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Power companies learn how little contracts mean to government

South China Morning Post – Dec. 20, 2011

When is a contract not a contract? When it is signed with the Hong Kong government, if the experience of the power companies is anything to go by.

The request by the power companies to raise electricity tariffs is a golden opportunity for our unpopular government. It can portray itself as taking the side of the “people” against the “greedy” power companies. It’s true the power companies did extremely well out of the previous scheme of control. It permitted an annual rate of return on depreciated net assets of 13.5 to 15 per cent – double the rates of markets such as Australia and Britain and making Hong Kong one of the most profitable power markets in the world.

The new scheme of control, which came into effect in 2009, permits a return of 9.99 per cent on assets using conventional resources and 11 per cent on assets using renewable energy assets, together with financial incentives for exceeding emission targets or fines for missing them.

We may not like the scheme. The government talked of opening up the market to competitive tender but opted to stick with the present arrangements. Any tariff increase over 5 per cent is supposed to be approved by the Executive Council. But this spat was always a problem waiting to happen. The power companies have invested in scrubbers to clean up their emissions. The government has agreed on a formula with the power companies. The fact that people don’t like paying more for electricity is not by itself a valid reason for not raising tariffs. If the government can show that the power companies are fudging their figures, that’s a different matter – but they haven’t done that. Instead we have this gutless posturing because it doesn’t have the nerve to say that there is an agreed formula for adjusting rates.

The posturing from Edward Yau Tang-wah, the secretary for the environment, is even more stomach churning. This is a man who has steadfastly ignored the evidence that Hong Kong’s noxious roadside pollution is harming Hong Kong’s public health. But as soon as he gets an opportunity to gain some cheap publicity, he emerges from his bunker. Bravo. What sort of message does this send to anyone contemplating signing a contract with the government?

Rethinking a bright idea

South China Morning Post – 17 Sept. 2011

The government wants to phase out energy-sapping traditional light bulbs, but the alternative isn’t as friendly to the environment – or your health – as some say

It could be lights out for Thomas Edison’s light bulb.

Moves are being made around the world, including in Hong Kong, to ban incandescent bulbs on grounds they fail to meet today’s standards of energy efficiency. Many see the old-fashioned light bulb giving way to the compact fluorescent lamp, or even the light-emitting diode (LED).

These would-be replacements come with some complicated shadows. Compact fluorescent lamps contain toxic substances – bad for the environment and possibly your health. And LEDs are expensive.

Compact fluorescent lamps  undoubtedly save energy. They are as much as 80 per cent more efficient than incandescent bulbs. The fluorescents have become big sellers, their costs cut by mass production. At about HK$30 each, a compact fluorescent lamp will save enough energy to cover its purchase price in a year, according to environment officials.

That is part of the government’s argument for a proposal released last month to outlaw the supply of incandescent light bulbs of 25 watts or above if they fail a minimum energy efficiency standard.

But each compact fluorescent bulb contains 2 to 5 milligrams of mercury. People should limit their exposure to 1 microgram, or a thousandth of a milligram, according to widely accepted recommendations, says Ron Hui Shu-yuen, chair professor of the department of electrical and electronic engineering at the University of Hong Kong.

“Energy saving is not equal to environmental protection. If the environment is to be truly protected, air, soil and water all have to be covered,” said Hui, an award-winning researcher in lighting science.

If the lamp does not break, the mercury might not present any danger. But when shattered, it could pose serious health risks, Hui said.

“If it breaks, the first thing to do is to run away from it and open all the windows to improve ventilation. Don’t go near it for at least 15 minutes as the mercury will vaporise in higher temperature. The vaporised substance can easily find ways into your lungs and blood vessels and damage the central nervous system,” he said.

Hui said some officials refused to acknowledge the hazards by insisting the mercury level was too low to cause any impacts on health. But  increasing scientific evidence suggests otherwise.

According to a recently published article in Environmental Engineering Science, a broken compact fluorescent lamp, or CFL, can continue to  release mercury vapour for more than 10 weeks at a level that is a health concern for people. The research, conducted by Li Yadong and Li Jin, associate professors in the department of civil and environmental engineering at Jackson State University in Mississippi, is one of the original studies on the release of the toxic substance from a broken lamp. Eight compact lamps of four different wattages were tested. The mercury volumes contained in each of the sampled lamps ranged between  0.17mg and 3.6mg.

