransmissioncapacity,thecurrenttransmissionanddistributionpricingstructurealsolimitsinterprovincialtradingandpreventsanefficientallocationofresources.‘Provincialism’isanotherroadblocktoarapiddeclineofcoal,partlydrivenbyperversefiscalincentives.TheChineseVATsystemisproductionbased,ratherthanconsumptionbased.Asaresult,provincesgetsubstantialtaxifcoalpowerplantsarebuiltwithintheirprovince,whiletheygetnoVATrevenueifelectricityisimportedfromanotherprovince,forinstance,fromRE-richprovinces.Asaresult,therehasbeenonlyverylimitedcross-provincetrading.102.TheEnergyRevolutiontowardahighshareofrenewableenergywillrequirea‘justandsustainabletransitiontoalower-coaleconomy’,especiallyincoaldependentprovinces.ForREsourcestobecomethedominantsourceoftheprimaryenergymatrix,theEnergyRevolutioninChinawillrequireclosingagrowingnumberofcoalpowerplantsandcoalminesundera‘justandsustainabletransition’process.Transitioningoutofcoaltorenewableswillaffectthewholevaluechainoftheeconomyofcoal-dependentprovinces,rangingfrommining,transporting,andexportingtopowergeneration,industrialuses,anddistrictheating.Theseverityoftheimpactwillbeamplifiedbythehighconcentrationofthecoalproductioninthreetopcoal-producingprovincesofInnerMongolia,Shanxi,andShaanxi,whichaccountformorethan70percentofnationalcoalproduction.AsuccessfulEnergyRevolutioninChinawillthereforerequireasuccessfulEnergyRevolutioninthemajorcoal-producingprovinces.Thiswillmeanaddressingaseriesofinstitutionalandpolicyissuesintheseprovinces,particularly(a)addressingsocialissuesrelatedtophasingoutcoal-basedactivities;(b)tacklingenvironmentalremediationandlandreclamationandrepurposing;and(c)developnew,non-coalactivitiesinthesecoal-dependentprovinces.103.Inconclusion,differentfromtheformerstagesofthedevelopmentofrenewableenergyinChina,thewayforwardtoachievehighsharesofREcannotbeanymorecenteredonpoliciesandincentivetodeveloptheREindustryanditscompetitivenessagainstfossilfuels.Itwillnotonlyrequirepoliciesandmeasuresthattransformthewholeenergysectorbutalsoeconomywidepoliciesandprogramsthatenablesuchastructuraltransformation.54CCICED.2015.ResearchonGreenFinanceReformandPromotionofGreenTransformation.November2015.63Part2:ThedevelopmentofthefourmainrenewableenergyindustriesChapter6:TheWindIndustryChapter7:TheSolarPVIndustryChapter8:TheHydropowerIndustryChapter9:TheBiomassIndustry65Chapter6.WindIndustryKeyMessagesDuringthelast15yearsfollowingtheenactmentoftheRenewableEnergyLawin2005,Chinabuiltover4,000windfarms,including120,000windturbineswithunitsizesrangingfrom55kWto6.7MW.Thetotalinstalledcapacityofwindpowergrewfromabout1.2GWin2005to281GWin2020,ofwhichabout9GWoffshore.Thisgrowthcreatedanenormousopportunityfordevelopingadomesticmanufacturingindustry.Annualaddedcapacityculminatedin2015at34GW,lessenedslightlyto26GWin2019,andjumpedto71GWin2020.Thewindindustry’sdevelopmentmirroredthefourstagesofRE’sevolution,followingthesamepragmaticapproachofextensivepilotingandassociationwithadvancedcountriesforknowledgetransfer,withastrongfocusonlocalization,followedbyscaling-up,qualityimprovementandcostreductiontoincreasecompetitivity.•Thenumberofwindturbinemanufacturersculminatedat80(2009),consolidatingtheninto22large-scalemanufacturersby2018.•Onshorewindturbinecapacitygrewfrom2kWin1983to5MWin2018;offshorereached10MWin2020.•InvestmentcostwasreducedfromCNY20,000perkW(US$2,457perkW)in1995toCNY7,100perkW(US$1,059perkW)in2018andCNY5,284perkW(US$788perkW)in2019.•Chinagraduatedfromanimportertoexporterofturbines,reachinganexportingcapacityofmorethan3,500MW.Duringthefirststage(upto1994),ChinatriedtoattractleadingforeigncompaniestomanufactureturbinesinChina,althoughwithoutsuccessbecausethemarketwastoosmall.Tobuildamanufacturingindustry,thegovernmentincludedseveralwindpowerprojectsinthesuccessiveFYPsandinitiatedseveralcooperationprogramswithleadingcountries.Thesecollaborationsallowedthedevelopmentof50kWturbines.Duringthesecondstageof‘Takeoff’(1995–2005),thegovernmenttookseveralmeasurestohelpdevelopthewindpowermarketto(a)strengthenandimproveR&Dandwidentheindustrialwindpowerbaseand(b)attractrenownedwindturbinemanufacturerstomanufactureinChina.Theseincludedthefollowing:•The‘DoublePushProgram’(1996)providedincentivesandlocalmarketaccesstoforeignmanufacturers,enablingthemanufacturingof600kWwindturbinesinChina.•The‘RidetheWindProgram’(1996)allowedjointventureswithChineseenterprises.•The‘WindConcessionProgram’(2003)createdalargemarket,whichattractedseveralinternationalmanufacturers.•Twokeyprojectswerelaunchedtodeveloptheproductionof1.2MWturbines.66Duringthethirdstageof‘BoomoftheWindIndustry’(2006–2017),Chinainitiatedseveralcooperationprogramswithwindstandardinstitutions,namely,theIEC,tobringequipmentqualitytointernationalstandards.TheChinaStandardsCommissionadopted24IEC16400standards,andIEC16400adoptedatleastoneChinesestandard.TostrengthenR&Dandmanufacturingcapabilities,thegovernmentestablishedtechnologicalinstituteswiththeassistanceofmoreadvancedcountries.Attheendofthisstage,Chinesemanufacturersbecamerecognizedcompetitorstowell-establishedforeignmanufacturers.Duringthefourthstageof‘CommercializationDevelopment’(2018topresent),Chinahasfocusedontacklingmajorhurdlesstilllimitingcompetitionofwindpowerwithcoal-firedpowerandondevelopingtheoffshoremarket.Withtheveryfastdevelopmentandhighlyfragmentedmanufacturingassets,mainlygovernmentowned,thequalityofturbineswasstillbelowpar.Toovercometheseproblems,Chinaembarkedonthefollowinginitiatives:•Makingwindturbinesandwindfarmsmorefriendlytothepowergrid.Griddisturbanceswerereducedbyraisingthepowerfactorandusingadvancedfaultmanagementliabilitycontrolsystems.•Developingdeepoffshorewindpowertechnology.Alltheturbinesrangingfrom5to6.7MWatthe80MWXinghuaBayoffshorewindfarmwerejointlymanufacturedbysevenSOEsandforeignprivatecompaniesin2018.•Researchanddesignonthehigh-capacityoffshorewindturbinesappliedinthedeepseaandassociatedkeycomponentssupportedbytheMoSTstartedin2019.•Developinglarger-scalewindturbines.MajorwindturbinemanufacturerssuchasGoldwind,Mingyang,andEnvisionareworkingonultralarge8–12MWoffshorewindturbines.Thepositiveoutcomeoftheseinitiativesledto(a)thereductionofthecostofwindpowertoCNY5,284perkW(US$788perkW)and(b)theupcomingcommercializationofthe10MWwindturbine.Inparalleltoitsmanufacturingindustry,Chinaalsobuiltastrongimplementationcapacity.Inthefirststage(upto1994),Chinalackedwindpowerexpertise,talent,financialresources,andimplementationcapacityandreliedonothercountriestodevelopwindfarmpilotprojectsfinancedbygovernmentfundsandgrantsfrombilateraland/ormultilateralinstitutions.Duringthesecondstage(1995–2005)ofREdevelopment,thegenerationsegmentofthepowersectorwasopenedtonewentrantsandChinaissuedaseriesofpoliciesandregulations,whichenabledtheemergenceofanationalwindprojectdevelopers.Thewindgenerationprojectsbenefittedgreatlyfromtheexpertiseofthelargefossilfuelandhydropowerdevelopersinconstruction,management,andoperationandmaintenance.However,theirwindportfolioremainedmodestcomparedtotheirmomentousothergenerationassets.Duringthisstage,ChinabeganborrowingfromtheWorldBankandotherfinancierstobuildlargerwindfarmsandintroducedChinesewindprojectdeveloperstointernationalbestpracticesinpreparing,building,andoperatinglargewindarms.67Duringthethirdstage(2006–2017),thegovernmentsetambitioustargetsforthedevelopmentofwindandmandatedapercentageofnon-hydropowerrenewableenergyinthegenerationmixofallpowergenerationcompanies.Thesetworequirementsledtotheestablishmentofatleast17keywinddevelopers,ofwhich10majorgenerationSOEs,2localgovernment-ownedcompanies,4Chineseprivatecompanies,and1jointventure.Theydevelopedmoreabout230GWofwindcapacity.ThemaintakeawaysfromtheChineseexperienceincludethefollowing:(a)Buildingalocalcompetitivemanufacturingindustryrequiresalargeandsustainedmarketcapacitythatisonlypossibleinlargeandresource-richcountries.Smallercountries,withsizableresources,needtolookbeyondtheirbordersandcooperatewithneighboringcountriestocreateregionalandsustainablemarkets.(b)Medium-andlong-termplanning,cooperationwithmoreadvancedcountriestobuildanintegratedchainincludingtestingandlearningaboutavailablestate-of-the-artequipment,developmentofastrongknowledgeandR&Dbase,gradualdevelopmentofamanufacturingindustry,andcooperationwithadvancedcountryandrecognizedinstitutionstodevelopcapacityinstandardsandcertification.(c)Standards,qualitycontrol,andsustainedR&Dareessentialtoincreaseandmaintaincompetitivityasthetechnologyevolvesandthecountryembarksonoffshorewindprograms.(d)PolicyandregulatorymeasuresandpriceandtaxincentivesarenecessarytocreateavibrantREmarketandattractdevelopersandinvestorsandsustainREdevelopment.MandatingminimumREsharesintotalelectricitygeneratedbylargeandhighlyskilledpowergenerationcompanieshasbeencriticalforChinatopromoteaprojectdevelopers’industry.104.ThedevelopmentofChina’swindpowerindustryisdrivenbygovernment-supportedtestprojectsandinternationalcooperation.After50yearsofdevelopment,itiscurrentlyoneoftheworldleaderscoveringacompleteindustrialchainfromR&Dtoequipmentmanufacturingandprojectconstruction.Thewindindustry’sdevelopmentmirroredthefourstagesofRE’sevolution.Duringthefirststage(upto1994),windpowerdevelopedmodestlythroughdeploymentofsmallwindturbinesinremoteareasanddeveloperswerestillexploringopportunitiesoftransferoftechnologyandmodernmanagementsystemsthroughinternationalcooperation.Thesecondstage(1995–2005),knownastheexperimentalstage,focusedmainlyonR&Dandimprovingthequalityofthenascentindustry.Thethirdstage(2006–2017)experiencedanunprecedentboomofthelocalwindindustriesasqualityimprovedandcostsdecreasedandcontributedtofurtheringthefastgrowthofthetechnology.Finally,thefourthstage(2018topresent)marksanewdevelopmenteraasthecountrybegantograduallyremovesubsidiesandincreasedthecommercialorientationofthesectortoincreaseREcompetitivity(so-called‘gridparity’)andstabilizetheREindustry,mainlywindandPV,toaddresslowefficiencyandballooningsubsidies.68A.TheAchievementsoftheWindIndustry105.FollowingtheissuanceoftheRenewableEnergyLawin2005,Chinabuiltover4,000windfarms,including120,000windturbinesrangingfrom55kW55to6.7MWeach.56Thetotalinstalledcapacityofwindpowergrewfromabout1,260MWin2005,allonshore,to210GWin2019,ofwhich204GWweregeneratedonshoreandabout6GWoffshore(seeFigure3.1).106.Duringthatsameperiod,theaddedannualcapacityfluctuated,peakingatabout34GWin2015,beforedecreasingtolessthan20GWin2016and2017andfinallyreboundingto26GWin2019,ofwhich2GWwasgeneratedoffshore,.In2019,thewindpowergenerationamountedto406TWh,accountingfor5.6percentofthecountry’selectricityconsumption(SeeFigure3.1).107.China’swindindustryparalleledthegrowthofthepowersectorandmadesignificantprogressinthefollowingaspects:•Increasednumberofwindpowerenterprises.Thenumberofwindturbinemanufacturersgrewtomorethan80atitspeakin2009butfellto22large-scalemanufacturersin2018afterrestructuringandconsolidationoftheindustry.Windfarmdevelopmententerpriseshavegrowntomorethan90.•Increasedsinglewindturbinecapacity.Onshorewindturbinecapacitygrewfrom2kWin1983to5MWin2018.Offshorewindpowerincreasedfrom3MWin2010to6.7MWin2018(seeFigure6.3).55OnMay1,1986,China’sfirstdemonstrationwindfarmwascompletedandintegratedtothegridatMalanwan,Rongcheng(ShandongProvince)withthreeimportedDanishVestas55kWwindturbines.56InFebruary2018,thelargest6.7MWwindturbine,developedbyXinjiangGoldwindTechnologyCo.Ltd.,wassuccessfullyinstalledinXinghuaBayoffshoretestwindfarmofThreeGorges(FujianProvince).69Figure6.3:SingleWindTurbineCapacityinChina2250750150020003,00045005000600067000100020003000400050006000700080001983199320002004200620102012201320142018Singlewindturbinecapacity(KW)Source:Studyteam.57•Lowerwindpowercost.Theinvestmentcostofwindpowerreducedfrommorethan20,000currentYuanperkWin1995to7,100currentYuanperkW(about3,990constant1995YuanperkW)in2018(seeFigure6.4aandb).Figure6.4:(a)WindPowerInvestmentCostEvolution(currentyuan)020004000600080001000012000140001600018000200002200019952005201020152018Thewindfarminvestmentcost(Constant1995CNY/kW)Source:Studyteam.5857BasedondataprovidedbytheChineseWindEnergyAssociation(CWEA).58BasedondataprovidedbytheCWEA.70Figure6.4:(b)WindPowerInvestmentCostEvolution(constantyuan1995)020004000600080001000012000140001600018000200002200019952005201020152018Thewindfarminvestmentcost(ConstantCNY/kW)Source:Studyteam.59•Increasedexportcapacity.Giventhefastdevelopmentandincreasedqualityofthewindindustry,Chinagraduatedfromanimportertoexporterofturbines.Bytheendof2018,thecumulativeexportedcapacityofwindturbineshadreachedmorethan3,500MW.108.TheseachievementsaretheresultofagradualandpragmaticapproachcharacterizedbyextensivetestingandknowledgetransferfromdevelopedcountriesduringtheearlystagesandlocalizationandqualityimprovementthroughincreasedR&D,improvedqualitystandards,andcertificationinthelaterstages.B.TheInfancy109.InthefirststageofREdevelopmentandtheearlyyearsofthesecondstage,windpowergenerationwasnegligibledespitethesignificantdevelopmentofwindpowerglobally,especiallyinEuropeandtheUnitedStates.110.Atthebeginningofthefirststage,ChinalackedtherobusttechnologicalandR&Dbaserequiredtoeffectivelydeveloplocalturbinemanufacturing.Thewindindustrywaslimitedtomanufacturingofmicroturbinesusedonlyforoff-gridpower.Thefewexistingwinddevelopersfocusedonsmalloff-gridprojects.Theylackedthedesign,construction,andoperationalexperienceoflarge-scale,grid-connectedwindpowerprojects.111.Toaddresstheseproblems,thegovernmentundertookthefollowingmeasurestopromotethedevelopmentofalocalwindpowerindustry:•Itincludedseveralwindpowerprojectsinthe6th,7th,and8thFYPstocreateamarketforthedevelopmentofalocalindustryassomeoftheleadingforeigncompaniesannouncedthatlocalizingmanufacturinginChinawouldrequireanannualproductioncapacityofatleast400MW.59BasedondataprovidedbytheCWEA.71•ItalsoinitiatedseveralcooperationprogramswithcountriesleadingthewindindustryatthattimetobroadenscientificknowledgeandbuildanR&Dbaseforthewindindustry.Forexample,theChina-Swedenwindenergyscienceandtechnologycooperationprojectwasamongthefirstinitiatedin1986andlasteduntil1992.OneofthemajorundertakingsduringtheimplementationofthisprogramisthatChina’sAerodynamicsResearchandDevelopmentCenterandtheSwedishAeronauticalResearchInstitutejointlycarriedoutafundamentalresearchon‘Yawingcharacteristicsofwindturbinesandcorrespondingthree-dimensionalflowphenomenononblades’.TheresearchresultswereessentialtodesigningandtestingwindturbinesinChina.112.Severalmeasureswereimplementedtobuildthecapacityofwinddevelopersinconstructionandoperationoflarge-scalewindpowerandtestcommercialturbines:•Severalteststationswereestablished:Pingtan(FujianProvince)in1976andShengsiIsland(ZhejiangProvince)andBadaling(BeijingMunicipality)in1979.TheBadalingwindpowerteststation,establishedbytheformerMinistryofWaterResourcesandPower,consistedof26windturbinesofvarioustypesinstalledsuccessivelytoreachatotalcapacityof120kW.Mostoftheturbinesweresmallandoperatedoff-grid.Theyincludeda1.5kWturbinejointlydevelopedbyUSEnerTechcompanyandTsinghuaUniversity,a7.5kWturbineproducedbyBaodingRepairandConstructionPlant,a1kWturbineproducedbyZhejiangPowerRepairandConstructionPlant,anda5kWunitproducedbyInnerMongoliaPowerPlantGroup.Twogrid-connectedwindturbineswerealsotested:a50kWunitproducedbytheBaodingRepairandConstructionPlantanda25kWunitmanufacturedbyErzhong(Deyang)HeavyEquipmentCompanyLtd.,anSOElocatedinSichuanProvince.•InMay1986,thefirstdemonstrationwindfarmconnectedtothegridwasbuiltinMalanBayRongchengCounty(ShandongProvince),indicatingthegovernment’sintentiontomovefromoff-gridwindusagetotheon-gridwindpowerstage.ThewindfarmwasfundedbytheShandongprovincialgovernmentandtheMinistryofAviationandconsistedofthree55kWwindturbinesimportedfromDenmark.•InOctober1989,DabanchengWindFarmPhaseIwascommissioned,andwiththecapacityof2,050kWitwasthelargestwindfarminAsiaatthattime.Itconsistedof13DanishBonus150kWstalltypewindturbinesandoneDanishWincon100kWwindturbine.•TheZhuRiheWindFarminInnerMongoliawascommissionedinDecember1989,comprisingfiveUS-madewindpower56–100kWwindturbines.InApril1991,sixmoreidenticalwindturbineswereinstalled.InSeptember1993,fourGerman-madeHSM-250TwereinstalledafterbeingdonatedbytheGermangovernment.ThesedemonstrationapplicationprojectssignificantlyincreasedthescaleandwindpowerexperienceinChina.113.ThesecollaborationsandtestprojectsallowedChinatobuildabasicscientificandR&Dknowledgebasethatallowedthelocalwindindustrytomakemodestprogress,namely,thedevelopmentof18kW,20kW,30kW,and50kWturbines.Bytheendof1993,thelastyearofthefirststageofREdevelopment,thetotalinstalledwindpowercapacitywas14.5MWandthemaximumcapacityofasingleturbinewas250kW.60Severalcompaniesbeganmanufacturingwindturbinesanddevelopingsmall-scalewindfarms.Asqualityvaried,theimportanceofstandardsandcertificationwasgraduallyrecognized.Alltheseaccomplishmentslaidthefoundationforfurtherprogressinthesecondstage.60ThetypeisHSM-250TfromGermanyHusumerCompany.72C.TheTakeoff(1995–2005)114.WhileChinagainedsomeexperienceduringthefirststage,bythemid-1990s,itswindindustrywasstillfarbehindtheleadingcountries,forexample,Denmark,Germany,andSpain.Itlackedthetechnicalknowledge,industrialinfrastructure,andhumanresourcestobuildacompetitiveindustrymostlydueto•NascentR&D,anoutdatedindustrialbase,andalimitedandfragmentedmarketasmultipleeffortsweredeployedattheprovinciallevelwithlimitedcoordinationandknowledgesharing;•Noqualitystandardsandcertificationsystemsleadingtospottyqualityofthelocallymanufacturedturbines;•Highercostoflocallymanufacturedturbines,ineffectiveassessmentofwindresources,andsubpardesignofwindfarmswhichledtohighinvestmentcosts(CNY20,000perkWat1995,equivalenttoUS$2,457perkW)andpoorreturnsoninvestments;•LackofwindpowertechnologyprofessionalsinR&D,turbinemanufacturing,standardsdevelopment,andcertification;and•Thewindpowerindustry’srelianceongrantsandloansfromforeigngovernmentsformanyyears.115.Toaddresstheseproblems,thegovernmenttookseveralmeasurestocreateawindpowermarketthatwouldstrengthenandimproveR&D,reinforceandwidentheindustrialwindpowerbase,attracthighcalibertechnicalandmanagementtalents,developqualitystandardsgaps,andreachlocalmassproductionscale.116.Severalinitiativeswereundertakentoachievetheseobjectives:•In1996,theSETClaunchedthe‘InvestmentandReformProgram’,dubbed‘DoublePush’,toselectthebest-performingenterprisesinthreeyears.Theselectedcompaniesweregivenaccesstolow-interestpreferentialloanstowidenthebreadthofthewindpowermarket.Inthreeyears,theprogramledto(a)therefurbishmentoffourwindfarmswithatotalofcapacityof80MWinthenorthofthecountry;(b)theconstructionofnewwindfarmstotaling120MW;and(c)thelocalizationof200kW,300kW,and600kWwindturbines.