Curr Sustainable Renewable Energy Rep DOI 10.1007/s40518-017-0067-3

REGIONAL RENEWABLE ENERGY (CHINA) (K LO, SECTION EDITOR)

Renewable Energy Development in East China Geoffrey C. Chen 1

# Springer International Publishing AG 2017

Abstract Purpose of Review The story of sustainable energies has long been narrated in the context of advanced economies. Many pioneering European states, for instance, have admittedly set examples for the followers in the renewable energy sector. However, in recent years, due to a series of regulations and plans formulated by both of the central and local Chinese states, the rapid expansion of renewable energy has obtained certain positive outcomes and passes beyond Europe in a number of renewable energy fields. Summary The goal of this paper is to review the recent academic contributions by focusing on how the assemble of state managers, business practitioners and manufacturing entrepreneurs in eastern market of China has enabled the rapid growth of the non-hydro renewable energy sector. To provide a more comprehensive understanding of the regional development of the sector, the potential barriers and commercial challenges that hindered the future growth of the offshore wind power and distributed solar energy will also be investigated.

Keywords Offshore wind power . Distributed solar power . Policy implementation

This article is part of the Topical Collection on Regional Renewable Energy (China) * Geoffrey C. Chen [email protected] 1

Department of China Studies, Xi’an Jiaotong-Liverpool University, Suzhou, China

Introduction Over the past decade, due to the rapid development of renewable energy in China, and the growing innovation capacity of clean energy technology, the development of this area of industry has received increasing attention [1, 2, 3••, 4]. The academic discussions have covered environmental policy, the ecological economy and political analysis, among other subjects, and have focused on the country’s development and on cross-region or cross-state comparative analyses [5–8, 9•, 10]. In this report, I will focus specifically on the eastern provinces of China and will discuss how, in the past 5 years, the development of regional renewable energy has been investigated, especially in the fields of wind power and solar energy. I will also examine future trends and challenges while reviewing the past literature. Institutional constraints and the interaction of economic actors with market mechanisms will also be discussed. Afterward, major opportunities and challenges related to two complementary policy experiments initiated by the state—namely, large-scale offshore wind farm planning and solar manufacturing and the distribution of solar power—will be investigated. The reason I have selected the two examples is that, in the existing literature, a number of scholars have pointed out that the development of renewables has been emphasised for local consumption in order to deal with the unsolved problem of remote transmission, because areas with intensive wind resource have long suffered from low power consumption [11–14]. Local consumption can, in theory, at the same time solve the bottleneck of local manufacturing overcapacity [15, 16]. The two relatively new policies were put forward for the purpose of stimulating further use of renewables in the near coastal provinces.

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Planning Offshore Wind Power Farms China’s offshore wind resources are abundant. Most of the resources are concentrated in the coastal areas of East China, especially in Shandong, Jiangsu Province and Shanghai. Because of their wind resources and the broad coastline, these administrative units have been considered to be the pioneering area for developing such projects [17]. In the Medium and Long-Term Development Plan for Renewable Energy, the National Development and Reform Commission set a goal of building a 1000-MW-scale offshore wind power farm by 2020. An important policy measure relevant to offshore wind power development is the Provisional Rules for the Administration of Offshore Wind Power Development, which was jointly released in 2010 by the NDRC under the National Energy Administration and the State Oceanic Administration. The regulation aims to guide and regulate offshore wind power development. According to the rudimentary plans of certain key coastal provinces, the installed capacity of offshore wind power should reach 10,000 MW by 2015, and by 2020, the installed capacity should reach 32,800 MW of offshore wind power [17]. Being part of the strategic industry, the planning of offshore wind power began in 2007. The first of these testing projects was installed by Goldwind on the offshore oil platform in Shandong in 2007 and was intended to complement the mainstream onshore wind power generation. In 2010, the government further encouraged Sinovel to complete the grid integration of the demonstration project, Shanghai Donghai Bridge Offshore Wind Power. In May 2010, the NDRC held a first round of offshore wind power concession bids for four construction sites located in Jiangsu Province [18]. It was estimated that a total of 1 GW of capacity would be generated after the project’s completion [19]. However, difficulties have plagued the local economic actors, and this is a political problem beyond the technical level, resulting from the different and conflictual understandings of sea use in the context of business development [20], which has brought about uncertainty and has heightened risk for developers and potential investors. In fact, as stated in the National Renewable Energy Industry Development Report 2015, compiled by the National Renewable Energy Centre, there is a lack of in-depth research on the impact of offshore wind power development on marine ecology, maritime traffic, fishery breeding and military aspects, which has resulted in governmental apparatuses responsible for marine fisheries, maritime and military becoming concerned. Due to such concerns, no tender has started construction, although the first round of offshore wind power bidding has been completed [20]. Furthermore, the supporting industries of offshore wind power development, such as equipment inspection and verification, offshore construction and operation services systems, have not yet matured. The above-mentioned dilemma implies that the coherence on the formation of the offshore wind power policy development is not in place. This seems to explain why

