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  • The next Industrial Revolution will be people powered

    The next Industrial Revolution will be people-powered

    Miguel Mendonça

    5th November, 2009

    Switching to decentralised renewable energy doesn’t just mean a new source of power – it means a revolution that will be both social and economic

    The way the world appears to work is as follows. Those with influence, generally at the centre of concentrations of wealth and power, are able to influence public policy. This goes deep into the core mindset of the policymaking machinery, and shapes whole nations on many levels. Contemporary governments in industrialised nations have become little more than facilitators for big business – businesses so big that they have little-to-no national allegiance, sometimes become ‘too big to fail’ and can hold governments to ransom over the creation of conditions wherein they will deign to operate and provide jobs.
     
    Dealing with such disempowering and destructive power relations is critical, and some have suggested that decentralised energy may play a key role. But the transition may be more difficult than ‘simply’ swapping the energy sources we use to power the whole show from conventional to renewable.

    The good news is that in doing so we can not only begin to get at the roots of some key problems of the modern world, but also create a whole swathe of positives that conventional energy generation can never achieve. 

    First, it can allow true citizen and community participation in climate- and environment-protecting activities.

    Secondly, renewable energy involvement creates an automatic awareness of, and hence improvement in, energy efficiency.

    Thirdly, the awareness-raising and job and industry creation that it drives creates a much wider stakeholder group in the proliferation of green policies and practices – no longer will decisions be made solely by a clique of policy wonks and industry reps.

    Fourth, it creates a democratisation of energy production, which can break up the monopoly stranglehold on markets and allow more innovation and progress.

    Fifth, it controls long-term energy costs, protecting against supply interruption, especially through geopolitical influence.

    And sixth, the creation of a new industrial economy, based on renewables and their attendant technological, supply chain and service requirements, can generate enormous earnings, exports, tax receipts and other economic activity. 
     
    When steam engines, computers and mobile phones were first developed, the potential was regarded by many as fairly niche, being outside of their direct experience. As technology, knowledge and experience developed, people far and wide began to understand how this could benefit them, and how they could profit from it.

    A whole new energy system, from domestic to large-scale applications, will yield a fantastic array of possibilities, not just in products and services, but in the embedding of direct knowledge and experience throughout society. The feed-in tariff policy which I wrote on, then campaigned for, will come into force in April 2010 in the UK. This will allow anyone to invest in small-scale renewable energy generation and get a guaranteed return for the energy they feed in to the grid. This is a perfect example of an empowering policy which promotes engagement with these issues and possibilities. The interaction and benefits of all of the above can be illustrated in the diagram below.

     
    What is needed next is this integrated move to a renewables-based economy and society. It will require several key features.

    Somewhere near the top would be that old cliché, joined-up thinking. Departments need to collaborate with all relevant stakeholders to produce a concrete plan – accounting for technology, infrastructure, institutional operation, administration, public participation, funding, public and private sector collaboration, and other key considerations.

    Mixed messaging from government must end. One cannot vigorously promote energy saving light bulbs as well as airport expansion without expecting to confuse and disillusion people. 

    NGOs and other civil society actors are more trusted sources of information than government, to my understanding, so they can work together on bringing the critical awareness and information to society at large.

    We need to make clear decisions on which technologies to support (given their infrastructural needs), as well as leave the door open for innovation. We need to connect top-down policy with the emergent bottom-up movement, typified by the Transition movement, and remove the political ceiling on which they keep hitting their heads.

    Our world is merely a construct, however complex. It is shaped by many things, but we can reshape it if we choose to do so. We can move from centralisation to democratisation, disempowerment to empowerment, confusion to engagement, and get where we need to go in time.

    Miguel Mendonça is a researcher, author and campaigner. His new books are A Renewable World – Energy, Ecology, Equality (Green Books, £14.95) and Powering the Green Economy: The Feed-in Tariff Handbook (Earthscan, £24.95). You can order A Renewable World at the special price of £12.95 (post-free in the UK) from Green Books’ website using the offer code ECORW, or phone 0845 4589910 quoting the Ecologist reader offer. All major credit cards accepted.

