Enhesa Flash 67 October 2012 Issue | Page 12

Wind Energy Policy: China’s approach to market leadership he world faces an energy challenge: simultaneously, demand for energy is rising while the threat of climate change requires the rapid replacement of carbon dense fuels, like coal, with renewable energy technologies. With an expected threefold increase in electricity demand by 2035 (according to the International Energy Agency, IEA) and widespread pollution from coal generation, the Chinese government has felt this pressure more than any other – and has responded. The country’s most recent Five Year Plan prioritized a “clean modern energy industry system” as one of its chief goals and, in 2010, China surpassed the US as the world leader in total installed wind capacity. This handson regulatory push differs greatly from that of other leaders, like the US and Germany, but has been hugely successful in spurring rapid wind sector growth. As China continues to shape international wind progress, understanding the country’s approach is a must for those navigating the renewables sector. T Source: www.bigstockphoto.com most capable of reducing CO2 emissions within the next 20 years. Yet to advance renewables like wind, regulators must make the energy source cost competitive with conventional fuels like natural gas and coal, whose negative externalities remain unpriced by the market. Incentivizing development also requires market certainty and reduced risk for investors, whose high capital costs require long term demand and price guarantees that often fall out of sync with policy cycles and energy price fluctuations. China’s Regulatory Approach In China, rapid wind sector growth is due in large part to hands-on government support, achieved through a set of national goals, policy and resultant regulatory certainty. China’s most recent Five Year Plan set binding targets to reduce energy consumption and CO2 intensity per unit GDP, while increasing the share of alternative energy consumption. Through a bidding process, the government has also guaranteed financial benefits, priority purchase agreements, and grid access to winning developers, many of whom are state owned enterprises (SOEs). In addition, China’s wind sector growth has wisely focused on technology transfers and on building domestic expertise - two factors that will continue to provide the nation with increased technology advancements, gains in regulatory experience, and production capacity (Continued on page 13) Wind: A Opportunity Challenge and Like all wind leaders, the Chinese government recognizes the wind sector as both an opportunity to supply clean, domestic energy and as an open door to economic growth and technological leadership. Wind is the most competitive of all non-hydro renewables and the 12 © Enhesa 2012 Enhesa Brussels Washington Enhesa Flash 67— October 2012