0 Master Thesis
Master of Science in Human Geography Graduate school of Social Sciences (GSSS)
University of Amsterdam
Thesis title: What governance factors in China may influence its ability to implement the green economy?
Student Name: Wong King Yip Student Number: 10654119 Supervisor: Prof. Joyeeta Gupta Second reader: Dr. Maarten Wolsink
1 Abstract
‘Green economy’ has becomes prevalent in academic debates. To achieve it, a set of instruments such as subsides and FITs are often regarded as important tools indicated in literatures. Apart from that, governance characteristics are seen as a highly influential factor. However, very few researches had been made to explore the relationships between the above issues which provides a gap to analyze. This master thesis uses China as a case study to explore what governance factors in China may affect its ability to implement the green economy. Literature review and content analysis are the main methods used in this research.
This research revealed that the authoritarian ruling manners in China which seizes the control the administrative work of provinces make the process of policy discussion and implementation become efficient. Furthermore, the control on other institutions such as banks also helped a lot in policy implementation process. Under such context, speedy installations in clean energy units had been prominently achieved across the country. Explicitly speaking, the instruments and strategies the Chinese government used are quite effective.
However, largely thanks to the abundant room for rampant rent-seeking activities, poor monitoring system and economic-oriented mentalities among local officials, disobedience to the central commands occurred rampantly. The disobedience inclination undermines China’s ability to implement the ‘green economy’ in a sustainable way.
Lastly, optimistically, by the continuous responsive actions made by the central government to improve the governance system recently, China shall be able to improve its governance system. Probably, it might be a role model in implementing green economy among the developing countries sharing similar political characteristics.
2 Table of Contents
Chapter 1
Introduction: Green Economy
Page 1.1 Introduction 4 1.2 Problem definition 4-6 1.3 Case Selection 7 1.4 Literature Review 8-15 1.5 Research questions 15 1.6 Conceptual framework 15-16 1.7 Methodology 17 1.8 Focuses 18 1.9 Limits 19 Chapter 2
Steering Renewable Energies
2.1 Introduction & Methodology 20
2.2 Geographical & physical characteristics 20 2.3 Historical development of wind energy in China 21 2.4 Instruments deployed in wind energy sector 22-27
2.5 Policy failures 27-28
2.6 Faults in governance 29-31
2.7 Geographic and physical characteristics 31
2.8 Historical development 31-33
2.9 Instruments adopted in solar energy sector 33-36
2.10 Policy failures 36-37
2.11 Faults in governance 37
3 Chapter 3
Phasing out the brown practices
Page
3.1 Introduction & Methodology 39
3.2 Coal’s appliance & coal’s role in China 40
3.3 Instruments deployed in coal industry 41-44
3.4 Policy failures 45-46
3.5 Faults in governance 47
3.6 Current trend of automobile industry in China 47 3.7 Instruments adopted in automobile industry 48-52
3.8 Policy failures 53
3.9 Faults in governance 53-54
3.10 Discussion & conclusion 49-51
Chapter 4
Institutional and administrative hindrances
4.1 Introduction & Methodology 56
4.2 The strengths of the governance system in China 56-57
4.3 The hindrances related to local cadres 57-60
4.4 The hindrances related to top-rank officials 60-61 4.5 The hindrances related to state-owned enterprises (SOEs) officials 61 4.6 Relevant solutions carried out/ proposed by the central government 62-66
4.7 Discussion & Conclusion 66-67
4.8 SWOT analysis 68-69 Chapter 5 Conclusion 5.1 Conclusion 70-71 5.2 Discussion 72 References
4 CHAPTER 1
1.1 Introduction
In chapter 1, section 1.2 illustrates the existing scientific problems and scientific gap. This part demonstrates the reasons why this topic is worth discussing and analyzing. Section 1.3 explains why I choose China as a case study. Subsequently, section 1.4 present the results of literature reviews, this literature review process helps me to formulate a main research question and three sub-research questions, which are shown in section 1.5. Chapter 1.6 presents and explains the conceptual model of my research. The following section, section 1.7, discusses the methodology deployed of this research. Lastly, section 1.8 and 1.9 discuss the focus and limits of this study.
1.2. Problem definition
1.2.1 Scientific problems
‘Green economy’ has drawn a lot of attention after the financial crisis occurred in 2009 since it seems to get rid of the downturn. (See Part 4 theoretical framework) Some countries, such as China and South Korea have embarked their green economy scheme promptly while spending around 3 per cent of their annual GDP on the project. (Barbier, 2011)
Inevitably, in the transition process to a new developmental regime, there would be a lot of dilemmas and bargains among the interest groups before reaching compromise for co-operation. (Khan, 2013) In addition, these bargains, or even conflicts, could occur in different levels of incumbent governance structure as well as the market. There are some core dilemmas indicated by the previous studies. First, different levels of governments have their own concerns and considerations that could making the green scheme slowed down and even idle. (Zhang, 2011; Hamdouch & Depret 2012) In China, indicated by scholars, conflicting interests do exist in the political system, for instance, some provincial governments are unwilling enforce the commands from central government that shutting down the polluting industries as lots of local tax incomes are from those manufacturing units. (He, 2014; Zhang 2011) Second, referring to firms in neo-liberal economy societies, there is a tenancy that managers are reluctant to shift their existing profit-making business practice unless being granted sufficient attractive incentives. (Khan 2013; Unruh 2000)
5 Therefore, in practice, how to operate this new mechanism well that integrating environmental, economic and social issues into development under a top-down governmental context is worth investigating.
1.2.2 Scientific gap
A large number of literature illustrating green economy are linked to science and technological aspects instead of discussing in governance. By using Scopus, Engineering and Environment Science shared approximately thirty percent of the publications of green economy. In regard to the source title, the tendency is similar. 'Mechanics' and 'materials' shared the top-two ranks in publications among the top-10. Articles issued under the discipline of environment and economic is far less in comparison with mechanics and mechanism. (See figure 2) By looking at the figure 1 and 2, a noticeable tendency is technological field is showed that obtaining an overwhelmingly domination in the debates of green economy over the others.
Some of the previous studies have firmly stated the importance of the proactive role of government in the progress towards green economy. (Bronkington; Yi 2013; Fitzgerald 2010; Borel-Saladin & Turok 2013; Hamdouch & Depret 2012) In addition, meanwhile, several scholars have deliberately remarked that the effectiveness of instruments depended upon the country’s political, economic, social and cultural contexts. (Borel-Saladin & Turok 2013; Hamdouch & Depret 2012) However, the literatures had not gone significantly further to examine green outcomes caused by incumbent governmental structure. Putting it in a more concrete way, there is a knowledge gap in examining how exactly the governance system affects the movements to green economy. I am going to use the context of China to analyze how governmental system, referred to top-down system, influence the green practices and outcomes.
