Planet Ark says China moving from coal to renewable power

Investors Betting on China's Green Energy Race

Story by Gerard Wynn, PlanetArk.com

BEIJING - Beijing-based clean energy investors are enlisting foreign and local interest, as financiers show increasing faith in China's ability to meet tough goals to clean up its coal-based economy.

The China Environment Fund, for example, has just tapped foreign investors to top up its clean energy fund to US$250 million. It counts Beijing's Tsinghua University, famous for its engineers, as a significant shareholder.

China is in the spotlight for its much dirtier, coal-based power generation, with the country poised to overtake the United States as the world's number-one emitter of carbon dioxide, the main greenhouse gas blamed for global warming.

High carbon-emitting coal still accounts for more than 70 percent of the country's power.

Earlier this week, Beijing gave a stark picture of the nation's ecological damage when it released the latest five-year plan for environmental protection. It vows to make polluters pay and urges officials to balance economic growth with environmental concerns.

Despite previous shortfalls in attaining its ecological goals, Beijing's new ambitious government targets, trail-blazing entrepreneurs, and China's low cost base have galvanised interest in technologies such as wind turbines and solar panels.

That renewable energy industry is now applying the same fast business culture that has seen China become the world's factory for everything from kettles to t-shirts.

"The result is what China is good at, finding things that work and cutting the price," said Chris Raczkowski, founder and managing director of renewable energy investors Azure International.

A clutch of Chinese companies have recently burst into the global solar power industry. Founded in 2001 and listed in 2005, Suntech now counts itself as a top-three solar cell maker, and its founder, Shi Zhengrong, is a billionaire, according to Forbes.

"That's a whole model that everyone aspires to," said Patrick Tam, general partner at the China Environment Fund.

Around 80 percent of Chinese solar power components are exported, say industry experts, because it's too expensive to compete in a market dominated by cheap coal-fired power.

But tariffs have made wind power attractive locally, and China has used that tempting market to nurture a manufacturing base with a rule that turbines are 70 percent made in China.

China is expected to pass its 2010 wind installation target this year as it moves towards a 2020 target for 8 percent of all power generating capacity to come from renewable sources, excluding big hydropower.

China's power generation is growing rapidly, but even applying that 2020 target conservatively to today's levels implies wind power equal to some two-thirds of the global total.

"What it's taken the world to do in the past 20 years, China will do in the next 10," said James Pennay, from the Beijing office of wind project developers IW Power.

Investors do have complaints, including an unclear premium for wind power, which depends on negotiation or competitive bids.

But Beijing's growing emphasis on tackling energy security and pollution concerns is filtering down to local officials who are increasingly keen on renewable and efficiency projects.

"We've noticed quite a significant change even in the last year," said Azure International's Raczkowski. (Reporting by Gerard Wynn, editing by Ken Wills)