During the recent China-US Renewable Energy Investment Forum, a senior official of China’s National Energy Administration (NEA) advised the local renewable energy firms to think global and increase their investments in the American renewable energy sector. The official encouraged the companies to take steps to increase their competitiveness by expanding their operations in other countries, especially the United States.
Wang Jun, head of the department of new energy and renewable energy at the NEA, made this statement while addressing a gathering of Chinese and American officials in Beijing. In attendance were officials from the U.S. Department of Energy and the Department of Commerce.
Jun pointed out that the foreign companies including those from the United States are taking advantage of the low manufacturing costs and cheap labor in China and expanding their core manufacturing businesses in China, this giving them an edge over the other companies. These companies are among the leading energy equipment manufacturing companies like General Electric, Ceradyne and others. Several American solar and wind energy companies have landed several order for building large-scale power plants.
China has attracted such a massive stream of investment for several reasons. One, they have very favorable financial policies with regard to renewable energy investments. The Chinese government offers a wide range of subsidies to manufacturers as well as project developers. Second, the government has made sure that there is ample demand for the power generated from renewable energy sources. Therefore, it has obligated industries to buy all the power generated from renewable energy power plants. China has set a target of generating 15 percent of its power demand from renewable energy sources by 2020. China is planning to add 500 GW of renewable power by 2020.
Third, China is on the rising curve of economic development and has been excessively aggressive in opening it industrial sectors and markets to foreign investment. And fourth, the Chinese government seems to have acknowledged the strategic importance of investing in renewable energy technologies. By taking the lead in investment in this sector China can potentially offset at least some pressure to agree to an international binding carbon emission reduction target. China is the largest emitter of carbon emissions but it is also the largest spender in the renewable energy sector.
During his address, Jun noted the immense wind energy potential that exists in the United States, both inland and offshore. But the high fiscal deficit, economic crisis and the political coherence are proving to be major hurdles in the acceleration of investment in the wind energy sector (and renewable energy sector as a whole). According to a report from the National Renewable Energy Laboratory, the Unites States has enough offshore wind energy resource to power itself four times over. Citing this very opportunity, Google announced a massive project to lay 350 miles of transmission lines off the Atlantic Coast from New Jersey to Virginia to connect 6,000 MW of wind energy turbines.
Jun also recognized the fact that the potential expansion plans of Chinese firms in the US markets would face some resistance. The Chinese learnt this valuable lesson from CNOOC’s failed bid for Unocal which it had withdraw after facing “unprecedented political opposition”. Chinese renewable energy policies is the latest issue of contention between the two countries. The United States government is investigating a complaint registered by the Steelmakers Union against subsidies offered by China’s clean energy policies.
Image: yunheisapunk (Flickr)/CC
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