Developing countries can learn from China's successful experience in promoting new energy

 

China has taken giant strides in renewable energy development and this has given it a shining business card. Starting from scratch, it has made great efforts to develop its new energy industry over the past 10 years, and it is now leading the wave of energy transformation, attracting worldwide attention.

 

China's new energy development is unparalleled. Consider this: In 2011, China's installed wind power capacity was 46 gigawatts and its installed photovoltaic capacity only 2 GW. The same year, Germany, the then world leader in renewable energy, had 29 GW of installed wind power capacity and 24 GW of installed PV capacity. By 2018, China's installed wind power capacity had increased to 221 GW and its installed PV capacity was about 176.1 GW, while Germany had about 59.3 GW installed wind power capacity and 45.4GW PV capacity. In the first half of 2019, the power generated by wind and photovoltaic power accounted for 16.2 percent of the total power generation in China.

 

Since 2018, the government has accelerated the process of cutting subsidies for the new energy industry. Due to the capacity that could lead to further cost reduction, China will possibly move up the time frame for large-scale grid parity.

 

But China's new energy development is based on China's actual national conditions, and it faces several difficulties:

 

First, China's total energy demand is so huge that there is no precedent in history and no experiences it can learn from.

 

Second, for China's new energy development to succeed, it has to change its coal-based energy structure, increasingly severe environmental pressures and energy hungry economic development mode. In developed Western countries, economic development is relatively stable and the environment has long been improved. Therefore, traditional energy can be simply replaced with the new energy. The Chinese economy, however, is still a large developing country with huge inertia and it is difficult to abruptly deviate from its original path. New energy can only partly replace traditional energy to mitigate environmental pressures and synergize with traditional energy to meet the expanding energy demand.

 

Third, China's new energy resources (wind and solar potential) are located far away from places with high energy demand, making it difficult to replicate the new energy development model successfully applied in developed countries.

 

Government support has played a crucial role in the rapid development of China's new energy but it has encountered three major problems in the process.

 

First is the cost issue in the early stage of development. The Chinese government's solution was to adhere to industrial planning, develop the basic manufacturing industry on a large scale with the support of government policies, and achieve substantial cost reduction through economies of scale.

 

The second is that the Chinese PV industry encountered foreign market restrictions in 2012. The government launched a huge domestic installation plan in time to check the collapse of the photovoltaic manufacturing industry and strongly supported the development and integration of the domestic PV industry chain, which laid a foundation for China's leading role in the PV industry today.

 

The third problem has been the curtailment of wind and PV power generation in the past few years, a common problem encountered the world over. Since 2015, the government has attached great importance to the problem and rationally coordinated the traditional power generation, the power grid, and power consumptions to better accommodate new energy. In fact, by 2018, this problem had been effectively alleviated.

 

China's new energy development has fully utilized China's manufacturing advantages. Development of new energy, especially for the domestic market, happened later than in developed countries. When it started the technology was backward, subsidies relatively low and even the development model was unclear.

 

However, China's new energy industry overcame the early difficulties. It applied large-scale production and took advantage of low cost as the entry point. It then encouraged whole production chain cultivation and moderate competition to address some fundamental problems.

 

Taking PV as an example, China's manufacturing has reduced the cost of PV modules by 90 percent over the past 10 years. With the advantage of scale and cost, China's new energy industry developed by accumulating talents and technological advantages and finally gained market advantages. The development of China's new energy is inseparable from the confidence in China's manufacturing. And the amazing development speed has strengthened the confidence of the government and industry.

 

China's experience can provide a development path for other countries to learn from. The success of China's new energy industry shows that with the right policies, developing countries with the same environmental pressures as China can develop new energy sources and even take advantage of being latecomers. Developed countries, especially some European countries, have transmitted a message to some extent in the past: New energy is a game for the rich, and society needs to bear high subsidies in order to achieve new energy development potential. In Germany, for example, since the development of new energy, the average residential electricity price has almost doubled, and its surcharge on renewable energy power, part of the residential electricity price, has already been more than China's average electricity tariffs. Such a development path is unbearable and difficult for developing countries. The success of China's relatively low-cost route has provided an example for developing countries, especially India, which is also facing resource constraints and environmental problems.

 

The author is dean of the China Institute for Studies in Energy Policy at Xiamen University. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

 

(China Daily Global 08/07/2019 page13)