A reader of our recent Watergy post pointed out to me that in China, other than for making steel, coal used in China (including those used for power) is seldom washed clean of its ash content before combustion. A recent op-ed in China Daily by Dr. Chuck Wells, Chief Technologist of OSIsoft, Inc., provides great insight on the value of washing coal at the mouth of coal mines prior to transporting it to power stations as a simple “cleaner coal” strategy.
What is coal washing?
From the BBC:
Coal washing involves grinding the coal into smaller pieces and passing it through a process called gravity separation. One technique involves feeding the coal into barrels containing a fluid that has a density which causes the coal to float, while unwanted material sinks and is removed from the fuel mix. The coal is then pulverised and prepared for burning.
On the benefits of washed coal, Dr. Wells says: Read the full story
You didn’t think The Green Leap Forward would go on to celebrate its first birthday (next week, folks! December 2nd!) without commenting on the recently announced RMB 4 trillion (US$586 billion) pump-priming package did you?
Of course not.
The basics of the package is that a total of RMB 4 trillion will be spent by the central government, local governments and state-owned enterprises in ten major areas, mostly infrastructure related. It is not clear to what extent part of the package is simply a repackaging of already existing budgets or expenditure plans in order to provide a psychological lift to the sagging stock markets. The more important question to readers of this blog, however, is to what extent the package addresses China’s environmental and energy (E&E) needs? Read the full story
The following is the complete transcript, modified and supplemented for completeness and readability, of the closing speech that the author of this blog (pictured below) delivered on November 11 at the JUCCCE Clean Energy Forum in Beijing.
We are at war. A world war. But unlike World War I or II, this is not a war about military tanks, but it’s a war about gas tanks. This is not a war about military strength, it’s a war about political strength, and innovation. This is not a war about conquering territories, its about conquering our addiction to fossil fuels. And unlike the first two wars, we are all fighting from the same side. We are engaged in a global energy and climate war. We have essentially, through our reckless consumption of the earth’s natural resources, provoked an unanticipated response in the world’s climatic system. We have essentially pitted Mother Nature against Mother Nature, and we are all caught in the middle.
So what now?
We need a serious restructuring of the way we organize our energy system, implement new rules and policies, and adopt new ways of using energy. We need to, as Rob Watson says, change transform “ego-nomics” into “eco-nomics,” and we do this by appropriate adapting human laws to the immutable laws of nature.
So how do we get there? How do we achieve the innovation to meet the energy-climate challenge? We need an smart and well informed mix of regulatory and market mechanisms. There is no single silver bullet, but I believe that over the past two days of discourse, we have collectively started forming a framework for the array of solutions, a full complement of many green bullets to get the green revolution under way. I see three themes emerging from our discussions: Read the full story
Despite the dire international financial straits and the tightening of credit markets, the consensus at a CEO panel at the Global/China Wind Power conference two weeks ago (Oct 29) is that China’s wind industry will continue its torrid growth in the long term. China’s installed wind capacity has grown rapidly in recent years, doubling roughly from 3 GW at the end of 2006 to just under 6 GW at the end of 2007. There are estimates that as much as 7 GW will be added by the end of this year alone. The government’s 10 GW by 2010 target will easily be shattered, as will, by all indications, its 30 GW by 2020 target. But here at The Green Leap Forward, we’d like to dig a little deeper beneath the rosy predictions of the wind industry CEOs.
Seated from L-R: Arthoures Zervous of Global Wind Energy Council; Zhang Dingjin of China Composites Group; Wu Gang of Goldwind; Andreas Nauen of Siemens Wing; Hang Junliang of Sinovel; Thomas Rochterich of Nordex China; and Lin Junfeng of CREIA.
Both Andreas Nauen, CEO of Siemens Wind, and Li Junfeng, Secretary General of the China Renewable Energy Industry Association (CREIA) agreed that wind is a long term priority for the government and a temporary financial crisis should not pose much problems for the wind industry over such a time horizon. Read the full story
I was recently interviewed by Social Bridges, a relatively new but excellent blog on sustainability and corporate social responsibility. The interview touched on various topics, including the following question on China (followed by my response):
Q: As your main focus is on China, what’s your take on the sustainability/greener efforts in your country and are you satisfied? International media keeps on criticizing the Chinese efforts such as the Olympics – how do you view all this?