•InMarch1996,theformerSPClaunchedthe‘RidetheWindProgram’.Throughtheprogram,theChinesegovernmentprovided240MWwindfarmdevelopmentopportunitiestoenticeforeignwindturbineenterprisestoenterChinesemarketthroughjointventures.Inexchangeforpartialownershipofthewindfarms,theseforeignventureswererequiredtocontributethedesignofwindandmanufacturingofwindturbinesbyChineseenterprises.Theprogramaimedtodeveloptheabilitytodesignandmanufacturelarge-scalewindturbineslocally.ThecommissionadoptedatenderprocesstoselecttheforeignpartnerstoformajointventurewiththeXi’anAero-Engine(Group)Ltd.andtheChinaYituoGroupCo.Ltd.todevelopgeneralassemblyplantsoflarge-scalewindturbines.Thisledtotheformationoftwojointventuresin1998:‘theXi’anWeideTurbineCompany,Ltd.’,betweenXi’anAero-Engine(Group)Ltd.andNordexGmbHofGermany,andthe‘Yituo-MADE(Luoyang)WindTurbineCompany.Ltd.’betweentheChinaYituoGroupCompanyLtd.andMADETechnologiesRenewableS.A.ofSpain.73•In2003,theformerSPC’s‘ConcessionBiddingProgram’implementedminimumlocalcomponentratesforwindturbinemanufacturinginthesuccessivecallforbids.Therequiredlocalcomponentrateofwindturbinesproposedtodeveloperswasfixedatnolessthan50percentinthefirstround(2003)andnolessthan70percentinthesecondround(2007).Itcontinuedtoincreasereaching75percentinthefifthround(2007)andsixthround(2008).Giventhepotentialsizeofthemarket,thisrequirementprovidedstrongincentivestoforeignwindturbinemanufacturerstoincreasetheirequipmentmanufacturinginChina.In2005,theGEEnergyGroup’sfirstwindturbineassemblyplantinChinawasestablishedinShenyang,focusingmainlyontheproductionof1.5MWwindturbines.VestasbegantheproductionofwindpowerequipmentinTianjinandlaterinInnerMongolia.InSeptember2006,thefirstwindpowerplantfundedbyGamesa,Spain’slargestwindpowerequipmentmanufacturer,wasputintooperationinTianjin.TheestablishmentofthesefactoriesbroadenedtechnologicalknowledgeandvitalizedChina’swindpowermanufacturing.•Duringthelastthreeyearsofthe9thFYP(1995–2000),theXinjiangGoldwindScienceandTechnologyCompanyLtd.(hereafterreferredtoGoldwind),theXijiangWindEnergyCompany,andtheXinjiangWindEnergyResearchInstitutejointlyundertooka‘NationalKeyResearchProjectfortheR&D’projecttodeveloplocal600kWwindturbines.Itresultedintheproductionoftheten600kWwindturbinesinstalledintheXinjiangDabanchengWindFarm.Theseunitswerebasedontechnologicalinnovationandlocalintellectualpropertyrightsrelatingtotheoveralldesign,domesticelectriccontrolsystems,generator,andgearboxdesignandhavemadenotablecontributionstothemanufacturingoflargewindturbineunitsinChina.•Duringthe10thFYP(2001–2005),twokeyprojectswerelaunchedtodeveloplarge-scalewindturbines.Thedomesticindustrialproductionofa600kWanda750kWwindturbinewereundertakenbyGoldwindwiththesupportoftheMoST.Duringtheimplementationoftheseprograms,localmanufacturingof600kWand750kWwindturbinesreachedmassproductionlevel.Thenational863program(describedinparagraph45and111)supportedR&DactivityundertakenbyGoldwind,tomanufacturekeypartsandcomponentstodevelopmegawattwindturbines.Bytheendofthe2005,theprogramproduced1.2MWturbineswhichwereinstalledontheXinjiangDabanchengWindFarm.117.Tobringequipmentqualitytointernationalstandards,Chinainitiatedseveralcooperationprogramswithwindstandardinstitutions,namelytheIEC.ChinawasparticularlyactiveintheTechnicalCommittee8861(TC88)workinggroup:•Itappointed81expertstoparticipatein27outof28TC88standardsworkinggroups.•TheChinaStandardsCommission,establishedin2002,adopted24IEC16400standardsasnationalstandards.•IEC16400adoptedatleastoneChinesestandardinNovember2019andpublishedinMay2020.118.Toincreasethenumberofwindpowertechnologyprofessionals,especiallyinR&Dcapacity,thegovernmentinitiatedbasiccurriculumsinnewlyestablishedtechnologicalinstitutesandtrainingprogramsinexistingoneswiththeassistanceofmoreadvancedcountries:61In1987,theIECestablishedanewtechnicalcommittee(TC88)forthewindpowerindustry,whichisresponsibleforpreparingandrevi-singtheunifiedstandardsfordesignrequirements,engineeringintegrity,measurementtechniques,andtestproceduresofwindturbines,namelytheIEC61400seriesofstandards.74•In1997,theInstituteofMeasurementandControlofRotatingMachineryandWindEnergyDeviceswasjointlyestablishedbytheNorthwesternPolytechnicalUniversityandtheBerlinPolytechnicUniversity.By2001,morethan150undergraduateshadparticipatedinthemoduleonwindpowergenerationtechnology.However,sincethewindindustrywasstillnascentandtherewerefewjobopportunities,only10undergraduatestudentsandonemaster’sstudentchosewindpowerastheirmajorandsuccessfullygraduated.•In2002,theSino-German‘windpowertalenttrainingcooperation’projectorganizedtworoundsoftrainingsessionsin2002and2005.Eachroundincludedabasicknowledgesessionandanadvancedknowledgesession.ThebasicknowledgesessionslastedthreemonthsandwerecompletedattheNorthwestPolytechnicUniversity.Theyprovidedparticipantswithbasicwindpowerknowledgeontopicslikeaerodynamicdesign,structuraldynamics,fundamentalsofpowerengineering,controlsystems,andgridconnectionconstraints.TheadvancedsessionslastedfourmonthsandwereconductedinGermany.Theyfocusedontheoperationandmaintenanceofwindfarmsandthedesigntechnologyofwindturbines.TheadvancedsessionswerefollowedbytraineeinternshipsinGermanenterprisesforsixweeks.Atotalof32traineesparticipatedinthetworounds.TheyconstitutedtheinitialcoreofChinesewindindustryleadership.Theyarestillcontributingtoitsdevelopment.119.Withthestrongsupportofthesepolicies,11windturbinemanufacturingenterpriseshaveemergedinChinaandimprovedtheircompetitiveness.In2004,Goldwind-producedturbinesreached40MWofinstalledcapacity,makingthecompanythethird-largestwindturbinemanufacturerintheChinesemarket,trailingSpanishleaderGamesa(71MW)andDanishNEGMicon(56MW).Thisresultedinanincreasingnumberofreliablepartsmanufacturers,includingblades,gearbox,generator,tower,andelectricalcontrol.Manufacturingtechnologygreatlyimprovedasaresult,leadingtothedevelopmentof2MWturbinesandreductionofimplementationcoststoCNY11,000perkW(equivalenttoUS$1,358perkW)installedbytheendof2005.Furthermore,thenumberofwell-trainedpersonnelincreasedsignificantlyincludingpolicymakers,R&Dprofessionals,andengineeringandconstructionpersonnel.Theseachievementspavedthewayfortheboomofwindpowerduringthethirdstage.D.TheBoomoftheWindIndustry(2006–2017)120.Atthebeginningofthisstage,thewindpowerinstalledcapacitybegantogrowsteadilyascostdeclinedowingtoeffortsdeployedduringthefirsttwostages.R&Dcooperationprogramsandthetransferoftechnologystemmingfromthe‘RidetheWind’programledtolocalmanufacturingof600kWto1.5MWgrid-compatiblewindturbines.SOEsplayedanimportantroleinthewindsectordevelopment;theydevelopedmostofwindpowerfarms,contributedsignificantlytothescale-upofthemarkettobringthecostdown,andextendedtheiractivitiestomanufacturingtobecomemajorplayersintheglobalwindindustry.However,thequalityoflocallymanufacturedturbinesvaried,andtheyfacedmanytechnicalhurdlesandstruggledtomeetqualitystandardsbecausetherewerenumerousmanufacturingcompaniesatprovincialandevencountylevels:•AlargenumberofChinesemanufacturerswereunabletomatchtheinnovationandtechnologicalimprovementsofadvancedcountries,leadingtoasignificantrelianceonimportsforkeycomponents(suchasbearings)andcontrolsystems.•Thetechnicalstandards,producttesting,andcertificationwerenotwellestablished.75•Windresourcesevaluationandwindfarmmicro-sitingskillswereinsufficienttomeetthefast-growingdemandofwindfarmdevelopment.121.Toaddresstheseissues,thegovernmenttookaseriesofmeasuresto(a)strengthentechnologicalknowledgeandbuildskillsinwindresourceassessment,(b)developnationalqualitystandardsalongwithtestingandcertificationsystems,and(c)increaseR&D.122.Tomeetthechallengesencounteredinthefirsttwophasesoftheindustry’sgrowth,thegovernmentinitiatedseveralprogramstodevelopdomesticwindturbinemanufacturingby(a)strengtheningscientificknowledgeatacademicandfundamentalresearchinstitutes,(b)promotingincreasedR&Dandinnovationinleadingenterprises,(c)incentivizingdomesticwindpowermanufacturingenterprisestoimprovetheirtechnicalbasesandpromotecreativity,(d)promotingthelocalizationanddevelopmentoflarge-scalewindpowerunits,and(e)attractingalargenumberoftechnicaltalentsandprovidingthemwithincentivestojointhegrowingwindpowerindustry.123.ThreemajornationalscientificandtechnologicalprogramsillustratetheeffortsdeployedbytheMoSTtosupportthelocalization62oflarge-scalewindturbines:•The‘NationalBasicResearchProgramofChina(973Program)’setupfourprojectstosupporttheR&Dandmanufacturingoflargewindturbinesforsevenyears(2007–2014):basicresearchoflarge-scalewindturbineaerodynamics,basicresearchonlarge-scaleoff-gridwindpowersystems,basicresearchoflarge-scalewindpowergridintegrationsystem,andkeymechanicalissuesanddesignoflarge-scalewindturbines.•TheNationalHighTechnologyResearchandDevelopmentProgram(‘863’ProgramdescribedinChapter2,paragraph47)launchedeightprojectstosupportwindenergydevelopmentandutilizationfrom2009to2014anddevelopknowledgeandR&Dtofurtherlocalmanufacturingofstate-of-the-artequipment.•TheNationalScienceandTechnologyInfrastructureProgramundertooksixprojectstosupportwindenergydevelopmentandutilizationfrom2006to2012.124.Inaddition,majorin-houseR&DandinnovationeffortsweredeployedbythelargeSOEsandprivateenterprisesandmany,suchastheXinjiangGoldwindScienceandTechCompanyLtd.,EnvisionEnergyCompanyLtd.,andMingyangSmartEnergyGroupLtd.,achievedcommendableresults.•Goldwind,whichenteredthewindpowerbusinessasadeveloper,engagedinwindturbinemanufacturingin1977bypurchasingalicenseofa600kWfixed-pitchstall-controlledwindturbineandgraduallymanagedtofullylocalizeitsproductionowing,inpart,tothetechnologicalbreakthroughsachievedbynationalprograms.InNovember2003,Goldwindsignedatechnologytransfercontractforthejointdesignanddevelopmentofa1.2MWdirectdrivepermanentmagnetunitwithVensysEnergyCo.Ltd.inGermany.Later,thecompanydeployedadditionalR&Deffortstodevelop2MW,2.5MW,and3MWhigh-powersets.By2015,Goldwindhadbecometheworld’sNo.1supplierofwindturbines,withR&DcentersinBeijing,Xinjiang,andGermany.In2018,thelargestoffshorewindturbinemadebyGoldwind,withcapacityof6.7MW,wasinstalledinXinghuaBay,Pingtan,FujianProvince.Itagainindicatesthatthewindenterprisesaremakinggreateffortforinnovation.Besidesincreasingthesinglewindturbinecapacity,Goldwindistryingtomakethewindfarmsandwindturbinesmuchsmarterandmorefriendlytothepowergrid,byintegrating62LocalizationinthisreportmeansthatwindturbinesandtheirmaincomponentsareproducedinChina.76theinternetofthings,digitalization,andartificialintelligenceintothewindindustry.Meanwhile,therevenue,safety,andreliabilitycanalsobeimproved.•EnvisionEnergyCo.Ltd.developedtheconceptof‘intelligentwindturbines’andfocusedonthedevelopmentofonshoreoflowwindspeedturbines.Theconceptof‘intelligentwindturbine’isbasedonusingmoderninformationtechnologytodevelopwindpowerturbines,byintegratingsophisticatedcontrolsystems,sensors,andcloudcomputingtoreducedisturbancestothegrid.Thecompanydevelopedanadvanced,full-cyclesmartwindfarmmanagementsystemwhichusedmoresensorsandcloudcomputingtoimprovetheperformanceofturbinesinmoredevelopedmarkets.•MingyangSmartEnergyGroupLtd.isanotherenterprisethatexperiencedsignificantreturnsonR&Dinvestments.ItsuccessivelyestablishedtheDanishR&DCenter,theUSNorthCarolinaR&DCenter,andtheShanghaiOffshoreEngineeringR&DCenter.Duringthethirdstage,itdeveloped1.5to6.5MWserieswindturbinessuitableforvariouswindconditions,includingtyphoonandlow-temperatureresistantturbines,plateauandintertidalzoneturbines,andlow-wind-speedandoffshoreturbines.125.Duringthisstage,Chinainitiatedalong-lastingcooperationwithinternationalinstitutionstodevelopqualitystandardsandatestingandcertificationsystem.Italsocreatedanumberofnationalkeylaboratoriesandengineeringresearchcenters:•TheNEAandMoSTcreatedanumberofnationalkeylaboratoriesandengineeringresearchcenters:oTheNationalEnergyR&D(experimental)CenteronWindPowerBladewasapprovedbytheNEAinNovember2011andestablishedbytheInstituteofEngineeringThermalphysicsoftheChineseAcademyofSciences.63oTheNationalOffshoreWindPowerEngineeringTechnologyResearchCenterwasapprovedbytheMoSTin2009andestablishedbytheChinaShipbuildingIndustryCompanyLimited(CSIC)HaizhuangWindpowerCo.Ltd.oTheNationalKeyLaboratoryofWindPowerGenerationSystemwasapprovedbytheMoSTin2010andestablishedbytheZhejiangWindeyCompanyLtd.oTheNationalKeyLaboratoryofWindPowerEquipmentandControlwasapprovedbytheMoSTin2010andestablishedbytheGuodianUnitedPowerTechnologyCompanyLtd.oTheNationalWindPowerEquipmentQualitySupervisionandInspectionCenterwasapprovedbytheNEAin2012andestablishedbytheHebeiElectricPowerSurveyandDesignInstitute.oTheNationalCenterofQualitySupervisionandInspectionforWindPowerEquipment(Gansu)wasapprovedbytheCertificationandAccreditationAdministrationofthePeople’sRepublicofChina(CNCA)in2015andestablishedbytheGansuSpecialEquipmentInspectionandResearchInstitute.oTheNationalCenterofQualitySupervisionandInspectionforWindPowerEquipment(Jjiangsu)wasapprovedbytheCNCAin2017andestablishedbytheJiangsuYanchengProductQualitySupervisionandInspectionInstitute.63http://www.etp.ac.cn/jgsz/kybm/fd/77•InNovember2010,theNationalStandardsCommitteeapprovedthe‘RulesandProceduresforConformityTestingandCertificationofWindTurbineGeneratorSystems’(NationalStandardNo.GB/Z25458-2010).Thewindturbinecertificationprocesscompriseddesign,type,project,andpartscertifications.ThiseventuallyallowedtheChinesecertificationsystemtobecomerecognizedinternationally.Furthermore,ChinesecertificationorganizationsactivelyparticipatedininternationalcooperationprogramandjoinedinternationalinstitutionssuchastheIECREProgramandgainedrecognitionfromothercountries.E.CommercializationDevelopmentStage(2018toPresent)126.EvenasChinatooktheleadintheinstalledcapacityofwindpower,theindustrystillfacedmajorhurdlesaswindpowerstruggledtocompetewithcoal-firedpowerplantsandovercomethechallengesofthegrowingoffshoremarket:•Theefficiencyofwindturbineneededtobefurtherimproved.•Systemcontrolsandmanagementsystemsneededtobeimprovedtobringthedisturbancestothegridtotheacceptablelevel.•Developmentandscale-upofoffshoreanddeepseawindfarms.•Acceleratingoftheintegrationofrenewableenergyandotherenergy.64127.Toovercometheseproblems,Chinaembarkedonthefollowinginitiatives:•Makingwindturbinesandwindfarmsmorefriendlytothepowergrid.Griddisturbanceswerereducedbyraisingthepowerfactorandusingadvancedfaultmanagementliabilitycontrolsystems.•Developingdeepoffshorewindpowertechnology.Alltheturbinesrangingfrom5to6.7MWatthe80MWXinghuaBayoffshorewindfarmwerejointlymanufacturedbysevenSOEsandforeignprivatecompaniesin2018.Thetotalcapacityis79.4MW,2×6.7MWfromGoldwind,2×5MWfromCSICHaizhuangWindpowerCo.Ltd.,2×5MWfromTaiyuanHeavyIndustryCo.Ltd.,2×5.5MWfromMingyangSmartEnergyGroupLtd.,1×5MWfromDECWindPowerCo.Ltd.,2×6MWfromShanghaiElectricGroupCo.Ltd.(Simons,aconsortium),and3×6MWfromGE.Theysuccessfullywithstoodthestrongtyphoon‘Maria’,demonstratingthequality,suitability,andsoundnessofChina’soffshorewindpowerequipment.•Researchanddesignonthehigh-capacityoffshorewindturbinesappliedinthedeepseaandassociatedkeycomponentsorganizedbytheMoSTstartedin2019.•Developinglarger-scalewindturbines.MajorwindturbinemanufacturerssuchasGoldwind,Mingyang,andEnvisionareworkingonultralarge8–12MWoffshorewindturbines.64Windpowerandsolarenergyareintermittent/variable.REdevelopmentrequiresthatgridoperatorsarepreparedtoaddmeasuresthatcaninstantlypickupthelostcapacityofwindorsolarcapacity.Thesemeasuresaimtobetter“integrate”intermittent/variabletechnologiesinthesystem.78128.Thepositiveoutcomeoftheseinitiativeswasdemonstratedin2018by(a)thereductionofthecostofwindpowertoCNY7,100perkW(aboutUS$1,059perkW)and(b)theupcomingcommercializationofthe6.7MWwindturbine.F.BuildingtheImplementationCapacity129.Inthefirststage(upto1994),Chinareliedonothercountriestodevelopwindfarmpilotprojectsfinancedbygovernmentfundsandgrantsfrombilateraland/ormultilateralinstitutionsduetothelackofwindpowerexpertise,talent,financialresources,andimplementationcapacity:•ChinareceivedinternationalaidfromDemarkandGermanytodeploytheirwindturbinesinsomesmallwindfarmsconstructedbylocaldevelopersinseveralprovinces,includingShandongandXinjiang(seeparagraph100).Throughthesedemonstrationprojects,Chinabegantodevelopknow-howandexpertiseinwindfarmsiteselection,windturbineinstallation,windfarmoperationandmaintenance,andsoon.•Atthesametime,theassistanceprogramsoftheWorldBank,GEF,andUNDPhelpedChinabuildcapacityinassessmentofwindresourceandprovidedtrainingto(potential)developersinimplementationofsmallandpilotwindprojects,mainlybuiltbygovernments,suchastheGovernmentofShandongProvinceandChina’sMinistryofAviation.130.Duringthesecondstage(1995–2005)ofREdevelopment,Chinaissuedaseriesofpoliciesandregulations,whichenabledtheemergenceofanationalwindprojectdevelopersindustry.Theseincludedthewindpowerconcession,RidetheWindandDoublePushPrograms(seeparagraph57),theseparationofthegenerationfromgrid(transmissionanddistribution)mandatedtheStateCouncilDecreeNo.5inMarch2002,andthefavorabletaxesandpolicies,whichopenedupahugemarketforwindpowerdevelopmentandallowednewentrantsintheconstructionandexploitationofgenerationplants.TheseincludesomemajorfossilfuelandhydropowergenerationcompaniessuchasHuarayGroup(hereafterHuaray)(100MW),GuangdongYudeanGroup(hereafterYudean)(100MW),LongyuanElectricPowerGroupCo.Ltd.(hereafterLongyuan)(350MW),BeijingInternationalElectricity(100MW),ChinaHuanengGroupCo.Ltd.(hereafterHuaneng)(200MW),andChinaHuadianGroupCo.Ltd.