  • Peak oil before 2020 a ‘significant risk’, say experts

    Peak oil before 2020 a ‘significant risk’, say experts

    David Strahan

    8th October, 2009

    A new report highlights how woefully unprepared the Government is for a looming peak in oil production

    There is a ‘significant risk’ that conventional oil production will peak before 2020, and forecasts that delay the event beyond 2030 are based on assumptions that are ‘at best optimistic and at worst implausible’.

    So says a major new report that puts the excitement over recent ‘giant’ oil discoveries into perspective and directly contradicts the British government’s position. It also warns that failure to recognise the threat of peak oil could undermine efforts to combat climate change.
     
    The report, entitled ‘Global Oil Depletion: An assessment of the evidence for a near-term peak in global oil production’, comes from the UK Energy Research Centre, an independent group funded by the Research Councils, whose mission is to resolve contentious technical issues and deliver clear guidance for policymakers.

    This report is significant because it is the first dispassionate academic attempt to reconcile the highly polarised debate over whether and when oil supplies will start to decline, yet its conclusions chime with a growing number of recent forecasts that warn of an early peak in production.

    ‘This is an important conclusion,’ says Steven Sorrell, of Sussex University’s Science Policy Research Unit, and lead author of the report, ‘because the worst impacts of oil depletion could come sooner than the worst impacts of climate change. Both are important, but depletion has been largely ignored by policymakers’.

    What’s the evidence?

    The UKERC set out to assess the evidence that conventional oil production will be limited by physical depletion of the geological resource, as opposed to ‘above-ground’ constraints such as a lack of investment or resource nationalism, before 2030.

    After reviewing the data, they found there were large uncertainties, and that peak oil forecasting techniques were often too pessimistic about future supply. Yet they concluded the information was good enough to assess the risk of global oil depletion, and that the peak of conventional production was ‘likely’ before 2030.
     
    The main reason is the relentless treadmill imposed on the industry by the falling output of most existing fields, as a result of falling reservoir pressures and a long-term decline in the size of the fields being discovered. The UKERC found that total production from existing fields is declining at 4 per cent or more each year, meaning the world has to add 3 million barrels of daily production capacity annually just to stand still, equivalent to developing a new Saudi Arabia every three years. This will present ‘a major challenge, even if ‘above-ground’ conditions are favourable’, says the report.

    Once the economy comes out of recession, satisfying demand growth would usually require another 1 million barrels of daily production capacity each year.

    The report also puts the breathless reporting of recent discoveries in the Gulf of Mexico and offshore Brazil into a more sober context. BG’s Guara field, discovered last month, contains 2 billion barrels of recoverable oil and was lauded as a ‘supergiant’, prompting some pundits to claim such finds would banish peak oil for decades.

    However, the UKERC argues that each additional 1 billion barrels delays peak oil by less than a week. To postpone the peak by a year would take 7 times what was discovered in 2007. ‘We’re unlikely to explore our way out of this,’ says Sorrell.

    Heads in the sand

    The report also implicitly challenges the British Government’s position on peak oil. In response to an online petition last year, the Government insisted there is enough oil for the ‘foreseeable future’, and that reserves will meet rising demand until ‘at least 2030’.

    The Government also refuses to conduct a risk assessment that peak oil might come before 2020, despite maintaining a comprehensive risk assessment and rapid response network for an outbreak of smallpox, which it admits has already been eradicated.

    But the UKERC concludes the risk of a conventional peak before 2020 is significant and, given the long lead times needed to develop alternatives, requires serious consideration.

    ‘If you don’t even recognize the problem you will inevitably be unprepared,’ says Sorrell. ‘The Government needs to wake up to oil depletion and start planning, because it’s going to mean major changes infrastructure, investment and lifestyles’.

    The Government bases its view on the work of the International Energy Agency, which forecasts conventional oil will peak in 2020, but which argues that rising output from non-conventional sources, such as the Canadian tar sands, will push the overall production peak out to ‘around 2030’. The UKERC report does not address the potential for non-conventional oil, but the numbers in the report show how unlikely it is that they will defer the peak for long, because of the sheer size of the hole left by conventional depletion.

    The UKERC report shows that two thirds of current oil production capacity – 60 million barrels per day – must be replaced by 2030 before allowing for demand growth. By contrast, non-conventional resources are expensive and difficult to produce and unlikely to expand by anything like that much. One of the most optimistic industry forecasts for tar sands production, for instance, from energy consultancy IHS CERA, shows output reaching 6.3 mb/d by 2035.

