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For many years, China's national and local governments have encouraged the use of renewables. Over the last decade, many provinces and autonomous regions established local subsidies and tax credits [7]. The national government established ambitious targets. Although small-scale technologies flourished under this support, utility-scale technologies like grid-connected wind power did not. For example, in 1994, a national regulation required utilities to allow interconnection of wind power and to purchase the power at cost plus a "reasonable profit," with the incremental costs shared by the grid. However,

TABLE 2.5 Current Renewable Energy Capacity/Production and 2010 and 2020 Targets

Technology

Current Installed Capacity

2010 Target

2020 Target

Wind power [2]

1260 MW

5 GW

30 GW

Solar PV [2]

70 MW

300 MW

1.8 GW

Biomass power [12,2]

2300 MW

5.5 GW

30 GW

Hydropower [2]

110 GW (35 GW is

180 GW

300 GW

small hydro)

Solar water heaters [2]

80 million square meters

300 million square

meters

Bioethanol [3]

3650 million liters

14 billion liters

"reasonable profits" were not defined; and it was not clear whether sharing of incremental costs should be at a regional or national level. This resulted in an ineffective policy attempt to promote wind power.

The new Law, which was developed at the beginning of 2003 and came into force at the beginning of 2006, appears to overcome these difficulties. Implementing regulations have begun to be detailed and already electricity prices for some technologies and a mechanism for sharing incremental costs at a national level have been defined. It should be noted that while the Law follows earlier policies about the importance of renewables and how renewables foster socio-economic development, this Law initiates a more market-oriented approach, addressing financial issues and how the public good of renewable energy use can be cost-shared among all end users.

Until this Law, few nationwide financial incentives for renewable energy existed. A notable exception was the reduction in value-added taxes (VAT) and income taxes for some renewables, such as biogas, small hydropower, and wind power. For example, VAT on wind power was reduced from 17 to 8.5% in 2001 [8]. This new Law provides consistent financial incentives at a national level for renewable energy power generation. The Law requires grid companies (at the end of 2002, the former State Power Corporation was restructured into five generation and two grid companies) to allow interconnection of renewable energy generators and to purchase their electricity at either "fixed" or "guided" prices, to be determined later.

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Renewable Energy 101

Renewable Energy 101

Renewable energy is energy that is generated from sunlight, rain, tides, geothermal heat and wind. These sources are naturally and constantly replenished, which is why they are deemed as renewable. The usage of renewable energy sources is very important when considering the sustainability of the existing energy usage of the world. While there is currently an abundance of non-renewable energy sources, such as nuclear fuels, these energy sources are depleting. In addition to being a non-renewable supply, the non-renewable energy sources release emissions into the air, which has an adverse effect on the environment.

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