(hereafterHuadian)(200MW).Thewindgenerationprojectsbenefittedgreatlyfromtheirexpertiseinconstruction,management,andoperationandmaintenance,buttheirwindportfolioremainedmodestcomparedtotheirmomentousothergenerationassets.131.Duringthisstage,ChinabeganborrowingfromtheWorldBankandotherfinancierstobuildlargerwindfarms,whichwiththecontinuedassistanceofCRESPandWED(seeparagraph70)introducedChinesewindprojectdeveloperstointernationalbestpracticesinpreparing,building,andoperatinglargewindarms.132.Duringthethirdstage(2006–2017),thegovernmentsetambitioustargetsforthedevelopmentofrenewableenergyandmandatedapercentageofnon-hydropowerrenewableenergyinthegenerationmixofallpowergenerationcompanies.The2007MediumandLong-termDevelopmentPlanofRenewableEnergy65mandatedthat(a)theproportionofnon-hydropowerREgenerationinthetotalpowergenerationconsumedintheareascoveredbythemajorpowergridsshouldbemorethan1percentin2010and3percentin2020and(b)theshareofnon-hydropowerREgenerationinthetotalgenerationofcompanies65https://baike.baidu.com/item/%E5%8F%AF%E5%86%8D%E7%94%9F%E8%83%BD%E6%BA%90%E4%B8%AD%E9%95%BF%E6%9C%9F%E5%8http://www.china.org.cn/e-news/news070904-11.htm79fullyowningmorethan5GWofgenerationassetsshouldexceed3percentin2010and8percentin2020.In2016,thegovernmentissuedtheGuidanceontheEstablishmentofInstitutionofRenewableEnergyExploitation66thatmandatedthatnon-hydropowerREgenerationshouldamountto9percentofthetotalgenerationofallpowergenerationcompaniesin2020.133.Thesetworegulations,combinedwithagenerousFiTandothertaxandfinancialbenefits(seeparagraph63),whichensuredthatwindpowerinvestmentswereprofitable,attractedpowerenterprisesanddevelopersandsomenon-powerenterprises,withhighcapacityinprojectpreparation,construction,management,andoperationandmaintenance,todecisivelyenterthewindpowerdevelopmentmarket.134.ThemajorityofthesewindpowerdevelopersareSOEs(CHNEnergy,Huaneng,Datang,SPIC,Huadian,CGN,ChinaResourcesPower,andCTG;seeTable6.1),whichaccountedfor68.1percentoftheinstalledcapacityby2017.ProvincialandloweradministrativelevelssuchastheJingnengGroup67(1,996.75MW),HebeiConstructionInvestment(3,600MW),LunengGroup68(800MW),andShenzhenEnergy69(615.4MW)benefitedfromthedecentralizationofprojectapprovaltoloweradministrativelevelsandaccountedfor3.3percentofthetotalinstalledwindcapacityin2017.Finally,severalprivatecompaniessuchasBeijingTianrunNewEnergyInvestmentCo.Ltd.(Tianrun),Chinawindpower(laterrenamedConcordNewEnergy),BeijingJieyuanNewEnergyInvestmentCo.Ltd.(hereafterJieyuan),andJingtaiNewEnergy(Shanghai)Co.Ltd.(hereafterJingtai)successfullyenteredthemarketandaccountedforabout4.2percentofthewindinstalledcapacityby2017.70135.ThepredominanceofSOEsinlargewindbasesdevelopmentismainlydueto(a)thehighfinancialandtechnicalrisksrelatedtothedevelopmentoflargewindprojectsthatrequiredaccesstolocalfinancing,strongimplementation,andmanagementcapacityoflargeandcomplexprojects;(b)accesstotrainingandcapacitybuildingfrombilateralandmultilateralprograms;and(c)theobligationforgenerationcapacitytodevelopaminimumREcapacity.136.Severalforeignenterprisesparticipatedinbiddingofthewindconcessionprogramandotherprojectsintheinitialstageofwindpowerdevelopment.Inthefirstroundoftheconcessionprogram,Navara,acompanyfromSpain,andInverness,acompanyfromGermany,participatedinthebidding,buttheirbiddingpricewastoohighandtheyfailedtosecureconcessions.Asaconsequence,foreignenterprisesdidnotparticipateinthenextroundsofthewindconcessionprogramalone.SomeofthemtriedtoenterthemarketthroughassociationwithChinesecompanies.Forexample,inAugust2007,AESoftheUnitedStatesestablishedajointventurewithGuohuaEnergyInvestmentCompany,oneofChina’sleadingREproducers,todevelopwindpowerprojectsinChina.InJanuary2008,BPcooperatedwithGoldwindtodevelopwindfarmsinChina.However,withtheadventofthefinancialcrisisin2008,foreignenterprisesbegantowithdrawfromChina’swindpowermarketasfinancialoutweighedthebenefitsofinvestinginChina’swindpowermarket.137.SomeChineseprivateenterpriseshaveparticipatedinthedevelopmentofwindpowerprojectsinChina.Huaruiparticipatedinthefirstroundofconcessionbidding(2003)andwonthebidofJiangsuRudong100MWwindpowerproject.Xiongya(virgin)Co.Ltd.associatedwithLongyuanPowerGroupCo.Ltd.andtheconsortiumwonthebidfortheBayin200MWwindfarminInnerMongolia.In2007,theHongKongConstructionEngineeringCo.Ltd.andChinaEnergyConservationInvestmentCorporationwonthe66http://zfxxgk.nea.gov.cn/auto87/201603/t20160303_2205.htm67https://news.bjx.com.cn/html/20180213/880850.shtml68http://www.luneng.com/business/index8.html69http://xinpi.cs.com.cn/new/file/bulletin/2020/11/18/1208756966.PDFhttp://pdf.dfcfw.com/pdf/H2_AN201804121122321885_1.pdf70Availablestatisticsareincomplete.Therearestillsomeenterprises,includingstate-ownedenterprisesandprivateenterprises,whosewindpowerscaleisrelativelysmall.80bidforGansuYumenChangma200MWwindfarm.In2009,aftertheissuanceoftheFiTpolicy,whichguaranteedhigherreturnsonwindpowerinvestments,severalChineseprivatecompanies,suchasTianrun,Jieyuan,Jingtai,andConcordNewEnergybegantoinvestinwindfarms.Buttheirparticipationremainedmarginalbecauseoftheirlimitedfinancingcapacitybecauseofthestringentrulesfordeveloperswithoutsubstantialcollateralstosecuredebtfromgovernment-ownedcommercialbanks.138.Table6.1listssomekeywindprojectdevelopers,whichplayedanimportantroleintheChinesewindprojectindustry.71727374757677787980Table6.1:CumulativeInstalledCapacityofChina’sWindPowerDevelopers(MW)NameSOE/PrivateBy2005By2017By2019HuarayPower70Private100n.a.n.a.GuangdongYudean71Localgovernment100526505Longyuan72SOE35018,39520,032BeijingInternationalElectricity73localgovernment100n.a.n.a.HuadianSOE20013,02014,630HuanengSOE20019,03022,620CHNEnergy74SOEn.a.37,68041,820DatangSOE016,89019,530SPIC75SOEn.a.13,68018,450CGN76SOEn.a.11,79014,750ChinaResourcesPower77SOEn.a.6,68011,190Tianrun78Domesticprivateenterprisen.a.5,5507,020PowerChina79SOEn.a.5,2506,690CTGSOEn.a.4,2305,710ConcordNewEnergyDomesticprivateenterprisen.a.2,4903,113JieyuanDomesticprivateenterprisen.a.7801,300JingtaiJointventurebyChinaandforeigncompaniesn.a.n.a.1,650Source:Companyannualreports;dataprovidedbytheChinaRenewableEnergyEngineeringInstituteandtheinternet.71Noinformationcanbesearchedafter2006.72GuangdongYudeanalteredthenametoGuangdongEnergyGroupin2019.73In2002,LongyuanbecamethepartoftheChinaGuodian.74Nomoredataupdatedafter2006.75ChinaGuodianandChinaShenhuamergedintoCHEEnergyin2017.76StatePowerInvestmentCoporationLimited(SPIC)wasfoundedin2015.77In2007,ChinaGeneralNuclearPowerCorporation(CGN)officiallyoperatedwindpowerbusiness.78ChinaResourcesPowerboughtthefirstwindpowerprojectin2005.79Tianrunwasfoundedin2007.80PowerChinawasfoundedin2009.81139.Duringthefourthstage(2018topresent),thelargecompaniescontinuedtogrowandadapttotheslowergrowthoftheChinesewindpowermarketby•Encouragingthedevelopmentofdistributedonshorewindpowerandbuildingcapacityinimplementationandmanagementofoffshorewindpowerprojectsand•Competingintheinternationalwindpowermarket.140.Bytheendof2019,thetop10windpowerdevelopers’totalinstalledcapacityincreasedtoabout162GW,accountingforabout69percentofthetotalinstalledcapacity:(a)eightSOEs—CHNEnergy(41,820MW,ofwhich2,039MWofoffshore),Huaneng(22,620MW,ofwhich915MWofoffshore),Datang(19,530MW,ofwhich302MWofoffshore),SPIC(18,450MW,ofwhich802MWofoffshore),CGN(14,750MW,ofwhich247MWofoffshore),Huadian(14,630MW,nodisclosureofdataonoffshore),ChinaRecoursesPower(11,190MW,itsfirstoffshorewindprojectof400MWratifiedin2019),andCTG(5,710MW,ofwhich928MWofoffshore)—and(b)twoprivatelyowned—Tianrun(7,020MW,nodisclosureofdataonoffshore)andPowerChina(6,690MW,nodisclosureofdataonoffshore).Theremaininginstalledcapacity,about31percent,wasdevelopedbysmallercompaniesownedbyloweradministrativelevelssuchasJingnengGroup,HebeiConstructionInvestmentCompany,LunengGroup,andShenzhenEnergy.G.LessonsLearned141.Localizingwindturbinemanufacturingrequiresasteadymarket,estimatedbysomeinternationalcompaniesat400MWperyear.142.Buildingalocalcompetitivemanufacturingindustryrequires(a)alargeandsustainedmarketcapacitythatisonlypossibleinlargeandresourcerichcountriesbecausesmallercountries,withsizableresources,needtolookbeyondtheirbordersandcooperatewithneighboringcountriestocreateregionalandsustainablemarketsand(b)medium-andlong-termplanning,cooperationwithmoreadvancedcountriestobuildanintegratedchainincludingtestingandlearningaboutavailablestate-of-the-artequipment,developingastrongknowledgeandR&Dbase,graduallydevelopingamanufacturingindustry,andcooperatingwithadvancedcountryandrecognizedinstitutionstodevelopcapacityinstandardsandcertification.143.AlthoughChinahasalargecapacitytoproducewindturbines,severalmanufacturersstillneedtomakebreakthroughsinmanufacturingofcorecomponents,includinghigh-qualityblades,bearings,gearboxes,andcontrolsystems.Theseareessentialtohighefficiencyandsafetyofwindturbinesandplayakeyroleinthedevelopmentofawindpowerindustry.ThesemanufacturersneedtocontinuedevelopingR&Dinthisarea.144.Regardingthewindfarmprojectindustry,China’sexperienceindicatesthatpolicyandregulatorymeasuresandpriceandtaxincentivesarenecessarytocreateavibrantREmarketandattractdevelopersandinvestorsandsustainREdevelopment.However,theymaynotbesufficienttomeetgovernmentambitioustargetsandtimeframe.Inadditiontobuildingtheregulatoryframeworkandgeneratingpriceincentives,mandatingminimumREsharesintotalelectricitygeneratedbylargepowergenerationcompanieshasbeencriticalforChinatopromoteaprojectdevelopers’industrywithgrowingskillsinprojectplanning,management,construction,andoperationandmaintenanceofprogressivelylargerandmorecomplexprojects.83Chapter7.SolarPVIndustryKeyMessagesThedevelopmentofChina’sPVindustryhastakenadifferentpathfromwindpower.ItwasdrivenbyentrepreneurswhoinvestedinChinatotakeadvantageofoverseascapital,highlyskilledtechnicalpersonnelandlowerdomesticlaborcoststocompeteingrowingoverseasmarketsfromtheoutset.Itstartedrelativelylatebutcaughtupquickly,coveringtheentirePVsupplychainandtransformedtheREmarketduringthelast15years.Chinawaspropelledinlessthantwodecadestoadominantpositionintheglobalmarketasabout70percentofthemodulesusedworldwidesince2015weremanufacturedinChina.In2019,6ofthetop10polysiliconproducersintheworldand15ofthetop20modulesmanufacturersintheworldwereChinesecompanies.Technologicaladvancementsandeconomiesofscalecontributedtosignificantpricereductionandduring2006–2019,thecostofsolarPVmodulesdecreasedby96percentandthecostofbalanceofsystem(BOS)decreasedby93percentinChina.Thisdramaticdevelopmentwasachievedinfourstages,whichdonotexactlymirrorthestagesofREdevelopmentinChinabecausethePVindustryreliedheavilyonexports,whichneverdroppedbelow40percentofthetotalmoduleproductionandreached60percentin2019.Duringthefirststage(before2000),China’sPVmodulemanufacturingcapacitywasclearlylaggingtheindustryleaders,BOSproductswereinefficient,manufacturerswereoverlyreliantonimportedmaterials,andthemarketwastoosmalltosupportcommercialdevelopmentandtechnologicalprogress.Duringthesecondstage(2001–2010),ChineseentrepreneursinvestedinPVindustrytakingadvantageofoverseastechnology,humanresources,capital,market,andlowcostlaborforces,especiallyafterthecountryjoinedtheWTOin2001.Theytookadvantageofthegeneralpolicyof‘inviteinvestmentfromoverseas’tobenefitfrompreferentialconditions,suchastaxdeduction,accesstoland,andfinancingprovidedbyadvancedprovincestofirstmoverstoestablishmanufacturingPVcapabilitiesintheirterritories.Thehighlyskilledexecutivesoftheseprivatecompaniesbroughttheirtechnicalcapacity,professionalnetworks,andcapitalandadvancedmanagementskillstoChina.Theyhiredinternationalexpertstoimprovedesignandproductionprocesses,soughtgrantsandloansfrominternationalfinancialinstitutionstoimprovetheirproducts,andsecuredcertificationfortheirproductsfromrecognizeduniversitiesandcertificationlaboratories.Tomeettheirvastfinancingneeds,allemergingChinesePVcompaniesreliedonforeigncapitaltakingadvantageofthePVutilizationboomindevelopedcountriesandincreasedinterestofinvestorsinAsianmarkets.China’ssolarcellproductioncapacityexplodedfrom300MWin2005to30GWin2010.InChina,theyweresoughtafterbylocalgovernmentsandofferedfinancialandlanduseconcessionstoinvestintheiradministrativeareas.Duringthethirdstage(2011–2017),theindustryenteredaperiodofmassiveexpansion.ToencouragethePVutilizationinthedomesticmarket,theChinesegovernmentadoptedpolicymeasuressuchasfeed-intariffandreliedon‘traditional’Chineseindustrysupportmethods—large-scaledemonstrationandpilotprojects,suchasthe‘GoldenSun’programandthePVpovertyalleviationprogram.Basedontheexperiencegainedduringthedevelopmentofthewindindustry,thegovernmentintervenedforcefully,issuingaseriesofspecificationsandstandardstoprotectconsumersagainstlow-qualityproducts.84Morethan40ChinesestandardswereadoptedfromtheIEC,SemiconductorEquipmentandMaterialsInternational(SEMI),andotherinternationalstandardinstitutions,andChineseexpertsledthedevelopmentofseveralstandardspublishedbytheIEC.Duringthefourthstage(2017–),thePVindustryenteredintoanewera.Theemergenceofnewtechnologieshasledtoanewroundofcostdeclines,andtheincreasedefficiencybroughtonbytheapplicationofintelligentcontrolsystemshaspromotedtherapiddevelopmentofdistributedPVinChina.Veryhighgrowthisusuallydisruptiveandrequiresconstantoversight.The‘PVrush’inChinawasnoexceptionandthedomesticmarket,shockedbydelayedornopaymentofsubsidies,spiraleddownandinvestmentswerecutbyabout17percentin2018.Chinesecompaniesrefocusedonoverseasmarkets,delocalizingmanufacturingclosertotargetmarkets,developingtechnologyadvancestoachievehigherphotoelectricconversionefficiency,anddevelopingstandardsforrecyclingandreuseofdecommissionedmodules.Regardingtheprojectindustry,inthefirststage,theChinesegovernmentinitiatedseveralprojectssupportedbygrantsprovidedbybilateralandmultilateralinstitutionstodevelopelectricityaccessinthepoornorthwesternprovincesandbuildthecapacityofPVdevelopersinprojectplanningandpreparation,PVstationconstruction,operation,andmaintenance,introducingthemtointernationalbestpractices.Duringthesecondstage,thefinancingprovidedtodevelopersandthepoliciesmandatingaminimumshareofREatthegenerationlevelopenedupahugemarketforsolarPVpowerdevelopmentandallowednewentrantsintheconstructionandexploitationofgenerationplants,includingsomemajorfossilfuelandhydropowergenerationcompanies.WithcontinuingdecreasingPVcost,thegovernmenttestedandadoptedagigawatt-levelutility-scalePVconcessionprogram,whichcontributedtothesurgeofPVduringthelateyearsofthethirdstageofREdevelopment,especially2018and2019.Forutility-scalesolarPVprojects,themarketwasdominatedbySOEs,localgovernment-ownedenterprises,andlargeprivateenterprises.FordistributedsolarPV,whichaccountedfor66GW,about31percentofthetotalinstalledcapacity,themarketisdominatedbymediumandsmallprivateenterprisesandREservicecompanies.ThecorrespondingChineseassociationcountsmorethan5,000members.ThelessonslearnedfromthedevelopmentthePVindustryinChinaareasfollows:First,Chinahasadoptedlawruling,planningguidance,financialsupportandothermeasuresinrecentyearstovigorouslypromotetherapidandlarge-scaledevelopmentofrenewableenergyandmakeaprominentcontributiontotheglobalenergytransition.Inparticular,therapidtechnologydevelopmentofPVhasresultedinsignificantcostreduction,whichgreatlyincreasedthecosteffectivenessoftheinvestment,andthereforemadePVcompetitivetothetraditionalenergy.Itmadeitarealityforrenewableenergytobecomethemainstreamenergysourceintheglobalenergymarket.85Second,Chinahasuseddevelopmenttargetasmeasuresatdifferentstagesforthedevelopmentofrenewableenergy.Chinahascontinuouslyadjusteditspoliciestoadapttothechangedsituationtoaddressissuesandcreateahealthydevelopmentenvironmentoftheindustry.Forexample,inresponsetothedownturnofglobalPVmarket,challengesinexportmarket,andunbalancedsupplychainoftheindustry,theGovernmentissued"SeveralOpinionsonPromotingtheHealthyDevelopmentofthePVindustry"inatimelymannerin2013(GuoFa[2013]24No).InordertoreducethegridconnectionpriceofPV,NEAhasadoptedtheunifiedbiddingpolicyandmeasuresatnationallevelsince2019,whichsignificantlycontributedtothequickcostdeclineofthePVandbringittothepathtogridparityandnowsectorisatthegateofnon-subsidydevelopmentera.Third,theopeningofChina'sPVmarkettovariousmarketplayers,SOEs,privateenterprises,Chinesecompanies,andforeigncompaniescanallparticipateinallpartsofthesupplychain.Forexample,theupstreammanufacturingindustryisdominatedbyprivateenterprises,thedownstreampowerstationinvestment,andutilityscaleprojectsaredominatedbySOEsandlargeprivateenterprises,anddistributedPVprojectsaremainlyconstructedbysmallandmediumprivateenterprises.VariousmarketplayershaveplayedtheirrespectiveadvantagesandjointlypromotedChina'sPVtobecomebiggerandstronger.145.ThedevelopmentofChina’sPVindustryhastakenadifferentpathfromwindpower.Itwasdrivenbyprivateentrepreneurswhotargetedtheoverseasmarketfromtheoutset.ExpansionofoverseasPVmarketsprovidedstrongincentivesforthedevelopmentofPVmanufacturingindustryandfocusonhigh-qualityproductsandcostreduction.ThedevelopmentofthePVindustrystartedrelativelylatebutcaughtupquicklyandtransformedtheREmarketduringthelast15years:•Inthefirststage(before2000),China’sPVmodulemanufacturingcapacitywaslimited,andtheBOSmanufacturingwasrudimentary.PrivatemanufacturersreliedoverlyonimportedmaterialsandChina’sPVmarketwastoosmalltosupportcommercialdevelopmentandtechnologicalprogress.•Atthesecondstage(2001to2010),withtheintroductionofmorecapitalandadvancedtechnologyfromoverseas,China’sPVindustrygraduallygrewintoanimportantsupplierintheworldmarket.However,rawmaterialssuchaspolysiliconwafers/ingotswerestillimported.•Duringthethirdstage(2011to2017),thegrowthofthedomesticmarketboostedtheindustryandledtotheestablishmentofprivatecompaniesandjointventuresintheentiremanufacturingsupplychain.Theincreasednumberofmarketplayers,technologicalprogress,andeconomiesofscaleledtovibrantcompetitionthatincreasedqualityandsignificantcostreduction.Governmentagenciesstruggledtokeepupwiththemarketandtimelyregulationoftheindustryandgraduallydevelopedstandardandcertificationcapabilities.