China to Spend $265 Billion on Renewable Energy by 2020

China plans to invest 2 trillion yuan ($265 billion) in renewable energy by 2020, most of it corporate cash, to wean itself off polluting coal as it aims for cleaner growth, a top energy planner said on Tuesday.

Chen Deming, vice-chairman of the National Development and Reform Commission, added that China aimed to be using domestically made and designed equipment by then, which could cut prices for clean energy worldwide.

"We expect the majority of the funds to come from companies," Chen said when asked about the 2 trillion yuan forecast.

The cash would help China meet its target to boost the portion of its energy that comes from renewable sources to 15 percent by 2020, up from 7.5 percent in 2005, as it wrestles with the legacy of decades of promoting growth at any cost.

Of around 1 trillion yuan slated for spending on pollution reduction and energy efficiency goals for 2010, 80 percent would come from companies and just 10 percent from central government with local authorities and others making up the rest, he added.

Over half the proposed investment will go into large dams, which environmentalists criticise and some scientists believe are a significant source of greenhouse gas methane.

But Chen said the benefits of dams outweighed their costs.

"According to our experience, we know large scale dams can have some environmental impact, but more importantly such projects make a contribution to our energy (mix) and reducing atmospheric pollution," he told a news conference at the launch of a medium and long-term development plan for renewable energy. The impacts of pollution and shortages of water have hampered investment and led to social unrest in some areas of China, while a recent survey showed poor air quality in Hong Kong is making it hard for companies to attract foreign staff.

Beijing is also coming under increasing international pressure to curb its emissions of greenhouse gases, expected to overtake those of the United States this year -- although on a per capita basis these are far below developed world levels.

Tax and fiscal policies will support the shift to cleaner energy, together with new rules for companies, which are expected to come up with most of the cash.

Power firms with over 5 GW of generating capacity have to get at least 3 percent of energy from renewable sources by 2020, Chen said, when asked about the role of large companies.

And China's central bank has already added the energy consumption and pollution records of over 12 million firms to a nationwide credit database as part of a push for greener growth, state media said on Tuesday.

Biomass, Wind

Biomass energy, particularly for power generation, plays a large role in the plan, which targets generating capacity of 30 gigawatts by 2020 -- the same as a wind energy goal that campaigners and even Chen's commission have said is unambitious. Based on experience in the European Union and China's actual situation, the country was capable of lifting its wind power capacity targets to 10 GW by 2010 and 80 GW by 2020, the NDRC said in a report released in June.

Chen admitted that China already has almost 5 gigawatts of capacity -- the country's 2010 target -- either built or under contract.

But he said that the country did not plan to change a bidding system used to set wind power prices and award contracts, which critics say is stunting the sector's development.

He also rejected short-term reforms to China's system of state-set power prices, saying higher tariffs would encourage construction of more coal-burning plants, rather than foster development of renewables.

The country is struggling to stop illegal construction of new plants, most of them coal-burning, as the national grid cannot always meet booming demand.

The plan also called for investment in solar, geothermal and tide energy, but all will make relatively small contributions to meeting China's ravenous appetite for energy.

Copyright 2009 Reuters. Click for restrictions.