Development Strategies for Rural Renewable Energy in China and India: A Comparison

Development Strategies for Rural Renewable Energy in China and India: A Comparison International Journal of Applied Sustainable Development (ISSN: 1742-2620) Volume 1 Issue 1 Huang Liming Jinan University, Shipai, Guangzhou 510632, People s Republic of China. and David Pollard University of Abertay Dundee, Scotland, UK and Jinan University, PRC. E-mail D.Pollard@abertay.ac.uk. ABSTRACT This paper compares development strategies for various types of rural renewable (RE) in China and India. Such a comparison is highly relevant because both countries face enormous rural challenges. Additionally, both countries have a large part of their rural population without access to modern fuels, with overall low income and consumption levels, poor protection of environment and health and an urgent need to accelerate economic growth. To meet increasing domestic requirements for of a sustainable level, China and India have been paying increasing attention to the development of RE systems. Both countries have made significant efforts to design, develop and undertake field demonstrations and to implement large-scale use of a number of RE products and systems and it could be argued, therefore, that important progress has been made. The underlying strategies and methods through which China and India have achieved success in developing rural RE are compared and discussed and some implications for rural economic development and for policy-makers are identified. Keywords: Development Strategies, Renewable Energy, Rural, China, India. 1. INTRODUCTION Development of sustainable in the rural areas of China is fundamental to the rural economy and the improvement of people s living standards. Over 860 million people live in rural China, of whom 72 million have no electricity (International Statistical Yearbook, 1998; Battelle Memorial Institute,1998; China Government, 2000a) and around 70 million live in poverty (China Government, 2000a). It is important that a capability exists for the development of RE allied to local conditions; for example, rural can provide electricity for the remote northwest areas and coastal islands, which are at present without or short of electricity, and can assist these areas to fight poverty through the creation of enterprises which, in turn, make a contribution to local economic development. Although rural China possesses abundant resources and has achieved remarkable progress in the development of RE, its current structure is primarily based on non-renewable fossil fuels. This inevitably leads to the continuing depletion of these resources and to emission of pollutants and greenhouse gases. The problem of development in rural India has many similarities to that in rural China. Over 700 million people live in rural areas, with only 31% of rural households having access to electricity supplies, and the per capita consumption of electricity in rural areas being only 135kwh. More than 350 million people in India currently live in poverty (www.undp.ogr.in/programm/rrlenrgy/renganl.htm.), with people in rural areas largely dependent on fuel-wood, crop residues and cattle dung to meet their basic needs for cooking and heating purposes. With mounting pressure on fuel requirements caused by an increasing

population, the consumption of fuel-wood has far exceeded its manageable supply, thereby leading to deforestation (Mitra 1998) and frequently also to desertification. The age-old practice of burning cattle dung and crop residues for cooking purposes is depriving the agricultural land of much needed manure, with a consequent loss of soil fertility. Additionally, the inefficient burning of biomass fuel materials in traditional chulhas creates high levels of in-door air pollution, which causes eye- and respiratory-related diseases among women and children in these areas. To improve the living environment of these people and at the same time protect their health, the Indian government has for many years paid considerable attention to the development of rural RE. The importance of the increasing need to provide RE sources was recognised by the government as far back as the early 1970s and, since that time, significant efforts have gone into the design, development, field demonstration and large-scale use of several RE products and systems. Although the desire for renewable sources has received further impetus since 1992, with the establishment of the Ministry of Non-Conventional Energy Sources (MNES), much work remains to be done. Currently, only 2963 MW, representing about 3% of the total grid capacity, is based on renewable sources. The infrastructure for large-scale development and development of renewables is relatively very small compared with more conventional forms of, which were significantly developed over the same period. Enormous challenges face both countries regarding the design and implementation of suitable strategies to accelerate the development of rural RE. While some strategies may exist in similar forms in both countries, it is recognised that others will be more country-specific. In this comparative study, successful policies and strategies adopted by both governments have been identified, together with the possibility of one country utilising models developed by the other. The remaining sections of this paper are presented as follows: in section 2 we analyse the present situation of sustainable resources and development in India and China. In section 3, we deal with development policies and strategies for rural renewables in both countries. In section 4, we compare Indian development policies and strategies for rural renewables with those formulated in China and discuss the potential impact on rural economic development, before our concluding remarks in section 5. 2. RENEWABLE ENERGY POTENTIAL AND ACHIEVEMENTS IN CHINA AND INDIA. The Present Situation of the Development for Rural Renewable Energy in China China has abundant RE potential and the resources are mainly distributed within rural areas. The hydropower potential is 378 million kilowatts, of which 5.8 per cent has been developed to date. Biomass, including firewood stalks and other kinds of organic wastes, equals 260 Mtce. There are about 6 million square kilometres of land on which the total yearly radiant quantity exceeds 600,000 Joules per square centimeters, offering considerable scope for solar. The potential of wind is 1.6 billion kilowatts, of which about 10 per cent can be developed. Geothermal resources need further exploration; so far, the reserves of geothermal resources explored equal the equivalent of about 462.6 billion tons of standard coal (China Government, 2000b). Considerable progress has been made in the development of RE. In 1998, production in rural China reached 20 Mtce (excluding traditional biomass - 223 Mtce), see Table 2. Small hydropower production dominated rural RE production, by 1998; small hydropower production had reached 16.6 Mtce, accounting for 83 per cent of total RE production.