A: China’s green push is a paradox. On the one hand, it has awakened to the imperative for sustainability and has announced all sorts of progressive environmental and energy reforms. On the other hand, its legacy of a highly polluting industrializing economy is of massive scale, and the socio-political pressures to maintain economic growth so as to provide jobs for its vast populous shows no sign of ebbing. It is clear that the Chinese government is well aware of the need to protect its environment, but as various China commentators have observed, there is a significant disconnect between the top-level central government green policy intentions, and the capacity of its various institutions to effectively manage its energy, environmental and water sector. This means that environmental and energy reform must be undertaken simultaneously with administrative and structural reform of its political institutions–no easy task by any measure. I guess I would consider myself an optimist, but a cautious one at that.
Yes, it is true that the international media has not always been kind to China on various cross-cutting issues. But that comes with the territory of being the world’s emerging superpower. China has to take the good with the bad. Hopefully, rather than simply stirring up local indignance, the international criticism can be turned into an opportunity for China to respond positively–with actions, rather than merely defensive rhetoric. China has demonstrated the ability to listen to its international partners–its current policy over the revaluation of its currency is a case in point.
For the rest of the interview, click here.
Peggy Liu, founder and Chairperson of Joint US-China Cooperation on Clean Energy (JUCCCE) , an innovative bilateral public-private partnership based in Shanghai, speaks to The Green Leap Forward.
Energy cooperation was one of the key issues that underpinned the fourth US-China Strategic Economic Dialogue held last week. Vice-Premier Wang Qishan, the head of the Chinese delegation released a statement calling for increased cooperation between the two sides on several fronts, including R&D, coordinated energy policies and increased bilateral dialogue. The energy discussions culminated in a commitment to negotiate a ten year energy and environment agreement.
Encouragingly, however, a handful of individuals and organizations have not waited for any ink to be spilled in the diplomatic arena before jumping into action. One such individual is Peggy Liu and her organization called Joint-US Cooperation on Clean Energy (JUCCCE).
The Juice on JUCCCE
JUCCCE was founded in April 2007 by Peggy Liu, a former McKinsey management consultant and COO of Mustang Ventures, a Shanghai-based venture capital firm. The organization was launched out of the MIT Forum on the Future of Energy in China held last year in Shanghai, where JUCCCE is also now based.
JUCCCE is a non-profit incubator of cleantech and energy efficiency capacity building institution initiatives seeking to serve, as Liu describes it in the video below, “a single bilingual and bicultural organization that will act as a hub of information exchange and cooperation” on clean energy in China. Based on the observation that China’s rapid development has it compressing 30 years of industrialization in the space of ten, JUCCCE has set itself a ten year mandate to create a legacy of self-sustaining, local capabilities. Tapping into Liu’s vast network of top minds whom she has become acquainted with as a result of her stints at consulting and venture work, JUCCCE conducted a comprehensive study of the Chinese energy industry and identified a dozen key projects designed to create the greatest impact in the shortest amount of time. What I love is the Chinese name for the organization, which is 聚思 (jǘ sì), which is not only a phonetic translation of the acronym, but by itself literally, and appropriately, translates in English to “collective thought” or “coalition of thinkers.”
Underpinning JUCCCE’s philosophy are three fundamental observations (the need to accelerate information flow, need for integrated urban planning and need to strengthen supply chains) which Liu describes in the following video:
Based on these observations, JUCCCE has formulated a three-pronged approach of education (skills building and leadership development at every level through effective channels), collaboration (with international and local institutions, taking advantage of web-based communications) and deployment (of customized green strategies for specific industrial sectors).
On education, Liu elaborated in an exclusive interview with The Green Leap Forward:
China doesn’t have an energy policy problem [GLF note: see, e.g. the various progressive policies that this blog has highlighted in its maiden post], rather, it has an energy workforce problem. We can have all the solar panels we need free of charge and that will not be enough if we don’t have the necessary skilled people to install these systems and maintain them. So, we believe that people matter…Education and skills building are very important.
Liu continued to explain that the ability to implement these progressive energy and environmental policies or programs is most effectively achieved through the strategic targeting of “channels of decision makers” rather than individual decision makers. Because Liu wants to teach the Chinese how to fish rather than catch the fish for them, JUCCCE’s programs are designed to be replicable and scalable. Let’s take a look at two of JUCCCE’s programs that Liu described for The Green Leap Forward, and that targets the decision-making channels of mayors and schools, respectively.
