By Feng Fei & Wang Jinzhao, Research Team on "Restructuring and Upgrading of Key Industries" of DRC

Research Report No 130, 2009

I. Development Trend of International New Energy Industries

1. New energies are noted for faster technological innovations, higher energy conversion efficiency and drastically lower prices

The largest wind-power unit capacity has risen from 30KW in the 1980s to 5,000KW at present, and its grid price has dropped from 15.8 euro cents per KWH to 4 euro cents per KWH during the same period. The efficiency of the silicon-based solar energy photovoltaic power generation has risen from less than 10% in the 1990s to 17%~18% at present. In addition, it has demonstrated an 82% technology learning curve, which means the price will fall 18% when the scale doubles. From the perspective of further development, there still exists a vast room for technological innovation. The wind-power price can drop to 3 euro cents per KWH and the solar energy-generated power price is expected to be at the same level of the thermal power price around 2020.

2. New energies have entered a period of rapid development on a larger scale, with an important position in newly-added energy supply and they will turn gradually from supplementary energies into mainstay substitute energies

Over the past decade, photovoltaic solar energy has grown at an annual rate of 38% and wind-power at an annual rate of 28%. In 2008, the global wind-power generating capacity reached 120 million KW. In particular, the wind-power generating capacity of the European Union was 66 million KW, accounting for 7% of the total EU power generating capacity. The ratio was over 20% in Denmark and Germany. Of the newly-added generating capacity, the EU wind-power generating capacity in 2008 accounted for 43% of its total newly-added generating capacity. With a generating capacity of 8.48 million KW, wind-power has become the first newly-added power source. The resurge of nuclear power has gained momentum. In 2008, a total of 10 nuclear reactors were under construction (excluding those in China), the highest annual figure of new nuclear plants since the first one was built in 1985.

3. Development of new energies has been regarded as a strategic pivot for solving the financial crisis and the climate crisis and leading countries have increased investments in the relevant areas in their economic stimulus plans

According to the analysis of the International Energy Agency, if the greenhouse gas emission in 2050 is to be controlled at the 2005 level, the energy sector will have to make an additional annual investment of US$400 billion, which is equivalent to 0.4% of the world GDP; if the emission is to be cut by half in 2050 which is the goal set at the Group8 summit, the additional annual investment will be US$1.1 trillion, which is equivalent to 1.1% of the global GDP. The forerunning countries have already benefited from the development of new energies. In 2005, Danish export of the technologies, products and services about renewable energies and energy efficiency totaled 40 billion Danish krone. Compared with the 5-billion-krone export in 1992 when the Kyoto Protocol was signed, this 8-fold had become a new point of economic growth. After the outbreak of the financial crisis, the United States, the European Union and other leading countries have taken new energies as an emergent industry, expedited their transition to low-carbon economy and increased investments in the sector of new energies in their economic stimulus programs and their recurrent research budgets. The U.S. economic stimulus package dedicated 10% or US$ 80 billion to the sector of new energies, which represented the largest investment the U.S. government has ever made in this sector. The European Union has also intensified its support for the research and development on new energies, with its budgetary support for one single demonstration project, namely the carbon capture and sequestration technology, being as high as 1.25 billion euro. The private sector has also been active in investment. Many technology companies in the American Silicon Valley have turned to the research on new energies. The influx of funds and human resources will inevitably accelerate the technological innovation and commercialization of new energies.

II. China's New Energies: Resources, Industrial Bases and Existing Problems

1. China is rich in renewable energy resources

China has the richest water energy resources in the world, which can be developed to support a power generating capacity of 540 million KW and can generate 2.47 trillion KWH a year. China is also rich in solar energy resources, with two-thirds of its territory having an annual sunshine time of over 2,200 hours and an annual sun radiation intensity of over 5,000 mega-joule per square meter (which is equivalent to 170 kilograms of coal equivalent per square meter). The country's land area has a developable wind energy resource of 300 million KW. If the developable wind energy resource in the offshore area is added, the total amount is about 1,000 million KW. China also has biomass resources that can be potentially turned into about 500 million tons of coal equivalent. With the expansion of afforestation and the economic and social development, the potential can reach 1,000 million tons of coal equivalent.

2. New energy development and utilization have scored some progress

In 2008, the water power, nuclear power, wind power, solar energy and other energies developed and utilized by China totaled 234 million tons of coal equivalent, accounting for 8.9% of the country's total energy consumption. Specifically, the generating capacity was 170 million KW for water power, 12.15 million KW for wind power and 9.08 million KW for nuclear power, and the total heat collecting area of solar energy water heaters reached 125 million square meters. In recent years, in particular, wind power and other renewable energies have developed rapidly. In 2008, the newly-added wind power generating capacity was 6.25 million KW, accounting for 23% of the total newly-added wind power generating capacity around the world. The grid price of wind power dropped to RMB0.5~0.6 yuan/KWH. The drop in the price of solar energy power was surprisingly fast. In 2008, the state set the grid price of solar energy power at RMB4 yuan/KWH. In March 2009, the media bid price of the solar power generation project at Dunhuang in Gansu Province dropped to RMB1.5 yuan /KWH, with the winning price being only RMB1.09 yuan/KWH.

3. New energy industries have formed considerable scales and fairly sound systems

China has made progress in the mass production of nuclear power equipment. Right now, it already possesses the capacity to produce 6~8 units or sets of nuclear power equipment. Its wind power equipment manufacturing capacity has also risen sharply. In 2008, the products produced by the Chinese and joint-venture enterprises accounted for 75.6% of the total newly-added generating capacity, with their accumulated generating capacity exceeding that produced by the foreign-invested enterprises. The output of photovoltaic cells reached 2 million KW, the highest in the world. As a result, China's global market share rose from 1.07% in 2002 to 30% in 2008. The output of solar energy silicon materials rose from 30 tons in 2005 to 5,000 tons in 2008, bringing the domestic self-sufficiency to 25%. It is expected that by the end of 2009, the output will reach 30,000 tons. The annual output of solar energy water heaters reached 35 million square meters, accounting for over half of the global output.

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