The scientists found that up to  86 per cent of the mercury could be released as vapour after the lamp was broken. In the worst case, it could take up to 128 days for all the mercury to escape fully into the air. The newer the lamp, the more mercury it could potentially release.

“The emission can last for weeks or even months,” the study said, “and the total amount of mercury that can be released in vapour from new CFLs can often exceed 1mg. Since vapour mercury can be readily inhaled by people, rapid removal of broken CFLs and sufficient ventilation of rooms by fresh air are critical to prevent people from potential harm.”

Citing another study in 2008, the researchers say the release of 1mg of mercury vapour into a 500 cubic-metre room can expose a child to   10 times the recommended limit.

Hui said the potential hazards could be even bigger in Hong Kong, where most indoor environments were sealed, no effective system for collecting used lamps was in place, and warnings and education on the safe handling of the devices left much to be desired. These lamps easily break when people throw them out in their building or on the street. There are no measures in place at landfills to prevent the release of  vapours and workers who collect rubbish are often unprotected from the hazards.

“I have told the government to start monitoring the blood of these workers who face a high risk of mercury poisoning, but apparently no one has listened,” Hui said.

At present, a chemical waste treatment plant in Tsing Yi is responsible for recycling the used lamps. It can handle about 400,000 fluorescent lamps a year. But that capacity fell far short of demand, Hui said. A spokesman for the Environmental Protection Department said the city currently had 900 collection points at residential estates and about 130 points in other places and it would continue to expand the network.

On its website, the department stresses that the amount of mercury in the lamps is small and unlikely to affect your health when they are broken. But the department does warn people not to vacuum pieces of a broken lamp and to use gloves to handle them. Pieces should be placed in sealable plastic bags for normal disposal.

Hui said the claim that fluorescent lamps were 80 per cent more efficient than traditional light bulbs needed to be placed in context. The amount of energy saved was tied to the lamps’ longer lifespan – up to 8,000 hours, he said. But in fact, improper use of the lights will often lead to early expiration. Hui said heat generated by the lamp could shorten the life of its capacitor, especially if the lamp was installed with it glass tube pointed downward.

The energy that went into making each lamp, including mining the heavy metals and making the circuits, also had to be considered  when thinking about the device’s efficiency.

Despite the drawbacks, Hui says fluorescent lamps are a key transitional product for saving energy before other devices – cleaner and greener – became widely available and affordable. But better measures are needed to govern the production and recycling of the lamps.

While the government is consulting the public about phasing out the older light bulbs, it is at the same time offering sizeable funds through the Environment and Conservation Fund to charities to encourage people to switch to compact fluorescent light bulbs or LEDs.

One of the charities, the Tai Po Environmental Association, last year distributed more than 20,000 compact fluorescent light bulbs to residents. Dr Yau Wing-kwong, an appointed district councillor who runs the association, said it had taught people about properly disposing of the lamps. “We believe there needs to be more publicity on responsible disposal,” he said.

2010 Budget Speech Excerpts

a world of green

Promoting Green Economy

89. In my last Budget, I proposed to promote a “green economy” and introduced a series of measures, including Hong Kong-Guangdong co-operation in environmental protection, the use of electric vehicles and promotion of green buildings. In his Policy Address, the Chief Executive further announced the development of environmental industries as one of the six industries and put forth initiatives in respect of the Cleaner Production Partnership Programme, the Clean Development Mechanism Projects, and Government Green Procurement. These initiatives have already been rolled out. In the next financial year, I will give further support in the following areas.

Pilot Green Transport Fund

91. To encourage the transport sector to test out green and low-carbon transport technology, I propose to set up a $300 million Pilot Green Transport Fund for application by the industry, initially by the public transport operators. I hope that this Fund will encourage the industry to introduce more innovative green technologies, such as the use of buses, public light buses, taxis, and ferries that employ green technologies, and help nurture the budding of green technology in Hong Kong.

92. The use of low-emission and energy saving transport will not only help improve roadside air quality, but also reduce carbon emissions and promote a low-carbon economy. I hope that the transport industry will actively try out innovative green technologies, contributing to better air quality and the health of people living in Hong Kong.

Phasing Out Old Diesel Commercial Vehicles

93. In 2007, the Government launched a scheme to subsidise the replacement of the more polluting pre-Euro and Euro I diesel commercial vehicles with newer models producing fewer emissions. The scheme will end this March. To continue to accelerate the phasing out of old diesel commercial vehicles, I will provide a 36-month subsidy scheme for the replacement of Euro II diesel commercial vehicles. The scheme will involve expenditure of about $540 million.