    ‘But by then we’ll need to add around ten times that much capacity without allowing for any growth in demand,’ says Sorrell, ‘so it’s very hard to see non-conventionals riding to the rescue. We haven’t demonstrated it in the report, but I think it’s likely that conventional peak oil will turn out to be peak oil full stop’.

    Peak oil: bad for climate change?

    As the UN climate talks in Bangkok reach their climax tomorrow – the penultimate round before the crucial Copenhagen summit in December – the UKERC warns that running short of oil may actually be bad for global warming. The report notes that climate policy assessments generally make no reference to oil depletion and frequently rely on optimistic oil price assumptions, which Sorrell says are unjustified. Further oil price spikes could tip the economy into recession again, sapping climate change efforts to mitigate climate change of political will and financial resources.

    Peak oil could also hamper attempts to mitigate climate change by creating a strong incentive to exploit vast deposits of carbon intensive non-conventional oils – even though they are unlikely to fill the gap in time.

    The report comes amid a growing consensus that the oil supply will fail to meet demand far sooner than 2020 for ‘above-ground’ reasons. Both the IEA and Christophe de Margerie, chief executive of Total, have warned of a supply crunch in the next few years as demand recovers, because of shrinking investment in new production capacity following the collapse of the oil price. Bankers Morgan Stanley recently predicted that tightening supply will push oil price back up to $105 per barrel by 2012, while analysts Douglas-Westwood have noted that an oil price of more than $80/bbl sends the US into recession.

    Welcome words

    The UKERC report has been broadly welcomed by depletion experts, who urged the Government to act on it. Christopher Patey, chairman of the Oil Depletion Analysis Centre, and a former executive with Mobil, said ‘this excellent report exposes the British Government’s position on peak oil for what it really is – obstinate denial in the face of the growing evidence, and a reckless gamble on all our futures’.

    Jeremy Leggett, convenor of the UK Industry Taskforce on peak Oil and Energy Security, said:
    ‘Having rejected the concerns of a cross-section of British industry about a peak in global oil production in the next decade, hopefully the government will listen to the concerns of the country’s premier energy research establishment.’

    ‘This is the right report at the right time,’ said Bernie Bulkin, Energy and Transport Commissioner at the Sustainable Development Commission and former chief scientist for BP, who introduced the report at its launch yesterday. ‘The Government should look at how we can run our economy effectively and efficiently without oil,’ he said in an interview. ‘It means electrification of road transport, and then making electricity zero carbon’.

    A spokeswoman for the Department of Energy and Climate Change said: ‘Government met with UKERC in July to discuss their initial findings – we’re interested in their report and will assess their conclusions closely’.

    David Strahan is author of The Last Oil Shock, a trustee of the Oil Depletion Analysis Centre, and served on the Expert Group of advisors to the UKERC report.

    See also

     

  • CARBON TRADING’ THE NEXT SUB-PRIME- NEW REPORT.

    Online video clip of report’s author, Sarah-Jayne Clifton, is available from the Friends of the Earth press office in London.

    Plans to expand carbon markets at UN climate talks this December could trigger a second ‘sub-prime’ style financial collapse and fail to protect the world from global warming catastrophe, a new report from Friends of the Earth warns today (Thursday 5 November 2009).

    ‘A Dangerous Obsession’ focuses on the buying and selling of a new artificial commodity – the right to emit carbon dioxide – which the UK and other developed country governments want to see expanded into a massive worldwide market and are pushing in the negotiations running up to the big Copenhagen climate talks in December.

    The trade in carbon permits and credits, mainly based in Europe, was worth $126 billion in 2008 and is predicted to balloon to $3.1 trillion by 2020 if a global carbon market takes off.

    But the majority of the trade is carried out not between polluting industries and factories covered by carbon trading schemes, but by banks and investors who profit from speculation on the carbon markets – packaging carbon credits into increasingly complex financial products similar to the ‘shadow finance’ around sub-prime mortgages which triggered the recent economic crash.

    This risks the development of sub-prime carbon and the possibility of an eventual collapse in confidence in the market, with catastrophic consequences for the global economy and also for our prospects of avoiding runaway climate change.