•Atthefourthstage(2018topresent),theemergenceofnewtechnologies,suchasPERCtechnologyandDiamondWireSawingtechnology,isleadingtoanewroundofcostdeclines,andtheincreasedefficiencybroughtonbytheapplicationofintelligentcontrolsystemsispromotingtherapiddevelopmentofdistributedPVinChina.86A.AchievementsoftheSolarPVIndustry146.Duringthe2000s,China’sPVindustrywasdrivenbyexportsasPVusebegantodevelopatalargescaleindevelopingcountries.Thisearlydevelopmentwasaccompaniedbyfastqualityimprovementandefficiencyandadramaticdecreaseinprices.Concernedgovernmentagenciesquicklyembracedtheopportunityandplayedanimportantroleinstimulatingthedomesticmarketbydevelopingpolicies,providingincentives,anddevelopingstandardsandcertificationcapabilities.TheboomthatensuedwasbeyondallexpectationsandpropelledChina’sPVindustrytoagloballeadershippositionwiththefollowingcharacteristics:•Quasitotalcoverageofthesolarsupplychain.AccordingtotheChinaPhotovoltaicIndustryAssociation(CPIA),in2019,6ofthetop10polysiliconproducersintheworldand15ofthetop20modulesmanufacturersintheworldareChinesecompanies.During2006–2019,technologicaladvancementsandincreasingeconomiesofscalereducedthepriceofsolarPVmodulesinChinaby96percentandthepriceofBOSby93percent(seeFigure7.1).87Figure7.1:(a)AverageSolarPVModuleandBOSCosts(CurrentYuan)inChina01020304020062007200820092010201120122013201420152016201720182019ModuleBOSAverageCost(Yuan/Wp)Source:Studyteam.81Figure7.1:(b)AverageSolarPVModuleandBOSCostsinChina(ConstantYuan1995)0510152025303520062007200820092010201120122013201420152016201720182019ModuleBOSAverageCost(ConstantYuan/Wp)Source:Studyteam.82•DominantpositionintheglobalPVmarket.OverseasmarketshaveplayedasignificantroleinthedevelopmentofChina’ssolarPVindustry.China’sPVmoduleexportratehasneverdroppedbelow40percentofthetotalproductionandreachedover60percentin2019(seeFigure7.2).About70percentofthemodulesusedworldwidesince2015weremanufacturedinChina(seeFigure7.3).81BasedontheCPIAdatabase.82BasedontheCPIAdatabase.88Figure7.2:ChinaSolarPVModuleProductionandExportRate020406080100020406080100DomesticUsageExportExportRateModuleProduction(GW）ExportRate(%)Source:Studyteam.83Figure7.3:WorldwideSolarModulesProductionSituation02040608010002040608010012014016020062007200820092010201120122013201420152016201720182019China'sProductionOtherCountries'ProductionChina'sShareinWorldProductionWorldwideSolarModulesProduction(GW)China'sShareinWorldSolarModuleProduction(%)SourceStudyteam.84•Worldleaderintechnologicalprogress.Despitefiercecompetitionathomeandabroad,aggressiveprivatesectorcompaniesachievedimpressiveresults.China’ssolarcellconversionefficiencyincreasedfrom15percentin2005to24percentin2019.Since2014,ChinesecompanieshavebrokentheworldconversionefficiencyrecordforPassivatedEmitterandRearCell(PERC)10times(seeFigure7.2).Specifictechnicalpathsforimprovingconversionefficiencyreportedbydifferentcompaniesvary.Forexample,JinkousedTopcontechnologytoimprovethePERCefficiencywhileLONGiuseddoublescreenprinting.Fromsiliconwafertocelltomodule,differenttechnicalpathsshowthediversityofChina’ssolarPVresearchandthisdiversityfromdifferentcompaniesleadsChina’ssolarPVtechnologicalprogress.83BasedontheCPIAdatabaseandGeneralAdministrationofCustomsexportdata.84BasedonCPIAdata.89Figure7.4:PRECConversionEfficiencyWorldRecordsinRecentYears2020.52121.52222.52323.52424.5Efficiency(%)Source:Studyteam.85B.TheInfancy(before2000)147.Bytheendof2000,China’ssolarPVdevelopmentwasmodest,technologicalcapacitywaslimited,andmanufacturingprocesseswerequitebackward.GiventhehighpriceofPVmodules,REdevelopmentfocusedmainlyonhydro-andwindpoweranduseofPVmoduleswaslimitedtosmallapplications,suchassignalstationsforcommunication,negativepoleprotectionofpetroleumpipeline,andweatherforecaststations.SeveralissueslimitedthedevelopmentofsolarPVinChinaduringthisstage:•Limitedmarket.Thesizeofdomesticmarketistoosmalltosupportcommercialandtechnologicaldevelopment.Theoverseasmarketisrelativelylarge,butChina’sPVproductswerenotcompetitiveontheinternationalmarketbecauseofhighpriceandlowquality.•Lackofadvanceddomesticmanufacturing.AlthoughChinaimported4.5MWPVcellproductionlinesfromEuropean,Canadian,andUScompaniesinthe1980sand1990s,thecrudeproductionprocessesandunskilledlaborledtolowproductionrateandpoorproductquality.Theaverageannualproductionwasonlyabout2MWandsomeproductslastedfromthreetofiveyears.•LackofsystematicR&Dframework.ChinastartedthesolarPVR&Dinthe1960s.However,duetothelackofsystematictrainingforresearchersandlackofresearchfund,China’sPVR&Dwasfarbehindthegloballevelandonlyachievedfewresults.•Lackofinvestment.TheChinesegovernmentdidnotconsiderPVdevelopmentasapriorityatthisstageofREdevelopment.Therefore,SOEswerenotinterestedinenteringthePVindustry,privatecompaniesdidnothaveaccesstofinancingfromstate-ownedbankslikethelargewindSOEs,anddomesticventurecapitalshowedlittleinterestinthePVindustry.•Lackofverticalintegrationofthesupplychain.Localmanufacturersreliedonimportsofnotonlycorematerialsrequiringhighcompetencytoproducesuchsiliconingotsandsiliconwaferbutalsobasicmaterialssuchassilverpasteandtemperedglass.Therewasnospecializeddomestic85BasedonChineseRenewableEnergySocietyPhotovoltaicProfessionalCommitteedataandcompany’sreports.90manufacturerfortheBOS.FewresearchinstitutionsproducedsmallquantitiesofPVsystemsbutstruggledtoovercomelowproductperformanceandreliabilityandhighprice.148.Duringthisstage,China’sPVmodulemanufacturingcapacityisstilllaggingtheindustryleaders,BOSproductsareinefficient,manufacturersareoverlyreliantonimportedmaterials,andthemarketistoosmalltosupportcommercialdevelopmentandtechnologicalprogress.C.TheRiseofPrivateSector(2001to2010)149.Contrarytothewindindustry,solarPVdevelopedfromthebottomowingtooverseasChineseentrepreneurs,whowereeducatedabroadandworkedforforeignresearchinstitutionsorsolarPVcompanies.TheycamebacktotakeadvantageofChina’sopeningandintegrationintheglobalizedeconomy,especiallyafterthecountryjoinedtheWTOin2001.Theyhadtheknowledge,entrepreneurship,andbeliefinthepotentialofPVmarkettojump-starttheindustryandplayasignificantroleinitsemergenceandvibrancy.Underthegeneralpolicyof‘inviteinvestmentfromoverseas’,someprovincialandmunicipalgovernmentsalsogavepreferentialconditions,suchastaxdeduction,accesstoland,andfinancing,tosupporttheseoverseasChineseentrepreneursinestablishingmanufacturingcompaniesasfirstmovers.150.Themarketlimitationwasaddressedbyimprovingqualityandreliabilitytoentergrowingforeignmarketsandtheemerginggovernmentinterestinthetechnologythroughthedevelopmentofdomesticdemonstrationprograms:•FollowingthesigningoftheKyotoProtocol,developedcountriesbegantoformulatelonger-termREstrategiesandcommittoambitioustargets,resultinginsurgingglobaldemandforRE,mostnotablyintheEuropeanPVmarket.•Intheearly2000s,Chinalaunchedaseriesofprogramstoprovideelectricityaccesstopoorremoteareasandnomadicpopulations,mainlyinthenorthwestregionofthecountry.TheseprogramscreatedtheinitialdomesticdemandforPV.TheseprogramscontributedtotheemergenceofthedomesticmarketforsolarPV,demandremainedmodest,andmorethan98percentofmoduleswereexportedtooverseasmarketsbefore2009.•In2009,toreduceitsexcessiverelianceanddependenceonfossilfuelsandinresponsetotheoverseasmarketshrinkagecausedbytheeconomiccrisis,Chinalaunchedthe‘GoldenSun’program(seeChapter4fordetails),whichsupportedtheinstallationofatotalof500MWPVprojectsbefore2011.Althoughthemoduleexportratedroppedbyonly3percent,the‘GoldenSun’programlaidthebaseforfuturepoliciestopromotethelarge-scaledevelopmentofdomesticphotovoltaics.151.ThelackoftechnologicalknowledgewasmitigatedbythereturntoChinaofChineseexpatriatestotakeadvantageofgrowingbusinessopportunitiesandsetupprivateenterprisesandjointventuresforearlyentryinapromisingmarket.Accordingtosomeexperts,in2011,morethan60percentofboardmembersofthethreelargestPVmanufacturershadgainedexperienceabroad.86Thesehighlyskilledexecutivesbroughttheirtechnicalcapacity,professionalnetworks,andcapitalandadvancedmanagementskillstoChina:86delaTour,A.,MGlachant,andY.Ménière.2011.“InnovationandInternationalTechnologyTransfer:TheCaseoftheChinesePhotovoltaicIndustry.”EnergyPolicy39(2).91•In2001,SuntechisfoundedinWuxitoinvestinChina’sfirstcommercialsolarcellproductionlinebasedontechnologyandexperienceacquiredinAustralia.The10MWannualproductioncapacityofthefactorywasfourtimeshigherthanChina’sannualproductionatthetime.•Theseprivatecompanieshiredinternationalexpertstoimprovedesignandproductionprocessesandtotrainengineersandskilledlabortooperatethelinesofproductionandensurequalitycontrol.VirtualPVproductionlinesoftware,developedbyforeignuniversitiesforcollegecourses,wasalsointroducedtoChina’sPVcompaniestohelptheirengineersunderstandthecomplexPVcellproductionprocess.•Thesecompaniesalsosoughtsupportfromtheworld’smostadvancedresearchinstitutionstoimprovePVefficiency.Forexample,in2002and2003,SuntechwasthefirstamongtheprominentPVcompaniestorequestREDPgrantstoundertakecost-sharedactivitiestoimproveitsproductsfirstandthensecuretheircertificationbyarenownedUSuniversity.In2009,itfollowedupwiththePlutocellproject87withaUS$50millionloanfromIFC,whichwasimplementedwiththeUniversityofNewSouthWales.152.Tomeettheirvastfinancingneeds,allemergingChinesePVcompaniesreliedonforeigncapitaltakingadvantageofthePVutilizationboomindevelopedcountriesandincreasedinterestofinvestorsinAsianmarkets:•Between2006and2008,9ofthetop10ChinesesolarcellcompanieswerelistedontheUSstockmarketandfavoredbyinvestors.AccordingtoMartinGreen,from2005to2010,thetop10ChinasolarcellmanufacturersraisedUS$7billionthroughstocksandconvertiblebondsonUSstockmarkets,withemployeestocksandoptionstotalingUS$10billion.88ThebehemothinvestmentfrominternationalinvestorspromotedthedevelopmentofChina'sPVmanufacturingindustry.China’ssolarcellproductioncapacityexplodedfrom300MWin2005to30GWin2010.•After2007,localgovernmentsbegantoattractlocalinvestmentfromPVcompaniesthroughtaxandlanduseconcessions,bringinglocaleconomicgrowthandemploymentopportunities,andreducingtheinitialinvestmentcostsofPVmanufacturing.153.Withthecellandmoduleproductioncapacitygrowth,thedemandofmaterialgrewdramatically.ThedemandforpolysilicongrewfasterthantheproductioncapacityandthepriceincreasedfromaroundUS$20perkgin2004toUS$500perkgin2008.89Thesoaringrawmaterialpricesstemmainlyfromeffortsdeployedbypolysiliconproducersusingtheirmarketpowertolimitproduction.ThisdroveChinesecompaniestoverticallyintegratetheirsupplychainstoreducerelianceonimports,bettercontroltheirproductioncosts,andmaximizetheirprofits.Theyexploreddomesticmanufacturingprocessesintrialproduction.SomeChinesecompaniesinvolvedintheentirePVsupplychainsharedtheirtechnologiesandmanufacturingprocesseswithothercompaniesatnocosttoincreasecompetitionandreducetheirinputcostsandultimatelythecostofproductionofPVcells.ItalsoenhancedtheoverallcompetitivenessofChina’sphotovoltaics.Asanexample,afterdomesticmanufacturersdevelopedmaturepolysiliconmanufacturingcapabilitiesin2009,China’spolysiliconimportratefellto49percent(seeFigure7.3).87In2009,SuntechPowerHoldingsCo.Ltd.hassignedaUS$50millionconvertibleloanagreementwiththeInternationalFinanceCorporation(IFC),amemberoftheWorldBankGroup,tosupportSuntech’stransitiontoitsPlutotechnologyanddebtrefinancingrequire-ments.Theconvertibleloanhasafixedratecouponof5.0percentperyear,whichispayableonJune15andDecember15eachyear.88MartinGreen,China’sPhotovoltaicDevelopmentHistory.89Source:Sandor,Debra.2018.SystemDynamicsofPolysiliconforSolarPhotovoltaics:AFrameworkforInvestigatingtheEnergySecurityofRenewableEnergySupplyChains.Figure1.92Figure7.5:PolysiliconDemandandImportRateinChina0102030405060708090100050100150200250300350400450DomesticProductionImportsImportRatePolysilicondemandinChina(thoundtons)Importrate(%)Source:CPIA.154.In2008,China’sPVexportstaperedastheeconomiccrisisengulfedtheworld.Thankfully,theincreaseddeteriorationofthelocalenvironment,thedramaticcostreductionofPVsystems,andthepolicysupportfromthecentralgovernmentcontributedtospurlarger-scalePVutilizationanddrivethegrowthofChina’sPVindustryinthenextstage.D.MassiveExpansion(2011–2017)155.After10yearsofprogress,China’sleadingmanufacturingtechnologyandcapabilitieswerewidelyrecognized.WiththerecoveryoftheinternationalPVmarket,China’ssolarPVmoduleexportsincreasedby2.5timesin2010comparedto2009.ThepopularityofChineseproductsinforeignmarketsandfastdecreasingpricesbroughtthepotentialofPVtotheattentionoftheChinesegovernment.PVismoreflexiblethanwindpowerandcanbedistributedtoproduceelectricityattheconsumerlevelandempowerconsumers.Ifpairedwithstorage,PVcancontributetomitigatepollution,addressclimatechange,andshortenthetransitiontowardagreenerandsustainablepowersector.Tomaterializethesepotentials,thecentralgovernmentbegantopromotetheapplicationofphotovoltaicsinChina.However,someproblemsemergedlatelyandneededtobeaddressedtosustainthedevelopmentoftheindustry:•Thedomesticmarketwastoosmalltosupportlargedevelopment.AlthoughthecostofPVmodulesdroppedmorethan70percentinthe2000s,thePVpowergenerationcostwasstillhigherthanthermalpower.•AlthoughChina’sPVexportproductsmaintainedhighqualityduetocompliancewithinternationalstandards,thelackofdomesticproductionprocessesandproductstandardsledto‘badmoneydrivesoutgood’.90•Thepaceoftechnologicalprogressandcostdeclineslowed.90‘Badmoneydrivesoutgood’isaChineseproverbofGresham’sLaw,whichmeansinthemarketwithoutstandard,theproductoflowqua-litywouldtakemoremarketsharewithalowerprice,andtheproductofhighqualitywouldlosetheopportunityoffurtherdevelopment.93156.ToencouragethePVutilizationinthedomesticmarket,theChinesegovernmentadoptedpolicymeasuressuchasfeed-intariffandcarriedforwardthe‘traditional’Chineseindustrysupportmethods—large-scaledemonstrationandpilotprojects,suchasthe‘GoldenSun’programforutility-scaleprojectsandthePVpovertyalleviationprogram.157.Itshouldbenotedthat,whilethegovernmentdeployedeffortstopromotethedomesticPVutilization,companiesactivelyexploredemergingoverseasmarketopportunities.AlthoughtheexportstoEuropeandtheUnitedStatesfellsteeply,theywerecompensatedbyexportstohugeemergingmarketssuchasBrazil,Mexico,andIndia,whichincreaseddemandfromnewoverseasmarkets.158.Thehighdomesticdemandledtocommercializationoflower-qualitysystemsbysomecompaniestakingadvantageoflackofdomesticstandardsandcertification.Thegovernmentsteppedintobetterregulatethedomesticmarket.•In2013,MoIITissuedthe‘SpecificationsforthePhotovoltaicManufacturingIndustry’.Thispolicysetminimalannualproductioncapacityrequirementsforfactories,unitwaterandpowerconsumptionlimits,andqualitystandardsforintermediateandendproducts.Thispolicyalsorequiredthatmodulesshouldbecoveredby10-yearwarrantiesandtheirservicelifeshouldbenolessthan25years.Thispolicyisrevisedannuallyorbiannuallytoensurethatstandardsandcertificationrequirementsareup-to-dateandenforced.•ChinaactivelyformulateditsownPVstandardssystemandcontributedtotheimprovementsintheinternationalstandardsystem:(a)MoIITpublishedthe‘StandardizationTechnologySystemofPhotovoltaicIndustry’in2017toimposequalitystandardstoallsegmentsofthePVindustry;(b)bytheendof2018,Chinadeveloped194nationalandindustrystandards(currently)forthePVindustry,ofwhichmorethan40areadoptedfromtheIEC,SEMI,andotherinternationalstandards;and(c)thedevelopmentoffivestandardspublishedbytheIECTC82wasledbyChineseexperts,andthreeongoingTC82standardsworkinggroupswereledbyChina.91159.Topromotetechnologyprogressandcostreduction,thegovernmentinstitutionsdevelopedmanycooperationprogramstobuildR&Dcapacityandpromoteinnovation(seeChapter2,paragraph45).Chinesecompaniesalsodeployedeffortstomaintaintheirleadingpositionininternationalmarkets:•SOEdevelopersestablishedPVpowerplantexperimentbasestotestdifferentmodules,BOSs,layouts,andenergystoragesolutionsandimprovesolarefficiencyinpractice.Testingscopewasalsoextendedtoenvironmentaltechnologies.TheimpactofPVpowerstationsonthelocalenvironmentwasobservedinmanyinstancesinChinawithpositiveeffectsongrasslandrestorationandevaporationcapacity.OnePVteststationinQinghaialsoannouncedpositiveimpactsonlocaltemperature,windspeed,airhumidity,andsoilorganicmatterbyyearsofmonitoring.However,thelatterconclusionsrequirefurtherstudiesandresearch.•Manufacturersacquiredadvancedtechnologythroughself-developmentormergersandacquisitions.By2013,Hanergyacquiredfiveforeigncompanies,whichenabledittoacquirethecopperindiumgalliumselenide(CIGS)filmcelltechnologyfromtheUnitedStates,anditwouldeventuallyleadtheworldinconversionefficiency.CertainsolarPVcompaniesestablishedtheirownresearchinstitutes.Theseinstitutesrecruiteddomesticchemical,semiconductor,electronics,andotherindustrialengineerstotackletheproductionprocess.Thecooperationbetweentheseinstitutesfurtherboostedresearchprogress.91ChinaElectronicsStandardizationInstitute.94E.BacktotheFundamentals(2018toPresent)160.Veryhighgrowthisusuallydisruptiveandrequiresconstantoversight.The‘PVrush’inChinawasnoexceptionandthedomesticmarket,shockedbydelayedornopaymentofsubsidies,spiraleddownandinvestmentswerecutbyabout17percentin2018andChinesecompaniesrefocusedonoverseamarkets.161.Atthesametime,thefirstbatchofPVpowerplantsarereadyfordecommissioningandthegovernmentandindustryareyettodeveloppoliciesandrequirementstoremovethepanels,properlydisposeoforrecyclethecomponentstosafeguardtheenvironment,andrestoretheland.162.CompaniesandassociationsaretakingstepstofurtherthedevelopmentofChina’ssolarPVindustryinasustainableandenvironment-friendlymannerbasedonmarketfundamentals:•Expandoverseasmarketsthroughlocalizingproductionclosertopromisingmarkets.Toincreasetheircompetitivity,Chinesecompaniesaredelocalizingmanufacturingclosertotargetmarkets.Asanexample,LONGihasalreadyinstalled1GWmanufacturingfacilityinIndiaanda2.3GWmanufacturingcapacityofmonocrystallinesiliconwafer,solarcells,andmodulesinMalaysia.Jinkohasdeployedsixproductionbasesand15branchesworldwide.•Seeknewtechnologyroutes.Thenewtechnologyrouteiskeytoachievinghigherphotoelectricconversionefficiency.AdvancedtechnologiessuchasPERCandblacksiliconhavebeendevelopedrecentlyandhaveincreasedcellconversionefficiencytoanewlevel,from20percenttomorethan24percent.Meanwhile,theheterojunctiontechnology(HJT)alreadybecomethenewresearchhotspotforhigherefficiency.•Carryoutmodulerecyclingtechnologyresearchandstandardformulation.TheCPIAestablishedthestandardworkinggrouponmodulerecyclingandreuseinNovember2018tobenchmarkrelevantinternationalstandardsandformulateadomesticstandardsystem.F.BuildingaSolarPVImplementationCapacity163.Before2000,solarPVdevelopmentwasmarginalandsupportedbyinternationalpartnerssuchasGermany,UnitedNationsEducational,Scientific,andCulturalOrganization(UNESCO),andotherinternationalpartiesthroughtheiraidprograms.Duringthatperiod,ChinaseizedtheopportunitytolaunchprogramstoincreaseaccesstoelectricityinremoteareasofthecountrysuchasGansu,Qinghai,Xinjiang,andXizang.Asaresult,severalsmallsolarcompanieswereentrustedtoimplementtheproposedsmallsolarPVprojects.Thesecompaniesweremostlyownedbytheprovinciallevelgovernmentandprivateintegratorcompaniesfocusingonelectricityaccess.164.During2001–2010,theChinesegovernmentinitiatedseveralprojectssupportedbygrantsprovidedbybilateralandmultilateralinstitutions.TheseprojectsweredevelopedtofurtherelectricityaccessinthepoornorthwesternprovincesandbuildthecapacityofPVdevelopersinprojectplanningandpreparation,PVstationconstruction,operation,andmaintenance.TheyprovidedsubsidiestoreducethecostofthesystemsandintroducedinternationalbestpracticestotheemergingChinesePVdevelopers.95•During2002–2007,theGovernmentoftheNetherlandprovidedaUS$15milliongranttocomplementtheXinjianggovernment’sUS$10milliontoimplementtheXinjiangSilkRoadBrightnessProgram,whichledtotheimplementationof78,000solarhomesystems.