94. I also propose to accelerate the tax deduction for capital expenditure on environment-friendly vehicles. Enterprises can enjoy a 100 per cent profits tax deduction in the first year under the proposal. This will encourage the business sector to purchase more electric vehicles, hybrid vehicles and other environment-friendly commercial vehicles.

95. To promote the use of electric vehicles, I set up the Steering Committee on the Promotion of Electric Vehicles last April. The Committee has made a number of recommendations on the strategy and concrete measures for promoting electric vehicles. One of the recommendations is that the Government should take the lead in using more electric vehicles. We have procured 10 electric vehicles, and plan to purchase 10 to 20 such vehicles in each of the following few years. Besides, 10 electric motorcycles have been introduced into the Police fleet. In the private sector, the two power companies have placed orders for over 20 electric vehicles. Furthermore, around 200 electric vehicles will be supplied to the local market in the next financial year. We expect to see wider use of electric vehicles in Hong Kong in the year ahead.

96. We have made good progress in increasing charging facilities for electric vehicles. We have built charging stations in nine government car parks and will build more than 20 such stations this year. Apart from these, the two power companies have started building 28 charging stations in various car parks. The Electrical and Mechanical Services Department has also issued guidelines on the installation of charging facilities in car parks to encourage operators of private car parks to provide such facilities. The Government and the power companies will continue to expand the charging networks for electric vehicles.

What do you think about the government’s proposals? Sound off after the jump.

Plant’s waste management plan would cost less than incinerator


I refer to the report (“Sewage could be energy source, scientist says”, September 28).

While the studies of Herbert Fang, chairman of environmental engineering at the University of Hong Kong, should be encouraged, I wish to point out that the use of sewage sludge as a refuse derived fuel is not an entirely new concept. There are many operations all over the world that treat sewage sludge and use it as an environmentally-friendly and cost-effective refuse derived fuel.

At Green Island Cement, we have been working on our waste management technology, the eco-co-combustion system, for the past nine years.

We have already presented the government with our environmentally-friendly and cost-effective solution for sludge treatment. However, it has rejected our proposal and decided to construct a conventional sludge treatment incinerator in Tsang Tsui to manage Hong Kong’s growing waste management problem.

Through our eco-co-combustion system, sludge would be used as a refuse derived fuel at our cement plant in Tap Shek Kok. Sludge would be taken from Stonecutter’s Island (using existing transport containers) and further dewatering would be carried out at our site to create sludge pellets. These refuse derived fuel pellets would then be fed into the cement plant’s burner system to replace imported coal.
Together with this technology, the refuse derived fuel could replace about 40 per cent of coal currently burnt at the cement plant.

Our eco-co-combustion system pilot plant tests have demonstrated excellent emissions results, far better than the government’s best practical means.

In sum, our system offers a waste management solution that will result in an overall net improvement in air quality. All residual ash is recycled and used in the manufacturing of cement clinker, thereby further reducing the burden on landfills.

We estimate that the quantity of dewatered sludge which can be treated by our proposed facility would be up to about 2,000 tonnes of sludge per day, the same as the government’s proposed incinerator.

The capital required to install such a sludge processing facility at Tap Shek Kok is around HK$950 million.

This is a substantial saving on the government’s proposal to spend HK$5.2 billion.

It is a significant saving for the public purse.

Despite these numerous benefits, the administration has pressed ahead with its own conventional sludge incinerator proposal, without giving due consideration to our technology.

So while Professor Fang should be encouraged with his studies, we hope officials can provide a forum in which new technologies can be assessed and brought into fruition. If the government will only consider conventional technologies, any new scientific studies or advancements will prove pointless.

Don Johnston, executive director, Green Island Cement (Holdings) Limited

Ferry operators get assurance on the cost of cleaner diesel

Cheung Chi-fai and Anita Lam – SCMP

The extra cost of using cleaner diesel in Hong Kong’s ferries is likely to be much less than ferry operators have claimed, the environment watchdog says.

Ultra-low-sulphur marine diesel, which went on trial in five ferries yesterday, would cost about 60 HK cents a litre more than conventional diesel, not up to HK$3 as the companies had estimated, the Environmental Protection Department said.