    Friends of the Earth’s report warns that the UK Government’s obsession with carbon trading as a solution to climate change is high risk, irresponsible and dangerous.

    Existing carbon trading schemes are not delivering the emissions cuts promised, and relying on this mechanism to reduce emissions globally is gambling with the health of the planet and the future of billions of people.

    Carbon trading is also being used as a smokescreen by rich countries to avoid their legal and moral commitment to provide money and technology to developing countries to grow cleanly and adapt to climate change.

    The green campaign group is calling on the UK Government to use simple, direct and proven policy tools like regulation, a carbon tax, and major public investment in greening the economy to reduce our emissions by at least 40 per cent by 2020, without offsetting.

    Friends of the Earth’s international climate campaigner and author of the report Sarah Jayne-Clifton said:

    “Pushing a world carbon market as part of a global agreement to tackle climate change risks a double whammy of financial and environmental disaster.

    “Carbon trading is failing dismally at reducing emissions, yet allows speculators to grow rich from the climate crisis and hands politicians and industry a get-out clause for polluting business as usual.

    “Science tells us rich countries must act first and fast to cut their emissions at home if we are to avert climate catastrophe – and support poorer countries
    with adequate public money to grow cleanly and adapt to the effects of climate change which they are already feeling.

    “The credit crunch has taught us that Governments, not markets are best placed to safeguard our future – at this critical point in the fight against climate
    change Ministers must step in and lead the way with a new, direct approach to tackling carbon emissions to create a safe and green future for us all.”

    Friends of the Earth is demanding in the UK that the UK Government changes its approach to climate change and is asking everyone to sign its international petition to world leaders for a strong and fair climate deal at www.demandclimatechange.org .

    ENDS

  • A new Revolution: China hikes Wind and Solar Power Targets

     

    With renewable energy in China continuing to struggle to compete with cheap, coal-fired power generation due to the country’s coal reserves, over the last decade, China’s policy makers have made considerable efforts to expand its renewable energy sector. Such efforts are not only driven by pollution problems and pressure on the country to reduce greenhouse gas emissions, but also by the desire to reduce reliance on imported oil. Despite being the world’s fifth largest oil producing country, China is currently forced to import nearly half of its oil demand. As a result, ‘green power’ is viewed as an issue of long term energy security.

    Green Power as National Policy

    Since the commencement of China’s power industry reform in 2002, various policy plans, laws and regulations which specifically address the renewable energy sector have been published.

    The outline for the 11th Five-Year Plan for National Economy and Social Development, announced by the State Council in 2006, states that the government plans to accelerate the development of renewable energy sources and to increase the percentage of energy consumption from renewable energy generation. To realize this goal, the National Development and Reform Commission (NDRC) released its ‘Medium and Long-Term Development Plan for Renewable Energy’ in August 2007. The plan sets specific targets for 2020, such as 30 GW installed capacity for wind power, 300 GW for hydroelectric power and 1.8 GW for solar power, raising the proportion of renewable energy in primary energy consumption to 10% by 2010 and 15% by 2020. To achieve these objectives, the plan contains a commitment to invest approximately US$200 billion in the sector and establish a ‘mandated market share’ policy which sets targets for electricity from non-hydro renewable sources at 3% by 2010 and 5% by 2020.

    The most influential vehicle, however, for the promotion of cleaner energy technologies has been proven to be the Renewable Energy Law and its implementing regulations. The Renewable Energy Law came into effect in January 2006 and reiterates the importance of established and future medium and long-term targets set by government authorities for the development and utilization of renewable energies.

    The law itself contains a clear commitment to provide special funds and offers financial incentives to stimulate renewable energy development, including discounted lending, the details of which have been set out in various regulations. Amongst other measures, in May 2006, the Ministry of Finance (MoF) issued regulations to initiate a national programme and provide financial incentives to the renewable energy sector. Under these regulations, sponsors of renewable energy projects can apply for either donor funds or discount loans with the local department of energy and the local department of finance.

    Preferential tax treatment is also available: renewable energy projects are entitled to benefit from a 50% reduction of the VAT levied on electricity generation. In addition, current tax regulations provide tax concessions of a three year exemption plus three years taxation at 50% of the full tax rate for enterprises engaging in projects involving power stations utilizing renewable energy.

