The Renewable Energy Law in China

Coal rules but diversification has begun

China is known for relying on coal. Coal is abundant and cheap, so new coal plants were considered the best way to keep up with the rapidly increasing energy demand (an increase of 65 GW in 2005 alone). The result is that today, coal constitutes 80% of the country’s total fuel mix. But to ensure energy security and to cope with environmental issues, China has recognized that it has to diversify this mix. The Law on Renewable Energy went into effect in early 2006 and urges accelerated development of solar energy and wind power. It is one of the largest state-sponsored commitments to renewable energy. The intent is that by 2020, 10% of China’s generating capacity will come from renewable sources. This figure does not include large hydroelectric projects such as the Three Gorges Dam.

China’s generating capacity surpassed 500 GW by the beginning of this year. This figure is expected to grow to 950 GW by 2020. Viewed from this perspective, the growth from almost nothing to 10% of the generating capacity becomes hugely significant. This law could well have a profound impact on the global renewable energy industry.