But one of the operators said the cleaner fuel would still push up its operating costs by 10 per cent, increasing pressure for a fare rise.

A department spokesman said clean diesel now cost HK$4.50 a litre, compared with HK$3.90 for conventional marine diesel, subject to oil-price fluctuations.

Hong Kong & Kowloon Ferry said that price difference would lead to a 10 per cent rise in operating costs if all its vessels used the fuel.

“The additional cost would erode our meagre profit and increase pressure for a fare rise,” general manager Nelson Ng Siu-yuen said.

Launching the nine-month trial of the cleaner fuel yesterday, the Environmental Protection Department said it would pay up to HK$10 million in incentives for ferry operators to take part. The money was for fuel subsidies and technical monitoring. The trial would provide data on operating costs, and the impact on maintenance and technical performance to help officials decide whether all ferries should use cleaner fuel.

The fuel, 100 times lower in sulphur, will be supplied to five selected ferries by an oil barge operated by Sinopec (SEHK: 0386) in Cheung Sha Wan.

These are New World First Ferry’s Xin Hui III and VIII between Central and Cheung Chau and Xin Ying running from Central to Mui Wo; Hong Kong & Kowloon Ferry’s Hoi Ming connecting Central and Peng Chau; and a Hong Kong and Yaumati Ferry car-carrier between Kwun Tong and North Point.

The Star Ferry did not join the trial, saying its own trial of cleaner diesel in 2006 resulted in loss of power, higher fuel consumption, and engine corrosion. “We will still keep track of the trial results of other ferry operators,” general manager Johnny Leung Tak-hing said.

The department spokesman said there had been no mechanical problems for government vessels since they started using the cleaner fuel in 2000. He said there were other solutions to resolve the operators’ worries about the lubricating effect of sulphur in the engines.

The spokesman said that if all local passenger ferries switched to the cleaner fuel, the total sulphur emissions from the marine sector could be cut by about 12.5 per cent. Other sulphur emissions come from domestic vessels such as barges and fishing boats, as well as ocean-going vessels and cross-border ferries.

The Marine Department said four local vessel operators were convicted for black-smoke emissions last year, compared with none in 2007

Pollution pays off for billionaire

Marian Wilkinson and Ben Cubby

Michael Kadoorie, left, in Hong Kong. Photo: AFP

A HONG KONG billionaire will receive millions of dollars in compensation under the Rudd Government’s emissions trading scheme – but would get almost twice as much under the Opposition’s plan.

The tycoon and philanthropist, Michael Kadoorie, is the chairman of CLP Holdings, formerly China Light and Power. The company, partly owned by his family, has power stations in Hong Kong, China, India and Thailand but one of its most heavily polluting plants is Yallourn in Victoria.

Under the Government’s scheme, Yallourn would share in $3.9 billion in free permits and assistance allocated to electricity generators to help them when companies and consumers begin to pay for emissions from 2011.

But under the scheme the Opposition Leader, Malcolm Turnbull, is advocating, the amount of compensation for generators such as CLP would more than double.

Mr Turnbull is demanding the Government raise the amount of assistance to between $8 billion and $10 billion.

The author of the Frontier Economics report Mr Turnbull released on Monday, Danny Price, has been one of the NSW Labor Government’s top-paid energy consultants for a decade and helped design the failed plan for privatising the state’s electricity industry.

Last year the federal Climate Change Minister, Penny Wong, promised that electricity generators would get the $3.5 billion assistance spread over five years because it was ”a necessary and important contribution to support essential new investment in the Australian electricity generation sector”.

Apart from Sir Michael’s company, which owns Victoria’s TRUenergy, British power giant International Power will also benefit through its ownership of the Hazelwood and Loy Yang B plants.

The British company owns generators in Indonesia, Britain, Pakistan and Europe and recently sold its Czech power plants for a reported $US1.24 billion ($1.48 billion).

The investment company, Innovest, in a report for the Australian Conservation Foundation, says International Power could receive about $84 million, Sir Michael’s company, CLP Power International, $55 million and Japan’s Tokyo Electric Power $31 million for its partial ownership in the Loy Yang A station.

The companies declined to comment yesterday on the Opposition’s latest commitment but both have been vocal in demanding Senator Wong increase the assistance.

The head of the Energy Supply Association, Brad Page, told the Herald the foreign generators’ claims were not exaggerated.

”There is a genuine, serious issue here”, he said. ”It’s not about who owns these companies and assets. This is about the sovereign risk that is attached to Australia.”