•TheREDP(seeparagraph54),aGEF/WorldBankproject,providedaUS$25milliongranttodeploysolarhomesystemsinNorthwestChina.Butmoreimportantly,itincludedasignificanttechnicalassistanceprogramthatsupportedthesmallandsomelargecompaniesparticipatingintheprojectandbuilttheircapacityindevelopingsoundandprofitableprojects.Bytheclosingoftheprojectin2008,625,000systems,withatotalcapacityof12MW,hadbeeninstalled.Thenumberofcompaniesparticipatingintheproject,asvendorsanddevelopers,grewfrom8atthebeginningto28atclosing.SomeofthesecompaniesbecamekeyplayersintheChinesePVmarket.165.Inaddition,Chinahasalsoformulatedaseriesofpolicies,includingtheRenewableEnergyLaw,preferentialtaxpolicies,themandatoryshareofrenewableenergyintotalenergyconsumption,andtheseparationofthegenerationfromgrid(transmissionanddistribution)mandatedbytheStateCouncilDecreeNo.5inMarch2002.Inparticular,the2007MediumandLong-termDevelopmentPlanofRenewableEnergy92mandatedthat(a)theproportionofnon-hydropowerREgenerationinthetotalpowergenerationconsumedintheareascoveredbythemajorpowergridsshouldbemorethan1percentin2010and3percentin2020and(b)theshareofnon-hydropowerREgenerationinthetotalgenerationofcompaniesfullyowningmorethan5GWofgenerationassetsshouldexceed3percentin2010and8percentin2020.93AlltheseopenedupahugemarketforsolarPVpowerdevelopmentandallowednewentrantsintheconstructionandexploitationofgenerationplants,includingsomemajorfossilfuelandhydropowergenerationcompaniessuchasSPIC,Datang,Huadian,ChinaEnergyConservationandEnvironmentalProtectionGroup(hereafterCECEP),CGN,CHE,ChintGroupCo.Ltd.(hereafterCHNT),andCo.Ltd.(hereafterTBEA).Thesolarpowergenerationprojectsbenefittedgreatlyfromtheirexpertiseinconstruction,management,andoperationandmaintenancebuttheirsolarPVportfolioaccountedforalargepartoftheirconsiderablegenerationassets.166.During2011–2017,assolarPVcostbegantosignificantlydecrease,thegovernmentsetambitioustargetsforthedevelopmentofPVandmandatedapercentageofnon-hydropowerrenewableenergyinthegenerationmixofallpowergenerationcompanies.In2016,thegovernmentissuedtheGuidanceontheEstablishmentofInstitutionofRenewableEnergyExploitation94thatmandatedthatnon-hydropowerREgenerationshouldamountto9percentofthetotalgenerationofallpowergenerationcompaniesin2020.167.Theregulation,combinedwithagenerousFiTandothertaxandfinancialbenefits(seeparagraph64),whichensuredthatsolarPVprojectinvestmentswereprofitable,attractedpowerenterprisesanddevelopersandsomenon-powerenterprises.withhighcapacityinprojectspreparation,construction,management,andoperationandmaintenancetodecisivelyenterthesolarPVprojectdevelopmentmarket.168.WithcontinuingdecreasingPVcost,thegovernmenttestedandadoptedagigawatt-levelPVdemonstrationprogram,whichcontributedtothesurgeofPVduringthethirdstageofREdevelopment,especially2018and2019,andstate-ownedenergyenterprisesenteredthemarketforcefullyandquicklysecuredaleadingpositionintheutilityscalesolarPVsegment.92http://www.china.org.cn/e-news/news070904-11.htm93http://www.china.org.cn/e-news/news070904-11.htm94http://zfxxgk.nea.gov.cn/auto87/201603/t20160303_2205.htm96169.By2019,therewerethousandsofsolarPVprojectdevelopersinChinawithgreatlydiversifiedownership,SOEsandprivateenterprises,largeandsmall.170.Forutility-scalesolarPVprojects,themarketwasdominatedbySOEs,localgovernment-ownedenterprises,andlargeprivateenterprises(seeTable7.1):•SOEswithlargeinstalledcapacitysuchasSPIC(19,290MW),CECEP(3,830MW)CHE(1,340MW),Huaneng(4,000MW),Datang(1,462.7MW),Huadian(3,199.4MW),CGN(874.3MW),CTG(4,400MW),andSINOMACH(1,500MW)accountedfor18percentofthetotalinstalledcapacityin2019.•ProvincialandloweradministrativelevelcompaniessuchastheBeijingEnergyGroup(2,071MW),BeijingEnterprisesGroup(2,256MW),JinnengHoldingPowerGroup(795MW),andShenzhenEnergy(1,062MW)accountedfor3percentofthetotalinstalledcapacityin2019.•LargeprivatecompaniessuchasGCL,Jinko,Xinyisolar,CHNT,SungrowPower,AKCOME,Trinasolar,RiseEnergy,Kongsun,andTBEAaccountedforabout9percentofthetotalinstalledcapacityin2019.Allofthem,exceptKongsunandTBEA,arealsomoduleorsolarcellmanufactures,•Developerswithdiversifiedownershipsaccountedfor39percentofthetotalinstalledcapacity.Animportantnumberofsmallprojectsdevelopedamountedto79GW.However,informationabouttheseprojectdevelopersisnotavailablebecauseoftheirlargenumber.Theyareconsolidatedatthecountyorprovinciallevelinthestatisticalsystem.Therearetoomanyofthemandthemarketofeachcompanyislimited.171.FordistributedsolarPV,whichaccountedfor66GW,about31percentofthetotalinstalledcapacity,themarketisdominatedbysmallprivateenterprises•Developerswithdiversifiedownershipsaccountedfor39percentofthetotalinstalledcapacity.Animportantnumberofsmallprojectsdevelopedamountedto79GW.However,informationabouttheseprojectdevelopersisnotavailablebecauseoftheirlargenumber.Theyareconsolidatedatthecountyorprovinciallevelinthestatisticalsystem.Therearetoomanyofthemandthemarketofeachcompanyislimited.171.FordistributedsolarPV,whichaccountedfor66GW,about31percentofthetotalinstalledcapacity,themarketisdominatedbysmallprivateenterprises.ThesecompaniesbuiltrecognizedcapacityinimplementingdecentralizedprojectsandcontributedsignificantlytoachievingChina’sEEtargets.Forexample,BeijingYuanshenEnergySavingTechnologyLtd.(Yuanshen)isoneofthreeESCOsfundedbytheWorldBank/GEFChinaEnergyEfficiencyPromotionProject.Yuanshengainedrichexperiencefromtheimplementationoftheproject.ItsstrongprojectimplementationcapacitywasrecognizedbytheBeijingmunicipalgovernmentandtheWorldBankanditwasselectedasanimplementationagencytoimplementa100MWdistributedsolarPVinvestmentprojectinBeijingfrom2013to2019ineducation,industry,commercial,agriculture,andinfrastructuresectors.Theinstalledcapacityoftheprojectaccountedfor20percentofthetotalinstalledcapacityofdistributedsolarPVinBeijingasof2019.TheChinaAssociationofEnergyManagementCompanies(EMCA)hasmorethan5,000members,manyofwhomaredoingbusinessindistributedsolarPVdevelopment.172.Table7.1listssomekeysolarPVprojectdeveloperswhichplayedanimportantroleintheChinesesolarPVpowerprojectindustry.97Table7.1:CumulativeInstalledCapacityofChina’sSolarPowerDevelopers(MW)NameSOE/Private201320182019SPICSOE2,22616,45719,290CECEPSOE1,2653,137.33,830HuadianSOE7802,949.33,199.4CHESOE8811,2201,340CTGSOE4183,6304,400HuanengSOE3803,1804,000SINOMACHSOEn.a.1,4001,500DatangSOE4741,111.61,462.7CGNSOE467403.8874.3BeijingEnergy94Localgovernmentn.a.n.a.2,071BeijingEnterprisesGroupLocalgovernmentn.a.n.a.2,256ShenzhenEnergy95Localgovernmentn.a.n.a.1,062JinnengholdingpowergroupLocalgovernmentn.a.n.a.795GCL[2]Domesticprivateenterprisen.a.7,3096,719JinkoDomesticprivateenterprise2133,0002,95096Xinyisolar[3]Domesticprivateenterprisen.a.2,5002,630CHNTDomesticprivateenterprise5701,6353,500SungrowPowerDomesticprivateenterprisen.a.1,8002,000AKCOMEDomesticprivateenterprisen.a.1,040700TrinasolarDomesticprivateenterprisen.a.1,0001,100RiseEnergyDomesticprivateenterprisen.a.1,7801,947KongsunDomesticprivateenterprisen.a.1,7891,629LONGiDomesticprivateenterprisen.a.5401,470TBEADomesticprivateenterprisen.a.n.a.1,300Source:Companyannualreports,dataprovidedbytheChinaRenewableEnergyEngineeringInstituteandtheinternet.959697G.LessonsLearned173.Establishmentofanenablingbusinessenvironmentisthekeytoreversethe‘braindrain’andattractinvestorsandtalents.IttookChinatimetoloosenthecommandandcontrolontheeconomyandgraduallyestablishafriendlybusinessenvironmentthatappealedtoChineseexpatriateentrepreneursandattractedthembackwiththeirtechnicalcapacity,professionalnetworks,capital,andadvancedmanagementskills.TheywerekeytostartingthePVindustryandmaintainingitsgrowththroughtechnicalinnovationsthatimprovedthequalityandefficiencyofoutputsanddecreasingcosts.However,toavoiddisruption,governmentsneedtoavoidabruptchangesinpolicyandregulationsandinterferenceinmanagementofthesecompanies.Atleast,onesuccessfulcompanystoppedmanufacturingmodulesinChinaratherthanacceptinggovernmentinterferencethatmightdisruptitsdevelopmentstrategy.95https://www.sohu.com/a/386461675_74930496https://oss.sec.com.cn/202004301627372808.pdf97GCLsoldsomeprojectsin2018,andthereforethenumberin2018ishigherthanthatin2019.SimilarlyforJinko,AKCOME,Kongsun.98174.Standardsystemisthesafeguardofproductquality.Duringthe2000s,China’sPVproductsweremainlyexportedtooverseasmarketsandthequalityoftheseproductswaswidelyrecognizedbecausetheywerecertifiedtomeetinternationalstandards.However,PVproductqualityproblemsfrequentlyoccurredinthedomesticmarketbeforethedevelopmentofacomprehensivestandardsysteminthelate2010s.175.Strictoversightmustbeinplaceduringthedeploymentofheavilysubsidizedprograms.The‘GoldenSun’programwashastilydeployedtoextendthedomesticPVmarketinChina.Theproject’squalitysupervisionandprojectacceptancewereentrustedtoaprivatecompany.However,thiscompanycolludedwithprojectdeveloperstodefraudstatefinancialsubsidiesbyissuingfalseauditreportsandillegallyprofitedCNY25.78million98fromthescheme.176.TheChineseexperienceindicatesthattodevelopastrong‘projectindustry’tomeettherapiddevelopmentofPV,itisrequiredto(a)relyonandsupportSMEsbyintroducingpoliciessuchas‘policyopinionsonencouragingandpromotingthedevelopmentofsmallandmedium-sizedenterprises’(2009)and‘policiesonsupportingthetechnologicalinnovation’(2013)and(b)attractwell-establishedstate-ownedenergyenterprisestoimplementgigawattutility-scaleprojectstostrengthentheimplementationcapacityinthesector.98Source:NationalAuditOffice99Chapter8.HydropowerKeyMessagesAfter70yearsofdevelopment,Chinabecameaworldleaderinhydropowerdevelopment.Bytheendof2019,Chinahadbuiltmorethan22,000hydropowerstations(over500kW).Thetotalinstalledcapacityhadreached350GWandthepowergeneration1,300TWh,whichaccountedfor65percentoftotalREpowergenerationand18percentofthetotalpowergeneration.Currently,China’shydropowerequipmentmanufacturingcapabilityiswidelyrecognized.Chinamasteredthemanufacturingofthe700MWsingleturbineduringthedevelopmentoftheThreeGorgesProject(1994–2010)andthe1GWsingleturbineintheunder-constructionBaihetanHydropowerStation(2013–2022).Bytheendof2019,Chineseenterpriseshadparticipatedin406internationalhydropowerprojects,amountingto127GWofinstalledcapacity,andChinahasestablishedcooperativerelationsinthisareaswithmorethan80countries.China’shydropowerdevelopmentwasandisstilldrivenbythegovernmentthroughmammothSOEsthatwereawardedthedevelopmentofriverbasinsplansinconsecutiveFYPs.Itwentthroughthreedistinctiveperiods:(a)Thefirstcoversthedevelopmentbeforetheopen-doorpolicy(1949–1977)andfocusedmainlyonsmallhydropowertomeettheneedsofadominantlyruralpopulation.Duringthe1950sand1960s,withtheassistanceoftheSovietUnion,Chinabegantodeveloprelativelylargerprojects,increasequalityandsizeofturbines,anddevelopnationalinstitutes.TheprogressmadeduringthisperiodwasdisruptedbytheCulturalRevolution.(b)Thesecondperiodcoversmorethantwodecades(1978–2000)andischaracterizedbytheopeningofChinatotheworldandthedevelopmentoflargehydropowerprojectswithinternationalfinancing.Theadventoftheopen-doorpolicyprovidedcooperationopportunitiestolearnfromadvancedcountriesandbuildstate-of-the-artprojects.Thebuildupoftheindustryfocusedonthefollowing:•Revisingthehydropowerdevelopmentplanforthemarkettoreachacriticalmassconducivetothedevelopmentofdomesticmanufacturing.Bytheendofthe1980s,theaverageannualproductionofhydraulicturbineshadincreasedto2GWandChinahadtheabilitytodesignandproduce300–320MWhydraulicturbines.•Launchingthe‘TwelveHydropowerBases’programinOctober1989,whichincludedacomprehensiveresourceassessmentandpreparatoryworkforthedevelopmentof12ofthemajorriversinthecountry.Thisledtotheinstallationofabout210GW,generatingabout994TWhperyear.•Commercializingandcorporatizingthehydropowerengineeringbureausintoenterprises,followingtheissuanceofthefirstCompanyLawin1994.Thisfacilitatedaccesstoequityanddebtfinancingandattractedandmotivatedskilledworkersbyofferinghighersalariesthanthoseofcivilservants.100•MasteringtechnologiesthroughinternationalcooperationbybuildinguponthesuccessoftheLubugeHydropowerStation(seeChapter2,Box2.1).Chinabeganallowingtheimportofadvancedequipmentforlarge-scaleprojects.ManyofthewinninginternationalbidderssubcontractedmanufacturingofsomepartstoChinesecompaniestoreducecost.Subcontractorswereintroducedtointernationaladvancedmanufacturingstandardsandqualityassuranceprotocols.•Accumulatingknowledgeaboutpumpedstoragethroughdemonstrationprojectstoincreasetheflexibilityofthesystemstomeetpeakloads,enablingtoaccommodatemorevariablerenewableenergywiththesurgeofwindgenerationcapacity.(c)Thethirdperiodcoversthelasttwodecades(2001–2021).Duringthisperiod,thegovernmenttookseveralinitiativestoenableChinesehydropowermanufacturersanddeveloperstocompeteinthethrivingglobalmarket,including•Organizingtechnicalmeetingsandconferences,•Participatingintheformulationofinternationalstandards,and•Carryingouthydropowerresourceassessmentsanddevelopmentplansforothercountrieswithinregionalandinternationalassociations.Duringthisperiod,China'shydropowermanufacturingcapacitycontinuedtoprogressincludingbuildingthecapabilitytomanufacture1GWhydraulicturbinesand350–400MWpumpedstorageunitsfitforthedevelopmentof500-meter-level-headstations.However,asexperiencedearlierindevelopedcountries,China’sdomestichydropowermanufacturingindustryquicklyfacedunderutilizedcapacityissues.In2018,itsmanufacturingcapacitywasover30GW,butitsproductionwaslimitedto7.6GWasdomesticandinternationaldemandsignificantlydecreased.WhileitcanbearguedthatChina’sexperienceindevelopingaworld-classlargeturbineandlargehydropowerplantindustriescanonlybereplicatedinotherlargedevelopingcountries,thefollowinglessonsarestillworthconsideringinsmallercountries:•Creatingaframeworkfortheenvironmentallysustainabledevelopmentofhydropowerandbuildingstrongteamstointegrateknowledgetransferrelatedtomanufacturingofadvancedequipmentcanleadtoacceleratedindustrygrowth.•Assessmentofresources,inventoryofpotentialsites,andsounddevelopmentplanningareessentialforsoundhydropowerdevelopment.Theyallowrankingofpotentialsitesandchannelinglimitedfinancialresourcestowardhigh-returninvestmentswithlimitedenvironmentalandsocialimpacts.Thisincreasestheconfidenceofinvestorsinsecuringadequatereturnsandallaysworriesaboutfinancialandenvironmentalandsocialrisks.Environmentalprotectioncanbringadditionalbenefitstohydropowerdevelopment.Whileslightlyincreasinginvestmentcosts,safeguardingthebiodiversityaroundthereservoirandavoidingtheblockageordelayofupstreamfishmigrationroutescancontributetodevelopingtourismandfisheryactivitiestobenefitthelocalpopulation.101177.After70yearsofdevelopment,Chinabecameaworldleaderinhydropowerdevelopmentwithstrongengineeringandmanufacturingcapabilities.Since1950s’,Chinapromotedthehydropowerdevelopmentthroughtheestablishmentofspecificpurposedfunds.Sincethereformandopeningup,throughthepowersystemreform,amarketbasedprojectdevelopmentmodel,withmorediversifiedstakeholderandfinancingsources,hasbeengraduallyestablished.Itwentthroughthreedistinctivestages:•Thefirststagecoversfrom1949to1977.Beforetheopendoorpolicy,China’shydropowerindustrywasdevelopedmainlytomeettheneedsofadominantlyruralpopulationandsufferedfromrudimentarytechnologyandequipment.•Thesecondstagecoversthetwodecadesfollowingtheopendoorpolicyfrom1978to2000.Inthefirsthalfofthe1980s,ChinadevelopedYunnanLubugeprojectwithWorldBankfinancing,whichadoptedinternationalcompetitivebiddingforthefirsttimeinChina.Theprojecttriggeredthesocalled“Lubugewave”.Asaresult,manyotherhydropowerprojects,suchasGuangxu,Yantan,Manwan,Geheyan,andShuikouweredevelopedfollowingtheLubugemodel.Adoptingthenewsystemsandoperatingmechanisms,peoplenoticedthatcontractmanagementimproved,qualitywasenhanced,andcostwentdown.Hydropowerdevelopmentembarkedthenonafasttrackjourney.Thedevelopmentofvarioustypeofhydropowerprojectalsopromotedthedevelopmentofdamconstructionandequipmentmanufacturingtechnology.•Thethirdstage,coveringfrom2001topresent,ishighlightedbytheconstructionandoperationoftheThreeGorgesProject.Chinahasbynowenteredthestageofinnovationindependenceandglobalrecognitionofitsplaceasafirst-classhydropowercountry.Duringthisperiod,inadditiontoadvancingthetechnologyofequipmentandcivilengineering,Chinahaspaidmoreandmoreattentiontoenvironmentandsocialprotection,aimingatcoordinatedeconomicandsocialdevelopment.Inthelasttenyears,Chinahasvigorouslypromotedtheecologicalenvironmentprotectionandtheclean-upandreformofsmallhydropowerintheYangtzeRiverBasin,andiscurrentlyfurtherpromotingtheconstructionofpumpedstoragepowerstationstoaccommodatethehighpenetrationofvariablerenewableenergysuchaswindandPV.Thiswouldleadtoasynchronizeddevelopmentofvarioustypeofgenerationsources,includingthermal,hydro,nuclear,wind,andPV.A.TheAchievementoftheHydropowerIndustry178.Bytheendof2019,Chinahadbuiltmorethan22,000hydropowerstations(over500kW).Thetotalinstalledhydropowercapacitywas356GW,andthepowergenerationwas1153.4TWh,accountingfor58.3%ofthetotalrenewableenergypowergenerationand16.1%ofthetotalenergypowergeneration.Theannualaddedcapacitygrewtoashighas30GWin2013,accountingfor27percentofthetotaladdedcapacity,thendroppedto3.8GWin2019duetovariousfactorssuchasmoreremotegeographiclocationsandlessfavorableresourcesconditions.Inaddition,therequirementsforresettlementandecologicalenvironmentalprotectionhavebeencontinuouslyenhanced,whichresultedinanincreaseoftheinvestmentcostandrisks.Hydraulicturbinemanufacturingcapacitygrewfrom0.5MWin1950sto1GWin2018.•Chinaacquiredworld-classdamengineeringandtechnologyability.Bytheendof2019,Chinahaddeveloped23damswithaheightofmorethan200meters,outofwhich10damswithaheightofmorethan250meters.Thosedamsincludetheworld’shighestArchDam(Jinping,305m),theEarth-RockDam(Shuibuya,233m)andtheworld’ssecondhighestRCCGravitydam102(Huangdeng,203m).Ithasalsomaderemarkableachievementsinundergroundengineering,flooddischarge,slopetreatment,andearthquakepreventionandresistance.