Table 1 China s rural renewable production in 1998 Type of Renewable Energy Source or Product Percentage of Total Renewable Energy Supply Amount Produced (Mtce) Small Hydropower 83 16.6 Marsh Gas 6.5 1.3 Solar 5.5 1.1 Wind Energy 0.1 0.02 Geothermal Energy 4.9 0.98 Total 100.0 20 Source: The Institution of Rural Energy Industry of China(2000): Development Strategies for Biomass Energy in China There are 5.25 million marsh gas pits in rural China. ( China Government, 2000b). Marsh gas production in rural China accounts for 6.5 per cent of total RE production 1998 (See Table 1). Comprehensive utilisation of marsh gas, as and environmental protection technologies, is carried out closely combined with ecological agriculture and sustainable development in rural areas. This reflects not only the fact that rural areas have abundant methane resources, but also have a comparative advantage of methane production in the development of RE. Solar in rural China can be divided into two categories: the utilisation of solar heat and the production of solar-cells. Solar heat includes solar water heaters, solar stoves, passivetype solar houses and solar dryers. Solar power has been the subject of major initiatives, for example Hebei province has some 64 enterprises using solar for various purposes and the number is set to grow. A United States grant-aided programme in Gansu province is addressing solar power problems through the provision of equipment, engineering technology transfer and training ( http://www.usembassy-china.org.cn/english/sandt/soleng.htm). Through ten years of effort, technologies in the above four fields have increased quality standards and scientific research has, in varying degrees, been turned into small mass production. Solar cells are used in telecommunication systems and in remote non-electrified areas, with a sales volume of approximately 1.1 Megawatts a year (China Government, 2000b). By 1998, total production of rural solar had reached 1.12 Mtce, accounting for 5.5 per cent of total RE production in rural China (See Table 1). In nation-wide terms, it is estimated that the use of marsh gas and solar power is cutting standard coal usage by approximately 10 million tons annually (http://ce.cei.gov.cn). The total installed capacity of wind power is up to 18,100 kilowatts, and, since the 1980s, 50 to 200 watt micro wind power generators have successfully been developed and put into production. At present, there are about 120,000 sets of such generators operating in the grasslands of pastoral areas in Inner Mongolia, Xinjiang, Qinghai and in coastal areas where there exists no power grid (China Government, 2000b). In 1998, rural wind production was 0.02 Mtce, accounting for 0.1 per cent of total RE in rural China (See Table 2). The development of geothermal resources also plays a role in rural China. By 1998, rural geothermal production reached 0.99Mtce, accounting for 4.9 per cent of total RE production in rural China (See Table 2). Although China s rural areas have abundant potential of RE resources and considerable progress has been made in their development, full commercialisation has yet to occur. RE consumption accounts for only about 2.9% of the total in rural areas. There is, therefore, a huge opportunity to develop rural RE, especially in the light of achievements obtained in other countries, including India.

