ELEVEN
China Moves Ahead on Clean Energy
Several countries in Europe, most notably Germany, have been the solar industries’ most stalwart supporters. It is no surprise that 66 percent of our revenues were generated from shipments to European customers. . . .
—Dr. Zhengrong Shi, founder, chairman, and CEO of Suntech,
China’s largest producer of photovoltaic solar panels
THE CIRCUMSTANCES SURROUNDING Zhengrong Shi’s birth looked less than promising. Shi was born in 1963 on Yangzhong Island in a small farming community where the conditions were desperate in the wake of what came to be known as China’s Great Famine, the catastrophic follow-up to the Great Leap Forward. In the three years leading up to Shi’s birth, more than 20 million people had starved to death, and that figure may have been an under-statement. Some experts put the actual death toll closer to 40 million. Shi’s parents already had two children whom they could barely support, and the prospect of another mouth to feed threatened the entire family with disaster. To make matters worse, it had been a twin birth. Shi’s parents did not see how they could keep both babies. As it turned out, another family had just lost their baby, who was stillborn. That tragedy offered a solution, and Shi’s biological parents suggested that the other family raise Shi in place of their lost child. The spur-of-the-moment adoption may have saved Shi’s life. It certainly saved his future.
Under the careful eye of his new parents, Shi proved himself to be a brilliant student. At 16, he left home to attend university in Manchuria, then transferred to Shanghai University for a master’s degree in laser physics. In 1988, he managed to get an exit visa and gain admission to the University of New South Wales in Australia.
Martin Green, the executive research director of the university’s ARC (Australian Research Council) Photovoltaics Centre of Excellence, recalled in an interview in Time magazine that Shi had come into his office a year after arriving in Australia and asked if he could apply for a full-time job. Green, a keen eye for talent, rejected Shi’s request on the spot. Instead, he arranged a scholarship for Shi to obtain a PhD focusing on photovoltaic cells. Six years later, Shi became deputy research director of the Photovoltaics Centre. His mandate was to research the next generation of solar technology.
Suntech Is Born
In 2001, Shi—who had by then become an Australian citizen—returned to China to open a factory to produce solar cells in the city of Wuxi. Within four years, Shi had managed to organize a buyout of the factory’s other Chinese investors. A few months after that, he succeeded in getting the company he had founded, Suntech, to become the first private Chinese corporation listed on the New York Stock Exchange.
In 2006, just a year later, Forbes listed Shi as 350th of the 500 wealthiest people in the world. By then, Shi had assets worth more than $2 billion, and he was briefly classified by Forbes as the richest man in Mainland China. Shi was unquestionably brilliant, but he was only one among an increasing number of stars in China to make their fortune by envisioning the future of energy.
The Possibilities of Energy
Energy is the key to economic power, and it is economic power that places nations in a dominant position on the international stage. If the late 20th century made oil king, it is still too early to tell what form of energy will finally dominate the 21st century.
For the Chinese, it is obvious that the American economic model, which relies on exploiting roughly a fourth of the world’s energy to satisfy the consumer appetites of less than 6 percent of the world’s population, is clearly not an option. The West, with its elaborate infrastructure already in place, is understandably reluctant to think about what will happen when the oil runs out, but China is building an infrastructure for the future, and it is coming to the industrial scene relatively late in the game. While China makes it clear that it is going to have to depend on fossil fuels as well as nuclear power for the foreseeable future, it is already looking for alternatives, and it is counting on people like Shi to show the way. The fact that the West continues to dither about the economic viability of alternative energy only serves to give the Chinese a head start at mastering the energy technology of the future, if only to escape from the deadly pollution that is already resulting from its overreliance on coal-fired power plants.
Until recently, wind and solar power appeared unrealistically expensive when compared to electricity produced by nuclear power. The March 2011 earthquake and tsunami in Japan, which caused a number of accidents at a nuclear power plant, showed just how expensive nuclear power can be when it goes wrong. That—combined with oil costing more than $100 a barrel—is beginning to make alternatives like wind power, solar power, and biomass fuels look much more attractive. Booming sales of hybrid cars (which can switch between gasoline and electric systems) and cars with flex-fuel engines (which can use alternative fuels like ethanol) show that the public is increasingly ready to try something new. The Chinese estimate that renewable energy could account for 15 percent of their total energy needs in the next ten years or so. That may not sound like much, but in a country the size of China, it can make a huge difference.
Early in his presidency, Barack Obama gave a passing acknowledgment to the importance of developing renewable energy technology, but the aftermath of the financial crisis and the growing obsession of the conservative Tea Party movement with cutting as much government spending as possible put the U.S. commitment into question. Financial problems in the Eurozone have also put a crimp into competitive efforts to develop renewable energy in Europe.
