World Bank Advises China on the Green Leap Forward

November 22, 2010

BEIJING, November 22, 2010 – Accelerating hydropower development, improving wind power performance, promoting interprovincial trade in renewable energy and promoting green electricity schemes could help China achieve its goal of meeting 15 percent of its primary energy consumption through non-fossil fuels by 2020, says a new World Bank report.

The policy note, "China's Envisaged Renewable Energy Target: The Green Leap Forward", first evaluates the existing and envisaged government's renewable energy targets by comparing them to two optimal solutions that were optimized using two contrasting external values for environmental pollutants under the same economic and technical assumptions. Second, the policy note assesses the existing policies and their adequacy to achieve renewable energy scale-up and the government targets. Finally, the policy note provides high-level policy recommendations that could be considered to promote the renewable energy development in China.

"China has achieved remarkable progress in developing renewable energy during the last three decades. A purpose of this report is to disseminate China's successful experience and lessons," said Ede Ijjasz, World Bank China Sector Manager for Sustainable Development. In 2009, China's installed capacity reached 55 gigawatts of small hydropower, 22.68 gigawatts of wind power, 4 gigawatts for biomass, and 300 megawatts-peak for photovoltaic solar power. Consequently, China became the world's leader in small hydropower development and second only to the United States in installed wind power capacity.

"Beginning with the enactment of the Renewable Energy Law in 2005, China has relied on a wide and diverse mix of policy instruments to achieve renewable energy growth. It has pragmatically combined: wind concessions; feed-in prices for biomass and lately for wind; and renewable energy obligations imposed on power generators, provinces, and in the future, on grid companies," said Ximing Peng, World Bank's Senior Energy Specialist and Task Team Leader of the Study. "

The Renewable Energy Law enacted in February 2005 set the stage for renewable scale-up to meet China's surging electricity demand and to achieve its objectives of energy security, pollution reduction, and poverty alleviation. The Renewable Energy Medium- and Long-Term Development Plan promulgated in 2007 specified the country's commitment to increasing the share of non-fossil fuel to 15 percent of the 2020 primary energy consumption. The government is envisaging increasing the targets of renewable electricity from 360 gigawatts generating 1,490 terawatt-hours to 500 gigawatts generating 1,820 terawatt-hours.

According to the policy note, the envisaged government target, if confirmed, would constitute major progress in addressing local and global environmental issues. It would put the energy sector on track to achieve the goal of meeting 15 percent of the country's primary energy needs through non-fossil fuel. The implicit local and global environmental externalities underlying the envisaged target indicate a tremendously increased focus on reducing local pollution and addressing climate change, as well as strong support to build a world-class renewable energy industry.

To help China achieve its target in a most-effective manner, the policy note recommends the following ways:

  • Developing hydropower faster:Hydropower rehabilitation and more rapid and environmentally and socially sound development could achieve the target at a lower cost because hydropower is already competitive with coal. Developing hydropower more quickly would allow for increasing the renewable energy target above the envisaged government target without increasing the incremental cost of the program.
  • Improving the performance of wind power rapidly:China's experience has been less than optimal in planning wind farm, operational integration and coordination between developers and grid operators. This considerably reduced the performance of the wind program. If not addressed adequately, the high level of inefficiencies could increase the cost to the nation of the envisaged wind program, which could become prohibitive.
  • Promoting trade:With trade, provinces could achieve their mandated targets. Renewable energy transactions would amount to about 360 terawatt-hours, 42 percent of the total of the envisaged government target. And more important, trade would reduce the discounted cost of the envisaged renewable energy target by about 56-72 percent.
    Developing green electricity scheme(s):Green electricity has been well studied in China and piloted in Shanghai municipality. Deploying green electricity schemes at the national and regional levels should be considered among the options to pay for the incremental cost resulting from the development of renewable energy. 


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