Private Sector: Renewable energy brings new opportunities

Pennsylvania companies can have a major role in China's embrace of energy development

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The Rendell administration should be commended for its leadership in taking concrete steps to enhance opportunities for Pennsylvania businesses to share in what promises to be an enormous new area of economic growth in China: renewable energy development.

Pennsylvania Environmental Protection Secretary Kathleen A. McGinty's participation last month in the 2006 Great Wall Renewable Energy Forum and subsequent one-on-one discussions with Chinese counterparts in industry, government and academia is helping to pave the way for Pennsylvania to play a role in China's focused and determined effort to build a renewable energy sector whose impact will reverberate worldwide.

   

Louis B. Schwartz is president of China Strategies LLC, www.chinastrategiesllc.com, which advises U.S. and Chinese corporations, government agencies and NGO's on public policy, trade and investment matters between the two countries.

   

According to estimates from international energy organizations, the world's consumption of energy will increase 60 percent from 2002 to 2030, with two-thirds of that growth coming from developing nations such as India and China.

China already is the second-largest energy consumer in the world after the United States. Its oil imports have increased roughly 15 percent a year over the last several years and now account for 40 percent of China's consumption of oil and 6 percent of international crude oil trade. The International Energy Association (IEA) recently estimated that by 2030 China's demand for oil will double to 15.3 million barrels a day.

Beyond increases in prices and greater tightness in the market, China's need to ensure a steady supply of oil has lead to a variety of foreign policy disagreements with the United States, including the U.S. blocking the sale of Unicol Oil to Chinese interests last year and ongoing concerns about China's relationship with nations such as the Sudan, Venezuela and Iran. These disagreements will intensify as the percentage of total Chinese oil imports from the Middle East continues to grow; by 2030, the IEA estimates that China will be importing 50 percent more oil from the Middle East than it does today.

Recognizing that the world must aggressively move into the "post-oil era," China rapidly has moved along the path of renewable energy development.

In 2005, China had the world's largest total investment in renewable energy sources, excluding large scale hydropower plants, with expenditures of $6 billion and the largest installed capacity of renewable energy, also excluding large scale hydropower projects such as the Three Gorges Project . With wind-power investment of $600 million and installed capacity of 800,000 kilowatts , China is now the eighth largest wind-power generator in the world .

According to Xu Dingming, the Vice-Chairman of the Secretariat of the China State Energy Resources Leadership Group, China's ambitious growth target for renewable energy production will require about $100 billion by 2020.

Like the Rendell administration, the Chinese government recognizes the indispensability of government in spurring renewable energy development. The Chinese central government in Beijing has set an ambitious target of renewable energy accounting for 10 percent of all energy output by 2010 and 16 percent of all energy output by 2020.

To further this goal, the Renewable Energy Law, which was passed by the National People's Congress, went into effect at the beginning of this year and the powerful State Development and Reform Commission has been tasked with the responsibility to draft the "Mid to Long Term Development Plan for Renewable Energy,'' which sets specific targets for solar, wind, hydro, methane and bio-mass power sources .

China's provinces and directly administered cities also have adopted their own renewable energy strategic plans. One such example is Shandong Province, the coastal province where the city of Qingdao is located. It has established a goal of increasing the percentage of total installed energy generating capacity that comes from renewable sources from 0.2 percent in 2005 to 5.3 percent by 2015 .

Similarly, the city government of Beijing has established a goal of having 4 percent of total energy consumption in 2010 generated from renewable energy sources, up from 1 percent last year .

Because the Chinese also recognize that investment in renewable energy is an emerging center of revenue and profit growth for business and employment for workers, the renewable energy industry is poised to grow exponentially in China.

To date, China's central government has approved more than 160 clean development projects for which it has allocated more than of $400 million to mid-size businesses . Secretary McGinty met with one such Chinese company on her recent trip to China.

The Tianpu Group, which makes solar water heaters, currently has the capacity to produce 500,000 solar-powered water heaters per year. The Beijing Tianpu Solar Energy Industry Co. Ltd., a Tianpu Group company, has constructed an 8,000-square-meter office building in Beijing that satisfies 80 percent of its energy needs with solar power .

Beijing understands that its renewable energy industry could benefit from the superior technology and standards of the developed world. Consequently, China's central government also is creating incentives for transnational companies to invest in this burgeoning sector and cooperate with Chinese companies and local governments in expanding the renewable energy industry in China while lowering costs.

This is one realm in which Pennsylvania companies can participate in China's long march toward renewable energy development.


Louis B. Schwartz can be reached at Lschwar2@ix.netcom.com or 412-521-1846.


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