economic actors in the field tend to seek implicit contractual contracts as political umbrellas to reduce the perceived risks of their investment under policy uncertainties. With respect to the short history of the development process of wind power deployment, one feature worthy of note is that a sort of intra-institutional network has emerged in which state-owned enterprises seem to dominate the market, as many commentators have found in the governance structure of the eastern region [9•, 17, 21]. In the last 10 years of investment trends, we have seen a pattern of cooperative relationship emerging between developers-as-bidders and equipment manufacturers, and these relationships combine to form myriad patterns of state-state or state-private collaborations [21, 22]. Such governance structures entail a sort of ‘harmonious’ relationship, containing, for example collaborations between state-owned groups, shareholders and subsidiaries. These relationships, while contributing to the rapid development of effective provisions, imply the potential problem of a lack of competition [21]. That being said, a lack of competition to some extent will inhibit the ability of endogenous innovation, as large-scale projects such as offshore wind power in particular require higher costs to complete the process, from offshore drilling to grid integration.

Localisation of Solar Power Market After discussing the long-delayed offshore wind power, in this section, another important renewable energy field— solar equipment manufacturing and distributed solar power—will be discussed [4, 23, 24]. In addition to offshore wind power projects, solar energy production is considered to be the field’s most important focus in East China. As local entrepreneurs, by their own initiative, and provincial government have consciously been increasing public and private enterprises’ development of solar equipment manufacturing in the past decade, the sector has undergone a process of innovative learning, which has allowed the local sector to become competitive in the global market [2, 25–27]. Thanks to the returning of overseas Chinese people who have established their enterprises and are continuing to gradually upgrade their technology and knowledge, companies headquartered in this regions have, in particular, managed to obtain market sales in overseas markets [3••, 28–30]. East China harbours the Yangtze Delta Region, which contains a manufacturing cluster in which state-owned and private enterprises have built their supply chain network, which has helped the technology industry to flourish [13, 17, 31]. In East China, many manufacturers supplying goods to the global market are located in his region, such as Trina Solar, JA Solar and China Sunergy. It is worth mentioning that these private companies are listed in New York and have become

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the main supplier to the advanced market economy [3••, 32] due to the rise of European and American solar energy use before 2012 when the USA placed tariffs on China’s solar products [33]. However, scholars have indicated that the key comparative advances that Chinese enterprises have in terms of the rise of the solar manufacturing industry are not due to cheap labour but due to flexibility of innovation—that is, the ability to quickly provide low-cost design products with strong operability [29, 34]. Such innovation focuses on applicability rather than quality. Driving these innovations is local firms’ rapid learning ability and the hunger to acquire foreign technologies and knowledge [29, 35–38]. However, the learning process has evolved, shifting from one-way technology transfer to co-innovation, as Jonas and Steinfeld indicate China is moving beyond our established understanding of technology learning, because, in the renewable energy manufacturing industry, the country has emerged in a unique way, focusing more on providing innovation in final products and processes. This innovation can be seen as a new capacity to link upstream design with mass productibility. Enterprises and multinational talent have all participated in the knowledge exchanges, which has become a common learning process in this field [29, 39]. That been said, the manufacturing industry has faced more and more challenges in recent years. With the slowdown of the policy of subsidies in the EU and the Chinese government’s conscious avoidance of introducing energy from abroad, from 2012 onwards, the Chinese government started to increase its efforts to cultivate domestic solar energy market development with the increasing support of policy. Installation of solar technology was then able to achieve a great leap [34]. In this process, some of the eastern provinces are regarded as the focus of solar energy installation; the state has been encouraging local electricity consumption and distributed solar energy installation, and this has therefore become the focus of experimental policy.1 It seems that the government is using this strategy to solve the problems of the PV industry, namely, overcapacity and over-reliance on the export revenue of foreign markets [40, 41]. The data from 2014 shows that grid-connected distributed photovoltaic power reached 16.6% of the total capacity nationally. Figure 1 indicates that the top ten administrative units are mostly located in East China, where urbanization is relatively high. As of the end of 2014, in terms of the cumulative installed capacity, six administrative units were located in East China: Jiangsu, Zhejiang, Shandong, Jiangxi, Anhui and Shanghai [42]. Most of the distributed solar power is installed in industrial parks, which, similarly, are also mainly located in eastern areas. 1