•Chinaachievedremarkableprogressinhydropowerequipmentmanufacturing.Itmasteredthemanufacturingofthe700MWsingleturbineduringthedevelopmentoftheThreeGorgesProject(1994to2010),the800MWsingleturbineduringthedevelopmentoftheXiangjiabaHydropowerStation(2008to2015),andthe1GWsingleturbineintheunder-constructionBaihetanHydropowerStation(2013to2022).Currently,China’shydropowerequipmentmanufacturingcapabilityiswidelyrecognized.•China’spumpedstoragepowerstationtechnologydevelopedrapidly.Basedontheadvancedtechnicalcapacityofconventionalhydropowerandstronginternationalsupportinthe1990s,pumpedstoragecaughtupwithmostadvancedcountriesinashorttime.•China’shydropowerbecameinternationallycompetitive.Bytheendof2019,Chineseenterpriseshadparticipatedin406internationalhydropowercooperationprojects,amountingto127GWofinstalledcapacity.Morethan80countrieshaveestablishedlong-termcooperativerelationswithChinainhydropowerplanning,construction,andinvestment.B.TheReconstruction(1949–1977)179.TheearlyyearsofthenewChinawereplaguedbyelectricityshortagesbecauseitsmainhydropowerstationsweredestroyedbythesuccessivewarsthecountryendured.By1949,Chinahadonly21damshigherthan30m,thetotalhydropowerinstalledcapacitywas540MW,andthesizeofthelargestturbinewas750kW.99TheElectricPowerConferenceheldin1950acknowledgedthathydropowerdevelopmentstartedlate,atasmallscale,andsufferedfromlowtechnicallevelandrudimentaryequipment.Atthetime,thecountrywasanautarkyfacinganinternationaleconomicblockadeandhadnomanufacturingcapabilitytodevelopitshydropowerresources.180.Todevelopdomestichydropowerconstructioncapabilities,Chinadeployedthefollowingefforts:•Duringthe1950s,Chinaestablishedseveralhydropowerprojectdesigninstitutes,engineeringbureaus,andscientificresearchinstitutes.•From1950to1956,Chinaconductedageneralassessmentofwaterresourcesandplannedthehydropowerdevelopmentofmajorrivers.TheseplansguidedtheorderlydevelopmentoflargehydropowerinChina.Mostofthefamoushydropowerprojects,suchasThreeGorges,werepreliminarilyplannedatthisstage.•From1950to1953,Chinarepairedandreconstructedexistinghydropowerstationstomitigatepowershortagesandprovideon-the-jobtrainingforhydropowerconstructionteams.•Beginningin1957,Chinabeganthedevelopmentofnewhydropowerstationsfeaturingdomesticdesign,equipment,andconstruction.99Yuanfang,Huang.2014.“WhoIstheFirstDesignerofHydraulicTurbineinChina.”EnergyNews.http://www.cnenergynews.cn/lslm/ztbd/201412/t20141230_2325.html.103181.Todevelopitslargehydropowerstationduringtheearlyyearsofthisstage,ChinaimportedthemajorequipmentmainlyfromtheSovietUnion.TheimportswerepairedwithcooperativeeffortstodevelopChina’shydropowerdesign,construction,andmanufacturingcapabilities:•Severalpubliccompaniesatdifferentadministrativelevelswereestablishedtomanufacturesmallturbines(from0.5to5MW)thatinmostcasesdidnotmeetinternationalstandardsbutmettherequirementsofruralelectrificationefforts.•Duringthe1950s,theSovietUnionprovidedhydraulicdesigndrawingsalongwiththeequipmenttodevelopthehydropowerproject.Atthesametime,theSovietUnionsupportedChina’seffortstomasterthedesign,equipmentmanufacturing,installation,andoperationofmodernhydropowerpowerplants.Thisresultedinthedomesticmanufacturingoflarger-sizeturbinesinstalledintheXin'anjiang(662.5MW)andYunfeng(400MW)hydropowerstationsintheearly1960s.•Bythe1970s,Chinahadmasteredthemanufacturingof100MWturbinesandmanagedtomeettheneedsoflargerprojectsinitiatedduringthedecade.However,someoftheseturbineshadqualityproblemsduringoperation,andsomecouldnotmeettheratedcapacity.182.Duringthe1950sand1960s,Chinagraduallymasteredhydropowerknow-howtodevelopatalargerscale:(a)domesticmanufacturersimprovedthequalityandincreasedthesizeofturbines;(b)institutesandutilitiesimprovedtheirdesignandplanningactivities;and(c)constructioncompaniesacquiredskillstomanagelargeprojectsandgotacquaintedwithindustrystandards.However,thecessationoftheSovietUnion’ssupportandtheCulturalRevolutiondisruptedtheprogressachievedandhydropowerdevelopmentregressedduring1970s.Designandresearchinstitutionswereabolished,leadingtothedevelopmentofprojectsatlowadministrativelevelswithoutadequatehydrologicsurveysandill-managedconstructionsites.Thischaoticmanagementmodelresultedinextensivedelaysandcostoverrunsthatdrasticallyreducedtheeconomicandfinancialbenefitsoftheprojects.C.LearningandCatchingUpwithHydropowerLeaders(1978–2000)183.Atthestartofthisstage,China’shydropowerinstalledcapacitywas18GWandthenumberofdamsover30mhadincreasedto3,600,butthehydropowerindustrywasstillreelingunderthedisruptionexperiencedduringtheCulturalRevolutionandconstrainedbyinadequateplanning,subpartechnologies,andlowequipmentquality.Thereformsoftheearly1980sopenedcooperationopportunitiestolearnfromadvancedcountriesastheyhadalreadydevelopedtheirowndomesticresourcesbythattime.Chinatookadvantageoftheseopportunitiestoelevateitshydropowerdevelopmentbackonasolidandscientificbasethroughthefollowing:•RebuildinghydropowerR&Dsystem.Beginningin1978,Chinabeganreestablishinghydropowerresearchanddesigninstitutionstoenforcegovernmentregulations,carryoutproperevaluationofhydrologicresources,andsuperviseconstruction.TheseeffortswereespeciallyfocusedonrebuildinghydropowerR&Dinstitutionstoimprovedomestichydropowerdesignandequipmentmanufacturing.•Extendingthemarkettoreachacriticalmassconducivetothedevelopmentofdomesticmanufacturing.Thenationalhydropowerdevelopmentplanwasrevisedin1980toputChina’shydropowerindustryonthedevelopmentfasttrack.Thesmallhydropowermarketexpandedowingtopilotanddemonstrationprogramsintendedtoincreaseelectricityaccessinruralareas.104Inthe1980s,theaverageannualproductionofhydraulicturbineswasnearly2GW.Thisincreasedmarketsizeencourageddomesticmanufacturerstoproducenew,higher-qualityproductstomeetdevelopers’needs.Bytheendofthe1980s,Chinahadtheabilitytodesignandproduce300–320MWhydraulicturbines,6-meter-diameterrunners,andotheradvancedmanufacturingprocesses.100•Makinganambitiousplanningforhydropowerdevelopment.InOctober1989,theplanningof‘Twelvehydropowerbases’wascarriedoutundertheleadershipoftheformerMinistryofElectricPower.Comprehensiveresourceassessmentanddevelopmentplanningwereundertakenforaseriesoflarge-scalehydropowerbasesintheupperreachesoftheYellowRiver,NanpanjiangRiver,HongshuiRiver,JinshaRiver,YabijiangRiver,DaduRiver,WujiangRiver,upperreachesoftheYangtzeRiver(includingQingjiangRiver),middlereachesoftheLancangRiver,WesternHunanandFujian,Zhejiang,Jiangxi,NortheastChina,andnorthmainstreamofthemiddlereachesoftheYellowRiver.Currently,thetotalinstalledcapacityofthese12hydropowerbasesisabout210GWandtheirannualpowergenerationisabout994TWh.•Promotingamodernenterprisesystem.FollowingtheissuanceofthefirstCompanyLawin1994,hydropowerengineeringbureausweretransformedintoengineeringcompanies,andprojectownerswereallowedtoestablishdevelopmentcompanies.Thenewsystementrustedtheprivatesectorwiththedevelopmentofprojectsaccordingtoindustrystandardsandenabledstandardizedoperationofhydropowerprojectsinaccordancewithcompanyrequirementsandgovernmentregulations.Thisimprovedtheoverallqualityofprojects,facilitatedaccesstoequityanddebtfinancing,andattractedandmotivatedskilledworkerswithsectorsalariesthatwerehigherthanthoseofcivilservants.•Masteringtechnologiesthroughinternationalcooperation.BuildinguponthesuccessoftheLubugeHydropowerStation(seeChapter2,Box2.1),Chinabeganallowingtheimportofadvancedequipmentforlarge-scaleprojects.Chineseteamsgainedessentialexperienceandexpertiseindesignandconstructionmanagement.Moreimportantly,takingadvantageofChina’sheavyindustrystrengthandlowcost,manyofthewinningbidderssubcontractedmanufacturingofsomepartstoChinesecompaniestoreducecost.Subcontractorswereintroducedtointernationaladvancedmanufacturingstandardsandqualityassuranceprotocols.Subcontractorswereintroducedtoadvancedinternationalmanufacturingstandardsandqualityassuranceprotocols.TheknowledgeaccumulatedthroughtheseexperienceshelpedChinadevelopdomesticdesignandmanufacturingcapacityinlinewithinternationalhydropowerequipmentstandards.Box8.1:700MWHydraulicTurbinesManufacturingProgressthroughtheThreeGeorgesProjectTheconstructionoftheThreeGeorgesProjectwasdividedintwostageswiththeinstallationof26x700MWturbinesontheleftandrightbanks.In1996,theChinaThreeGorgesCorporation,calledforbidsfor14turbinesontheleftbank.Atotalof22manufacturersfromninecountriesofferedbids.Twoconsortiumswonthebidsfortheprovisionofeightandsixturbines,respectively.Toreducethecostofmanufacturingandfulfillbiddingrequirements,Chinesemanufacturerswereinvolvedinthemanufacturingofthefirst14turbines,whichwerepredominatelymanufacturedbyinternationalcompanieswithalocalcontentoflessthan20percent.Inaboutsevenyears,Chinesecompanies’contributionhadjumpedtoabout70percentinthemanufacturingofthetwolastunits.100Xilin,Sha.1991.“China’sHydropowerquipmentDevelopmentAchievementandOutlook.”Hydropower10:57–60.105In2003,whentheChinaYangtzePowercompanycalledforthesecondinternationalbidsfor12turbinestobeinstalledonoftherightbankofthepowerstation,Chinesemanufacturerswereawardedcontractstosupply8unitsandaFrenchmanufacturerwasawardedacontracttosupply4units.Whenallthe12turbineswereputintooperationin2008,performanceoftheturbinesmadeinChinareachedthesamelevelasabroad.Theexperiencegainedduringthejointmanufacturingofthefirst14unitsallowedChinesecompaniestogetacquaintedwithadvancedindustrystandards,integratemodernmachineryandotherheavyequipment,andimportadvancedcontrolsoftwaretoupgradetheirmanufacturingplantstoindustryspecifications.Moreover,Chinesemanufacturersdevelopedthecompetenciestoindependentlydesignandmanufactureextra-largeturbines.Ittooklessthan10yearsforChineseteamstomakeupfora30-yeartechnologicallagasnotedbyLiJugenin“ChinaHydropowerDevelopmentandEquipmentTechnologyInnovation.”(seeHydropowerAutomationandDamMonitoring,2011,Vol.35(No.3)page1–4).•Accumulatingknowledgeaboutpumpedstoragethroughdemonstrationprojects.Duringthelate1980sand1990s,China’spowersectordevelopmentwasmainlybasedoncoal-firedpowerplants,mostlackingtheflexibilitytofollowloadfluctuations.Thegovernmentallowedpublicpowercompaniestoundertakemorethan10pumpedstorageprojectstoimproveandoptimizetheoperationofprovincialpowersystems.Bytheendofthe1990s,thetotalinstalledcapacityofpumpedstoragepowerstationreached5,600MW.SeveraloftheseprojectswerebuiltwithimportedequipmentandintroducedChineseutilitiestoanti-seepagemeasuresduringtheconstructionofthereservoirs.Utilitiesandsubcontractorsalsogainedknowledgeofadvancedengineering,constructionandoperationofpumpedstorage,andtheinstallationofpumpedstoragepowerstations.D.AccesstoLeadershipStatus(2001toPresent)184.Atthebeginningofthisstage,abundantdomesticopportunitiesweregeneratedbythepowersectorreform.Theseparationofgenerationandtransmissionanddistributionintroducedcompetitiononboththegenerationsideandthedistributionside.Thereformopenedthepowergenerationmarkettonon-utilitypowergenerationcompanies.Thisgeneratedagreatinvestmentopportunitiestodomestichydropowerdevelopmentcompanies.However,thefollowingissuesrestrictedthefurtherdevelopmentofChina’shydropowerindustry:•Thelackofacknowledgementfromtheglobalmarket.WhileChinesemanufacturershadovercomethemajortechnicalandmanagerialissues,theirlackoffamiliaritywiththeprocessandrequirementsoftheglobalmarketrestrictedtheircompetitivenessandhinderedtheirabilitytoexport.Hydropowerunitmanufacturersrealizedthatoptimaluseoftheirvastproductioncapacitywouldrequireenteringthehighlycompetitiveinternationalmarkets.•Irrationalplanning.Becauseofdelays,thegovernment'sriverbasindevelopmentplandidnotplayeditsdueguidingrole.Inaddition,localgovernmentsdidnotproperlyfollowthestandardsapplicabletohydropowerprojectsconstructionandoperation,whichcausedseriousnegativeimpactsonenvironments.(SeeBox8.2).106Box8.2:CaseStudyofDisorderlydevelopmentofSmallHydropowerPlantsUpstreamtheLedongRiverDuring2003–2007,10smallhydropowerplantswerebuiltupstreamofthe29-km-longLedongRiverinJiangxifollowingapoorlypreparedriverbasindevelopmentplan.Theecologicalflowwasnotsecuredasrequiredbythestandardsanddownstreamwaterflowwasinterrupted.Therootscausesofthismismanagementwerethelaggingplanningofriverbasinsandthepoormanagementbylocalgovernments.TheplanfortheZhangjiangRiverbasin,whichtheLedongRiverbelongsto,wasformulatedin1985andhadnotbeenupdated.In2010,JiangxiProvincelaunchedtherevisionoftheZhangjiangRiverBasinPlanningbuthadnotyetcompleteditattheendof2018.Thelaggingplanningpairedwiththeapprovalofasinglepowerplantbasedonmaximumeconomicbenefitledtothedisorderlyandchaoticdevelopmentofsmallhydropowerplants.185.ThegovernmentthenundertookseveralinitiativestoallowChinesehydropowermanufacturersanddeveloperstocompeteinthethrivingglobalmarketby•Participatingintheformulationofinternationalstandards.In2002,ChinaheldtheIEC/TC4(hydraulicturbinecommittee)plenarymeetinginBeijingtoannounceChina’sintentiontoembraceinternationalhydropowerstandardsandparticipateintheirformulation.Bytheendof2015,China’sexpertshadparticipatedin10IEC/TC4workinggroupsandled1workinggrouptoshareChinesestandard-settinghydropowerexperience;and•Carryingouthydropowerresourceassessmentsanddevelopmentplansforothercountries.WithintheAssociationofSoutheastAsianNations(ASEAN)andotherinternationalorganizationsframework,Chinabeganexportingaccumulatedknow-howbycarryingoutaseriesofpreliminaryhydropowerdevelopmentworkplansforMyanmar,Pakistan,andothercountries.Chinaadvocatedandpromotedcoordinatedregionaldevelopmentandcomprehensiveplanningfortransboundaryrivers.TheseactivitiesprovidedopportunitiesforChinesehydropowercompaniestodevelopinternationalprojectmanagementandequipmentexportexperience.186.Toincreaseenvironmentalawarenessandintegratestricterenvironmentalassessmentandmitigationmeasuresduringthepreparationandimplementationofhydropowerprojects,thegovernmentpromotedthefollowinginitiatives:•Sincetheearly2000s,severalvegetationrestorationandsoilandwaterconservationstudieswereinitiatedandtakenintoaccountinthesubsequentconstructionoflarge-scalehydropowerstations.•TheChinaInstituteofWaterResourcesandHydropowerResearch(CIWRHR)begantechnicalresearchonimpactsofdamconstructiononfishmigrationin2011.Thefirstdam,takingintoaccountfishmigrationrequirementstoprotect16kindsofrarespecies,wasbuiltin2014andfishmigrationhasbeenconsideredinsubsequentdamprojects.•The13thhydropowerdevelopmentFYP(2016–2020)strictlylimitedthefurtherdevelopmentofmediumandsmallhydropowerstationstoretainthenecessaryhabitatsoftheriverbasinandensuretheecologicalhealthoftheriverbasin.107•In2018,theMinistryofWaterResources,NDRC,theMinistryofEcologyandEnvironment,andNEAjointlydeployedtheclean-upandrectificationoftheYangtzeRiverEconomicBelt.Theclean-upandrectificationof25,000powerstationswascompleted.Theecologicalflowofallpowerstationswasrestored,thedevelopmentintensitywasgreatlyreducedtheintegrityofthenaturalecosystemwasbettertakenintoaccount,andriverconnectivityandwaterresourcesconditionswereimproved.187.Atthesametime,buildinguponthemomentumofthelastdevelopmentstage,China’shydropowermanufacturingtechnologycontinuedtoprogressandimprove.TwoofthelargestChinesecompaniesbuiltthecapabilitytomanufacture1GWhydraulicturbines.Manufacturinghasalsobeenmasteredforotherequipmentsuchas350to400MWpumpedstorageunitsfitforthedevelopmentof500-meter-level-headstations.China’sdamengineeringandtechnologyperformance,acquiredduringtheconstructionofmorethan100,000dams,hasalsogainedwiderecognition.188.However,asexperiencedearlierindevelopedcountries,China’sdomestichydropowerindustryquicklyfacedissuesstemmingfromunutilizedcapacity.In2018,itsmanufacturingcapacitywasover30GW,butitsproductionwaslimitedto7.6GWasdomesticandinternationaldemandsignificantlydecreased.101TheplanneddevelopmentrateofmajorriversinChinaexceeded80percentandthedevelopmentofsmallhydropowerhadslowedtoanearstandstill.Thedevelopmentoftheglobalhydropowermarketalsotapered.E.LessonsLearned189.WhileitcanbearguedthatChina’sexperienceindevelopingaworld-classlargeturbineandlargehydropowerplantindustriescannotbereplicatedinsmallerdevelopingcountries,itcanberelevanttolargemiddle-incomecountriessuchasBrazil,India,andIndonesia.Lessonslearnedduringthelast30yearsregardingthedevelopmentofdomestichydropowerresourcesareworthconsideringinthelattercountriesandregionalmarketswithlargeuntappedpotential:•Developingnoncoretechnologyandpromotingsubcontractingintheearlystagesofindustrydevelopmentcanincreasedomesticorregionalexperienceandcreateopportunitiestomakeupfortechnologicallaginashorttime.Creatingaframeworkfortheenvironmentallysustainabledevelopmentofhydropowerandbuildingstrongteamstointegrateknowledgetransferrelatedtomanufacturingofadvancedequipmentcanleadtoacceleratedindustrygrowth.Chinanotonlymanagedtofillthetechnologicalgapinarelativelyshorttimebutalsolaidthefoundationforfurtherinnovationandtechnologicaldevelopment.•Environmentalandbiodiversityprotectioncanbringadditionalbenefitstohydropowerdevelopment.Althoughenvironmentandbiodiversityprotectionmeasurescanslightlyincreaseinvestmentcosts,theygreatlyincreasetheecologicalbenefitsofhydropowerstations.Forexample,safeguardingthebiodiversityaroundthereservoirandavoidingtheblockageordelayofupstreamfishmigrationroutescancontributetodevelopingtourismandfisheryactivitiestobenefitthelocalpopulationasexperiencedinmanyChinesehydropowerprojects.•Assessmentofresources,inventoryofpotentialsites,andsounddevelopmentplanningareessentialforsoundhydropowerdevelopment.Theyallowrankingofpotentialsitesandchannelinglimitedfinancialresourcestowardhigh-returninvestmentswithlimitedenvironmentalandsocial101Source:ChinaSocietyforHydropowerandChinaElectricityCouncil108impacts.Thelatterisimportantforattractinggovernmentaswellasprivateinvestmentsastheysignificantlyincreasetheconfidenceofinvestorsinsecuringadequatereturnsandallayworriesaboutfinancialandenvironmentalandsocialrisksrelatingtothedevelopmentofhydropowerprojects.109Chapter9.TheBiomassEnergyIndustryKeyMessagesChina’sbiomassenergyindustrystartedinthe1950s.After70years,ithasbecomeagloballeadercoveringbiomassandMSWincinerationforpowergeneration,biogas,bioethanol,andbiodiesel.•Thetotalinstalledcapacityofbiomasspowergrewfromabout2GWin2005toabout22.5GWin2019,amountingtoabout17percentoftheglobalinstalledcapacity.•Biogasproductionamountedin2018toabout19billionm3,alsodomesticallyproduced.