China, Wind Power Domination, Isolationism and Global Conquest

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July 15, 2009

China, Wind Power Domination, Isolationism and Global Conquest

Energy Secretary Steven Chu and Commerce Secretary Gary Locke will land in Beijing today to plan for Copenhagen, and possibly attempt to diffuse a growing international trade dispute that could potentially empower the Chinese to dominate the global renewable energy market. Some critics believe that trade protectionism and over-reaching government subsidized projects are positioning China to be the primary economically viable supplier for blossoming green economies like the United States, Japan, and Eastern Europe.

China: Renewable Energy is a Strategic Industry

China's regulations for domestic development of green manufacturing is drawing parallels to the obstacles Japan and Korea set up to deter the sale of Detroit automobiles in their countries. The New York Times and the Union Tribune suggest that like the giant Japanese auto firms, China's protection of their clean-energy industry is an attempt to protect that sector until it can be unleashed on the global market as a world-dominating industry.

Proof of this could be China's Longyuan Electric Power Group, which was on record as having 2,630 megawatts of installed wind capacity at the beginning of 2009, and plans to grow that to 20,000 by the end of the year. This astronomical number dwarfs America's best efforts, such as T. Boone Pickens proposed wind farm in West Texas. Pickens' installation has been delayed due to funding concerns, but at completion will only have a 4,000 megawatt capacity which is far smaller than China's objectives. According to the Chinese Electrotechnical Society, there are currently six major wind farms under construction, each with a peak generation exceeding 10,000 megawatts, making them 6,000 megawatts more than what Pickens is calling for in the United States. China's 10,000 megawatt wind farms will thus become the largest in the world.

What is startling and shocking to those at Business Week and the Wall Street Journal is that Chinese power companies are actually posting losses when compared to last year, citing a decreased demand for electricity and weakening energy tariffs as the primary culprit. The research company IHS states that 95% of China's wind turbine and solar cell manufacturing is set for export, and that number will increase as the Chinese electricity transmission infrastructure and consumer demand struggles to keep up with supply.

According to Bloomberg, China manipulated their clean energy regulations to continue the growth of that sector beyond the country's needs. China revised their renewable portfolio standard to count their generation capacity instead of the actual power generated. This would allow electric power companies to buy droves of inexpensive wind turbines and solar panels that are prone to mechanical failure, as the power companies need only to own and install them, not necessarily operate them, in order to comply with government regulations. This change would give a competitive advantage to low-cost Chinese wind turbines, which a United Nations' carbon credits study generalized to be less expensive to purchase, but more costly to maintain than European and American competitors.

Chinese Trade Protectionism to Dominate Clean Energy?

Many groups, including the EU Chamber of Commerce and General Electric Wind Energy claim that unethical domestic favoritism and government regulation is making it nearly impossible for foreign enterprise to compete in the Chinese market. According to the EU chamber of commerce, not only must all wind turbines used in China be made with 70% Chinese raw materials, but 80% of all equipment in Chinese power plants must be manufactured by a domestic company. This leaves a very narrow window for foreign manufacturers to submit bids for future jobs. According to the New York Times, the six new wind farms that began construction this spring spawned over 30 contracts from green power companies, all of them won by Chinese companies.

“This is not a level playing field,” said Boris Klebensberger, the chief operating officer of the German company SolarWorld AG. His comments mirror the statements of Victor Abate, VP of General Electric Wind Energy: "That has been a tough market for non-Chinese manufacturers."

The Chinese government denied allegations of trade protectionism, which would be in violation of their WTO agreement that gives them low-tariff access to Europe and the United States. A statement by the Xinhua official news agency stated that China would not discriminate against foreign enterprises, though this contradicts a directive found on China's National Development and Reform Commission's website (only available in Chinese). A translation of this page reveals what China refers to as "economic management supervision." According to the document, seven local governments were found to be giving too much preference for non-domestic bidding, and would be forced to follow "regulations for economic growth decision-making." Businessweek contends that this equates to government oversight enforcing the purchase of domestic goods for infrastructure projects.

The Wall Street Journal reports that this may be a backlash for a number of similar violations that the United States has committed against the WTO agreement, including the "Buy American" clause in the US Economic Stimulus that requires all steel for infrastructure projects to be sourced in the United States, as well as a pair of damaging anti-dumping lawsuits against China's market-choking exports of cheap tires and steel springs.

Regardless of where the trade conflict originated, some feel that the Chinese renewable energy market is all but closed to outsiders. The President of the EU Chamber of Commerce in China stated that EU wind turbine manufacturers have stopped bidding for some Chinese contracts after deciding that their attempts are not even being considered. There are feelings in that office that competitive bids are being ignored, and contracts are being awarded to manufacturers who have no experience in the industry. The EU Chamber of Commerce also recognized the role that low-interest loans from government-run banks in China are taking in manipulating the market, allowing Chinese startups to compete against major world players.

“The Chinese government won’t consider such a big solar industry without considering the building up of the domestic industry,” said Lu Hong of the nonprofit Energy Foundation of Beijing.

EU Confident that Western Reputation for Quality will Prevail Against Green Chinese Manufacturers

Locke and Chu's primary reason for visiting Beijing today is to address China's involvement in the upcoming Copenhagen meeting in December, and the possibility of slowing the expansion of coal-fired power plants, which accounts for over 90% of China's baseline power as reported by Reuters. The EU Chamber of Commerce believes that they will continue to be competitive with Chinese green power, and that Western industry would be protected by their reputation for quality and reliability. Despite this, a recent regulation forbids the installation of wind turbines in China with a capacity below 1000kw, which serves to exclude all turbines built to the 850kw EU standard. This move by the Chinese government may force European companies to engineer the product to be a larger size, which would push Western clean energy even farther away from Chinese price points. The other option Western manufacturers have is to ignore the Chinese market, and only do business with the rest of the world.

SOURCE: http://www.ecofactory.com/

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