Delivering clean energy: Why policy matters

Updated: 2012-11-30 09:53

By Priya Barua (China Daily)

  Comments() Print Mail Large Medium  Small 分享按钮 0

Getting the fundamentals right is the path to success as china and germany have shown

The global renewable energy industry has experienced dramatic growth in recent years. Renewable energy capacity, excluding hydropower, has more than doubled since 2005.

Last year new clean-energy investments reached a record $257 billion (198 billion euros), a six-fold increase from 2004, and about half of the world's new electric capacity came from renewable sources.

These gains came despite the tumultuous backdrop of a global financial crisis and a rapidly changing clean-energy technology industry, one that is experiencing increased global competition, rapidly falling industry prices and oversupply in the solar photovoltaic and wind sectors.

However, the benefits of the clean-energy industry have not been shared evenly around the world. A new working paper by the World Resources Institute, Delivering on the Clean Energy Economy, shows that countries have varied widely in their success of growing renewable energy industries that achieve both global competitiveness and domestic benefits. The main reason for this variation lies in the types of national policies in place.

According to the institute's research, countries that have been successful with their clean energy development have:

Taken a comprehensive approach, integrating policies at a national level;

Sustained policies in a predictable manner, so they have an established lifetime of at least three to four years to enhance industry certainty;

Implemented targeted policies, ones that address the needs of different technologies and target the needs of the entire value chain.

Key insights in the research include:

1. Countries with comprehensive, predictable and targeted policies have had the biggest increase in domestic installations and manufacturing capacity.

This trend is seen in both Germany and China, where supportive policy frameworks are integrated into national economic and energy plans that have a life of at least five years. These policies target cost reductions along the entire value chain, from manufacturing to installation, rather than simply subsidizing clean technology costs. In the solar photovoltaic sector, for example, both countries have created a positive feedback loop where relatively low and declining solar system prices are fueling annual installation rates that are three to seven times higher than in Japan or the United States.

In turn, this situation is helping their domestic solar industries continue to reduce costs. It also keeps their impact on energy costs down.

2. Differences between solar photovoltaic and on-shore wind highlight the limitations of one-size-fits-all clean energy policy approaches.

Both the solar photovoltaic and on-shore wind industry value chains can be divided into upstream activities, related to research and development and manufacturing, and downstream activities, related to installation and electricity generation.

For the solar photovoltaic industry, because of the international tradability of most solar photovoltaic components, building a domestic manufacturing sector appears to be only loosely related to domestic installation support policies. So it is important for policies to explicitly target both portions of the value chain.

The institute's analysis reveals that stable, well-designed national installation support policies that drive down average system prices are crucial to driving the highest annual installation rates, which is seen in both Germany and China. Successfully increasing domestic manufacturing capacity, on the other hand, seems to require building a competitive advantage either based on price or on high-quality, high-performance products.

For example, Japan, with the highest average solar module prices, has managed to maintain annual module manufacturing production comparable with Germany and double that of the US by building on its quality advantage. While competitors of the US have taken more deliberate and active policy approaches, it has had a largely passive approach to manufacturing, with short bursts of national investment and policy support. This approach seems to have been less effective in the context of global competition, delivering the smallest national manufacturing capacity of the study countries.

For the on-shore wind industry, the institute's analysis reveals that policies supporting domestic installation are fundamental for building both upstream and downstream domestic industries, largely due to the high costs associated with trading wind turbine components. Further, policy stability seems critical for driving growth in domestic wind manufacturing industries.

For example, significant additions of domestic manufacturing capacity in India, China and the US all followed the introduction of support policies that had at least a three-year time horizon. Short-term installation support policies delivered installations, but manufacturing capacity was slow to develop in all three countries until long-term policy was established. In the US, the advantages of spending more on wind research and development than any of the other countries analyzed also seems to have been undercut by unpredictable market support policies, and it is the only study country that remains a net importer of wind equipment.

3. Considering solar and wind's entire value chain, both upstream and downstream activities, is important, as economic benefit opportunities extend beyond the manufacturing sector.

In designing support policies for clean-energy industries, considering the entire value chain is critical, as significant economic opportunities lie beyond the manufacturing sector. Although limited comparable data on job estimates was available across all five countries, the evidence suggests that 50 to 60 percent of jobs for both technologies lie outside manufacturing.

The story is still unfolding in the dynamic solar and wind industries. Looking at historical evidence to see who has been the most successful to date and being the next country to do it are two different tasks. However, the paper's findings provide a useful guide for policymakers: By understanding enabling conditions that support clean-energy growth and industry competitiveness, policymakers can continue to pursue renewables and the economic development opportunities they offer.

The author is an associate in the Climate & Energy Program, World Resources Institute. The views do not necessarily reflect those of China Daily.

(China Daily 11/30/2012 page9)