Hong Kong Government to Conduct Trial On BYD Dual Mode Plug-in Hybrid Vehicles

Business Desk, June 12, 2009

The Permanent Secretary for the Environment, Ms Anissa Wong, today (June 12) participated in a promotional activity on clean fuel vehicles in Shenzhen to mark the launch of a trial on BYD’s dual mode hybrid vehicles by the Hong Kong SAR Government and the Shenzhen Municipal Government.

“I am pleased to see that the Environment Bureau of the SAR Government has joined with the Environmental Protection Bureau of the Shenzhen Municipal Government to promote the use of clean fuel vehicles, and launched the trial scheme together. The scheme will enhance our understanding of this new generation of dual mode hybrid vehicles,” Ms Wong said.

She added that Shenzhen was among the 13 pilot cities on the Mainland to showcase and promote energy-saving vehicles powered by new types of fuel. The co-operation between the Environment Bureau of the SAR Government and the Environmental Protection Bureau of the Shenzhen Municipal Government marked an important step in enhancing the transformation of the Pearl River Delta region into a green and quality living area. She expressed the wish that the two places could make the best use of their experiences in developing energy-saving transportation and step up communication and knowledge sharing on research, supply and use of environmentally friendly vehicles.

The SAR Government will commence the trial of two BYD dual mode plug-in hybrid vehicles “3DM”starting from this July. The trial will not only provide the Government with useful information for assessing the use of this type of vehicle in Hong Kong, but will also encourage the public to learn more about this new type of vehicle.

Ms Wong, representing the Environment Bureau of the SAR Government, took part in the Green Action Day 2009 cum Shenzhen-Hong Kong Clean Fuel Vehicle Promotion held in Shenzhen this morning. A number of officials from the Shenzhen Municipal Government, including the Vice Mayor Mr Zhang Siping, were also present.

The Financial Secretary identified in this year’s Budget the promotion of electric vehicles as a key measure to promote a green economy. The Government earlier announced a host of measures for this cause, and set up a steering committee under the leadership of the Financial Secretary to make recommendations on strategy and specific measures to promote the use of electric vehicles. The Government began a trial on an electric vehicle in mid-May.

Can China Clean Up Its Act?

BusinessWeek by Adam Aston – May 14, 2009


Beijing has big plans to curb pollution and start a cleantech industry. But the global recession and looming trade frictions will test its resolve

China’s unprecedented growth in recent years has come at a terrible price. Two-thirds of its rivers and lakes are too polluted for industrial use, let alone agriculture or drinking. Just 1 in 100 of China’s nearly 600 million city dwellers breathes air that would be considered safe in Europe. At a time when arable land is in short supply, poisoned floodwaters have ruined many productive fields. And last year, ahead of most forecasts, China passed the U.S. to become the world’s largest source of greenhouse gases.

The immensity of these troubles has produced a result that may surprise many outside China: The nation has emerged as an incubator for clean technology, vaulting to the forefront in several categories. Among all countries, China is now the largest producer of photovoltaic solar panels, thanks to such homegrown manufacturers as Suntech Power (STP). The country is the world’s second-largest market for wind turbines, gaining rapidly on the U.S. In carmaking, China’s BYD Auto has leapfrogged global giants, launching the first mass-produced hybrid that plugs into an electrical outlet. “China is a very fast follower,” said Alex Westlake, a director of investment group ClearWorld Now, at a recent conference in Beijing.


Understanding they are in a global race, China’s leaders are supporting green businesses with policies and incentives. Beijing recently hiked China’s auto mileage standards to a level the U.S. is not expected to reach until 2020. Beijing also says it will boost the country’s share of electricity created from renewable sources to 23% by 2020, from 16% today, on par with similar targets in Europe. The U.S. has no such national goal.

While most environmentalists applaud these developments, China watchers are voicing two very different sets of concerns. Some question whether China will really stand by its ambitious targets and are worried by signs of backsliding as the recession in China’s key export markets drags down economic growth. Another group, interested mainly in America’s own industrial future, fears that China’s growing dominance in certain green technologies will harm budding cleantech industries in the U.S. After all, China’s emergence comes just as the Obama Administration is trying to nurture these same types of ventures, hoping to generate millions of green jobs. Many of these U.S. businesses will have trouble holding their own against low-price competitors from China.