6
Source: Scopus Database
7 1.3 Case selection
This study is focused on the context of China. I select China as a case study basically owing to the following reasons.
First of all, China had became more and more influential in global economy. It is currently the second largest economy measured by Gross Domestic Product (GDP) and the largest developing country. The direction as well as approach in development would cause significant impacts to the world, not only in economic aspects, but also the environmental aspects. It is worthwhile to investigate and analyze the issues of this country.
Secondly, the governance in China had long been remarkably different from most of the Western countries. Commonly speaking, the nation had been formulated as an authoritarian regime ruled by the Chinese Communist Party (CCP). From the perspective of economic development, China had completed great movement from the perspective of economic development. Breakthroughs had been undergone from time to time since the open door policy had been adopted. (Dai & Bai, 2014)
Thirdly, to my surprise, China has become renowned in renewable energy industries gradually. China is currently leading in some particular aspects. It is interesting to explore the relationship between the government policies formulated by CCP and the progress made.
Finally, being a Chinese, I am relatively familiar with the national policies, historical development and language, which should allow me to analyze the research topic with insights.
8 1.4 Literature Review
Green Economy
The fascinating characteristics of ‘Green economy’ is it seems being a magic bullet that steering economic growth while coping with climate change and environmental degradation . A supposed tradeoff between stimulating economic development and protecting environment might not take place (Yi, 2013).
In fact, ‘Green economy’ is not seen a new term in academic field, it has been invented and introduced for long according to scholars. This term and concept has been in focus repeatedly from time to time. According to Lorek & Spangenberg (2014), this concept had been drawn into policy discussions from time to time, probably having revived every ten year. Since 2009, 'green economy’ has become a hot topic again, largely thanks to the occurrence of one of the most serious global economic crisis in modern time (Gouvea et al, 2013). Yi (2013) also noted that the reason for pursuing ‘green economy’ is not for environmental merits, but for the economic outcomes such as the creations of jobs and the following economic growth .The recent pop-up of green economy is shown in the below figure.
Figure 1b The number of published documents in ‘green economy’ by year
Source: Scopus Database
As mentioned, a lot of scholars have highly emphasized the crucial role of state government. (Brockington, 2012; Borel-Saladin & Turok 2013; Hamdouch & Depret
9 2012; Yi 2013; Gouvea et al, 2013; Rasul 2013) State has been specifically remarked needed to embark on the green campaign proactively. (Brockington, 2012; Borel-Saladin & Turok 2013; Hamdouch & Depret 2012; Yi 2013; Gouvea et al, 2013; Rasul 2013), the failures in market mechanism are anticipated to be addressed. (Brockington 2012; Rasul 2013) Governments are supposed to stimulate the public and private investments for the continuity of the growth following with its initial intervention. (Borel-Saladin & Turok 2013; Hamdouch & Depret 2012) Based on the empirical experience in an evaluation, governments stepping into green economy basically shared the following key characteristics. (Hamdouch & Depret 2013) The characteristics are as follwings:1) Getting high degrees of involvement; 2) Having strong commitment 3) Being responsive 4) Recognizing the campaigns are mid to long term. 5) Focusing on single or a few green sectors 6) Using various tools in different aspects such as environment, transport and energy. In short, good and consistent public policies are expected to be implemented by state government to generate business interest (Fankhauser et al, 2013)
In practice, state government shall use a series of policy instruments to foster the progress in green economy. (Brockington ,2012; Li & Zhou, 2011) Those policy tools in general include tax, subsides, feed-in tariffs, abundant investment in research and development, schemes in education and trainings. (Borel-Saladin & Depret, 2013) These instruments are mainly categorized as four types. The first type is regulatory, or named as command and control. (Rasul, 2013) Precise targets and means are given to the related groups. (Müller & Siebenhüner, 2007) Standards. Bans, permits, laws, licenses, registrations, administrative guidelines are some of the typical regulatory tools. (Rasul, 2013) Second, the second type is market-based instruments, or named as economic instruments. (Rasul, 2013) Individuals and cooperation are given financial incentives to act what the regulator desire. Different from command and control instruments, the concerned parties are left the right to act accordingly or not. (Müller & Siebenhüner, 2007) Grants, subsides, taxes, charges, emission trading are common market-based policy tools. (Rasul, 2013) The third type is persuasive instruments. The characteristics of this is it focuses on self-regulatory. Information is provided to consumers, by doing this, anticipating to put pressure on the firms to work according to the regulator’s intention. (Müller & Siebenhüner, 2007) Examples are environment labels and self-reporting obligation. (Müller & Siebenhüner, 2007) Fourth, they are technological innovation instruments. Conventional practice are supposed to be disrupted, meanwhile, innovations enhance the degree of ‘efficient utilization of natural resources’’ (Gouvea et al, 2013) Intense collaboration connecting universities, institutes, private firms and different players are remarked. (Gouvea et al, 2013)
10 Some important stages needed to go through before reaching the goal of green economy. First, clean energy industries become continuously and widely established. (Li & Zhou 2011; Gouvea et al, 2013; Yi, 2013) Those industries are characterized as low-carbon, being energy efficient with advanced technological improvement. Job opportunities created and bring economic growth. (Yi, 2013) Economic atmosphere and performance get better and better driven by green jobs created and occupied. To a great extent, at least moderate economic growth will be achieved. (Borel-Saladin & Turok 2013; Yi 2013) Second, carbon-based practice has to be largely phased out. (Borel-Saladin & Turok, 2013; Yi 2013) Third, the environmental value of natural assets become truly reflected in market (Pearce, 1989). However, this goal is highly doubted that whether it is reachable in today’s market systems as the concerned market faults let people down on this matter for ages . (Borel-Saladin & Depret 2013)
Remarkable challenges towards green economy have been well-illustrated in literatures. One of them is path dependency. Barbier (2011) stated current technological production is commonly build up upon the historical, socio-economic and institutional structures. This makes people in societies become further embedded in the current social and economic systems. Such path dependency is often linked to high transaction costs, for example, search and information costs, policing and enforcement cost. These costs commonly discourage the implementation of environmental-friendly policies. (2011: 238) The players in market might feel reluctant to shift their current working modes to a new one.
The reluctance problem also exist in the stage of innovation. Jacobsson & Johnson (2000) indicated the difficultly in stimulating private investments in technological innovations. High-tech businesses are often seen as risky as requiring long-term and extensive loans as supports while the returns is highly unknown. Therefore, private banks have a tendency not to approve the loan request from those companies. Meanwhile, traditional big firms in the markets could use their existing relatively stable income records as supports to ask for further loans to continue their current practice. ‘Path dependency’ become deepened gradually.