•Ethanolconsumptionamountedtoabout3.4milliontons,2.8milliontonsproducedinChinaand600,000tonsimported.•Biodieselproductionamountedin2018toabout680,000tons,ofwhich320,000tonswasexported.Chinaranked10thinbiodieselproductionintheworld.Productionhoweverremainslimitedinrelativetermscomparedtofossilfuelsalternativesthatbiomassissupposedtodisplace.Itaccountedfor6percentoftotalpowergeneration,3.7percentintotalgasproduction,and1.4percentintotalautomotivefuels.Theindustrydevelopedoverthreeperiods,progressivelybuildingacompleteverticalindustrialchainfromR&Dtoequipmentmanufacturingandprojectimplementation.Thefirstperiod(upto1994)wasdedicatedtodevelopingbiogasequipment,withmixedsuccess,tomeetenergydemandinruralareas.PilotdemonstrationsofbiogasdigestersinChinaexperiencedsetbacksateverystepduetothelackofaqualifiedworkforceandmanagementskillstomeettheextensiveneedsofthehouseholdbiogasprogramslaunchedbythegovernmentduringthisperiod.ToaddressthebiogasindustryshortcomingsandpromoteMSWincineration,thegovernmentlaunchedseverallargeandmediumbiogasprojects:•Biogas.In1964,itundertookafirst2,000m3industrialbiogasprojectinNanyang,HenanProvince,toproducebiogasfromresiduesandwastewaterinthedistilleries,followedbyincreasinglylargerprojects,upto12,000m3in1980,withtheinstallationofa30,000m3storagetanktoincreasethereliabilityofsupply.Theexperiencewasreplicatedinmanyprovinces.In1988,theChinaBiogasAssociationwasestablishedtohelpintegratenewkeyanaerobicdigestionprogressachievedabroadandrebuildthepopulation’strustinbiogas.•MSWpower.In1982,ChinalauncheditsfirstMSWprojectinSichuanProvincetoprocess30tonsofwasteperday.Afewyearslater,itimportedawasteincinerationequipmentwithacapacityof150tonsperdaythatwasinstalledinShenzhenin1988.TheexperienceaccumulatedduringtheimplementationofthisprojectlaidthefoundationfordevelopingalocalR&DcapabilityinChina.110Bytheendofthisstage,China’sR&Dwasstillweakandtheindustrywassufferingfromthelackofaskilledequipmentmanufacturing,engineering,andconstructionworkforce.Thesecondstage,theexperimentalanddemonstrationstage(1995–2005),focusedmainlyonR&D,toreinforceandwidentheindustrialbiomassenergyknowledgebaseandattracthigh-calibertechnicalandmanagementtalents:•Biogas.Thegovernmentreliedoninternationalcooperation,inparticularwithUNDP/GEFsupport,andimportedstate-of-theartequipmentfromadvancedcountries,inparticularfromGermany.Duringthisperiod,Chinabegantoaddressdigestersqualityissues.Itadoptedfourstandardsrelatingtohouseholdbiogasprojects,includingbiogaspipeline,biogastank,acceptancechecklistofbiogasdigesters,andoperatinginstructions.•Bioethanol.In2000,Chinalauncheditsfirstprojectusinggrainsasrawmaterialtoproducebioethanol.FromJune2002toJune2003,ethanolgasolinewaspilotedinthreecitiesinHenanProvinceandtwocitiesinHeilongjiangProvince.InFebruary2004,thescopeofthepilotwasexpandedto27citiesandcitiesinnineprovinces.•Biomasspower.In2004,thefirstthreebiomasspowergenerationprojects,around25MWeach,werelaunchedinthreedifferentprovinces,oneusingimportedequipmentandtwodomesticequipment.Thegovernmentalsoinitiatedinternationalcooperationprogramswithmoreadvancedcountriesandmultilateralinstitutionstoincreasethenumberandimprovetheskillsoftechnologyprofessionals,theChinesegovernment/WorldBank/GEFCRESPIbeingoneofthese(seeparagraph54).•MSWincinerationpower.Thisstillremainedatthedemonstrationstageduringthisperiod,withtwonotableprojects,onewithadailytreatmentcapacityof160tonscommissionedin2001inWenzhouDongzhuang,usingadomesticequipment,andonelargerwithadailytreatmentcapacityof3×365tonsperday,thefirstlarge-scaleincinerationpowerplantprojectinChina,commissionedinSeptember2002ininthePudongNewArea(ShanghaiMunicipality).•Biodiesel.In2001,HainanZhenghebioenergyCo.Ltd.establishedthefirstbiodieselexperimentalplantinHandan,HebeiProvince,usingrecoveredwasteoilfromkitchensasrawmaterials.In2004,theMoSTlaunchedthe‘BiofuelOilTechnologyDevelopment’projectandtheNDRClaunchedthe‘keytechnologiesforsavingandreplacingoil’project,including‘biodieselproductionandprocesscontrolatindustrialscale’,aimingtoovercomethemainbarriersforbiodieselproduction.Inthethirdstage(2006topresent),Chinaexperiencedanunprecedentedboominlocalbiomassindustries;thisphasewascharacterizedbythedevelopmentandenforcementstandardsofaseriesmodernindustrystandards.Still,Chinacontinuestofacemanytechnicalhurdlesandisstrugglingtomeetthegrowingdemandofbiomassenergy.Tomeetthechallengesencounteredinthefirsttwophasesoftheindustry’sgrowth,thegovernmentundertookseveraldemonstrationprograms:111•Biogas.In2008,theMoSTlaunchedthe‘Researchonhigh-efficiencyandlarge-scalebiogasengineering’projecttopromoteanaerobicdigestiontechnology,engineeringequipment,andbiogasslurrytreatmenttechnology.ThegovernmentalsosupportedjointventuresbetweenChineseandforeigncompaniestodevelopdemonstrationprojectsandengagedinseveralcooperationprogramswithmoreadvancedcountriessuchasSwedenandGermany.Theobjectivewastoenableamoremarket-orientedbusinessenvironment,withanincreasingindustrialstandardsbasis,butstillsupportedwithsubsidies.Thisalsoincludedaseriesofdemonstrationprojectsonkeytechnologies.By2019,morethan95standardshadbeenformulated.•Biomasspower.OnJuly28,2009,theShandongBiomassDirectFiredPowerEngineeringTechnologyCenterwasestablishedtoeventuallybecometheR&DreferencebasetotheChinesebiomasspowersector.Duringthe12thand13thFYPs,theMoSTlaunchednumerousprojectsto“testanddemonstrateadvancedbiomasspowergenerationtechnology.”OnJanuary19,2018,theNEAannouncedtheimplementationofbiomasscogenerationin100towns,whosemainpurposeistopromotecleanheating.By2019,threestrawpowergenerationstandardsweredeveloped.•MSWincinerationpower.In2006and2008,ZhejiangandTsinghuaUniversitydevelopedthreedifferenttypesofcirculatingfluidizedbed(CFB)incinerators.Theseincineratorshavebeeninstalledinmorethan60MSWincinerationpowerprojects.Chinesecompaniesalsopurchasedlicensesfrommoreadvancedcountries,inparticularJapanandGermany.TheselicenseacquisitionsenabledsubstantialimprovementofwastecombustionandpromotedbiomasspowergenerationtechnologyinChina.By2019,eightindustrystandardswereformulatedforwasteincinerationpowergeneration.•Bioethanol.Duringthisphase,R&Dfocusedonnon-grainethanol.In2006,thefirstdomesticbioethanolfactorywascommissioned,withanannualoutputof200,000tons.InFebruary2009,SinopecGroup,COFCOGroup,andDanishNovozymesignedacooperationagreementtojointlydevelopcropwaste-basedsecondgenerationofbioethanolusingcornstraw.InMay2008,thefirstindustrialtrialproductionlineofdomesticcelluloseethanolwasconstructedbytheHenanTianguanGroup.OnJuly23,2010,theNEAapprovedtheestablishmentoftheNationalEnergyResearchandDevelopment(Experiment)Center,establishedbyCOFCOanddedicatedtothedevelopmentofnon-grainethanol,particularlyfromcellulose.Duringthe14thFYP(2016–2020),theMoSTlaunchedthe‘solidwasterecycling’projectdedicatedtoR&Dofcellulosetoethanol.By2019,20ethanolstandardswereformulated.•Biodiesel.Duringthe12thFYP,theMoSTsupporteddemonstrationprojectstodevelopmanufacturingofkeyequipmentandthecultivationofnewenergyalgae.TheMoSTfollowedupduringthe13thFYPwithsimilarprojectstosupport‘CleanProductionandEfficientSeparationofBiomassLiquidFuels’.In2018,2019,and2020,theMoSTlaunchedthe‘SolidWasteRecycling’projectdedicatedtoR&Dof‘strawtogasoline’and‘strawtodiesel’transformations.By2019,morethan15standardsforbiodieselweredevelopedbutnoneareyetapprovednationally.Throughtheabovementionedmeasures,Chinabuiltastrongknowledgebaseindiversebiomasstechnologiesandanimportantindustrialbasetodeploybiomassatalargerscale.•TheefficiencyofbiomasspowerandMSWgenerationcontinuestoimprove,from24.5percentin2005to33percentin2018,butstilllowerthanDanish42percent.112•Biogasproductiontechnologyalsogreatlyimprovedbutstilltrailedbehindmostadvancedcountriesintermsofsize.•Bioethanoltechnologygreatlyprogressedregardingbothfirstgeneration,usingcornastherawmaterial,andthe1.5generationbioethanoltechnology,usingcassavaastherawmaterial.However,Chinastilldidnotcatchupwithadvancedcountriesregardingthesecondgenerationofbioethanoltechnology,usingcropstrawasrawmaterial,stillremainingatthedemonstrationphase.•Biodieseltechnologycaughtupwithadvancednations.Chinesemarketplayersdevelopedpatentswithindependentintellectualpropertyrights,whichmakethemmorecompetitiveglobally.In2018,1milliontonsofbiodieselwasproduced,roughly17percentof1.8billiongallons(about5.8milliontons)producedbytheUnitedStates.Thelessonslearnedinclude,butarenotlimitedto,thefollowing:(a)supportingtechnologyR&DandstandardsettingisanimportantfactorforbiomassdevelopmentasearlyChineseprojectssufferedfromtheirabsence;(b)biomassrawmaterials,includingavarietyoforganicwastes,varyextensivelyfromcountrytocountryandthedevelopmentofbiomassneedstobeadaptedtolocalconditions;(c)thegovernment-drivenapproachthatledtoarecognizedsuccessinthedeploymentofwindpowerwasnotappropriatefordeploymentofbiomasspowertechnologies—nationalagenciessetupambitioustargetsandhighfeed-intariffsasforotherpriorityREsources,butbiomasswastheonlytechnologythatdidnotachievetheobjectivessetbythegovernment;(d)explicitsupportfornon-powerutilizationofbiomassenergyshouldnotbeneglectedinRElawsandregulations;and(e)adequateandreliablesupplychainisaprerequisitetosuccessfuldeploymentofallbiomasstechnologies.Deploymentofprojectsand/orprograms,especiallythosebasedonagriculturalandforestresidues,requiresclearlong-termlegalarrangementbetweencommunitiesandconcernedgovernmentagenciestodevelopreliablefuelsupplychains.190.ThedevelopmentofChina’sbiomassenergyindustrystartedinthe1950s.After70yearsofdevelopment,ithasbecomeagloballeadercoveringbiomassandMSWincinerationpower,biogas,bioethanol,andbiodiesel.IthasdevelopedacompleteverticalindustrialchainfromR&Dtoequipmentmanufacturingandprojectimplementation.Thebiomassenergyindustrygrowthhasexperiencedthreestagesofgrowth.Thefirststage(upto1994)wasdedicatedtodevelopingbiogasequipment,withmixedsuccess,tomeetenergydemandinruralareas.Thesecondstage,knownastheexperimentalanddemonstrationstageordiversification(1995–2005),focusedmainlyonR&Dandimprovingthequalityofthebuddingindustry’sproductquality,namelybiogas,bioethanol,biomass,andMSWpower.Inthethirdstage(2006topresent),Chinaexperiencedanunprecedentedboominlocalbiomassindustriesastechnologyimproved,andstandardswereimplementedtomodernizetheindustryandcontributetofurtheringtherapidgrowthofbiomasstechnologiestocatchupwithmostadvancedcountries.A.TheAchievementsoftheBiomassEnergyIndustry191.FollowingtheissuanceoftheRenewableEnergyLawin2005,Chinamadesignificantprogressindevelopingbiomassenergy.Thetotalinstalledcapacityofbiomasspowergrewfromabout2GWin2005toabout22.5GWin2019,amountingtoabout17percentoftheglobalinstalledcapacity.Itincludedabout12GWofMSWpower,about9.7GWstraw-firedpower,and0.8GWbiogaspower.Powergenerationgrew113from5.2TWhto111TWh.Furthermore,by2018,theconsumptionof(a)biomassbriquetteamountedtoabout15milliontons,alldomesticallyproduced;(b)biogasamountedtoabout19billionm3,alsodomesticallyproduced;(c)ethanolamountedtoabout3.4milliontons,with2.8milliontonsproducedinChinaand600,000tonsimportedfromabroad;and(d)biodieselamountedtoabout680,000tonsdomesticallyproducedwith320,000tonsofexcessproductionexported.Chinaranked10thinproductionintheworld.Despitetheseachievements,modernbiomassaccountedforasmallshareofChina’s2018energymatrix:1.6percentoftotalpowergeneration,3.7percentintotalgasproduction,and1.4percentintotalautomotivefuels.192.China’sbiomassenergyindustrymadesignificantprogressinthefollowing:•Increasingthenumberofbiomassenergyenterprises:Thenumberofbiomassenergyenterprisesgrewfrom60in2005tomorethan600in2018,coveringtheentireindustrysupplychainincludingR&D,manufacture,andprojectconstructionandmaintenance.•Improvingtheknowledgeandtechnologicalbaseoftheindustry.Chinahasachievedgreatprogressinbiogasengineering,straw-baseddirectcombustionpowergeneration,wasteincinerationpowergeneration,andbiodieselproduction.Thenumberofpatentsgrewfrom1,388in2006to49,401in2018.193.Theseachievementsaretheresultofagradualandpragmaticapproachcharacterizedbyextensivetestingandknowledgetransferfromdevelopedcountriesduringtheearlystages,andlocalizationandqualityimprovementthroughincreasedR&D,andestablishmentofstandardsandcertificationprocessesinlaterstages.B.TheEarlyYears(upto1994)194.Atthisstage,theglobalbiomassenergyindustrydevelopedrapidly.Germanywasleadingthepackinbiogasproduction,Denmarkexcelledinbiomasspowergenerationandbiomassheating,JapanwasproficientinMSWpowergeneration,andBrazilandtheUnitedStatesbothboastedstrongbioethanolindustries.China’sbiomassenergy,meanwhile,wasmainlylimitedtothedevelopmentandutilizationofbiogasforruralareasandlaggedbehindtheaforementionedcountriesinotherareasofbioenergy,biomasstechnology,R&Dcapacity,theavailabilityofaskilledworkforce,andexperiencewithdevelopingandoperatinglarge-scaleprojects.195.Ruralhouseholdbiogasconstructionhadundergoneaparticularlytortuousdevelopmentpathsincethe1950s.Pilotdemonstrationsofbiogasdigestersexperiencedsetbacksateverystepduetothelackofaqualifiedworkforceandmanagementcoretomeettheextensiveneedsofthehouseholdbiogasprogramslaunchedbythegovernmentduringthisperiod.Basedongovernmentrequirements,localcommunitiesandevenindividualfamiliesinstalledrudimentaryandhastilydesignedbiogasdigesterswiththesupportofafewtechnicians.Lessthansatisfactoryresultsledtodistrustofthetechnologybytheruralpopulation.196.Toaddresstheseproblems,thegovernmentundertookthefollowingmeasurestopromotethedevelopmentandimprovethequalityofthelocalbiomassenergyindustry:114Biogas•Largeandmediumbiogasprojectswererevivedin1964byundertakinga2,000m3industrialbiogasprojectinNanyang,HenanProvince,toproducebiogasfromresiduesandwastewaterinthedistilleries.•In1980,twomore5,000m3biogasprojectswerecommissionedandtheircapacitywaslaterincreasedto12,000m3.A30,000m3storagetankwasinstalledtoincreasethereliabilityofsupply.Duringthe1980s,manyalcohol-,sugar-,andfood-processingfactoriesandanimalhusbandryfarmsacrossthecountryemulatedthisexperienceandbuiltlargeandmediumbiogasdigestersduringthe1980s.•In1988,theChinaBiogasAssociationwasestablishedtounifymorethan1,700biogastechnologiststocarryoutcollaborativeresearchonbiogasdigesters,carryoutlarge-scaletechnologicalresearch,andintegratenewkeyanaerobicdigestionprogressachievedabroadtorebuildthepopulation’strustinbiogasandinitiateaperiodofsustaineddevelopment.MSWIncinerationPower•In1982,ChinalauncheditsfirstMSWproject,theLingyunwasteincinerationpowerproject,inLeshanCity,SichuanProvince.Theproject,commissionedinFebruary1982,processed30tonsofwasteperday,farbehindtheaveragecapacityofJapaneseMSWprojects,whichamountedtoabout150tonsperdayin1980.102•In1988,theShenzhenQingshuihewasteincinerationpowerprojectinGuangdongProvincewascommissioned.Theprojectpurchasedtwosetsofwasteincinerationequipmentwithacapacityof150tonsperdaymanufacturedbyMitsubishiHeavyIndustryofJapan.Theprojectwasthekeyscientificandtechnologicalresearchundertakenduringthe8thFYP(1991–1995).Basedontheexperiencegainedduringtheimplementationofthisproject,ChinabegantodoresearchandstudyMSWincinerationequipment,layingthefoundationfordevelopingalocalR&DcapabilityinChina.197.Bytheendofthisstage,Chinahasimplementedseverallarge-scalebiogasprojectsandMSWincinerationpowergenerationprojects,whichlaidthefoundationforthedevelopmentoftheensuingstages.Mainachievementsincludethefollowing:•Biogas.Thecountryaccumulatedsignificantexperienceinconstructionandoperationoflarge-scaleprojects,especiallylarge-scalebiogasanaerobicdigesters.•MSWpower.ConstructionandoperationexperienceaboutMSWincinerationpowerprojectswasaccumulated;particularlytheresearchandstudyontheMSWincinerationboilersweremade,benefittingthelocalizationoftheboilers.C.TheDiversificationStage(1995–2005)198.WhileChinagainedsomeexperienceduringthefirststage,bythemid-1990sitsbiomassenergyindustrywasstilllaggingfarbehindtheleadingcountrieslikeDenmark,Germany,Japan,Brazil,Sweden,the102https://www.sohu.com/a/286460971_120047582115Netherland,andtheUnitedStates.Itlackedthetechnicalknowledge,industrialinfrastructure,andhumanresourcestobuildacompetitiveindustrymostlyduetothefollowing:•WeakR&Dandlackofaskilledequipmentmanufacturing,engineering,andconstructionworkforce.•Theabsenceofqualitystandardsandcertificationsystemsleadingtospottyqualityofequipment,engineering,andproducts.•MostofthebioenergyprojectsthathavebeenbuiltinChinaweredevelopedwithrudimentarytechnology,low-efficiencyequipment,andunskilledworkers.Thisledtolowreturnoninvestmentsandhighoperationalcost,whichlimitedbiomassdevelopmentinasustainableway.•Thebad,sometimesdismal,financialsituationsofthebiomassenergyenterprises,largelyestablishedatlowadministrativelevels,didnotallowthemaccessequityordebtfinancingtointroducemoreadvancedforeigntechnologiesandupgradethequalityoftheirproducts.199.Toaddresstheseissues,thegovernmenttookmeasuresandlaunchedmanyprogramstoimproveR&D,reinforceandwidentheindustrialbiomassenergybase,andattracthigh-calibertechnicalandmanagementtalents:Biogas•In1999,theHangzhouDengtaPigFarmBiogasProject(ZhejiangProvince),aUNDP/GEFdemonstrationproject,wascommissioned.ItadoptedUp-flowAnaerobicSludgeBed(UASB)withanaerobicfermentationatnormaltemperatureandproducedonaverage8,500m3perdayofbiogas.Thechemicaloxygendemand(COD)concentrationreached10,000mgperliterandtheoverallremovalefficiencyofCODreachedabout85percent,matchingefficienciesreachedinmoredevelopedcountries.ItwasthefirstbiogasprojectthatadoptedtheLIPP103anaerobicdigesterfromGermany.•In2001,theShunyipigfarmbiogasproject(BeijingMunicipality)wasbuiltwiththesupportofUNDP/GEFtotestlarge-scalebiogasprojects.•In2003,theQingdaoalcoholwasteliquidbiogasproject(ShandongProvince)wasdevelopedtointroduceandtestadvancedtechnologiesinChina.