Beijing’s green intentions will soon be put to the test. China is in the midst of the biggest building boom in history. A McKinsey & Co. study estimates that over 350 million people—more than the U.S. population—will migrate from the countryside into cities by 2025. Five million buildings will be added, including 50,000 skyscrapers—equal to 10 New York Cities. And as quickly as new offices and houses multiply, they are filled with energy-hungry computers, TVs, air conditioners, and the like, sharply increasing demand for electricity, which comes mainly from coal-powered plants.

Environmental groups say it is therefore critical that Beijing promote rigorous, greener standards. And to some degree, that’s happening. A government mandate states that by the end of next year, each unit of economic output should use 20% less energy and 30% less water than in 2005. Portions of Beijing’s $587 billion economic stimulus package are earmarked for cleantech. On top of that, in March the Finance Ministry unveiled specific incentives to spark solar demand among China’s builders. Included was a subsidy of $3 per watt of solar capacity installed in 2009—enough to cover as much as 60% of estimated costs to install a rooftop solar array.

Steps like these will help Himin Solar Energy Group in Dezhou, Shandong Province. Founded in 1995 by Huang Ming, an oil equipment engineer turned crusader against the use of fossil fuels, the company is the world’s largest producer of rooftop piping systems that use the sun’s rays to heat water. Its eye-catching headquarters, the Sun-Moon Mansion, showcases these heaters, which Himin cranks out in immense volumes—about 2 million square meters’ worth each year, equal to twice the annual sales of all such systems in the U.S. Because its water heaters sell for as little as $220, they are becoming standard in new housing complexes and many commercial buildings across the country.

Broad Air Conditioning, based in Changsha, Hunan Province, is also set to profit as Beijing pushes toward its green targets. By using natural gas and so-called waste heat from other machines and appliances instead of electricity, Broad’s big chillers can deliver two to three times more cooling per unit of energy than a conventional unit. In a similar fashion, Haier, headquartered in Qingdao, Shandong Province, combines low-cost manufacturing and a variety of advanced technologies to create affordable, energy-sipping refrigerators and other appliances. During the 2008 Beijing Olympics, Haier supplied more than 60,000 such devices for visiting athletes and tourists to use.

As these and other domestic players bump up against technological obstacles, they can draw on the expertise of many of the world’s top multinationals. In return for access to its domestic market, Beijing asks such companies as General Electric (GE), DuPont (DD), 3M (MMM), and Siemens (SI) to share their technology, help upgrade their China-based supply chains, and spread industrial processes to make manufacturing more efficient. These aren’t simply green practices, says Changhua Wu, Greater China director of the Climate Group, a consultancy in London that partners with companies to combat climate change. “They’re best practices.”

GE, for example, has transferred expertise to Chinese partners in everything from wind turbine construction to the building of low-pollution factories. At the Beijing Taiyanggong power plant, waste heat from the combustion process is recycled, resulting in around 80% efficiency, more than double the rate of most conventional power plants in the U.S. The bulk of GE’s sales of turbines for power plants in China are the ultra-efficient models. David G. Victor, a Stanford University professor who has studied China’s electric grid, says some of the coal plants being built there are “much more advanced than those we see in the U.S.”

Wal-Mart Stores (WMT), which buys some $9 billion worth of goods in China each year from some 20,000 vendors, infuses its supply chain with the latest ideas about energy efficiency. For example, Chinese factories that work with Wal-Mart are obliged to track vast quantities of data on energy use and make the information available for audits. “Many Western companies can’t track their own energy consumption,” says Andrew Winston, consultant and co-author of the book Green to Gold.

China’s early achievements in cleantech owe a lot to collaborations such as these. The benefits: China cleans up its own pollution, and the government-backed initiatives in solar and wind help drive down the cost of renewable energy systems in countries around the world.

But there is a downside. The rock-bottom prices for made-in-China green technology could make it impossible for cleantech ventures in the U.S., Europe, or Japan to compete. How, for example, will they go up against Suntech Power, based in Wuxi, Jiangsu Province, the world’s lowest-cost manufacturer of standard solar panels? The U.S. boasts plenty of advanced technology. But any efforts by Washington to nurture this sector could be quickly undercut by a flood of Chinese-made solar panels. Such a deluge is likely if there is a big increase in public subsidies for rooftop solar systems. “What [that would] do is create 10,000 Chinese jobs,” says Roger G. Little, chief executive of Spire Corp. (SPIR), a leading U.S. maker of manufacturing equipment for photovoltaics. “If we import all the [solar] modules, it will obliterate U.S. manufacturing” in this area.