Mayoral Training on Energy Efficiency
One program is the Mayoral Training for City-level Energy Efficiency Programs, which was announced as a one of the commitments under the Clinton Global Initiative in 2007. As the name of the program implies, JUCCE is planning workshops to equip mayors of cities nationwide with energy efficiency solutions to deploy in their home jurisdictions. JUCCCE will partner with international experts and energy efficiency solution providers (many of which are multinational corporations) in order to build a web-based database of best practices and products, sector-by-sector, that can be presented to, and easily deployed by, the workshop participants.
The importance of focusing on cities is obvious. I have previously highlighted a McKinsey report on China’s rapid urbanization to facilitate the largest scale of rural-to-urban migration in history—approximately 350 million by 2025. “In China, city mayors are the kings of their fiefdoms, so it is really important to target them,” explains Liu, referring to the broad authority of city mayors in determining economic and development policy. This acceleration of information flow of best practices/products targeting mayors as key channels of decision making becomes even more effective when coupled with the State Council’s new policy to include environmental and energy efficiency criteria in the promotion evaluation of local and provincial bureaucrats, as well as the national goal of increasing energy consumption per unit of GDP by 20% by 2010 (see here).
Shanghai Lighting Program
Another noteworthy JUCCCE program involves the replacement of 10 million conventional incandescent light bulbs with energy efficient compact fluorescent light (CFL) bulbs in Shanghai. The brilliance of this lighting program is two-fold. First, it targets youth by directly enlisting the help of Shanghai school children for distribution. Each student will receive up to 18 CFL bulbs and will be asked to bring back an incandescent bulb for every CFL bulb they replace it with. Liu conservatively estimates that the program will reduce approximately 2.2 million tons of carbon dioxide emissions over the lifespan of the CFL bulbs. This is environmental education at its best— empowering the young to recognize that little actions can make a difference by coordinating and aggregating individually small efforts into part of a large-scale city wide program with substantive results.
Second, the method of financing the program is highly innovative. The purchase of the CFL bulbs will be made by proceeds from advertising on the packaging of the CFL bulbs and by the clean development mechanism (CDM) under the Kyoto Protocol. JUCCCE and its partners are exploring the possibility of structuring the project as a programmatic CDM, which I have previously described in the context of Xiamen’s ecocity efforts. Although Liu recognizes the legal and technical complexities involved in structuring such a CDM project, she is hopeful that such a program would be approved by the CDM authorities as it would represent of the first energy efficiency lighting programs to ever use the CDM.
Liu expects the program to launch in the next six to seven months, but JUCCCE has in the meantime partnered with Citi and GE to hold a pilot program distributing 10,000 CFL bulbs last November (pictured). The hope is that the success of this larger CFL lighting program can be adopted and replicated in cities across the country.
Why JUCCCE Matters
What makes organizations like JUCCCE so important in tackling the energy and climate challenges of our day is that it effectively bridges the gaps between the public and private realm. In the vocabulary of an economist, it helps correct market failures such as free rider problems and information asymmetry and creates incentives or platforms for businesses and policy makers to undertake clean energy initiatives that they would not normally undertake. This is demonstrated well in the two projects described above. In the case of the mayoral training program, information asymmetry is overcomed by the creation of a web-based database. In the case of the Shanghai lighting program, financial barriers are overcome through the use of innovative financing techniques.
China, and the rest of the world, needs institutions like JUCCCE to “fill in the gaps” because of the limitations to motivations/incentives inherent in political and commercial institutions to take action. The Green Leap Forward looks forward to profiling more innovative organizations like JUCCCE that are breaking silos to redefining how all stakeholders can think about tackling our energy and climate crisis.
The Chinese wind sector is booming and should continue to in the long run, but some discussions at the recent Renewable Energy Finance Forum-China 2008 in Beijing suggest some challenges ahead in the short to medium term.
Late last month, a Shanghai Daily article reported that the National Reform and Development Commission was considering almost tripling wind energy targets for 2020, from 30 GW to as much as 100 GW. To put that number in context, realize that current installed wind capacity is about 94 GW…globally.
A wind farm in the northwestern province of Xinjiang
Although some warn against drawing hasty conclusions, there has more talk in the market recently to back up that report. At the Renewable Energy Finance Forum on May 14, Jens Olsen, newly minted CEO of Nordex China, talked about the NDRC’s renegotiation of the 2020 wind energy target. According to Olsen, a 60 to 100 GW target is being considered, so 100 GW is really at the upper range. Still, a few panelists at the forum expressed bullish sentiments that 60 to 80 GW of installed wind capacity would be achievable. Olsen himself thinks that the wind supply chain in China is capable of manufacturing 80 GW by 2012-13. One industry executive went so far as to suggest that 120 GW of installed capacity by 2020 would be possible.