    Other important elements of the Renewable Energy Law include purchase obligations on the grid companies and a regime for feed-in tariffs.

    Thus, under the legislation, grid companies are generally obliged to purchase the full amount of electricity generated from renewable energy projects that are located in the areas covered by their grids and must provide grid-connection services and related technical support.

    The law further stipulates feed-in tariffs for renewable energies shall be determined by the relevant administrative authorities in accordance with the principle of promoting the development and utilization of renewable energy. In implementing these principles, different pricing mechanisms have been established for various types of renewable energy.

    For solar PV and solar thermal power projects, a feed-in tariff, based on the principle of reasonable production cost plus reasonable profit, is set by the pricing department of the State Council once a solar power project has been approved. Obviously, this approach does not provide a high level of certainty to investors as to whether a project will be approved; nor, once a project has been approved, as to whether it will receive a feed-in price allowing it to become profitable. However, the given reason for why this approach (rather than a guaranteed-margin price with the market determining project uptake) should be adopted is that solar power remains too expensive to be supported by set feed-in prices alone, given that such prices would require additional financial support, such as government funding.

    In 2001, a different approach was introduced by NDRC for large-scale wind energy projects through the concession project programme. In effect from 2003, essentially this concession model is a competitive tender system under which renewable energy developers must submit proposals for wind energy projects of 100 MW and above. The government selects potential investors through a competitive bidding process, taking power price and domestic content as the key criteria, and the purchase of all electricity generated by the project is then guaranteed through long-term power purchase agreements. The applicable feed-in tariffs are determined depending on two different periods during the project’s lifetime (typically 25 years): during the first period, the feed-in tariff is the bidding price proposed by the winning bidder up to an electricity generation level of 30,000 accumulative equivalent full load hours; thereafter, the feed-in tariff is set as the average electricity price of the local grid at that time.

    Most recently, however, a benchmark system has been introduced for feed-in tariffs for wind power. Under a circular issued by the NDRC on 20 July 2009, feed-in tariffs for wind power projects approved from 1 August 2009 onwards are fixed on a centrally-determined price basis. The circular divides China into four different types of wind-power resource areas, based on their wind resources, and stipulates different prices for each of these areas and ranging from 0.51 yuan/kWh for wind power in regions with the most wind resources, such as Inner Mongolia, to 0.61 yuan/kWh for regions with the least wind resources (US cent 7.5–8.9/kWh). Furthermore, according to a recent statement, NDRC is planning to establish a similar framework for large-scale solar PV projects soon.

    In the past, the concession model had been criticized for resulting in downward pressure, not only on price but also on quality. Although the Chinese government intended to select the most suitable wind farm developer by way of tendering, in practice, the main selection criterion became the lowest on-grid price offered, resulting in wind parks not operating profitably and in a lack of further capital investment and related research and development. The latest step of setting up fixed feed-in tariffs, which lie above the average offers of the successful bidders in past public tenders, is therefore seen as a measure to improve the quality of the installed turbines and to further attract investment and R&D in wind parks and their development.

    Solar tibetOther Influences on Development

    In order to achieve additional benefits, it is usually intended for renewable energy generation projects in China to be recognized and registered as Clean Development Mechanism projects, a mechanism established under the Kyoto Protocol. This has been of particular relevance for wind power generation projects. Once the project has been approved by the NDRC and registered with the CDM Executive Board (an international body set up by the United Nations Framework Convention on Climate Change), the Certified Emissions Certificates (CER) obtained can be traded on the secondary CER market.

    In addition, although not directly related to clean energy, clean energy projects have also benefited from China’s Property Law (promulgated in 2007) which largely improved the legal and regulatory environment for secured lending. The new law expanded the scope of security over property and provided for the definition of mortgageable assets to include any property, property rights and assets associated with property rights, unless specifically prohibited by laws or regulations. The new law also introduced the possibility of creating a security over present and future assets and effectively established the previously unrecognized concept of ‘floating charges’ in China. This new concept enables a renewable energy project lender to take a security interest over all of the project company’s assets then existing or thereafter acquired.