A similar scenario exists in the much heralded area of electric vehicles. BYD, headquartered in Shenzhen, started selling its first plug-in hybrid, the F3DM, last year. It beat Toyota (TM) and General Motors (GM), both of which are developing such “plug-ins,” and hit the market with a price tag they probably can’t match: just $22,000. Henry Li, a BYD general manager, says the company will roll out a version of the car in the U.S. in 2011. Chevy’s answer to this car, called the Volt, is expected to cost about twice as much and won’t be out until next year.

How did BYD pull off this coup? Part of it is just being the new kid on the block. Today’s automobiles, with their advanced combustion engines, are the most complex mass-produced goods ever made, assembled from thousands of highly engineered parts provided by a web of suppliers. It’s difficult for a Chinese startup to compete on such a sophisticated playing field. But the emergence of a new, green-vehicle category clears the way. BYD was able to break in by leveraging its background as a battery maker. When it ran into technical hurdles, the company could draw on a deep pool of inexpensive, well-trained talent at China’s top engineering schools. BYD is also a leader in pure electric vehicles, the logical next step. The government is now putting some muscle behind BYD’s push. It is heavily subsidizing electric-car sales in about a dozen cities—in a stroke, making China the world’s biggest market for such advanced vehicles. Its goal is to boost domestic output of battery-powered vehicles to a half million per year in 2011.

How Washington and the beleaguered U.S. auto sector might respond to a wave of inexpensive electric vehicles from China is difficult to predict. And it is also unclear how China’s cleantech efforts in cars, energy, and other areas will be affected if key markets such as the U.S. and Europe don’t recover quickly from the recession. Chinese makers of solar photovoltaics, including Suntech, export about 98% of their production. They have been battered this year by a collapse in demand in Germany, Spain, and Japan, China’s top markets for solar gear. Suntech’s factories are currently running at half of last year’s capacity.

Even inside China, academics and business executives say Beijing needs to do more to bolster cleantech initiatives and make them recession-proof. For example, without better information on how such policies as the current Renewable Energy Law are to be enforced, “many of the terms are meaningless,” complains Himin’s Huang. And even when the terms are clear, companies don’t always adhere, says Zhou Weidong, the Guangzhou-based China director at the Business for Social Responsibility, a global consultancy promoting sustainable business practices: “Paying penalties is cheaper than complying with the law in many areas.”

At times, it seems as though Beijing is pedaling in the wrong direction. Late last year, China’s Environmental Protection Ministry loosened review standards on potentially polluting industrial projects. In an economic crunch, “environmental protection is downplayed to second, or third, or even fourth priority,” observes Guo Peiyuan of SynTao, a corporate social responsibility advisory firm in Beijing.

While acknowledging there has been some backsliding, most China watchers say the government is unlikely to stage a full-throttle retreat. Too much of its export growth is contingent on meeting strict environmental regulations. And Beijing recognizes that Chinese society can’t tolerate much more environmental degradation. The World Bank estimates damage from pollution—everything from decimated fisheries to premature human death—saps nearly 6% of China’s gross domestic product each year as well. For economic reasons alone, it will be difficult for China to turn back the clock.

with Charlotte Li and Pete Engardio

Aston is Energy & Environment editor for BusinessWeek in New York.

China to Focus on Renewable Energy

Kari Cameron, Voice of America – 1 May 2009

China is battling air pollution and high costs for imported energy with an aggressive focus on renewable energy.


Workers build a highway near a wind farm in the Gobi desert, in China's northwest Gansu province (File)

China’s government says it will have 100 gigawatts of wind-power capacity by 2020 – enough to power more than 60 million homes. That figure is more than three times the target the government laid out just 18 months ago.

Steve Lyons is the director of CWE Renewables, a wind energy company based in Hong Kong. His company is setting up wind farms in Inner Mongolia, funded mainly by Chinese investors. Despite the global economic crisis, the company has seen continued interest from investors and from provinces.

“There are provinces that have good wind resources, no wind capacity, and have asked us to help them put in place what needs to be put in place for a wind developer to come in,” he said.

China’s government has vowed to increase the use of alternatives to oil and coal for energy, such as wind, solar and nuclear power. The goal is to reduce the thick air pollution that blankets its cities and to reduce expensive imports of oil.

