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Blowing in the wind

(China Daily)
Updated: 2008-11-10 08:08

Visitors look at wind power generating equipment during the Wind Power Equipment Exhibition of the Global Wind Power 2008 conference which took place in Beijing on October 29.

Editor's note

: With more than 25 years in the renewable energy industry, Michael Eckhart, president of the American Council On Renewable Energy, explained his views on China's potential for the renewable energy industry and how to bring it to a higher level in an interview with China Business Weekly reporter Si Tingting at the Global Wind Power 2008 conference on October 30 in Beijing.

Q: When you first entered the renewable energy industry more than 25 years ago, were you aware of its huge potential?

A: I joined a consulting firm called Booz Allen Hamilton in 1976, and my practice was in emerging energy technologies, which 30 years ago was a very narrow field, but today it's huge. Even 30 years ago, we thought the renewable energy industry would grow after the year 2000. It was going to take 25 years to develop the technologies, and it would just take off and grow very, very big. That's what I thought way back then. So, it is happening just as we predicted.

Q: Do you think the Chinese government is doing enough to encourage the renewable energy industry?

A: I don't think any governments are doing enough; they are just taking initial steps. The Chinese government passed the Renewable Energy Law in 2006 and China has initial goals to have renewable energy equal to 15 percent of the country's energy supply by 2020. That's a good start. But really, China won't be in a good condition environmentally unless renewable energy is 85 percent. The government has a long way to go in terms of policy-making and it has to make it happen faster or lots of coal-fired power plants will be installed to ruin the environment. We (ACORE) are going to do a study next year on the feasibility for the United States, Europe and China to get 25 percent of renewables by 2025.

Q: What has the US government done in this regard?

A: In my country, we have Renewable Portfolio Standard (RPS) at the state level, where the utility companies are required to have a certain level of renewable energy. And then, we have federal incentives to reward financial investments in renewable energy. We just passed a production tax credit for wind power and extended that for one more year; and we just also passed an investment tax credit for solar energy and extended that for eight years. This kind of long-term commitment is good and all governments should do it like this.

Q: Are people in the US aware of the importance of a clean energy?

A: Yes, people are very aware now. They are not as aware of it five years ago. In the US, we have the state requirements; we have the federal government incentives; and over 1.5 million Americans are buying green energy voluntarily, even though it's much more expensive. Personally, I buy 100 percent wind power for my house even it costs 50 percent more, but I'm happy to pay for it, because I'm providing clean energy. The government has nothing to do in this. It is the people who demand green energy and the utility companies have to offer it. It's the same in most of the parts in Europe.

However, in China, people generally don't have the access to clean energy. That's where the government has to change things - a mechanism has to be put in place to allow individual people and individual companies to buy green energy. With this mechanism, you can order green energy and the utility companies have to get the green energy for you.

Q: Currently, oil and coal prices are much lower than a few months ago, do you think this will affect the development of clean energy solutions?

A: Well, it just requires us to drop the cost of clean energy very quickly to be able to compete. Oil and coal prices don't reflect the environmental damage done by fossil fuels. That's why we need government incentives to reward clean energy because of the environmental and health benefits they provide.

Q: What do you think of the prospects for the renewable energy industry in China?

A: It's already a multi-million dollar industry in China now. I believe it'll be much, much bigger. Because China has manufacturing skills, China can easily be the leader in the renewable energy manufacturing. The question is whether you are going to be the world leader in putting them in use. It seems very difficult for now because people are caught in bad habits, building coal-fired power plants and just not trying. The Chinese government should adopt a stronger philosophy to do the right thing. Wind and solar energy is not expensive in the long run. Right now you are paying for the pollution. If you paid money to eliminate pollution, then coal will cost more than wind.

Q: Do you see any factors that hold back its development?

A: Yes, take the wind energy for example, the Chinese government does not allow independent power developers to come and develop wind farms and sell the electricity, so it's difficult to bring in private financing here. Secondly, China's concession bidding model prefers a-low-price-bidder-wins system, so China will not get reliable quality wind farms to do it. You have to evaluate the bids for quality and give awards based on quality but not just the lowest price.

Actually, there's a completely different way of doing it. In Germany, they have what we call it feed-in tariff - the government sets the price and all wind power will be purchased at this price. In this way, the low-price bidding will be completely gone; there's no cheating, no bad behavior; only competent companies can make a profit. It's a much more healthier system, and China should look in that.

Q: Is the current credit crunch doing any harm to this industry?

A: A little bit. Actually it's going to benefit the industry in a long term. I think the credit crisis will cause banks to stop putting their money in home mortgage and to buy securities and credit default swaps and all kinds of paper. Instead, they will put money into good purposes like the renewable energy industry. I think after we sort of had a big bump here, things will turn to our advantage later. We are the answer to the credit crisis. Relatively speaking, if anybody is coming out of this winter first, I think it's the renewable energy.

(China Daily 11/10/2008 page5)