Long-term needs

From May to June, the Standing Committee of the 12th National People's Congress dispatched inspectors to examine the implementation of the Renewable Energy Law. A report by the inspectors released in August says renewable energy industries have become a new engine of growth for the Chinese economy. In the past five years, half of all spending in power generation hardware went to renewable energy. In 2012, investments in renewable energy hardware totaled 400 billion yuan ($65.36 billion).

However, the report also warns of problems in the development of China's renewable energy industries. Although the scale of China's renewable energy manufacturing is big, there are still no clear market access standards and technical norms. Blind construction in the wind and solar power industries has created surplus capacity and caused prices to fall dramatically, affecting the overall development of the industries. Some industries are weak in their core competitiveness and have fallen further behind their counterparts in developed countries. As a result, these industries have had to import a lot of foreign parts, even during times of surplus capacity.

Meanwhile, the country's input into basic research on renewable energy development is inadequate and the cost at developing and utilizing renewable energy is high, impeding possibility for widespread use.

Meng thinks raising renewable energy surcharges will make up for the fund shortage. However, the subsidy can only be a temporary solution to developing clean energy.

What impact would a surcharge increase from 0.008 yuan to 0.015 yuan per kwh have on the fund? China Credit Rating Co. Ltd. has crunched the numbers. Even if the surcharge is raised starting September 25, there will still be a funding gap of 3 billion yuan ($490.34 million) for the remainder of the year. It is estimated that in 2014 a total of 70 billion yuan ($11.44 billion) of surcharges will be collected, 35 billion yuan ($5.72 billion) higher than before and enough to satisfy the subsidy demand. But in 2015, the installed capacity of wind power is expected to reach 100 GW, solar power 35 GW and biomass energy 13 GW. With soaring power generation, the subsidies for the three energy sources will total 74.7 billion yuan ($12.21 billion), but the collected surcharge will again be unable to satisfy the demand for subsidies.

The China Credit Rating report says the government could further raise the renewable energy surcharge, but this should not be the only method used to develop renewable energy in China. Renewable energy producers should reduce the construction costs of their power plants in order to align prices closer to those of thermal energy. This way, the development of renewable energies can be sustained.

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Power Production by Renewable Energies

By the end of 2012, the installed capacity of renewable energy production had accounted for 28 percent of the country's total installed capacity, up 5 percentage points from 2005. Electricity generated by renewable energy accounted for 20 percent of the total power production, up 4 percentage points from 2005.

At the end of 2012, China's total installed capacity of hydropower, wind power and solar power reached 249 GW, 63 GW and 6.5 GW respectively.

Thermal Power Transformation

By the end of the first half of 2013, 92 percent of the country's thermal power generation plants had been installed with desulfuration facilities and 27 percent of the thermal power generation plants with denitration facilities, in a bid to reduce the high level of particulate matter present in a number of cities.

(Source: NDRC)