    The international financial crisis, which (because of its impact on export demand) has strongly affected China’s economy, has certainly also had an impact on the Chinese renewable energy sector.

    In particular, Chinese solar panel manufacturers saw dramatic changes. After years of unsatisfied demand, China’s PV industry, like so many of the country’s export industries, has been hit hard by diminished overseas demand and the lack of a domestic market. According to some reports, 50%–90% of China’s estimated 350 – 400 solar PV manufacturers have gone out of business since October 2008.

    In the wind power sector, declining prices for CERs caused some foreign companies to exit the Chinese wind farm development business. This exodus is largely explained on the basis that oil prices declined, credit became increasingly difficult to obtain (and costly to acquire) and an overall reduction in energy use occurred together with falling power prices throughout China.

    Mandated Markets

    Despite this confluence of events, the impact on the domestic wind power industry has been limited. In part this is attributable to the fact that the development of the Chinese wind industry is in large measure directed by the central government and 80% of the market is concentrated in large state-owned enterprises. Furthermore, the decision of the Chinese leadership to forge ahead with renewable energy development has also played its part in allocating a reported $146 billion (out of the $590 billion economic stimulus fund announced by the Chinese government in November 2008) to the renewable energy sector.

    In line with this, chief policy makers have been recently cited as saying that the NDRC is in the process of drafting a plan for the development of the renewable energy sector, revising earlier targets and now contemplating targets which are more than threefold the level of these earlier versions. Officials have stated that the new goal for 2020 could amount to as much as 100 GW installed capacity for wind energy (as opposed to 30 GW in the 2007 plan) and 20 GW for solar energy (as opposed to 1.8 GW in the 2007 plan). The plan has, however, not yet been published and its details remain opaque.

    Nonetheless, according to statements made by government officials in May this year, the National Energy Bureau has finalized a solar energy promotion plan which aims to turn China into a leading global harvester of the world’s most abundant energy source. Given the confluence of lower production costs and a decreasing overseas demand, such a plan would represent a welcome boost for domestic solar deployment.

    However, concerns remain as details of the plan are yet to be made public as REW goes to press For example, although in March 2009 the government thrilled the industry with a pledge to subsidize roof-mounted panels, it has still not made clear whether such subsidies were a one-off or a permanent programme. Some industry reports then stated that the budget for such subsidies is to be capped at yuan 2.5 billion ($366 million), limiting installations under the programme to around 180 MW. In addition, the announcement failed to explain whether and how projects under the subsidy programme would be linked to the electricity grid.

    Even more ambitious plans are in place with the government intending for it to be pushed forward through large-scale wind parks. According to reports, China plans to build seven wind power ‘mega projects’ with a minimum capacity of 10 GW each by 2020 in the provinces of Gansu, Hebei, Jilin, Jiangsu, Xinjiang and Inner Mongolia. Once completed in 2020, the seven bases will have a combined capacity of around 120 GW. This means that the government envisages wind energy to be a bigger source of power than nuclear power plants for which the capacity levels have been anticipated to reach around 60-70 GW by 2020. The earliest of these mega wind projects, a 10 GW wind farm in Juiquan, Gansu province, only recently received NDRC approval.

    Reports also stated that strong efforts to develop offshore wind power recourses are to be made. Given China’s long coastlines and vast oceanic areas, offshore wind power is seen to provide power to the economically well-developed eastern areas of the country which suffer from a shortage of fossil fuels. The construction of the Shanghai East Sea Bridge Wind Power Plant, where the first set of 34 wind power turbines began construction in March this year, is seen as a start for the development of offshore wind power generation.

    One of the remaining key issues which substantially impedes wind power generation is the deficient development of China’s power grids. The lack of a fully developed power grid in China causes difficulties in connecting the country’s wind farms which are mostly located in Inner Mongolia, Gansu and Xinjiang, with the wealthier, cities and towns on the east coast thousands of kilometres away. Recently, the Inner Mongolian government announced detailed plans to accelerate the construction of power grids and to increase transmission capacity. It is also expected that some of the funds under the central government’s stimulus package will go toward grid improvements and thereby facilitate the development of wind energy by supporting wind base projects located in remote areas.

