SHANGHAI (Intefax-China) Dr. Eric Martinot, former senior energy and environment specialist at the World Bank and now visiting scholar at Tsinghua-BP Clean Energy Research and Education Center, talked to Interfax about his research findings regarding China's renewable energy development on the sidelines of a forum held in Shanghai last week.
Martinot believes that China will have no problem achieving its targets for different forms of renewable energy, such as hydro, wind, biomass, solar power and bio-fuel. However, Martinot's concerns remain regarding biomass because of insufficient raw materials, solar power because of its high costs and bio-fuel because of its technology and the wide dispersion of raw materials. He further suggested that the Chinese government should set higher power tariffs for renewable energy, which would mean larger profits, in order to attract more players to the market.
China aims to have renewables account for 10% of the country's primary energy consumption by 2010 and 16% by 2020. Hydropower generation capacity will reach 180 gigawatts a year by 2010 and 300 GW by 2020, compared with 115 GW in 2005. Regarding wind power, the government aims for an annual generation capacity of 5 GW by 2010 and 30 GW by 2020, as compared to its 2005 figure of 1.3 GW. Biomass power will also grow almost three-fold to reach 5.5 GW in 2010 from 2 GW in 2005, and 15 times as much by 2020, to 30 GW. Solar photovoltaics power generation capacity was 0.07 GW in 2005, but the figure is expected to hit 0.3 GW in 2010 and 1.8 GW in 2020.
In the meantime, the country will produce 2 million tonnes of ethanol a year by 2010 and 10 million tonnes by 2020, significantly larger when compared to 2005's 0.8 million tonnes. Bio-diesel output will grow four times compared to 2005 to 0.2 million tonnes in 2010, and 40 times annually by 2020, to 2 million tonnes.
At the World Bank, Martinot managed the renewable energy program of the Global Environment Facility (GEF) for four years and was responsible for about $80 million per year in GEF grants for renewable energy projects in developing countries. He was also a consultant to the Untied Nations, the U.S National Renewable Energy Laboratory and the International Energy Agency.
INTERFAX: What do you think about all the targets that the Chinese government has set for the different forms of renewable energy?
DR. ERIC MARTINOT: For all the renewable technologies, I think all of them are reasonable to achieve, except that I am not so sure about biomass, because the raw material is very dispersed, and you have to collect it. For a biomass power plant, like a 25-megawatt power plant, which is a reasonable size for efficiency, you have to collect the resources from a very large area, around 50 thousand hectares as we counted, maybe from an entire county just for one plant and from a large number of farmers. But in Europe, they can do it, because farms are very big and you can just buy from one company.
But for all the other technologies, I think they'll all achieve [the targets] early. Wind will go definitely more than 30 gigwatts by 2020 and it would very likely achieve its 2010 target two years earlier. Also for hydropower, I think they'll achieve the target early. For ethanol and bio-diesel, it's difficult until we get the ethanol cellulose technology so that we can produce ethanol from crop wastes, not from corn, as corn is very limited and competes with food supply.
INTERFAX: What are the challenges you see for China's fastest growing wind and solar power industries?
DR. ERIC MARTINOT: There are over 50 companies trying to produce wind turbines in China, and this is a very large number. China will likely reach solar PV production capacity equivalent to what the rest of the world is able to produce, but they are all for exports. So the real question is, how soon will the cost come down so that there will be a domestic market for solar PV? We are looking at maybe at least five years. Actually a lot of people are thinking much longer. The first problem with solar in China is the acceptance by the utility companies to use power generated by solar power.
INTERFAX: Doesn't that have a lot to do with the amount of subsidy the government is able to provide?
DR. ERIC MARTINOT: Yes, definitely. Currently the subsidy would be too much for the government to handle. Within five years, the price will come down enough. Some people even think by 2010 the price will be very low. Right now, the cost for solar PV is RMB 3.5 ($0.46) per watt. Some people say it would come down to RMB 2 ($0.26) per watt by 2010, so almost half. And then you start thinking about a cost essentially equivalent to RMB 1 ($0.13) per kilowatt hour, and then with a subsidy, solar power is able to compete with other forms of power generation. For example, biomass is getting a subsidy of RMB 0.55 ($0.07) to RMB 0.6 ($0.08) [per kilowatt hour].
Solar power is very important in Germany and Japan and everybody is putting them on top of their roofs, but they won't be here for houses first in China, but instead for commercial buildings or maybe public buildings, because they have the highest rate of power tariff. The power rates for commercial users in China are higher than for civil users, so solar power is more competitive for them.
INTERFAX: A wind power expert said that the rapidly growing wind power capacity could only make a difference to China's power generation if the country's grid buildup is able to catch up. What's your comment on that?
DR. ERIC MARTINOT: I think there is still a lot of wind to be developed close to population areas, so we don't need to worry that much. If we are looking at the next 20 years, then yes, there are a lot of resources in the far west and we need stronger transmission lines, but I think economics for wind energy will be good enough to build those transmission lines.
INTERFAX: Li Junfeng, an energy expert with the National Development and Reform Commission, has said that China doesn't need any more aggressive policies for the wind power industry until about 2015, so as to allow time for the sound development of the industry. Do you agree with Mr. Li?
DR. ERIC MARTINOT: Yes, very much so. The biggest problem [regarding wind power in China] to begin with would be quality, because the industry doesn't have any experience. What we've seen in the United Sates and Europe is that when companies start developing wind turbines, it takes them a long time to develop a good quality design. You have to see it operate and then receive the information and change the design, and it took them 10 years in California in the United States to develop a good wind turbine design based on experience. So similarly, it'll take time here. In the meantime, we'll probably see a lot of problems in technical design.
I think for the next couple of years the policy is okay, but then probably you'll see the development accelerating much more quickly. And because there will be all this Chinese production coming in, and the market will need to grow very quickly, the current policies would not be sufficient. What's happening right now is that prices are very low, and many companies are willing to take a small profit, but in the future, because of the size of the market, you have to offer larger profits to get larger number of companies. I think maybe within three to four years, [China] has to change the existing [bidding] system based on low prices and increase some of the prices that people can receive.
INTERFAX: Considering the high costs and limited profits in China's wind power industry right now, what are the companies in the market?
DR. ERIC MARTINOT: I think there is a wide variety of companies, because they are interested in the long term, so they are willing to take small profits now to gain experience. I don't think there are any foreign companies that are involved in the concession bidding process. Foreign investors just go to the local price bureau and try to get a reasonable price. I think that's how most foreign companies are proceeding right now, through the provincial level projects instead of the national level projects.
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