•Duringthisperiod,Chinabegantoaddressdigestersqualityissues.Itadoptedfourstandardsrelatingtohouseholdbiogasprojects,includingbiogaspipeline,biogastank,acceptancechecklistofbiogasdigesters,andoperatinginstructions.Bioethanol•In2000,Chinalauncheditsfirstprojectusinggrainsasrawmaterialtoproducebioethanoltostudyandexploretheproductionofbioethanolfromcorn,wheat,andotheragedgrains.103Lippertechnologyistheworld’sadvancedtechnologytobuildsteelplatecan,inventedbyXavafLippofGermany.LIPPtankhastheadvantagesoffastconstructionprogress,ashortconstructionperiod,andconvenientconstruction.Comparedtoconcretetanks,itismoresuitablefortheconstructionoflargeanaerobicdigesters.116•InApril2001,testingoftheuseofethanolgasolinewasapprovedbythegovernmentandseveralcompanieswereestablishedfortheproductionofethanol:theJilinBioEthanolCompanyLtd.toproduce300,000tons,theHenanTianguanBioethanolCompanyLtd.toproduce300,000tons,theAnhuiFengyuanBiochemicalCompanyLtd.toproduce320,000tons,andtheHeilongJianghuarunAlcoholCompanyLtd.toproduce100,000tons.TheHenanTianguanGroupmainlyusedwheatasrawmaterialandtheotherthreecompaniesusedcorn.Thetotalproductioncapacityoftheethanolpilotprojectswas1.02milliontons,whichroughlyamountedtoone-fourthoftheUSethanolproductionin2000.•FromJune2002toJune2003,ethanolgasolinewaspilotedinthreecitiesinHenanProvinceandtwocitiesinHeilongjiangProvince.InFebruary2004,thescopeofthepilotwasexpandedto27citiesandcitiesinnineprovinces.BiomassPower•In2004,thefirstthreebiomasspowergenerationprojectswerelaunched:the25MWbiomasspowergenerationprojectinShancounty(ShandongProvince),the25MWstrawpowergenerationprojectinRudong(JiangsuProvince),andthe24MWstrawpowergenerationprojectinJinzhou(HebeiProvince).TheShandongShanCountyprojectwasthefirsttoburnstrawforpowergenerationinChina,usingequipmentimportedfromDenmark.Theboilerhighpressureandtemperatureparameterswere9.2millionPa(MPa)and540°C,respectively.Theothertwoprojectsuseddomesticequipmentwithmiddlepressureandtemperatureparametersof3.82MPaand450°C.•Toincreasethenumberoftechnologyprofessionals,especiallyinR&D,thegovernmentinitiatedinternationalcooperationprogramswithmoreadvancedcountriesandmultilateralinstitutions.TheChinesegovernment/WorldBank/GEFCRESPI(seeparagraph54)playedanessentialroleintherapidgrowthandqualityimprovementofthebiomassmanufacturingindustry.The25MWRudongbiomass-firedpowerplant,supportedbyCRESPI,faceddifficultiesduetohigher-than-expectedmoisturecontentinthefuel.Theissuewassuccessfullyaddressedwiththeassistanceofinternationalexperts,supportedbyGEF.HighmoistureinstrawwascommoninChinaandthesolutionbefittedthebiomasspowerindustryandwasdisseminatedwidely.MSWIncinerationPower•In2001,theWenzhouDongzhuangwasteincinerationpowerplantPhaseIwascommissioned,withadailytreatmentcapacityof160tons.ItwasthefirstinChinatoadoptdomesticequipmentinlinewithmoderninternationalpracticesatthetime.•TheYuqiaowasteincinerationpowerplantinthePudongNewArea(ShanghaiMunicipality)wascommissionedinSeptember2002,withadailytreatmentcapacityof3×365tonsperday.Itwasthefirstlarge-scaleincinerationpowerplantprojectinChina.ItwaspartiallyfinancedbyaFrenchExportCreditandkeyequipmentwasfromtheFrenchcompanyAlstomtohandle1,000tonsofdailywaste.Biodiesel117•In2001,HainanZhenghebioenergyCo.Ltd.establishedthefirstbiodieselexperimentalplantinHandan,HebeiProvince,usingrecoveredwasteandwildoil104asrawmaterials,markingthebirthofChina’sbiodieselindustry.•In2004,theMoSTlaunchedthe‘BiofuelOilTechnologyDevelopment’projectaimingtoovercomethemainbarriersforbiodieselproduction.•In2004,theNDRClaunchedthe‘keytechnologiesforsavingandreplacingoil’project,including‘biodieselproductionandprocesscontrolatindustrialscale’.D.TheCatch-UpStage(2006toPresent)200.Duringthefirststage(upto1994)andthesecondstage(1995–2005),Chinaachievedsignificantprogressindevelopingbiomassenergy,whichbenefitedlocalmanufacturingofbiomassboilers,grateboilers,biogasdigesters,andsoon.However,Chinawasstillfacingmanytechnicalhurdlesandstruggledtomeetgrowingdemandofbiomassenergy:•TheChinesemanufacturingindustrywasunabletomatchtheinnovationandtechnologicalimprovementsofadvancedcountries,leadingtoloweconomicandfinancialreturnsfromthebiomassenergy.•Thetechnicalstandardsandproducttestingandcertificationwerenotwellestablished.•Thetechnologiestoexploitbiomassresourceswereinsufficientlymasteredtomeetthediversifiedenergydemandsuchasbiogasforcooking,bioethanolandbiodieselfortransportation,andbiomassforcleanheating.•Biomassresourcesevaluationanddistributionwereinsufficienttomeetthedemandofbiomassenergydevelopment,whichwasalreadygrowingfastdespitethemanytechnicalhurdlesmentionedabove.201.Tomeetthechallengesencounteredinthefirsttwophasesoftheindustry’sgrowth,thegovernmentundertookseveraldemonstrationprograms.FourmajornationalscientificandtechnologicalprogramsillustratetheeffortsdeployedbytheMoSTtosupportbiomassenergydevelopment:Biogas•In2008,theMoSTorganizedmanyinstitutionstocarryouttheprojectof‘Researchonhigh-efficiencyandlarge-scalebiogasengineering’andcomprehensivelyresearchedtheanaerobicdigestiontechnology,engineeringequipment,andbiogasslurrytreatmenttechnology,withatotalinvestmentofCNY180million(aboutUS$25.7million),whichplayedapositiveroleinpromotingbiogastechnologicalandengineeringprogress.•OnJune9,2009,HeilongjiangLongnengGasInvestmentCo.Ltd.andBioprocessControlSwedenABsignedacomprehensivecooperationagreementonbiomassenergytechnology.Bothsideswill104Wasteoilmainlyreferstotheoilrecoveredfromkitchenwaste.Wildoilmainlyreferstotheoilrecoveredfromwildoilcrops,suchasPistacia,jatropha,andcastor.118jointlydevelopnewtechnologiesandprocessesinthedesignoflargeandmediumbiogasprojects,completeequipment,andengineeringservices.•InJanuary2009,theGermanAgencyforInternationalCooperation(DeutscheGesellschaftfürInternationaleZusammenarbeit,GIZ)andtheForeignEconomicCooperationCenteroftheMoAstartedtheimplementationofa‘BiomassEnergyOptimizationProject’toimprovebiomasstechnicalstandards,optimizetheperformanceoflargeandmediumbiogasprojects,andincentivizegovernmentagenciesandindividualstoinvestinbiogasindustry.TheprojectbenefittedChinabyimprovingdesignandconstructionoflarge-scalebiogasprojecttolaunchlarger-scalethebiogasprojects.•InDecember2010,NirasCompanyofDenmarkandQingdaoTianrenEnvironmentalEngineeringCompanysuccessfullyestablishedabiogasprojectinAnyangCity(HenanProvince)andwillproducevehiclegas.TheDanishgovernment’sbusinesspartnersupportprogram(theB2Bproject),managedbytheDanishEmbassyinChina,providedfinancialandtechnicalsupportfortheestablishmentofthebiogasproject.•Duringthe12thFYP(2011–2015),theMoSTsupportedbiogasthroughthefollowinginitiatives:(a)demonstrationofkeytechnologiesandcleanbiomassfuels,(b)high-efficiencybiorefiningandcomprehensiveutilizationofagriculturalresidue,(c)researchonanddemonstrationofkeytechnologiesofwasteresourceutilizationinmodernlivestockandpoultryfarms,and(d)technologyanddemonstrationofdryanaerobicdigestionofMSWandutilizationofbiogasinNorthChina.•Duringthe13thFYP(2016–2020),theMoSTfollowedupwithaprojecttosupporttheR&Dandmanufacturingofkeyequipment:EfficientProductionandHighValueUtilizationofBiogas.•In2018,2019,and2020,theMoSTlaunchedathe‘solidwasterecycling’project,whichplayedakeyroleintheR&Dofbiogasproductionfromlivestockfarmwaste.•OnAugust28,2018,theNEAissuedthe‘noticeonsubmittingtheindustrializeddemonstrationofupgradedbiogasprojects’.105Thepurposeofthenoticewasto(a)improvekeybiomasstechnologiestosupportindustrialcapacity,(b)exploretheestablishmentofbusinessmodelstoincreasethemarketorientationofbiomassdevelopment,(c)improveindustrystandardsandindustrialsystem,(d)buildanumberofcommercialprojectstopromoteecologicalandrecyclingbusinessactivities,and(e)establishpolicysupportandmanagementsystemandimprovethesubsidypolicy.•By2019,morethan60nationalstandardshadebeenformulatedforbiogasandabout35industrialstandardshavebeenformulated.BiomassPower•OnJuly28,2009,theShandongBiomassDirectFiredPowerEngineeringTechnologyCenterwasestablished.ThiswasthefirstofitskindinChina.Itwasentrustedtocarryoutresearchandusetheresearchresultsindevelopingbiomasspowerprojects.Itaspirestobecomethebaseofresourceevaluation,projectdesign,R&D,andaconsultationinstitutetosupportChinesebiomasspowersector.105Thecontentofmethaneinthebiogasisnormally50–60percent.Themethanecontentcanberaisedtoover90percentwhenupgradedbyseparationtechnology.Andthereforeitiscalledupgradedbiogasifthemethanecontentisover90percent.119•Duringthe12thFYP(2011–2015),theMoSTsupportedaproject,‘testanddemonstrationofadvancedbiomasspowergenerationtechnology’toincreasebiomasspowerR&Dcapacityanddevelopmanufacturingofkeyequipment.•Duringthe13thFYP(2016–2020),theMoSTfollowedupwithaprojecttosupporttheR&Dandmanufacturingofkeyequipment:AdvancedCombustionofBiomassBriquettesandCombinedHeatingPowerGeneration.•OnJanuary19,2018,theNEAannouncedtheimplementationofbiomasscogenerationin100towns.Themainpurposeoftheprogramistopromotecleanheatingatthecountylevelandbuildadistributedcleanheatingproductionandconsumptionsystem.Themaintechnologyrequirementsareasfollows:(a)designpowergenerationbasedonheatdemand,(b)establishdistributedcleanheatingsystemsandadequatecustomerservice,(c)meetthenationalandlocalpollutantemissionstandardsandotherrequirements,and(d)usetwinbiomassheatingboilersandheatstoragedevicestofurtherimprovetheheatingcapacityandexpandtheheatingarea.•By2019,threestrawpowergenerationstandardsweredeveloped(onenationalstandardandtwoindustrialStandards).MSWIncinerationPower•In2006and2008,ZhejiangUniversity’sInstituteofThermophysics,ChineseAcademyofSciences,andTsinghuaUniversitydevelopedthreedifferenttypesofCFBincinerators.TheseincineratorsweredesignedinparallelwithChina’sMSWtechnicalrequirementsandhavebeeninstalledinmorethan60MSWincinerationpowerprojects.•Duringthe11FYP(2006–2010),ChongqingSanfengEnvironmentalProtectionIndustryCompanyacquiredthelicenseoftheMartingrateboilertosolvecombustionofproblematiclow-gradewastefromMartinGmbHofGermany.HangzhouNewCenturyEnvironmentalProtectionEnergyEngineeringCo.Ltd.andWeimingEnvironmentalProtectionEnergyCompanyofWenzhou(ZhejiangProvince)purchasedMartingrateboilersfromMitsubishiHeavyIndustryCompanyofJapan.EverbrightEnvironmentalProtectionCo.Ltd.andShenzhenEnergySourceEnvironmentalProtectionCo.Ltd.purchasedSEGHERSgrateboilersfromKeppelCompanyofSingapore.AlltheseimprovedwastecombustionandpromotedbiomasspowergenerationtechnologyinChina.•Duringthe12thFYP(2011–2015),theMoSTsupportedaproject‘DemonstrationofKeyTechnologiesandCleanBiomassFuel’toincreasedomesticR&Dcapacityanddevelopmanufacturingofkeyequipment.•In2016and2016,threeChinesecandidatesjoinedapostgraduatebiomasstrainingorganizedbytheSinoDutchcooperationprogram.•By2019,eightindustrystandardswereformulatedforwasteincinerationpowergeneration.BioEthanol•InAugust2006,ChinaOilandFoodstuffsCorporation(COFCO)issuedthe‘2007–2011BiochemicalEnergyStrategicPlan’,whichaimedtobuildbioethanolfactoriesusingcassava,sweetpotato,andcornasrawmaterials.InOctober2006,COFCOinvestedinthefirstdomesticbioethanol120factorywithanannualoutputof200,000tons.Itusedcassavaasrawmaterialandrealizedthefirstbreakthroughofnon-grainbioethanol.•InFebruary2009,SinopecGroup,COFCOGroup,andDanishNovozymesignedacooperationagreementtojointlydevelopcropwaste-basedproductionofbioethanol,aimingtodevelopalarge-scalecommercialproductionbasedonthesecondgenerationofbioethanolusingcornstraw.Thecooperationrelatedtotheentireproductionandsupplychainofbioethanol.•InMay2008,thefirstindustrialtrialproductionlineofdomesticcelluloseethanolwasconstructedbytheHenanTianguanGroup.•OnJuly23,2010,theNEAapprovedtheestablishmentoftheNationalEnergyResearchandDevelopment(Experiment)Center,establishedbyCOFCO.TheR&Dcenterisdedicatedtothedevelopmentofbiomassenergyandwillfocusonthedevelopmentofnon-grainethanol,particularlyethanolmadeofcellulose.•Duringthe12thFYP(2011–2015),theMoSTsupportedprojectstofurtherdomesticR&Dcapacityanddevelopmanufacturingofkeyequipment,including(a)demonstrationofkeytechnologiesandcleanbiomassfuel,(b)efficienttechnologytoutilizecellulosicbiomass,and(c)breedingandlarge-scaleutilizationofnewenergyplants.•Duringthe13thFYP(2016–2020),theMoSTfollowedupwithaprojecttosupporttheR&Dandmanufacturingofkeyequipment:CleanProductionandEfficientSeparationofBiomassLiquidFuel.•In2018,2019and2020,theMoSTlaunchedthe‘solidwasterecycling’projectdedicatedtoR&Dofcellulosetoethanol.•By2019,20ethanolstandardswereformulated.BioDiesel•Duringthe12thFYP(2011–2015),theMoSTsupportedprojectstoincreasedomesticR&Dcapacityanddevelopmanufacturingofkeyequipment.Theseinclude(a)demonstrationofkeytechnologiesandcleanbiomassfuelsand(b)cultivationofnewenergyalgae.•Duringthe13thFYP(2016–2020),theMoSTfollowedupwithaprojecttosupporttheR&Dandmanufacturingofkeyequipment:CleanProductionandEfficientSeparationofBiomassLiquidFuel.•In2018,2019and2020,theMoSTlaunchedthe‘SolidWasteRecycling’projectdedicatedtoR&Dof‘strawtogasoline’and‘strawtodiesel’transformations.•By2019,morethan15standardsforbiodieselweredevelopedbutnoneapprovednationally.•Throughtheabovemeasures,China’sbiomassenergybuiltastrongknowledgebaseindiversebiomasstechnologiesandanimportantindustrialbasetobringbiomasstoalargerdevelopmentscale.•TheefficiencyofbiomasspowerandMSWgenerationcontinuestoimprove.Theparametersofboilersandsteamturbineshavecontinuouslyprogressed.Boilertemperatureandpressurecharacteristics121increasedtoreach540°Candover14MPa.Thepowergenerationefficiencyimprovedfrom24.5percentin2005to33percentin2018,stilllowerthanDanish42percent.•Biogasproductiontechnologyalsogreatlyimproved.Design,construction,andoperationoflargeandmediumbiogasprojectsweremastered.Themaximumvolumeofsingleanaerobicdigesterreached12,000m3perday,andtheCODconcentrationoffeedmaterialreached50,000mgperliter.Themaximumbiogasgasproductionreached100,000m3perday.Useofrawmaterialswasdiversified,andthemixedfermentationtechnologyofanimalmanureandstrawhasbeendemonstrated.ThelargestprojectinHebeiProvincecanproduce100,000m3biogasperday,roughly41percentoftheGüstrowbiogasproject(producing240,000m3biogasperday)inGermany.•Bioethanoltechnologygreatlyprogressed.Thefirstgenerationofbioethanoltechnology,usingcornastherawmaterial,andthe1.5generationbioethanoltechnology,usingcassavaastherawmaterial,werecompetitiveglobally,butthesecondgenerationofbioethanoltechnology,usingcropstrawasrawmaterial,isstillinthedemonstrationphase.Chinastilldidnotcatchupwithadvancedcountries.Forexample,(a)inDenmark,NovozymeshasdevelopedtheenzymesuccessfullyandInbiconA/Shasbuiltalarge-scalecelluloseethanolproject,producing1.4milliongallonsofethanolperyear,and(b)intheUnitedStates,RangeFuelsCompanybuiltacommercialcellulosebioethanolinGeorgiain2008andDuPontcommissioneda30milliongallon(about114liters)cellulosicethanolrefineryinNevada,Iowa,onOctober30,2015.•Biodieseltechnologycaughtupwithadvancednations.Intermsofbiodieselproduction,marketplayersdevelopedpatentswithindependentintellectualpropertyrights,whichmakethemmorecompetitiveglobally.In2018,1milliontonsofbiodieselwasproduced,roughly17percentof1.8billiongallons(about5.8milliontons)producedbytheUnitedStates.E.LessonsLearned202.SupportingtechnologyR&Dandstandardsettingisanimportantfactorforbiomassdevelopment.Since2000,ChinahasinvestedalotonR&Dofbiomassenergydevelopmentandutilization,especiallyinbiomasspowergeneration,thusovercomingthetechnicalproblemsfacedbytheindustryinearlyprojectsandlayingthefoundationforlarge-scaledeployment.203.Thedevelopmentofbiomassneedstobeadaptedtolocalconditions.Biomassrawmaterials,includingavarietyoforganicwastes,varyextensivelyfromcountrytocountryandcanbeusedtoproduceheat,gas,andelectricity.Therefore,biomassdevelopmentplansneedtobeadaptedtothecountryresourcesandenergyneeds.AsChina’sexperienceindicate,itisadaptedtomeetingruralareas’modernenergyneedstoavoiddeforestationandacuteindoorpollution.Italsocontributestodevelopthelocaleconomy,whichisalsooneofthereasonsfortherapiddevelopmentofbiomassinChina.204.Adequateandreliablesupplychainisaprerequisitetosuccessfuldeploymentofallbiomasstechnologies.Biomassenergydevelopmentstronglydependsonrawmaterialcollectionandstoragetoensuretimelysupplyofgenerationfacilities.Inadequatefuelsupplychainsanddisputesaboutlong-termpricingaffectedthedevelopmentofmanypowerprojectsinChina.Thecountryembarkingonlarge-scaledeploymentofbiomassshoulddevelopdetailedstatisticaldatabasesonthequalityanddistributionofrawmaterialstomeettheneededaccuracyrequiredforthedevelopmentofsuccessfulprojectsandattractinvestors,especiallyintheriskiersegmentofsmallREprojects.Fuelsupplychainsarespecifictoeachsegmentofthebiomassindustry.Deploymentofprojectsand/orprograms,especiallythose122basedonagriculturalandforestresidues,isdecentralizedandrequiresinvolvementofagricultureandforestmanagementdepartmentsandaclearlong-termlegalarrangementbetweencommunitiesandconcernedgovernmentagenciestodevelopreliablefuelsupplychains.205.Thegovernment-drivenapproachthatledtoarecognizedsuccessinthedeploymentofwindpowerwasnotappropriatefordeploymentofbiomasspowertechnologies.Nationalagenciesrightlydevelopedandrecommendedstandardsforbiomassenergytoguidethedevelopmentofthedifferentsegmentsofthebiomassindustry.However,itproveddifficulttoapplynationalstandardsbecausethecharacteristicsoftheresourcesandthediversityofproductsaredeterminedbyregionalandsometimesevenlocalspecificcharacteristics.Theseagenciessetupambitioustargetsandhighfeed-intariffsasforotherpriorityrenewableenergysources,butbiomasswastheonlytechnologythatdidnotachievetheobjectivessetbythegovernment.Countriesengagedinbiomassdevelopmentcouldlearnfromthesedeficienciesandrely,asmuchaspossible,onmarket-basedinitiatives,involvingalllocalconcernedpartiesanddevelopinglong-termlegalarrangementsasenablingpreconditionsbeforeundertakinglargedeploymentofbiomassenergy.206.Thegovernment-drivenapproachthatledtoarecognizedsuccessinthedeploymentofwindpowerwasnotappropriatefordeploymentofbiomasspowertechnologies.Nationalagenciesrightlydevelopedandrecommendedstandardsforbiomassenergytoguidethedevelopmentofthedifferentsegmentsofthebiomassindustry.However,itproveddifficulttoapplynationalstandardsbecausethecharacteristicsoftheresourcesandthediversityofproductsaredeterminedbyregionalandsometimesevenlocalspecificcharacteristics.Theseagenciessetupambitioustargetsandhighfeed-intariffsasforotherpriorityrenewableenergysources,butbiomasswastheonlytechnologythatdidnotachievetheobjectivessetbythegovernment.Countriesengagedinbiomassdevelopmentcouldlearnfromthesedeficienciesandrely,asmuchaspossible,onmarket-basedinitiatives,involvingalllocalconcernedpartiesanddevelopinglong-termlegalarrangementsasenablingpreconditionsbeforeundertakinglargedeploymentofbiomassenergy.

1、当您付费下载文档后，您只拥有了使用权限，并不意味着购买了版权，文档只能用于自身使用，不得用于其他商业用途（如 [转卖]进行直接盈利或[编辑后售卖]进行间接盈利）。
2、本站所有内容均由合作方或网友上传，本站不对文档的完整性、权威性及其观点立场正确性做任何保证或承诺！文档内容仅供研究参考，付费前请自行鉴别。
3、如文档内容存在违规，或者侵犯商业秘密、侵犯著作权等，请点击“违规举报”。

碎片内容

碳中和的最新文档