    Turbines chineseForeign Investment Opportunities

    The enormous volume of the stimulus package announced by the central government in 2008 immediately raised hopes amongst foreign market players. However, foreign investments in this sector generally face a number of obstacles and uncertainty remains as to how much foreign companies can benefit from recent plans. Under the foreign guidance catalogue (a centrepiece of China’s foreign investment policy covering all industry sectors and specifically classifying investment projects into encouraged, permitted, restricted and prohibited categories), foreign investments in the renewable energy sector are mostly encouraged projects. Whereas foreign investments in power grids are restricted (a foreign investor can hold only a minority stake in a Chinese-foreign joint venture constructing or operating power grids), in particular the ‘operation of power stations using new sources of energy’ (including solar and wind power) belongs to the encouraged category. Principally, foreign investments into wind or solar farm projects as well as in the supply and manufacturing industry are therefore possible and can, in principle, benefit from the same investment incentives that are available for domestic companies.

    In fact, in the past, China’s wind power equipment manufacturing industry had been predominantly owned and operated by foreign companies. After several years of development, Chinese competitors caught up quickly and increased their market share to over 50% in 2007. This share is continuously increasing, supported by a policy implemented by the NDRC as early as July 2005 and which requires that 70% of the equipment for any wind farm project is produced in China. In addition, in April 2008, the MoF announced the elimination of tariff-free importation of wind turbines of less than 2.5 MW, a move further supporting the domestic wind turbine industry. At the beginning of 2009, international wind farm equipment manufacturers therefore raised their concerns. A statement by the president of the European Chamber of Commerce in China, who was cited in June this year saying that bidding criteria for wind projects were set in a way that made it difficult for foreign suppliers to win, caused some tension and was answered by Chinese trade organizations complaining about preferential treatment of foreign products by the authorities.

    It remains to be seen whether foreign market players in the wind manufacturing industry will be able to gain some of their earlier market shares back. Some hope comes from the most recent move towards a fixed price system for feed-in tariffs for wind power generation. Today, foreign wind farm equipment, although usually not capable of competing in price with Chinese products, is still generally considered to be at the forefront of technological development and preferable in terms of long-term cost efficiency. The latest introduction of fixed feed-in tariffs, aimed at improving the quality of the installed turbines, might therefore be generally welcomed by the international wind power manufacturing industry.

    Christian Zeppezauer is an Associate with Freshfields Bruckhaus Deringer LLP, Connie Carnabuci and Stuart Grider, both partners at Freshfields Bruckhaus Deringer LLP, also contributed.

    e-mail: christian.zeppezauer@freshfields.com, connie.carnabuci@freshfields.com, or stuart.grider@freshfields.com,

  • Fossil Fuel Subsidies more Than Double Those for Renewables

     

    More than half the subsidies for renewables—$16.8 billion—are attributable to corn-based ethanol. Of the fossil fuel subsidies, $70.2 billion went to traditional sources—such as coal and oil—and $2.3 billion went to carbon capture and storage.

    “The combination of subsidies—or ‘perverse incentives’— to develop fossil fuel energy sources, and a lack of sufficient incentives to develop renewable energy and promote energy efficiency, distorts energy policy in ways that have helped cause, and continue to exacerbate, our climate change problem,” said John Pendergrass, ELI senior attorney. “With climate change and energy legislation pending on Capitol Hill, our research suggests that more attention needs to be given to the existing perverse incentives for ‘dirty’ fuels in the U.S. Tax Code.”

    The subsidies examined fall into two categories: foregone revenues, mostly in the form of tax breaks and direct spending, in the form of expenditures on research and development and other programs.

    ELI researchers applied the conventional definitions of fossil fuels and renewable energy. Fossil fuels include petroleum and its byproducts, natural gas, and coal products, while renewable fuels include wind, solar, biofuels and biomass, hydropower, and geothermal energy production.

    For more information on the research from ELI, click here.

     

  • MIGRATION : THE TRUE STORY

     

    A predictable orgy of blame-throwing has accompanied the latest influx of boat people, an influx that followed changes in the policy and rhetoric of the Rudd Government, which announced it would use mandatory detention as a last resort.

    The term xenophobia has immediately been thrown about by the usual suspects, the refugee lobby, the human rights lobby, the utopian left and a predictable section of the media. The policy of detention has been portrayed as self-evidently cruel and discriminatory, and the bipartisan political support for a regime that acts as a deterrent to unauthorised arrivals has been presented as proof of this country’s latent xenophobia.

