China Sets Renewable Energy Quota and Pens German Agreement

January 16, 2006 by Jeff Shepard

China has told power companies that 5 percent of their electricity will have to come from renewable energy sources by 2010, as the country tries to diversify away from fossil fuels to power its fast-growing economy, a news report said Friday. Zhang Guobao, vice-minister of China's top economic planning body, said the quota would increase to 10 percent by 2020, according to the China Daily newspaper. Wind and solar power are included but nuclear and hydropower are not, Zhang said.

In a related development, China and Germany will jointly invest about €50 million (US$60 million dollars) to build a wind power plant in eastern China. Five wind turbines with a power capacity of 5 megawatts each will be constructed off the coast of the eastern city of Qingdao, generating power when the city hosts the water events of the 2008 Beijing Olympics, the China Daily newspaper said.

The two countries have signed a memorandum of understanding about the wind turbine project, as well as six other renewable energy projects, during the Sino-German Forum on Environment in Qingdao. The total investment for all seven projects was about €100 million (US$121 million).

The renewable energy quota applies to large power companies with an installed capacity of more than 5 gigawatts. Analysts estimate that China has 15 such companies generating about half of the country's power supply. China's larger power companies currently rely mainly on coal and other fossil fuels with renewable energy making up a small percentage.

Zhang said China wanted to reduce its reliance on polluting fossil fuels and secure a reliable energy supply for the booming economy, according to the paper. Financial incentives are also offered to power grids that use energy from renewable sources, Zhang said.

Two of China's top power companies, Datang International Power Generation Co. Ltd. and China Huaneng Group, have both invested in wind turbines. Datang said it plans to cut its coal-fired power generation from the current 99 percent to 75 percent by 2014, according to the report.

Total installed capacity of all of China's power plants last year reached 508 gigawatts, up nearly 15 percent from the previous year. It is expected to exceed 1,000 gigawatts within 15 years.