China’s government characteristics
As stated previously, this study is focused on the context of China. China has drawn a lot of attention since it has made exceptional achievements in several fields related to
11 low carbon development under the conventional top-down governmental structure in the past years. According to Barbier, nearly 1 million of green collar workers had been already employed in China. (2010) Off-grid power supply system based on renewable energy had been facilitated and operated in the remote areas. (Jänicke 2012) Currently, Chinese government had been targeting to set up a series of green policies as well as systems such as developing feed-in tariffs and reducing the taxes in purchasing fuel-efficient vehicles. (Barbier, 2010) As estimated, China’s renewable sectors had been invested at least 79 billion within 2005 to 2009. (UNEP, 2010; Hamdouch & Depret, 2012) Apart from extensive money investment, laws and regulations had been enacted from time to time.
Rules and regulation had been enacted and amended. The Renewable Energy Law (REL) passed in 2006 mandates the grid operators to buy the renewable energy from registered producers. Under this law, major power co-operations are required to generate 3% of electricity from renewable energy by 2010 which is completed. (Porfir’ev 2012) China has become the leading player in renewable energies since 2009, specially in wind energy, solar cells and energy-saving light bulbs. (Barbier, 2010; Hamdouch & Depret, 2012; Schreurs 2012)
The current development probably show a certain degree of the effectiveness of the governing approach. However, to step further and make splendid progress in the near future, the central government have to deal with the constraints embedded in the contemporary political context. Not few scholars had pointed out the importance of political context in the road of going green. Indicated by Schreifels (2012), he
emphasized political context as a crucial element determining the effectiveness of the policy tools applied. Economy (2007) stated in a more concrete way. She stated the solution of environmental issues in China should not be simply linked to technologies, but also the political culture. The political culture largely decide the results of
deploying policy instruments in China. Schreifels (2012: 781) tends to agree with this statement by pointing out the effectiveness of the policy tools is "highly dependent on context", particularly referred to the "unique system of governance" (Schreifels 2012: 781) of China.
Based on previous experience in the Western countries, the involvement of general public is essential to make environmental governance become well-achieved. It brought a good question that whether the similar approach could enhance the policy outcome in China as well. However, argued by scholars, China had been heavily
12 embedded in authoritarian governance with its historical development, it is highly difficult and even impossible for the country to switch their institutional framework dramatically. (Andrew-Speed 2012; Gilley 2012), Thus, indeed, the state-dominated approach seem an only pragmatic option for the government to adopt. (Gilley 2012)
Clearly, The central government dominates the in the decision-making process of domestic economic, social, cultural and different kinds of policy aspects. Five main levels are basically in the political system of China. (Lin, 2012) The highest level is central government, following by provincial, prefectural, county and township governments. (Lin, 2012) Basically, the central government override all other governments below.
The central government set its plans, issue them and request the local governments to work accordingly. Principally speaking, local governments officials do not have much room to make objection but to implement concerned politics based on the central plans and relevant guidelines. (Lin, 2012) Affirmed by China’s Constitution Article 3, “All administrative, judicial and procuratorial organs of the state are created by the people’s congress to which they are responsible and by which they are supervised.” To a great extent, the top-down governing structure was obviously clear.
Some scholars argued that the Chinese governmental structure is not largely top-down since the previous reforms working on decentralization. The local governments are "choosy" in deciding what policies to be "faithfully implemented". (Kostka & Mol, 2013: 6) This kind of arguments might be true when the monitoring work of the central government is loose. Free rider practices are possible to take place at local levels from time to time. However, it tended to be unrealistic that whether such the non-cooperation governing style could maintain for a certain period of time without being interfered. With the evaluation become more and more unambiguous and standardized, the compliance towards Beijing is supposed to be prominently reinforced.
State council is one of the most powerful and influential central government agencies in China. (Tsang & Kolk, 2010) Directly led by Premier, it is ‘leading administrative unit responsible for implementing laws and policies of the National People Congress (NPC) while NPC is the highest level legislative unit in the country. (Tsang & Kolk, 2010: 181) Apart from state council, several governmental bodies had been playing significant role in enacting energy policies. National Development and Reform Commission (NDRC) is one of them. According to the institutional structure of
13 Chinese government, NDRC is set under the State council. This department is in charge of examining and formulating “policies for economic and social development, maintains a balance of economic aggregates and guides the overall economic system restructuring” (Tsang & Kolk, 2010: 181) Discussed in the below paragraphs, in practice, it is such a role coordinating different governmental units typically Ministry of Finance and Ministry of Science and Technology (MOST) to work towards of the goals and objectives set by the state council.
A noticeable powerful agency situated in the same level of NDRC is called the State-owned Assets Supervision and Administration commission (SASAC). To a certain extent, it is a unit developed under the economic development progress of a planned economy since state-owned enterprises had been widely established in the developmental path of China. Up till now, state-owned enterprises are still consolidate in particular sectors such as energy sector. SASAC was set up to regulate and “exercise ownership authority over the large central-governmental firms. (Naughton, 2011: 318) Recently, SASAC was strategically working on improving the efficiency and productivity of the SOEs. (Naughton, 2011: 318)
Since the Mao era, Development planning became a administrative tradition of the Chinese Communist Party (CCP) government. Indicated by Naughton (2010), planning is such a ‘pervasive’ activity that widely taken place in Chinese economy. Five Year Plan, commonly recognized by the public, demonstrate the forthcoming direction in development of the country in the next five years and sometimes even longer period. Within the plan, ambitious goals, ambitious targets and ambitious deadlines are set and assigned to government in different levels. (Andrew-Speed, 2012: 154) Normally, working guidelines will be distributed to all levels of government and meanwhile the concerned units are requested to cooperate. One thing should be paid attention, in regard to energy issues, there is a ‘continuous preference’ of Chinese government to use administrative tools instead of market tools to deal with the conflicts occurred in the sector. (Andrew-Speed, 2012). Wang et al (2010) noted in a consistent way, China has relied on using administrative tools, instead of tools based on market oriented instruments, to drive the deployment of renewable energy in the country.
Underlined by Andrew-Speed (2012: 148),
14 sub-national government is to adapt national policies, laws and regulations to local conditions and to enforce them.’
To tightly control government of provinces, autonomous regions, provincial-level and municipalities, in addition, ensuring local officials are working for the central government with high degree of obedience and 'productive' manners, cadre system with appraisal mechanism had been used as a core tool serving the purposes. (Lin, 2012)
To sum up, it is worthwhile to look into the top-down approach in governance green economy aspects, specifically referred to foster further progressive clean energy development and phase out carbon-based production practice.