In contrast, China is starting out relatively fresh, and it has plenty of motivation to move quickly. What is more, it has the cash to buy or develop the technology. When the Obama administration announced in July 2010 that it was committing $2 billion in stimulus spending to solar energy, it seemed like a significant gesture. But Bloomberg New Energy Finance reported that the China Development Bank approved $19 billion in credit facilities to all aspects of solar energy in just the last half of 2010. The U.S. investment seems paltry in comparison.
Chinese Efforts in Solar Power
While competition among suppliers may look slightly chaotic in China today, there is a method to the madness. Instead of rushing into production of solar cells for China itself, the government in Beijing appears to be backing as many Chinese companies as possible to strive for foreign market share rather than domestic sales. Zhengrong Shi, CEO of Suntech, notes that two-thirds of his company’s sales are to the European market. The success of clean energy depends on some level of government subsidy, but the Chinese have been holding back on deploying solar power in China itself until they can analyze Europe’s experience. They are anxious to avoid the speculation that has appeared as collateral fallout in European efforts to pick up part of the tab for solar deployment.
While China’s own purchases of solar panels accounted for less than 3 percent of the 18.5-gigawatt capacity of the solar panels sold in 2010, the ultimate plan is to eventually expand China’s own solar installations by more than 6,000 percent to produce 20 gigawatts of electric power. By then, the manufacturing process will have matured, and China’s aggressive campaign for market share and competition among suppliers will have driven the price of solar panels down to a level that is likely to prove far more affordable. In addition, by then, the Chinese companies will have priced most of their competition in the West out of business. When and if China does finally commit, Suntech, China’s largest producer of high-quality solar panels, is likely to be well positioned to set standards for the rest of the world. For Zhengrong Shi, already one of the world’s wealthiest individuals, it may be only the beginning.
Chinese Efforts in Wind Power
For the moment, however, the most advanced deployment of new clean energy technology in China, not counting hydroelectric power, is from wind turbines. Once again, China has managed to take the lead.
As far back as 2005, China appeared to have only a negligible presence on the clean energy scene, but by 2011, China was already dominant in the market. At least seven of the top 15 producers of wind power today are Chinese companies. Financial analyst Frost & Sullivan noted that the global market for wind power, which was worth nearly $9 billion in 2009, is likely to be worth $52 billion by 2016.
In 2007, only 20 companies in China were involved in wind-generated electricity. By 2010, that number had risen to 80, and price competition was intense. According to the Global Wind Energy Council, China had 42.3 gigawatts of installed capacity in 80 wind farms. It had just managed to surpass the United States, which had 40.2 gigawatts of installed capacity.
The most productive wind-producing areas in China were Inner Mongolia, which had more than 5,000 gigawatts of installed capacity, and the southeastern coast, where much of China’s manufacturing capacity is located. China’s meteorologists predicted that China could eventually produce 150 gigawatts of electricity from wind power alone by 2020. According to a report by Credit Suisse, the China Electricity Council reported in December 2010 that apart from hydroelectric power, wind accounted for 99 percent of China’s installed capacity of renewable energy. The World Wind Energy Institute reported that the United States had increased its wind capacity by only 1.5 gigawatts in 2010. In contrast, China was increasing its capacity by 13 to 14 gigawatts a year, and it was striving for a rate of increase by 16 gigawatts a year. While the United States accounted for nearly half the wind power market in 2010, and Asia accounted for another fourth, analysts were predicting that China alone could account for nearly half the world’s wind power within the next few years. World capacity stood at 194.4 gigawatts in 2010 but was projected to exceed 450 gigawatts by 2015.
While most of the manufacturing of wind turbines and gearboxes in China had previously consisted mainly of assembling components bought from Europe and the United States, that situation seemed likely to change. The financial crisis had slowed wind development in the United States, and the European market was beginning to appear saturated. Manufacturers in Europe and the United States were consequently less likely to get the kind of investment that China was positioned to offer its own manufacturers, and in any case, the Western companies would have a hard time competing with the Chinese on price.
The saturation problem in Europe was only partly a question of where to put the turbines. A more important issue was the need to reconfigure Europe’s electrical grid to handle power on a continent-wide basis rather than on a country-by-country basis. Most European countries had configured their power grids to serve their own domestic needs. While there were estimates that Europe could produce up to 100 gigawatts from wind farms in the North Sea and solar installations in the south, the European grid could take in only around 20 gigawatts. With most Europeans questioning the future of the euro and their own employment prospects, investment in a major undertaking such as reconfiguring the continent’s electric power grid seemed difficult to imagine.
With the European market temporarily reaching saturation, future production appeared likely to go to China, where costs were lower and future market needs were clearly greater. Despite its rapid growth, the installed wind capacity in China stood at only around 3 percent of China’s total installed capacity of 962 gigawatts in 2010. That compared with 19 percent in Germany, 19 percent in Spain, and 4 percent in the United States. China clearly had room to grow, and it was very likely that by growing in wind power, as with solar power, China would be positioning itself to set future standards and pricing for the foreseeable future.