Renewable Energy

China's rapid GDP growth and rising living standards translate to higher energy use. China's energy use was the second highest in the world, having doubled between 1996 and 2007. China electricity use has also doubled between 2000 and 2007.

While most of China's electricity comes from coal and hydropower, the growing use of oil for China's burgeoning vehicle fleet is adding to concerns about energy security. China currently imports half of its oil, and oil demand is expected to raise 6.5% in 2008. Concerns about energy security, power capacity shortages, and air pollution are all adding urgency and pressure to switch to renewable energy and increased energy efficiency. Climate change also adds pressure-China will soon pass the United States as the largest emitter of carbon dioxide from fossil fuels.

China spent an estimate of $84 billion (1.2% of GDP) on environmental protection between 2001 and 2005. Some booming coastal cities such as Shanghai, Xiamen, and Dalian claim to be spending 2-3% of local GDP on environmental protection. It is estimated that China invested more than $10 billion in new renewable energy capacity in 2007, second only to Germany. Most of this is for small hydropower, solar hot water, and wind power. Meanwhile, investment in large hydropower projects continues at $6-10 billion annually. A landmark renewable energy law, enacted in 2005, supports continued expansion of renewable energy as a national priority. China currently obtains 8 percent of its energy and 17 percent of its electricity from renewable sources, which are projected to increase to 15 percent and 21 percent respectively by 2020.

Among renewable technologies:

Solar power is still in its infancy in China, although a growing amount is used in rural areas and other off-grid applications. A large market for grid-tied solar photovoltaic (PV) is still several years away pending further cost declines. Already, China is a global manufacturing powerhouse for solar PV, third only to Japan and Germany, with huge investments in recent years and much more expected.
Wind power is the fastest-growing power generation technology in China, having doubled in capacity during 2006 alone. While wind is still slightly more expensive than coal power, policies encourage competitive pressure on costs, and new mandates require power companies to obtain a minimum share of their power from wind and other renewables. China is home to more than 50 aspiring domestic manufacturers of wind turbines and a number of foreign producers.
Biomass power in China comes mostly from sugarcane wastes and rice husks, and has not grown in recent years. New policies will likely mean more biomass power from other sources, such as agricultural and forestry wastes. In addition, industrial-scale biogas, such as from animal wastes, is starting to make a contribution to power generation.
Water & Wastewater Treatment China and its foreign lenders still spend far more on the water sector than on air and solid waste, especially on the clean up of priority river basins and lakes. But domestic competition is also stiffest in this market. To meet increasing demands, water tariffs are set to rise, cities are starting to levy wastewater surcharges, and BOT-type concession projects are emerging.
Biofuels for transportation have received widespread attention in China. Ethanol is produced in modest amounts from corn, and biodiesel is produced in small amounts from waste cooking oil. The government plans to expand biofuel production from cassava, sweet sorghum, and oilseed crops, although large-scale potential is limited. The greatest promise lies with cellulosic ethanol, which many expect to become commercially viable within 7-10 years. If China could use its vast cellulosic resource of agricultural and forestry wastes-up to half a billion tons per year-it might become a major ethanol producer after 2020.

It is likely that China will meet and even exceed its renewable energy development targets for 2020. Total power capacity from renewables could reach 400 gigawatts by 2020; nearly triple the 135 gigawatts existing in 2006, with hydro, wind, biomass, and solar PV power making the greatest contributions.

China's acute environmental problems stem from a deteriorating natural resource base, dense population, heavy reliance on soft coal, outmoded technology, under-priced water and energy, and breakneck industrial growth. The World Bank estimates that air and water pollution cost the Chinese economy up to eight percent of GDP. In response, the government has unleashed a burst of environmental legislation and shut down thousands of small and inefficient factories.

Still, local enforcement of environmental laws is uneven, investment in pollution control infrastructure inadequate, and competition from domestic firms increasingly strong. Products enjoying the best sales prospects include low-cost flue gas desulfurization systems, air and water monitoring instruments, drinking water purification products, vehicle emissions control and inspection devices, industrial wastewater treatment equipment, and resource recovery technologies.