Path Dependency
Many scholars argued that path dependency is critical in affecting innovations to be grounded. (Fuchs, 2005) The term path dependency, often refers to
When a technological design largely adopted by the general public, very likely, it becomes a standard and will be further developed. (Fuchs & Shapira, 2005) Thus, some argued that current technological production is commonly build up upon the historical, socio-economic and institutional structures. (Barbier, 2011; Fuchs & Shapira, 2005)
Market users play an important role in the path dependency problem. The players in market generally feel reluctant to shift their current working modes to new ones. Eventually, new kinds of technology cannot gain a large market share in the market. (Barbier, 2011; Fuchs & Shapira, 2005).
The reluctance problem not only refers to the users, but also the product developers. Some argued that the highly influential enterprises tend to favor incumbent designs as those designs are likely to bring continued success for the companies. (Fuchs & Shapira, 2005) Even though some firms dare to invest in revolutionary products, the road shall be full of challenges. Jacobsson & Johnson (2000) indicated the difficultly in stimulating private investments in technological innovations. High-tech businesses are often seen as risky as the practices require long-term and extensive loans as
supports while the returns is highly unknown. (Jacobsson & Johnson, 2000) Therefore, private banks have a tendency not to approve the loan requested from those
15 companies. Meanwhile, traditional big firms in the markets could use their existing relatively stable income records as supports to ask for further loans to continue their current practice. (Jacobsson & Johnson, 2000) ‘Path dependency’ become deepened gradually. A crucial reason is firms are likely to continue continued their previous success with that kinds of designs. (Fuchs & Shapira, 2005)
1.5 Research questions
The main research question of this thesis is What governance factors in China may influence its ability to implement the green economy?
Several sub-questions are formulated and are going to be addressed in the below chapters of this thesis.
Research question 1 : Are the instruments and strategies under top-down governance effective enough to bring further rapid development in wind and solar power energies?
Research Question 2: Are China’s policy instruments effective enough to cope with the path dependency? Are the instruments effective to enforce mitigation and uprooted the brown practice in coal-fired power generation and transportation?
Research Question 3: What are the institutional and administrative hindrances alleviating the effectiveness and efficiency of the process? Under what circumstances, can the Chinese government cope with them?
1.6 Conceptual framework
Green Economy
Facilitating the green practice
e.g. wind energy
Getting rid of the carbon-based practice e.g. outdated coal-fired capacities Path Dependency Governance Characteristics Instruments e.g. subsides
16 ‘Green Economy’ is a broad concept indeed. (Bigg, 2011) It is not feasible to analyze all components linked with green economy in a master thesis framework. Based on the literature review, clean energy industries facilitations are regarded as critical. Thus, it is set as a key body of my conceptual model above. In parallel with the
establishment of green industries, carbon-based practices have to be sharply
eliminated or even phased out. Owing to this, it is also marked as a main body of the model as well.
As indicated in literature review, instruments such as subsides are basic in steering development of green economy. At the same time, government characteristics are influential that partly deciding the facilitation of green practice. In Chapter 2 of this thesis, I seek to figure out how instruments and government charactirctics functioned in wind and solar energy policy implementation and eventually affect the outcomes of the green facilitation. To achieve this objective, the first sub-question is set as Are the
instruments and strategies under top-down governance effective enough to bring further rapid development in wind and solar power energies? and going to be
answered in this chapter.
To reach green economy, apart from facilitating the green practice, getting rid of carbon-based practice is crucial as well. Not few instruments are remarked as useful helping to phase out the dirty production activities. However, path dependency, is widely described as reinforcing the solidarity of current technological designs and practice that shall make the phasing out actions become difficult. Under this context, I formulate the second sub-question as: Are China’s policy instruments effective
enough to cope with the path dependency? to enforce mitigation and uprooted the brown practice in coal-fired power generation and transportation? targeting to assess
whether the policy tools used in China are effective to get carbon-based activities out of coal-fired power generation sector and the field of light private vehicles and address the path dependency issue in a good manner.
Also stated in literature review, the results of previous researches indicate political context is so influential that is likely to determine the outcomes of environmental-related policies implementation. Thus, I formulate the third sub search question as: What are the institutional and administrative hindrances alleviating the
effectiveness and efficiency of the process? Under what circumstances, can the Chinese government cope with them? ,seeking to search and identify the charactirctics
of the ruling system shall hamper the green progress as external factor, which eventually disallowing China to reach green economy
17 1.7 Methodology
1.7. 1 Literature Review
The reason of using this method/ approach is it enables me to equip with rich
knowledge such as essential concepts concerning green economy. Provide me insights of this research topic. Importantly, by conducting the literature review, it helps me to identify the scientific gap as well as the core concepts. Subsequently, I am able to construct the conceptual framework soundly. As Guthrie (2010) indicated, literature review helps to ‘define the research topic’ and ‘narrow down the field to provide a research problem that can guide operational research.’ (28)
1.7.2 Content analysis
Content analysis is the systematic analysis of text (Krippendorff, 2004: 3), more concretely, it is a method emphasizing systematic reading of printed or visual
documents and text (Bryman, 2012), finally, the content shall be quantified orderly ‘in terms of predetermined categories.’ (Bryman, 2012: 289)
In Chapter 2, I seek to first explore the instruments adopted by the Chinese
government in the development and deployment of wind energy and solar energy and subsequently evaluate the effectiveness of those instruments. In Chapter 3, I
aim to identify the policy tools used to phase out small coal-fired plants and
fuel-inefficient private cars. Moreover, the tools in facilitating new generation green technologies. Extensive scientific literatures are searched out. Principally, they are selected and read based on several criterias. The content of them are related to the below themes, namely ‘wind energy policy in China’ , ‘wind energy development in China’, ‘solar PV policy in China’, ‘solar PV industry in China’, ‘coal-fired power plants in China’ and ‘transportation policy in China’.
The majority of the scientific literatures used in this research are downloaded from the below online databases, namely Science Direct, Wiley and Taylor & Francis. Apart from articles, several books focused on China, governance and the implementations of green economy are used as well. The reviewed publications cover a lot of disciplines, including energy studies, political science, geography, law etc. Those publishcations are carefully reviewed
18 In Chapter 4, to answer the third sub question concerning the institutional and adminsistrive hindrance in China and the capability of Chinese government to deal with, I peruse newspaper articles from official media namely Xinhua News Agency in the past one year. The main reasons are as following. First, the stances of the high-rank officials (particularly referred to core policy makers) from central government are always stated in the articles published by this agency. Through reviewing and analyzing those data, I shall be able to figure out the mentalities of the central agencies in a better way. Second, those newspaper articles shall give me information and insights of the most recent approaches and strategies adopted by the governments in different levels. News Articles relevant to the research theme published by two renowned media agencies namely BBC and Reuters are selected to go through as well.
1.8. Focuses
As pointed out in literature review and conceptual framework, ‘green economy’ is a broad concept (Bigg , 2011). In fact, it can be linked to different issues under a number of academic disciplines.
