For More Blue Skies

　　China‘s subsidizing scheme aimed at increasing business use of renewable energy and reducing pollution has high hopes

　　Starting from September 25， the energy surcharge will be raised from 0.008 yuan per kilowatt-hour (kwh) to 0.015 yuan per kwh for businesses， said the National Development and Reform Commission (NDRC)， the country’s top economic planner. The surcharge is to make up for a shortfall in China‘s renewable energy development fund.

　　To encourage power plants to install equipment to remove nitrogen oxide， a major air pollutant， the government also increased the subsidy for power plants with denitration facilities from 0.008 yuan per kwh of electricity they produce to 0.01 yuan per kwh. Plants produced power under a certain particle-emission standard will also receive a subsidy of 0.002 yuan per kwh of electricity. This policy does not affect residents’ electricity bills and is aimed at heavy-polluting industries.

　　Meng Xian‘gan， Secretary General of the Chinese Renewable Energy Society， says this policy illustrates the resolve of the Chinese Government in developing renewable energy， increase energy efficiency among power plants and pushing along the development of China’s energy-saving and environmental protection industries.

　　“This policy will help alleviate the financial difficulties renewable energy industries face and attract more domestic and foreign investment in this emerging sector，” Meng said.

　　Targeting air pollution

　　Compared with traditional forms of energy， renewable energy has the advantage of being clean， environmentally friendly and， of course， renewable， but the financial costs for its use is currently higher than that for traditional counterparts. For this reason， companies devoted to renewable energy need government subsidies to start. This is also common practice in the international community. According to a report released by the Washington， D.C.-based Worldwatch Institute， 127 countries have made plans supporting the development of renewable energy.

　　According to Article 20 of China‘s Renewable Energy Law， which went into force in 2006， if the price of electricity generated through renewable energy is higher than the cost of electricity generated by using conventional energy， the balance shall be apportioned by adjusting the selling price of the electricity. Based on this， China began to collect renewable energy surcharges as a development fund for renewable energy. The surcharge has been raised several times， and every year 20 billion yuan ($3.27 billion) is collected.

　　However， because of the rapid development of China’s renewable energy industries， the funds cannot satisfy the growing demand for subsidizing renewable energy. By the end of 2011， the subsidy fund had a shortfall of 10.7 billion yuan ($1.75 billion). Therefore the NDRC decided to raise the renewable energy surcharge from present 0.008 yuan per kwh to 0.015 yuan per kwh.

　　In recent years， due to fast economic growth， China‘s energy consumption and pollutant emissions have also been soaring， having an adverse impact on the environment. Since January， hazy days have been frequent in cities like Beijing， with sulfur dioxide and nitrogen oxide affecting the concentration of fine particulates (PM 2.5) in the air. According to the Chinese Government’s plan， by 2017 the PM 2.5 levels in key areas of the country will drop by 15-25 percent.

　　Long-term needs

　　From May to June， the Standing Committee of the 12th National People‘s Congress dispatched inspectors to examine the implementation of the Renewable Energy Law. A report by the inspectors released in August says renewable energy industries have become a new engine of growth for the Chinese economy. In the past five years， half of all spending in power generation hardware went to renewable energy. In 2012， investments in renewable energy hardware totaled 400 billion yuan ($65.36 billion).

　　However， the report also warns of problems in the development of China’s renewable energy industries. Although the scale of China‘s renewable energy manufacturing is big， there are still no clear market access standards and technical norms. Blind construction in the wind and solar power industries has created surplus capacity and caused prices to fall dramatically， affecting the overall development of the industries. Some industries are weak in their core competitiveness and have fallen further behind their counterparts in developed countries. As a result， these industries have had to import a lot of foreign parts， even during times of surplus capacity.

　　Meanwhile， the country’s input into basic research on renewable energy development is inadequate and the cost at developing and utilizing renewable energy is high， impeding possibility for widespread use.

　　Meng thinks raising renewable energy surcharges will make up for the fund shortage. However， the subsidy can only be a temporary solution to developing clean energy.

　　What impact would a surcharge increase from 0.008 yuan to 0.015 yuan per kwh have on the fund？ China Credit Rating Co. Ltd. has crunched the numbers. Even if the surcharge is raised starting September 25， there will still be a funding gap of 3 billion yuan ($490.34 million) for the remainder of the year. It is estimated that in 2014 a total of 70 billion yuan ($11.44 billion) of surcharges will be collected， 35 billion yuan ($5.72 billion) higher than before and enough to satisfy the subsidy demand. But in 2015， the installed capacity of wind power is expected to reach 100 GW， solar power 35 GW and biomass energy 13 GW. With soaring power generation， the subsidies for the three energy sources will total 74.7 billion yuan ($12.21 billion)， but the collected surcharge will again be unable to satisfy the demand for subsidies.

　　The China Credit Rating report says the government could further raise the renewable energy surcharge， but this should not be the only method used to develop renewable energy in China. Renewable energy producers should reduce the construction costs of their power plants in order to align prices closer to those of thermal energy. This way， the development of renewable energies can be sustained.