All these giddy projections have been cast in the background of a flurry of large scale wind projects announced recently. China Power International will spend RMB 6 billion over five years for at least 600 MW in wind projects along the coast of Guandong. Elsewhere, JiuQuan city in the northwestern province of Gansu is poised to take Chicago’s moniker as ‘the Windy City’ by adding 28 new wind farms for a whopping total 10 GW of wind by 2015.
What accounts for the big wind surge in China? According to Liu Qi, the Vice General Manager at Sewind, the Chinese wind market is blessed with supportive government policies (e.g. the Renewable Energy Law of 2006, national targets for wind, etc.), a good foundation of wind developers and a growing components industry (fostered by regulatory requirements that 70% of wind turbines have to be made of components manufactured domestically). Domestic component makers like China Transmission, which commands 90% of the China market for gearboxes, are poised to benefit from these policies as they quadruple capacity over the next two years.
Another supportive government policy has been the refunding of value-added tax and import duties on core wind power turbine materials to ease the supply chain bottle necks and also plans to cease its tariff-free policy on the import of whole turbines with a capacity of less than 2.5 MW. The combined effect is to encourage the import of foreign-made components and more advanced foreign turbine technologies (the average capacity for turbines installed in China is 1 MW).
Short-Medium Term Bottlenecks on the Horizon
Supply Chain Hiccups
Whatever China buys becomes more expensive—such is the buying power of any Chinese industry because of its sheer scale. In the wind industry, turbine prices have been increasing consistently for the past four years, said a Morgan Stanley analyst in the audience. Paulo Fernando Soares, CEO of Suzlon’s China operations, attributes this to the increasing costs of components. Indeed, the wind market globally has been facing a supply chain crunch, and any raising of national targets will only serve to stretch the global wind supply chain. Yet, not everyone considers supply chain issues as the main concern. At least domestically, expected manufacturing output rates for 2008 are expected to increase and thereby reduct the backlog in turbine orders ranging to a manageable11-12 months, says Sebastian Meyer of Azure International.
Moreover, while Soares observes that only 55% of wind farm projects awarded since 2004 have been built, he does not attribute this bottleneck to a turbine or component shortage. Indeed, it is the view of Paul Eveleigh, group CEO of Honiton Energy, that turbine overcapacity will be a problem in China unless there is a massive drive for export; the top four Chinese turbine manufacturers are projected to have 9GW of capacity by 2010 (compared to the just under 6 GW of installed capacity at the end of 2007!).
Rather, the bottleneck, according to Soares, is the unattractive tariff structures, which are the lowest in the world for wind and makes it tricky for foreign players with a vastly different perception of cost. Such tariffs in China are typically only half of what a developer could get in a Western market, says Eveleigh. Of course, the cost structure of business inputs in China is vastly different as well, though this gap is surely narrowing as of late with domestic inflation.
Lower tariff rates are better than zero tariffs, however. Yet, said KK Chan of Climate Change Capital at the forum, some wind developers are getting stiffed by tariff payment delays.
It is also argued that a move towards a German-style feed-in-tariff system should be adopted. In fact, this was originally contemplated in the Renewable Energy Law of 2006, as a reader to my last blog post commented. However, this policy tool was abandoned in favor of a bidding system. A full discussion of this issue is beyond the scope of this post but can be found here, although I suspect that the debate has cooled off a bit over the course of the pass 12 to 18 months given the explosion of installed capacity over the same period.
With a proliferation of new entrants, competition in the China turbine market is stiffening, and domestic players are growing from strength to strength. For the first time, Chinese turbine manufacturers now have the majority of the Chinese market at 56%, said Soares, with Sinovel and Dongfang gaining market share recently, while every other player lost some of theirs. A consolidation in the wind turbine manufacturing market is surely imminent.
The competition picture is different in terms of wind developers and the grid transmission—with different implications. The biggest wind farm developers are the big five national utilities. Ironically, the price squeeze in coal (i.e. the inability of these utilities to pass on the increasing costs of raw coal inputs to retail customers due to mandated price controls) is not working to the advantage of the wind industry. All big five utilities experiences a net loss in Q1’08, observed Meyer, largely due to the coal price squeeze. In the long term, if the leading investors in wind farms are not profitable, Meyer went on to say, their ability to invest in wind is negatively impacted.