Distributed PV refers to a particular type of solar energy installation with the characteristics of self-construction and self-sponsorship. Their installation in a vast number of towns and rural areas where various buildings and public facilities may be available for usage has been encouraged.

90 80 70 60

85 69.51

50 40 30 20 10

50 38.41 29

27

26

25.46 18.17

16.3

0

Fig. 1 The accumulated installed capacity of distributed solar power in the top ten administrative units in China, 2014 (million kilowatts) [42]

As we can see, the government has been seeking to intervene by introducing new regulations to solve the problems of solar equipment manufacturing industry, but the development of the field still faces challenges. While the government has recently provided a feed-in-tariff policy for distributed PV solar energy, commentators note that its development is not in line with expectations. There are many reasons for this, such as the lack of a clear subsidy policy, backward technical standards, a stringent approval process and the lack of clear and explicit regulations on how to connect the distributed solar power to the grid [23, 43]. These problems particularly affect the levels of electricity distribution and transmission. In fact, the above-mentioned policy uncertainty has exacerbated the investment risk of small- and medium-sized economic actors who have been struggling under the framework of China’s state capitalism. Their pressure has been increasing, especially in terms of dealing with banks; they have more difficulties obtaining loans, as state-owned enterprises enjoy the privilege [11, 44, 45]. Although the National Energy Bureau and China Development Bank have explicitly announced further support, the absence of detailed supporting policies and the fierce competition have meant that many small and medium distributed PV application programs do not receive a favourable credit rating [24]. It can be said that in the distributed PV industry, the profitability of private enterprise and a business model have not yet become established [23]. Generally speaking, the introduction of distributed solar energy deployment has occurred against the backdrop of electricity reforms that seek to encourage market competition. In so doing, the government has introduced a series of policy reconfigurations, incrementally adjusting the pricing regime in order to break the previous state monopoly in the power sector.

Conclusion In this report, the recent literature on renewable energy development in East China over the past 5 years has been reviewed,

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focusing on two new policy areas that the central government considers to be experimental. With regard to the development of the field, the recent findings suggested that the government and entrepreneurs have collaborated closely to utilize the resources for the future of the project, although some administrative challenges lie ahead. First, offshore wind power, as an abundant renewable resource in East China, seems to be a sufficient resource for fulfilling local demand. However, due to a lack of understanding of the value assessment and administrative division of the resource, inter-sectoral disagreements have delayed the vigorous development of the sector. In addition, in the manufacture of solar energy equipment and distributed solar power, we have seen the introduction of relevant incentives (although slightly late), but, in response to such systems, economic actors are still hesitant, making the progress slower than expected. In response to these questions, the central government should perhaps be more decisive in sending clear, appropriate signals to participants while proposing long- and short-term technology regulations that support the renewable industry in reducing the perceived risks and continually nurturing participants’ enthusiasm. Although an increasing number of sustainable policy incentives have been implemented to encourage the new experimental projects [46–50], the business environment, particularly related to the above-mentioned sectors, is still not conducive to new smalland medium-sized private companies to enter the market. The performance of the offshore wind power and distributed solar sector has thus far lagged behind previously successful sectors such as large-scale wind power projects.

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15. Compliance with Ethical Standards 16. Conflict of Interest Geoffrey C. Chen declares that he has no conflict of interest. Human and Animal Rights and Informed Consent This article does not contain any studies with human or animal subjects performed by any of the authors.

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