Table 2 Rural Energy Consumption by Fuel Type in China in 1998 Fuel Type Amount Consumed (Mtce) Rural Energy Consumption by Share (%) Coal 299 43.4 Electricity 98 14.3 Oil 48 7.0 Traditional Biomass (firewood and straw) 223 32.4 Renewable Energy 20 2.9 Total 688 100.0 Source: The Institution of Rural Energy Industry of China (2000): Development Strategies for Biomass Energy in China; our calculation. Note: Renewable in this table includes small hydropower, marsh gas, solar, wind and geothermal Renewable Energy Potential and Achievements in India India also has great potential for RE, according to the MNES, the opportunity for exploitation is in the order of 80,000 MW and further scope for generating power and thermal applications using solar is huge. Indian activities cover all major RE sources relevant to this study including biogas, biomass, solar, wind, small hydro power, recovery from wastes and other new and emerging technologies, including efficiency improvement in cooking stoves. Details of current and potential development is presented in table 3 below Table 3 Renewable Energy Potential and Achievements in India, 2000. (MW) Type of Renewable Energy Source or Product Approximate potential Amount Product Achievements Percent of Total Renewables Supply Wind Energy 45000 1267 42.7% Small Hydro Power 15000 1341 45.3% Biomass Energy 19500 308 10.4% Solar Energy 35000 47 1.6% Total 114500 2963 100% Sources: MNES. (2001). Renewable Energy in India Business Opportunities. New Delhi: Ministry of Non-conventional Energy Sources; TERT estimates; own calculation. India is the fifth largest wind power producer in the world after Germany, the USA, Denmark and the UK, with wind power generation capacity of 1,267MW, of which 1,210MW comes through commercial projects. The wind potential in India has been estimated at 45, 000 MW, the states with highest wind potential being Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, Madhya Pradesh and Maharashtra. By 2000, wind production had reached 1267 MW, accounting for 42.7 per cent of RE supply in India. Currently, biomass contributes 14% of the total supply worldwide and 38% of this is consumed in developing countries, predominantly in rural and traditional sectors of the economy. Applications of biomass include thermal or heat, mechanical water pumping for irrigation

and power generation including village electrification, as well as industrial applications. Biomass supplies 308 MW, accounting for 45.3 per cent of RE supply in India. Three million families are covered under the biogas programme and 33 million improved cooking stoves have been deployed. India receives about 300 clear sunny days in a year. This is equal to over 5,000 trillion kwh/year, which is far more than the annual total consumption of this country. SPV systems have found applications in households, agriculture, telecommunications, defence projects and railways, among others. The all-india SPV programme to develop cost effective technology and its applications for large-scale diffusion in different sectors (especially in rural and remote areas) is currently being implemented by MNES. More than 80,000 SPV systems totalling about 47 MW have so far been installed. A major development, the first in the country and amongst the largest in the world, is the 140 MW integrated Solar Combined Cycle (ISCC), with a solar thermal component of 35 MW power project at Mathiana, near Jodhpur, in Rajasthan. Also widely employed in India are non-grid thermal technologies, including solar use in water heating, cookers, air heating and thermal building design. The main programmes under the Thermal and Rural Energy in India project are Biogas, Improved Chulahs (cooking-stoves) and the Integrated Rural Energy System (IREP). As of December 31 st. 2000, 3.1 million biogas plants had been set up, with an estimated potential of 12 million and installation of 0.18 million family-type biogas plants was targeted for 2000-01. Only a small fraction of the aggregate potential in renewables, and particularly solar, has been utilised so far. (See Table 3). 3. STRATEGIES FOR RENEWABLE ENERGY DEVELOPMENT IN CHINA AND INDIA. In this section, we analyse strategies for RE development in China and India, including strategic objectives, strategic measures and management, this analysis forming a foundation for the comparison of strategies for RE development in section 4 of this paper. Strategies for Renewable Energy Development in China Strategic Objectives of Renewable Energy Development in China Suitable strategic objectives are very important for the development of RE in rural China and form a critical part of the national development strategy. Long-term strategic objectives are reflected in China Agenda 21 and Long Term Objectives on Economic and Social Development of China, especially Outline for Development of the New and Renewable Energy in China (1996-2010). The Sixth, Seventh, Eighth, Ninth and Tenth Five Year Plans listed middle-term strategic objectives of RE development. (http://dp.cei.gov.cn/lszl/lsz101.htm). According to Outline for Development of the New and Renewable Energy (1996-2010) and Tenth Five Year Plan, the overall objectives of RE development are to raise conversion efficiency, to reduce production costs and to increase the proportion of new and RE in the overall structure; to strive for innovation in processes and technology in order to achieve modernized production, and to meet an target of up to 3.9 Mtce (including traditional application of biomass ), so as to contribute to the sustainable development of national economy and environmental protection. In order to reach the above-mentioned objectives, the new and RE industry development plan are divided into the following stages: 1. From 1996 to 2000, the focus was on the creation of a modern industrial base and the infrastructure necessary for the production of mature technologies, such as wind and solar photovoltaic (PV) systems for homes and small communities. Research and demonstration projects would expedite the maturity of other RE technologies 2. From 2000 to 2005, the focus would be gradually to set up economic incentive policies and administrative management systems suitable for a market economy, building and implementing quality control, monitoring and service systems and the strengthening of supporting industries and products, in order to promote industrial development. New and