The dominance of the big 5 utilities in wind development, coupled with the duopoly of the two national grid transmission companies—State Grid Corporation and China Southern Power Grid, make it difficult for small wind farm developers to negotiate with the grid transmission companies for interconnection.
It seems to me, then, that the wind development sector is facing the opposite situation as turbine manufacturing—the dominance of few big players rather than a fragmented market with too many new entrants. Wind development is capital intensive and carries its unique risk profile and there are limited players up to the task. Will the government recognize the need to create a favorable policy environment to attract new entrants, especially foreign developers?
Access to debt capital is getting tougher. As discussed in my last post, bank credit is tightening due to the mandated increase in bank reserve ratios. Moreover, observes Sebastian Meyer of Azure International, that the cost of capital is going up as global interest rates, including those in China, are climbing, making it more expensive to borrow. Justin Wu, a senior analyst at New Energy Finance, observes that the belt tightening in the credit market has also affected the ability of wind farm developers to pay their turbine suppliers on time, and this is in turn cutting into the margins of turbine manufacturers.
Also described in my last post was the lack of reliable wind data raises the risk profile of wind projects, which makes lenders hesitant to offer more flexible loan packages, and insurers less willing to offer business interruption insurance.
Currently, rules governing clean development mechanism projects in China prohibit foreign developers from owning majority interests in CDM projects. The CDM is crucial in making wind projects in China financially viable. An easing of this prohibition may encourage foreign players to make further inroads into the China market, and create more competition amongst developers. According to some observers, including Jacob Jacobelli of Merrill Lynch, this easing of this prohibition on foreign-controlled CDM projects is imminent.
Separately, if what the World Bank says is true about an impending carbon credit crash, then there may be tough times ahead for wind development in the medium term given how instrumental the CDM is in making wind projects profitable
I have not mentioned other potential bottlenecks such as the shortage of skilled talent and intellectual property concerns. But I don’t want to take the above list of industry challenges out of context and lose the forest for the trees. Wind energy has its skeptics, but the reality is that the wind industry in China is powering ahead compelled by the three forces Jacbobelli described in my last post (logistical energy security, environmental protection and poverty alleviation). The announcement of Texas-based GreenHunter at the forum on May 14 to build a 300 MW wind farm near Shanghai, using turbines manufactured by Mingyang Electric, is just a portents of things to come.
On May 14 and 15, I attended the Renewable Energy Finance Forum (China) 2008 at the Ritz Carlton Hotel at Financial Street. My next couple of posts are inspired by some of the discussions that took place at this forum. Today’s post are mostly drawn from the first two sessions on May 14.
RE Looking Bullish in the Long-Term
The sentiment at the forum on the renewable energy (RE) industry in China was overwhelmingly bullish. The government’s targets for renewable energy are well known—15% of primary energy from renewable sources by 2020—and there is little to suggest that this will not be achieved. Perhaps the wind industry, more than any other RE sector, is emblematic of China’s fast growing RE industry–the national targets to install 30GW of wind power by 2020 will be easily exceeded by as much as another 30 to 50GW according to some of the forum’s panelists.
A recent paper (excerpt here) by Eric Martinot of Tsinghua University and Li Junfeng, a conference panelist and head of the Chinese Renewable Energy Industry Association paints the sunny state of China’s RE industry.
Joseph Jacobelli, a senior banker at Merrill Lynch, put forth three reasons at the conference why the RE industry was on an unambiguous march towards growth:
- Logistical energy security (especially in the wake of lack of domestic sources of conventional energy supply, and rising oil and coal prices)
- Environmental protection (this one is obvious)
- Poverty alleviation (where distributed power generation, especially wind, solar and biomass, have advantages over centralized fossil fuel supply)
As Li pointed out in his keynote speech, China has, since the release of the energy white paper last year, modified the presumption of a “coal-based energy structure.” Renewables, energy efficiency, and even nuclear (gasp!) will have an increasing part to play. The Renewable Energy Law of 2006 and the impending comprehensive Energy Law (currently in draft form) reflects this shift.
But Coal to Remain King
But make no mistake, coal will continue dominate China’s energy structure for years to come, unless major breakthroughs in utility-scale or distributed solar occur. Coal is an entrenched energy choice at the moment because of distorted price signals (the health and environmental costs of coal are not reflected in its price) and huge sunk costs of coal infrastructure. The sheer scale of coal use, accounting for some 70% of electricity production in China, is what, in the eyes of venture capitalist and entrepreneur-in-residence at Qiming Ventures, Brian Curtis, presents the greatest investment opportunity. Increasingly, it looks like these investment opportunities in China will be undertaken by RMB-denominated funds, rather than offshore US or European funds, due to the evolving regulatory landscape governing China investments.