Fanhasuer et al (2013) defined ‘green economy’, particularly referred to ‘green growth’ as a concept generating “economy-wide transformation” instead of purely leading “the expansion of the environmental goods and services sector” (903). Because of this, analyzing whether a country about the green economy implies nearly having to take every domestic sectors and industries into account. It is impossible to address all those within a thesis framework.
In this thesis, I pay attention to the green economy issue from the perspective of governance, to see how it could bring or hamper the transitions towards green economy.
The below two stages are my key analyzed focuses. The first one is the process in widely facilitating innovative clean technologies industries. The second one is the process of getting rid of carbon-based development path.
19 1.9 Limits
As stated repeatedly, green economy is a broad concept (Bigg, 2011) that difficult to be fully addressed a in a thesis. Therefore, some of the components could not be largely addressed. The first one is environmental valuation. An ultimate purpose of promoting green economy is to include the actual value of resources in the market prices that taking the cost of ecological losses caused in production and consumption process into account. This criteria is not going to be highly addressed in this thesis. Second, the issue of job creation and the supposed green growth would not be analyzed.
Third, it is sustainable development. At least several scholars have linked green economy to sustainable development. Porfir’ev perceived ‘green economy’ “does not differentiate from sustainable development concept.” (2012:120) Some regarded it as transition (Lorek & Spangenberg, 2014: 36) and pathway (Borel-Saladin & Turok 2013: 211). However, I am not going to analyze this concept and the relationship between green economy and sustainable development this time. Hopefully, further publications could address the above issues.
Secondary data are mainly used in this study, methodically speaking, they are indeed culture products that might not be totally compatible with my perspectives in the research. (Kitchin & Tate, 2000)
20 CHAPTER 2
2.1 Introduction & Methodology
The first half of this chapter is focused on wind energy. Section 2.2 & 2.3 begins with an analysis of the physical and geographical characteristics and historical
development in regard of wind energy in China. Section 2.4 identifies and analyzes the policy tools deployed in steering the previous development progress. The
evolution of the policy and certain pros and cros of those policies are stated as well.
Following this, in section 2.5 & 2.6 policy failures and governance problems in the developing process are analyzed.
The latter part of this chapter is focused on solar energy development in China, which is structured in a similar manner as above.
In section 2.7 & 2.8, geographical and physical characteristics and historical development are illustrated . Chapter 2.9, I identify and analyze the policy instruments deployed in the previous development of solar energy sector. The evolution and pros & cros of the policies are illustrated. In section 2.10 & 2.11, I explore the policy failures and negative governance factors in the industry. Finally, section 2.12 discusses and concludes the sub-research question 1 Are the instruments
and strategies under top-down governance effective enough to bring further rapid development in wind and solar energies.
2.2 Physical and geographical characteristics
The wind resource in China is generally abundant. North China, commonly referred to Jilin, Liaoning, Hebei, Inner Mongolia, Xinjiang and Gansu province, are particularly advantageous in facilitating wind farms in terms of wind power density. (Xia & Song 2009) The wind power density in these areas reach 250 W/m2 in average. (Xia & Song, 2009) In some specific mountainous regions, the wind power density is possible to reach 500W/m2. (Xia & Song, 2009) Southeast part of China such as Fujian and Hainan which located near the coast are also ideal for setting wind turbines. (Xia & Song, 2009)
21 2.3 Historical development of wind energy in China
China began to deploy wind power in early 1970’s. At that time, the main aim of using wind energy was to address the electricity needs of the households situated in remote areas without grid connected. (Xia & Song, 2009)The first grid connected wind farms projects got started in the year of 1986 while around three to four wind turbines produced by Vestas, Denmark were delivered to China and installed in Rongcheng county, Shandong province. (Lema & Ruby 2007; Xia & Song 2009) A year later, approximately 20 more wind turbines were set up in Xinjiang and Inner Mongolia. (Xia & Song, 2009). From then on, wind farms became common in the country.
In 2010, in regard to wind energy, China recorded 44.7 GW in total capacity. In terms of installed wind capacity, China took over the rank position of the U.S. and become the leading player in the industry. (Santalco 2012: 659) Sinovel and Goldwind had become two of the largest turbine manufacturers worldwide. (Zhang, 2010) On-shore Turbines had taken a dominate share among the installed capacity. Off-shore turbines had been developing relatively slow due to technical problems in maintaineces and the higher costs. (Xia & Song, 2009) However, recent data showed that extensive relevant research projects had been undergoing. Demonstration projects in deploying
offshore wind turbines had been taken place in big cities which are Shanghai and
Shandong respectively. Specific supporting policy had been implemented in 2010. (Zeng, 2013) (see table) In addition, 15 domestic firms began their scientific researches and development in improving the offshore turbines technology. (Wang Z, 2012)
China aimed to apply wind energy to 150GW in total capacity before 2020 while this plan is approximately 22.5% annual increase in the forthcoming years. (Zhao et al, 2011) In 2020, China's wind power should be able to play a crucial role in power generation of the country. The installed capacity of wind power will be the third largest among all the energy sources, followed by coal-fired and hydropower. (Wang, 2010)
22 2.4 Instruments deployed in wind energy sector
2.4.1 Administrative guidelines
The Chinese government had used a number of administrative plans to deliver its orders to the local cadres and require changes making in the wind sector. Five Year Plan(s) are the key tool. The below are some key plans indicating the central government delivered in the past years.
Name of the Plan Key Targets
The 10th Five-Year Plan By 2005, the installed capacity for wind power generation reached 1500 kW
The 11th Five-Year Plan for Renewable Energy Development
By 2010, the wind and solar power capacity should reach 10 GW & 0.3GW respectively. Medium-Long term
Renewable energy development Plan (2007)
Renewable energy share 15 per cent of the total energy generation combination by 2020 The 12th Five Year Plan
(2011-2015)
Ultra high voltage transmission grid will be set up to transfer
electricity generated by wind farms situated in the hinterlands to the eastern part of China
More than 200,000 km of 330KV or above power grids will be facilitated
23 Some policies/ documents released for the participants in wind energy sector (in chorological order)
Notice on printing and issuing the Tentative Methods of Management on Special Fund for Industrialization of Wind Power Equipment by the Ministry of Finance (Energy, NDRC, 2006, No. 2535)
08.2008 Presenting the ways of applying
subsides, giving out the subsidy
standards
Notice on Improvement of Wind Power FIT policy by NDRC (Pricing, NDRC, 2009, No.1906) Qi,2013
07.2009 Four types of wind resources areas had been designated. Benchmark electricity prices are
between 0.51-.0.61 RMB/ kWh
Tentative Procedure for the Administration of Offshore Wind Power Development and Construction
2010 Presenting the principples of
offshore wind turbines development
and management
24 2.4.2 Feed-in Tariffs (FITs)
2.4.2.1 Categorized FITs
Categorized FITs was affirmed under The Renewable Energy Law issued in 2005, replacing the project-based FITs. (Qi, 2013a) Under the Law, article 19 points out the State Council is in charge of the pricing issues of the renewable energy. State council shall adjust the tariffs based on the actual situations such as regional developing varraitions. However, the council would ensure investors of different kinds of
renewable erergy could obtain similar degree of economic returns from their projects.