    Australia is not a xenophobic nation. The argument is nonsense. Let me count the ways:

    1. The number of refugees or humanitarian cases admitted by the Howard government was the highest of any government in Australian history, other than a brief spike after World War II. This legal intake did not generate significant public opposition or partisan division in Canberra. The number of humanitarian arrivals admitted during the Howard years was more than 128,000, says the field’s leading expert, Dr Katherine Betts.

    2. The number of Muslims admitted to permanent residence was far higher during the Howard years than during any other government. The Muslim population rose from 200,000, in 1996, to 340,000 in 2006, a 65 per cent surge in 10 years. (Figures again supplied by Betts.) This surge took place during a time of rising violence by militant Islamists, and the murder of scores of Australians by Islamic fundamentalists. Yet the historic increase in Muslim numbers via legal channels generated no meaningful political opposition.

    3. Australia has the highest number of foreign-born residents of any large, advanced Western democracy. The proportion is almost one in four. For years Australia has maintained one of the world’s largest per capita immigrants intakes, and the majority of arrivals have been non-European. Debate over immigration has flared only when the immigration stream has been abused by widespread fraud. The most sustained opposition has come from environmentalists concerned with sustainable growth.

    4. People who arrive by boat present a more confronting challenge to legal, security and health screening than those who arrive by air and overstay their visas. Arrivals by air must present valid documentation before travelling. It is common practice for those who arrive by boat to destroy their travel documents, and engage people smugglers, measures designed to create a fait accompli, and make it more difficult to send them back to their nations of origin. This makes a far more difficult and expensive process of checking arrivals’ legal, security and health status.

    5. The rigorous deterrence and screening of unauthorised arrivals is integral to national security. Some of those who have settled in Australia and later engaged in criminal behaviour or welfare fraud have arrived via the refugee or humanitarian programs. The screening process for such programs is more problematic. So, too, is the absorption process. A recent spate of convictions for terrorist activity within Australia has largely involved people who came as immigrants.

    6. The Tamil Tigers, whose campaign for independence from the central government in Sri Lanka led to a long and bloody civil war, have received considerable support from within the Tamil community in Australia. In April more than 1000 ethnic Tamils blockaded the gates of Kirribilli House, the Prime Minister’s Sydney residence, calling for a ceasefire in the Sri Lankan Government’s military offensive against the Tigers. The Sri Lankan high commissioner to Australia, Senaka Walgampaya, said the Tamil Tigers had received significant support from Australia, a view shared by Australian intelligence.

    7. The number of refugees or displaced persons in the world, more than 20 million, is roughly the same as the population of Australia, 22 million. Advanced economies could only accept all these people by incurring domestic social and economic costs, which they are not prepared to make. Immigration policies have ripple-on effects, hence the need for quotas.

    8. The Rudd Government deploys a zero-sum refugee policy. Although it increased immigration and temporary-working visa intakes, it maintained the annual intake of refugee/humanitarian at 13,500. Government policy thus dictates that those who arrive by boat and are given asylum status have displaced people who have registered with the United Nations or the government. The 13,500 annual refugee quota is a real waiting line of people with real needs. It is a queue that cannot simply be rendered invisible or irrelevant.

    9. UN laws and conventions pertaining to the treatment of asylum seekers have no override authority over Australian law. The concept of ”the international community” is no more than a rhetorical device. In reality the phrase refers to other like-minded human-rights activists overseas. Most democracies punish governments that fail the test of border security.

    10. The 78 ethnic Tamils who have illegally occupied the Australian customs vessel Oceanic Viking are demanding rights that do not exist under international law. Most have been in Indonesia for some time. They want to settle in Australia, or another wealthy country, but that decision is not theirs to make.

    The Oceanic Viking needs to be reclaimed, secured, prepared for sea, then sail for Sri Lanka with the 78 recalcitrants on board. They have rejected Indonesia. Anything less is a capitulation to moral blackmail, where children have been used as props and pawns. The impasse is not a test of rights but a test of wills. The prolonging of the Oceanic Viking saga has shown Rudd to be a man who seeks to be all things to all people.