Curtis did not elaborate on specific opportunities that coal presented, but one would have to imagine they would include efficiency technologies such as gasification, co-generation or poly-generation. I personally wonder, however, if the capital-intensive nature of “clean coal” technologies lend itself well to venture capital-type equity investments. As we shall soon see, bank credit in China is tightening as well, leaving “clean coal” in a temporary bind.
What perpetuates the coal industry is the continued government subsidies on energy. Despite repeated calls by international policy makers to reduce subsidies and allow market forces to determine prices, concerns of inflation means that in the short term, price controls will remain in place. However, the draft energy law and recent moves to allow increases in the price of gasoline indicate an unavoidable, even if not complete, shift towards market prices some time down the road.
The Need for Progressive Policies
In the mean time, RE will need the aid of policy and finance to change the status quo. KK Chan, of Climate Change Capital, laments that long term power purchase agreements (PPA) between RE generation companies and utilities, which are so crucial to assuring investor certainty, are simply not an option in China.
Gao Guansheng of the National Coordination Committee of the National Development and Reform Commission (NDRC) went as far as to suggest that a serious consideration should be given to German-style feed-in tariffs, whereby all RE power must mandatorily purchased by utilities at a preferential tariff rate, and with the cost of such tariff premium being spread across all end-users. Such a policy would not only provide a de facto PPA (since utilities would be required to purchase all RE power produced for as long as the law provided, and tariffs would be set over a fixed period of time), but also provide the necessary incentives for RE producers and necessary certainty for investors in RE to spur RE development. Feed-in tariffs has been the most successful RE policy tool in Europe.
If this is coming from the mouth of an NDRC official, can we expect feed-in tariffs to become reality in China?
KK Chan would probably say “first things first.” At least twice over the two day conference did he point out that RE project developers have had tariff payments held back without cause, increasing the risk profile of doing projects in China.
Financing and Insurance
Policy issues aside, RE projects will have to deal with financing issues. Jonathan Drew of HSBC pointed out that the availability of bank credit to finance RE projects has been drying up as of late; in attempts to stall inflationary pressure and soak up excess liquidity, the central government has increased bank reserve requirements. In other words, banks are required to increase the amount of assets they hold in reserve, thus reducing the amount they can make loans for, with the result that RE project developers are finding it increasingly difficult to take out the necessary debt to fund their projects. Furthermore, Li Weirong, a senior manager of China Merchants Bank, one of the major state-owned enterprise banks, explained that in terms of project scale, domestic banks are reluctant to stomach projects that are too large, reflecting a limit to their risk appetites.
But RE projects can perhaps take advantage of quasi-public money in the form of equity made available by the International Finance Corporation. Dana Younger, of IFC, was on hand to explain the growing emphasis on the RE sector by IFC. Specifically, Younger said that IFC is increasing its investments in RE by 20% over the course of the next five years, and suggests that even this figure may be upped. Additionally, IFC is spreading money across a several cleantech funds across China and the rest of Asia. It has already invested in a fund run by Aloe Private Equity.
Another panelist, James Maguire, a managing director at the Asia infrastructure division of Marsh, a major insurer, laments that there is a lack of understanding of the role insurance can play in supporting wind development projects in China. For instance, business interruption insurance is seldom purchased. The dearth of accurate and high quality wind data is also blamed by Drew (HSBC) and Maguire for the stricter terms in the security package of financing agreements and inability to secure proper insurance for wind projects, respectively. This suggests an opportunity for reputable wind data providers to help boost the immature market in wind data collection, and wind industry in general.
Next Wave of Reforms to be Price Centered
My sense is that the most effective and immediate set of actions that the central government can take to boost RE development and deployment is to begin a conscientious but gradual shift towards price reforms. Jocobelli (Merrill) believes that in the long run, retail electricity prices cannot be artificially suppressed. Several panelists, including Gao Shixian of the NDRC, exhorted the transition to a more market-oriented system, and I take price reform to constitute the heart of that transition. Inflationary concerns, especially in light of the Sichuan quakes which may cause a temporary jolt to energy supply (and hence prices) will probably delay this transition, but the march towards price liberalization is inevitable.
It’s the only way forward. A green leap forward.
Next: An update on the outlook for the wind industry.