An advantage of this instrument makes the upcoming different kinds of renewable energy projects become more transpartent, for example, wind energy and biomass energy, investors could calculate the upcoming returns in a more accurate way. From the perspective of the government, this policy shall make the development of different kinds of renewable energy in the country become more balanced. (Qi, 2013a)
2.4.2.2. FITs specified for wind energy
An uniform standard of FITs in wind energy had been established in the year of 2009. According to the Notice on Improvement of Wind Power FIT policy by NDRC (Pricing, NDRC, 2009, No.1906), the territories of China were designated into four main
regions. Four types of tariffs levels were set respectively. The four levels are as following (Qi 2013a), 0.51 yuan/kWh, 0.54 yuan/kWh, 0.58 yuan/kWh, 0.61
yuan/kWh. Following with the issue of this new policy, new projects will be complied with this new standard, however, wind projects approved before August 2009 would not be adjusted due to the release of new FIT policy. (Qi, 2013a)
An advantage of this policy is making the returns in operating wind energy units become less ambiguous. (Qi, 2013) Investing in wind industry become less risky since the return is more assured. (Qi, 2013)
The establishment of FITs is supposed to give a promising prospect for the wind energy developers while they could better predict the revenue. (Liu et al, 2014)
However, on the other hand, such policy is inflexible at all. (Zeng et al, 2013) It created difficulties in price negotiation. (Zeng et al, 2013) Moreover, notably, the wind power price subsidy is possessed merely two times a year, wind developers
25 might face heavy pressure in financial management. (Zeng et al, 2013)
In addition, current financial policies still do not cover the loss in electictiry transssion, the central government better address this issue (Zeng et al, 2013).
2.4.3 Mandatory Grid facilitation
Grid connection had long been a key obstacle in developing wind energy
widespreadly. (Huang & Sun, 2014) Security and costs are part of the reasons that discouraging the grid companies to facilitate the grid to the wind turbines. (Qi, 2013a). Under the Renewable Energy Law, article 13 states grid companies must provide grid services for the licensed renewable energy operator, if they fail to comply with, they face penalties and shall compensate the loss of the renewable energy operator due to their incorporation. This should make sure most of the wind turbines are connected with grid.
2.4.4 Cost-sharing
A surcharge had to be paid by the electricity consumers within China. (Qi, 2013a) Under the Renewable Energy Law, article 20 indicates the initial cost of generation companies shall be recovered after the electricity sales. (Qi, 2013a) Tentative
Management Methods of Feed-in Tariffs of Renewable Generation and Cost-sharing
states the practical matters of the scheme such as payment transfer arrangements. (Qi, 2013a)
The core meaning of this policy instrument is to make electricity consumers across the country to share the incremental cost of developing renewable energy in a
balanced and equal way (Qi, 2013a). Also, through collecting the surcharge nationally, it is hoped to push the progress in renewable energy development across the country. (Qi, 2013a)
26 2.4.5 Credit Support
Banks with state background, namely China Development Bank,
Bank of China, Agricuural Bank of China, China Construction Bank, Industrial and Commerical Bank of China, supported the wind power industry significantly. (Qi 2013b; Li 2014) These banks generally offer low-interest loans and even loans without charging interests. (Li 2014). Moreover, some branches of those banks are even providing extremely user-friendly services for the wind energy firms. According to Qi (2013b), some branches of the state background banks in Gansu approached the wind energy firms spontaneously, asking them whether having finacinal needs and need more relevant financial resources. Some banks even
establish ‘exclusive credit service team’ to reach wind energy firms since the heads of the banks ‘treat wind power project as a key market’. (Qi, 2013b: 253)
2.4.6 Seizing assistance and cooperation in diplomatic level
In fact, the Chinese government recognized the weaknesses of the local wind industry. Lacking of technological innovations and development experience had been identified by the officials as two main weaknesses in the early years. (Zhao et al, 2011) To cope with them, the central government indicated international cooperation was essential that could be a practical solution. (Zhao et al, 2011)
China had worked proactively with a number of national governments international agencies in renewables. Not only having cooperation in advanced technologies transfer in upgrading 'hardware', the Chinese government worked with the Western countries in getting practical skills as improving ‘software’, for example, skills in enacting policies in wind energy, formulating implementation guidelines and Renewable Energy Law and wind farms planning skills. (Zhao et al, 2011) The below are some vital projects carried out in between the year of 1999 to 2009.
Year Name of the
projects Participating countries/ agenices Key achievement s/ Remarks 1999-2007 Capacity Building for the Rapid Commercialization World Bank, United Nations Development 1. Providing support in formulating
27 of Renewable Energy in China Program (UNDP), GEF, Chinese government China’s Renewable Energy Law 2. Developing guidelines in implementation 3. supporting wind resources assessment projects 2003-2008 EU-China Energy and Environment Program EU commission, Chinese government 1. Developing energy policies 2. Supporting capacity building 3. Technology transfer 4. setting up training centres 2005- Renewable Energy Scale-up Program
World Ban, GEF, Chinese government 1. Developing renewable energy policy development 2006-2009 Sino-Danish Wind Energy Development Programme Danish government & Chinese government 1. Supporting research and capacity building on wind resource assessment Source: Zhao et al (2011) 2.5 Policy failures
2.5.1 Defects in wind turbines designs and operations
R&D policies had been widely carried out. However, the technological level is still low. Extensive attention should be paid on enhancing the technological level of the equipment. In recent years, wind turbines breakdowns had become a trend. (Zhang S
et al, 2013) Two common errors occurred previously were disconnection and short
28 During the first nine months of 2011, 193 wind turbines had been proved as being disconnected. A great amount of output loss were reported. A more shocking case happened in Gansu province, nearly 600 wind turbines in a single wind farm had been found disconnected from grids, causing at least 800 MW outputs were reported lost. (Zhang S et al, 2013)
In terms of quantity, China is the latest winners in particular aspects of renewable energy, namely cumulative installed capacity and newly installed capacity. (Zhang S
et al, 2013) However, in speaking of capabilities, there is still a lot of room for the
participants of the sector to improve. The local technology capability is still far from getting mature. (Fu & Zhang, 2011) In the past years, some key laboratory had been established and practiced jointly by local universities and state enterprise, however, the outputs were valued as unimportant in the whole national development. (Leam & Lema, 2012)
Also, even though the central had demonstrated very positive attitude in supporting R&D activities throughout the country, the coordination between key players is still considerably weak. According to Fu & Zhang (2011), the current joint projects conducted by universities and industries are often frustrating experiences. The innovations had not solved the real life problems and eventually could not be applied in a widespread manner.
