Common prosperity

Since the onset of the financial crisis, the new energy industry has been given another meaning—one with which to increase employment while promoting economic recovery.

WASTE NOT: China's National Bio Energy Co. Ltd., which operates biomass power plants like this one in Xingtai, Hebei Province, has worked extensively with the Danish company BWE since 2006 (CFP)

Thanks to the long-term cultivation of a series of policies, including the integration of renewable energy into the power grid, price incentives, tax preference, investment subsidies and export financing, the EU has become the major market of the global new energy industry.

However, with the increasing exploration of the market, the EU's own market capacity is decreasing. How to strengthen the comparative advantages it has already gained in the field of new energy, fully use them to expand the international market, and transfer them to eye-catching economic figures have become the question of greatest concern for the member states.

The new energy industry has been developing quickly in China, especially renewable energy, which has enjoyed a quick expansion in market scale.

Nevertheless, the rapid development has not freed China from the lack of equipment-manufacturing capacity and technological innovation capability. In order to prevent China from becoming a mere "workshop of the world," Beijing desperately needs technological upgrades and enhancement of research and development ability.

Meanwhile, China is regarded as the most important potential market of new energy. With the introduction of various incentive policies, this market is gradually showing huge vitality.

Wind power is an industry in which China-EU cooperation is relatively mature. Europe is the world's major technology supplier of wind power generation. Indeed, the three major kinds of wind turbines currently in use are all first created and developed in Europe.

The technologies used by the more than 30 wind power equipment companies currently operating in China were originally imported from Europe. Many of the world's top wind power equipment manufacturers, such as Vestas, Gamesa, Siemens and Nordex, have established wholly owned or joint ventures in China. What's more, European wind power developers, for instance, RES of the UK, Acciona of Spain, DONG Energy of Denmark, have all entered the Chinese market in various forms.

In the field of solar energy utilization, the recent trade frictions between China and the EU in the PV industry will be relieved with the launch of China's domestic market. Due to the financial crisis and the changes of incentive policies in some EU member states, the PV industry experienced a sharp drop in orders. European PV cell producers were hurt more than their counterparts from Asia and other regions due to their high manufacturing costs.

Take the German company Q-Cells for example. In the first half of 2009, its revenue fell by 36.8 percent, compared with the same period of last year. Against this backdrop, German PV companies took a series of drastic measures against their Chinese competitors including launching anti-dumping measures. Q-Cells, meanwhile, unilaterally announced the termination of the supply contract with Chinese PV manufacturer LDK Solar.

In fact, the new energy industry is unable to develop without Beijing's support in subsidies and preferential policies. The launch of China's domestic PV market provides good opportunities for resolving the trade disputes. At the end of 2008, the installed capacity of PV power generation in China was 140,000 kw. This figure is expected to post a 100-fold increase within the next 10 years under the upcoming new energy development plan.

To abandon the short-term trade disputes while considering how to better participate in China's domestic market from a long-term perspective will greatly benefit both European and Chinese PV companies.

In the field of biomass power generation, BWE of Denmark is leading the world's technology. China's National Bio Energy Co. Ltd. has worked together with the Danish company to generate electricity with straw since 2006. Until now, the National Bio Energy Co. Ltd. has established 23 biomass power plants, which have achieved good social benefits and reached a modest profit.

However, Chinese biomass resources are different from those of Europe. Therefore, besides the large-scale biomass power plants, China-EU cooperation will expand to systems with lower quantity and quality requirements relative to biological resources in the next step. These shall include combined heat and power production, biomass gasification power generation and biomass briquettes.

The experience of Northern European countries—especially Denmark and Sweden—when it comes to the comprehensive management and use of biomass, will hopefully further promote the Chinese biomass energy utilization market.

In terms of biomass liquid fuel, the China-EU, especially Chinese-Danish, cooperation is worthy of expectation. The world's two biggest enzyme companies, Novozymes and Genencor, are both from Denmark.

The two are leading global researchers in hydrolyzing cellulose to make ethanol. Cellulosic ethanol is expected to realize commercial production in 2015 and achieve wide commercial availability without subsidies under oil prices between $80 and $120 per barrel.

As for specific cooperation between China and the EU, Novozymes has joined hands with China's COFCO Corp. and Sinopec Group to promote the second generation of ethanol fuel in China. Meanwhile, research institutions from China and the EU have also started extensive cooperation in cellulose hydrolysis.

The author is a research associate with the Sino-Danish Renewable Energy Development Program