Companies from start-ups to well established businesses such as General Electric, see China’s drive to clear the air as an opportunity. They are tapping the market hoping to capitalize on Beijing’s push to for cleaner energy sources.

Renewable energy could play significant role

Adrian Ho is the director of CWE Renewables. He thinks China’s use of renewable energy will increase in coming years to play a significant role in meeting the nation’s energy needs.

“There is a high chance that I believe China will go to 25 percent some day and that 25 percent will keep expanding,” he said.

Today, renewable sources produce just eight percent of China’s total energy. But Beijing aims to increase that to 15 percent by 2020. In comparison, the United States hopes to generate 10 percent of its energy from renewable sources by 2012.

The roots of China’s push for renewable energy are in a 2005 law that gives incentives such as fixed rate tariffs and carbon credits to renewable-energy companies. The law also makes clear that provinces are expected to meet new clean energy guidelines.

Chris Flavin is the president of the Worldwatch Institute, a U.S. environmental group. He says the law works thanks to China’s entrepreneurs and a government that is making the move to clean energy a priority.

“The Chinese government, I guess in part of the fact that it does not have some of the kind of democratic complexities that Western countries do, is able to do things quicker and without the kind of resistance from narrow economic interests that might make it more difficult,” said Flavin.

China’s wind energy capacity has doubled

The World Wind Energy Association says China’s wind energy capacity has doubled every year since the law was put in place, to 12 gigawatts. Wind is the fastest growing renewable energy in China, with 60 percent more capacity since 2005.

But pollution takes much longer to clean up than it does to create. China is failing to hit targets for bringing pollution and carbon emissions under control.

U.S. Secretary of State Hilary Rodham Clinton has said she will push developing nations such as China and India to commit to reducing carbon emissions as part of a new international treaty on fighting climate change. Emissions from fossil fuels, such as coal and oil, are thought to contribute to global warming.

Flavin says that it is not that China does not want to reduce emissions – the problem is their lack of a better option.

“The main driving force is that China is not rich in any fossil fuel except for coal and coal is a heck of a lousy way to fuel an economy,” he said.

Stimulus plan is helping

Things are changing. Wind and nuclear power are getting a boost from China’s almost $600 billion economic stimulus plan, which promises to help with grid infrastructure and nuclear development.

“If you look at where we are today and compare with what anybody might have expected or even hoped for five years ago, I think it’s really extraordinarily encouraging what they’ve accomplished,” Flavin added.

As China continues to build its renewable energy capacity, the world’s most populous nation is emphasizing that clean energy is not a luxury but a necessity for its survival. Renewables will help reduce pollution in the long term, quelling Beijing’s concerns about social unrest over pollution-related illness. China also needs clean energy to increase its role on the global stage – a lack of natural resources make clean energy the only possibility for China to achieve energy independence.

Government To Help Firms Take Advantage Of Green Opportunities

Cheung Chi-fai, SCMP – Apr 08, 2009

The government will organise seminars for local professionals in environmental services this month, to help them explore emerging markets locally and across the border, Environment Secretary Edward Yau Tang-wah said.

Mr Yau said the Closer Economic Partnership Arrangement had enabled such servicing companies to own and operate businesses on the mainland. That would increase their chances of tapping the growing demand for environmental services amid the economic transformation in Guangdong province.

“Hong Kong and Guangdong are strongly pushing forward energy efficiency and emission reduction,” he said. “There is great room for these environmental professionals to organise themselves to cater to this rising demand.”

Chief Executive Donald Tsang Yam-kuen announced plans last week to further explore business opportunities for the environment industry, among others, in the global financial crisis.

Mr Yau said some of the sector’s professionals might be ready to pursue their advantages; but others might need to adjust their operations, or join forces, to tap the opportunities.

The HK$450 million matching-fund scheme for energy and carbon audits and improvement works for local buildings, to be launched today, would be an opportunity for such firms to find business locally, he said. Across the border, Mr Yau said, the market was also growing gradually, after the introduction of the HK$93 million clean-production scheme. So far, 160 companies have participated in the programme. The scheme’s success has encouraged Guangdong provincial and local authorities to roll out similar incentive programmes, which would increase the demand for environmental services.

Mr Yau said green businesses were still taking shape in Hong Kong and across the border, and it was still difficult to know how big the market was. “It is like a blind man who tries to feel the size of an elephant … [he] can never tell how big the elephant is.”