Wind turbines incidents indicate the domestic invented and manufactured were not yet sufficiently reliable. The quality of components in wind turines, for example, gear box, frequency conversion system and control system, had been argued that still produced in poor quality. (Zhang S et al, 2013) In China, every unit of installed capacity generated less than 1000MWh per year, regarding the U.S., same unit could produce approximately 2000 MWh.
(Wang et al, 2010) Liu et al (2013) stated that the technologies that domestic wind turbine producers currently mastered is still laying behind the western counterparts for about 10 years.
One thing deserves more attention, as discussed in the first chapter, technological innovation is such a crucial element in the green revolution.(Gouvea et al, 2013) If China wants to make progressive steps in the race, policies in promoting applied science researches conducted by educational institutes and firms in renewable industry are necessary to be reinforced.
29 2.6 Faults in governance
2.6.2 Officials’ uncooperative behavior & poor co-ordination
Some studies showed local officials in favor of widely facilitating wind energy projects as it is a good way to increase the local investment and boost the economic growth. (Qi, 2013a) Tax incomes from the wind industry serve as extra revenue for the local government. (Qi, 2013a). Rapid development of wind energy had been apparently taking place across the country; however, the method used is worrying. According to The decision of the state council on reforming the Investment system, projects exceed 50 MW require state government level approval. It makes the central government hold the control the regional development to ensure the national planning. Previous studies show provincial government designed and facilitates a lot of '49.5 MW projects' to escape from being regulated and monitored from the upper level government. (Zhang et al, 2013) This ‘bypassing’ approach adopted by the local government causes a negative effect on the grid planning in the country. (Zhang et al, 2013; Qi 2013a)
On the other hand, poor coordination also delayed the operation. Often, geographically speaking, the wind farms were in remote areas that far away from electricity demand area. A large share of existing power grids had not covered the new wind farms or being too small to transmit the power generated by wind turbines. (Yu & Fi, 2009: 5224; Zhang, 2011; Wang Y et al 2011 ) Projects in Taonan and Qianán (remote areas) located in Jilin province revealed the existing grid problem that the nearest 220kW or above grid was 150 km away. (cited in Wang Z, 2012) Without the available grids, the wind turbines had been commonly needed to wait at least additional 4 months after installations for being connected to suitable grids. (Zhang, 2011) Even worse, indicated by Wang et al (2011), about one-third of the power generated by built wind turbines was wasted due to the inefficient grid installations.
Also, the uncooperative attitude of the grid companies delay the progress of grid facilitation. (Wang et al, 2011; Cherni & Kentish, 2007)
2.6.3 The monopoly of state-owned enterprises (SOEs)
Indeed, as pointed out above, the policy instruments adopted by the central government provide abundant financial resources for the firms in wind sector. The Special Fund system established under the Renewable Energy Law ensures financial
30 supports would be granted to qualified projects by governments. Local firms shall benefit a great deal in expanding their businesses from the policies regardless of their scales. However, the bidding mechanism hinder the progressive development of the small firms.
Indeed, at the beginning of the operation of the bidding mechanism, the government had not explicitly stated that the bid price will be the determinative criteria. However, in practice, nearly all cases showed that the firm proposed the lowest bid won. (Wang, 2010) State-owned enterprises (SOEs) were the usual winners. Foreign entrepreneurs such as German and Spanish firms had taken part in the first two auctions, however, their proposed prices were found remarkably 50 to 70 percent higher than those suggested by SOEs and failed. (Lema & Ruby, 2007) Noticeably, state-owned enterprises are generally advantageous compared to other players in the market. Different from the scale of small private firms, the state enterprises are large national energy group that strong enough to bid large scale projects that requiring extensive investments. (Qi, 2013) Also, being the giants in energy sectors such as profitable coal-fired power and hydropower, they are capable of allowing some unattractive profit margin practice, and even unprofitable practice for years. (Wang, 2010) Some scholars even argued that these national background companies had planned and deliberately to sacrifice the short term profits with incredibly low prices. (Yu & Ji 2009: 5223) Under this context, In 2008, state owned enterprises successfully obtained a lion's share in installed capacities that sharing approximately 90 percent of them. (Liu & Kokko 2010) All concession tenders in public bidding had been distributed to them. (Yu & Ji, 2009: 5223) Commonly, probably being top leaders in technological skills, foreign companies had been facing very tough situation. (Cherni & Kentish, 2007) Nordex and Gamesa had got access in the Chinese market and set up their production line in China during 1990s, however, only a small part of their products were commissioned eventually. (Cherni & Kentish, 2007)
Following with this, some private firms, including foreign co-operations with more advanced and competitive technologies, decided not to get involved in the bidding as well as the new projects. BP is one of the examples. BP decided to opt out the wind energy development projects in China and sold the existing wind sites to the state-owned enterprises in the year of 2008. (Yu & Ji, 2009: 5223) Obviously, there is a tendency that the local market may become monopolized by state background companies. The problem of the phenomenon is it shall hinder progressive development in the sector while competitive companies are being driven out. (Liu & Kokko, 2010)
31 One thing deserves more attention,, the electricity price is decided by the central government based on the actual cost of the projects and guaranteeing satisfactory returns for the operators. (Wang et al, 2010: 1877) In other words, to a great extent, the common bid winners which had been state-owned enterprises do not need to take the cost of the operation into account carefully as they knew the central government shall guarantee their practices are profitable. The problem of this mindset is it alleviates the firms’ desires in putting financial resources in researching and developing innovations to lower the cost and reach a better profit margin. (Wang et al, 2011)
Solar energy
2.7 Physical and geographical characteristics
China has good natural conditions to develop solar energy as well. It is estimated that more than 3000 sunshine hours per year. (Chang et al, 2003) The daily radiation is around 4 kW h/m2 in average, however, regional variations are strikingly obvious. The majority of regions in western part of China (except Sichuan and Guizhou) have abundant solar radiation resources, as estimated, 2800-3000 sunshine hours in average could be recorded each year. (Chen W et al, 2010) Tibet, Xinjiang, Qinghai and Inner Mongolia are namely the regions with the best potential in developing solar energy in terms of sunlight radiation length. (Chen W et al, 2010) These areas are traditionally categorized as economically and socially underdeveloped that having harsh conditions such as desert environment.. (Chen W et al, 2010)
2.8 Historical development
Compared to wind energy, solar power had been less emphasized until the past five to six years since global financial crisis occurred in 2008. (Zhang & He, 2013) Without doubt, local adoption did happen in China, however, the appliance of solar energy is normally taken place in remote areas where power grids had not been well-facilitated. Solar PV industries are mainly dependent on exports. Before the crisis, as estimated, over 90 per cent of the domestic made solar panels were eventually sold to overseas markets. (Zhang & He, 2013) Unfortunately, the financial turmoil led to a sharp drop in the demand of solar PV products in overseas countries. The Chinese solar PV
32 manufacturers suffered due to the decreased orders. Interestingly, some argued that the crisis provided a great chance for China to shift the existing approach, partly due to the remarkable price fall on panels led by overstock. (Qi, 2013a)
This crisis stimulated the Chinese government to change the direction in developing solar power energy. Fostering local needs on solar energy is put in higher rank. As mentioned, before 2008, the solar power industry in China had been export-oriented. The Chinese government affirmed the importance of cultivating local needs. Second, trade disputes with the panels imported countries, specially referred to the U.S., kept reminding the government could not let the solar power industry heavily depend on the international trade.
To achieve the aim of promoting local use of solar energy, the Chinese government implemented several strategic programs in promoting the local deployment of solar energy. Co-ordinated by Ministry of Finance and the Ministry of Housing and Urban-Rural Development of China, Solar Roofs Program had been carried out in March 2009. The central government offered subsides for the installation of rooftop and BIPV systems. The amount is RMB 15/W and RMB 20/W respectively. (Zhang & He, 2013) Apart from that, subsides would be also paid for key components such as crystalline silicon module and lead acid storage battery. (Zhang & He, 2013) Another subsidy program named as Golden Sun Demontration Program launched in 2009. Both on-grid systems and off-grid systems were entitled to be offered the subsides with no less than a half of the total cost. (Zhang & He, 2013) The below table showing two major energy program carried out.
Township Electricification Program
2002-2004 Boost the solar cell production in the country
697 million had been invested Over 700 small power stations had been set up in nearly 1100 villagesof un-electrified area , a large share of them were
operated by solar PV
Golden Sun Program
2009-2011 National wide program
Subsizing investment for solar PV projects, at least 50 percent of the total investment of each
33 project will be granted
Around 275 projects had been approved in late-2009, the total capacity exceed 600MW
Source: Qi (2013a)
2.9 Instruments adopted in solar energy sector
2.9.1 FITs
Before 2011, the feed-in tariffs in solar energy are given on a project-based basis. (Liu & Huang, 2014) The amount of FITs was released differently in each bidding process. (Liu & Huang, 2014) It was not until the document
Circular on the Establishment of Feed-in tariffs for On-Grid Solar PV Power Generation was issued in July 2011. Projects approved the issue date of this documents shall follow the new policy that having the tariff rate at RMB 1/ kWh. This revise in FITs symbolizes the government eventually strategically plan to expand the adoption of solar energy in the country, opting out the stage of demonstration. (Liu & Huang, 2014)
2.9.2 Mandatory Grid facilitation
Same as wind energy development, grid connection had been a key obstacle in developing solar energy (Huang & Sun, 2014). The Article 13 under Renewable requires grid companies must provide grid services for the licensed renewable energy operators. Offenders face penalties.
The grid companies are found still reluctant to facilitate grids for renewable energy units, seeking to neglect their assigned duties, although Renewable Energy Law has clearly stated such duties as well as the consequences for the offenders. (Wang et al, 2011) Under the Renewable Energy Law, Article 14 makes all electricity produced by licensed renewable energy producers will be purchased by grid companies. (Cherni & Kentish 2007) Participants who failed to comply with this regulation will risk a penalty that compensating the loss of the licensed renewable energy player and face
34 further financial penalties. (Article 20) (Cherni & Kentish 2007)
2.9.3 Cost-sharing
An extra expense had to be paid by the electricity users (Qi, 2013a). Article 20 of Renewable Energy Law indicates the initial cost of renewable energy generation companies shall be recovered after the electricity sales. (Qi, 2013a) Tentative
Management Methods of Feed-in Tariffs of Renewable Generation and Cost-sharing
presents the payment transfer arrangements under this policy. (Qi, 2013a)
The core aim of this policy instrument is to make electricity consumers across the country to share the incremental cost of developing renewable energy in a balanced and equal way (Qi, 2013a). Also, through collecting the surcharge nationally, it is hoped to push the progress in renewable energy development across the country. (Qi, 2013a)
2.9.4 Abundant financial supports
Evidences showed abundant financial support had been provided for players in the industry through state banks. (Grau et al, 2012) The supports include concessional loans, interest free loans and extended credit cycle. (Yang 2014) China Development Bank (CDB) had been found that acting actively in offering financial solutions for solar energy manufacturers. (Santalco, 2012; Grau et al, 2012; Yang 2014) Based on estimation, the state-funded bank had offered nearly 9 billion RMB loan to LDK solar.(Grau et al, 2012) Suntech got a loan of CNY50 billion for five years. (Yang 2014) Yingli Solar, commonly known as the sponsor of 2014 Brazil World Cup, received a loan of CNY 36 billion. (Yang 2014) Another manufacturer JA solar also obtained approximately CNY 30 billion from state banks. (Yang 2014)
Therefore, subsides for the industry are remarkably generous. A predictable result is some less capable enterprises are also become bigger and bigger. Once the supporting policies ended, they are likely to fell down and create extra burden for the government. (Li & Huang, 2014)
2.9.5 R&D
National Basic Research Program (973 program) and State High-tech development Plan (863 program) are two main schemes supporting the solar power innovation resarch projects. (Grau et al, 2012) Under 973 program, 3 million Euro had been
35 allocated to projects targeted at enhancing thin-firm techniques. (Grau et al, 2012). A lot of solar power techniques had been examined under the funding of 863 program as well, for example, Building-integrated photovoltaic (BIPV), concentrated photovoltaic (CPV) and large scale appliance in deserts.
2.9.6 Cooperation with foreign governments/ agencies
In parallel with the development stage of wind energy, China had cooperated with foreign government and agencies in enhancing the solar energy capabilities.
Relevant projects had been carried out by the authorities occasionally, in spite of being less valued in the earlier years. The table below shows the key projects conducted in earlier years.
Year Key project(s) Participating
countries/ agencies Key content/ remarks 2001-2010 China-Germany ‘Western Solar Power’ projects German government & Chinese government German government granted 26 million Euros 1300.5kW capacity had been installed in remote areas 2001-2007 Silk Road Brightness Project Dutch government & Chinese government Dutch government granted 13.79 million Euro Nearly 80,000 solar PV systems had been set up Nearly 2000 kW capacity had been installed