RE would take up 0.7% of China s commercial consumption, amounting to 13Mtce. 3. From 2006 to 2010, the building of industry support and service systems and further regulating market development would take place, including the setting up full scale economic incentive policies and legal regulation with new and RE amounting to 25Mtce, forming up to 1.25% of China s commercial consumption The main tasks for each technology are as follows: 1. Small hydro: Continue development so that installed capacity increases to 20 gigawatts (GW) by 2000 and 28 GW by 2010. 2. Wind power: Market small-scale wind turbines and improve their performance; develop local production capacity for wind turbines above 200 kw; develop wind power control and management systems; strengthen the capacity for wind measurement, planning, siting and designing; and finally, construct 1,000 megawatts (MW) of large-scale wind farms by 2000 and 3,000 MW by 2010. 3. Solar/PV power: Improve efficiency and reduce system costs through development of lowcost solar cells and associated equipment. PV power stations will be built in nine counties in Tibet. Small PV systems should be promoted so that the electricity needs of 28 counties, 10,000 townships, and 1,000 islands will be met. Distributed and centralized MW-scale PV power stations connected to the grids should be piloted 4. Geothermal : Regions with high-temperature resources should be actively exploited, while s olutions should be sought to the problems of geothermal corrosion and water recharge. The use of heat pumps will be encouraged. 5. Biomass: Plans for biomass power stations of 50 MW or more to be built, using rice husks, wood scraps and bagasse as fuel. 300 MW will be installed by 2010. Biogas for power plants is not included in this scheme. (See table 4) Table 4 Strategic Objectives for Renewable Energy Development in China Targets for 2005: Solar PV: 53 MW; Solar water heater: 64 million m^2; Wind farm: 1500 MW; Off-grid wind turbine- 35 MW; High temperature geothermal generation: 45 MW; Middle/low geothermal space heating: 14-15 million m^2; Installed biomass gasification and generation: 80 MW; Tidal and wave : 2 MW installed capacity (per year) Targets for 2010: PV 174 MW (about 28 counties 10,000 townships 1,000 islands without electricity); 2.7 billion m^3 biogas; 50 MW tidal power; Small hydro 32.5 GW; Wind 4,900 MW; 13.4 m hectares fuel wood plantation0 Biomass electricity about 300 MW; The total volume of utilisation of NRE will increase to 390 million tons of standard coal equivalent Proposed 5% renewables as share of annual investment in power generation. Competitive solicitation for wind farm concessions and PPA, Development of standards, Demonstration projects, RE electrification program for Western Provinces includes subsidies. Interim targets achieved by year 2000: Small Hydro 23.5 GW Wind 344 MW Solar PV 16.5 MW; Biomass electricity 50MW Standard for improved stoves adopted. Investment, assistance in project development and implementation. Sources: Outline for Development of the New and Renewable Energy, 1996-2010, Tenth Five Year Plan

Strategic Measures of Renewable Energy Development in China. In order to achieve the strategic objectives outlined above, the government has introduced several incentive-based measures. Table 5 Central government incentives for RE Import Duty Reduction Reduction in Value Added Tax Low Interest Loans Subsidies The average import duty now stands at 23%. Renewable technologies enjoy special low rates: of 3% for components of wind power plants, 6% for wind turbines, and 12% for PV systems. The rate of value added tax (VAT) is 17%. VAT on biogas is only 3%, and VAT for small hydro is 6%. Specific low interest loans for rural development have existed since 1987. The interest rate for large and medium biogas projects, solar applications and wind technologies is only half that from co mpatible commercial loans. The amount of low interest loan was increased to 120 million yuan in 1996. China has also established special low interest loan programs for small hydro projects. Subsidies provided by the central government usually support research, development and demonstration projects for renewable. Source: The cooperation programme between US-China: Comparison of Renewable Energy Policies of China and the United States. Table 6 Some Examples of Local Government incentives for renewable Region Subsidy Policy Taxation Policy Price Policy Loan Policy Other Policies Inner Mongolia (1) Subsidise customer: 200 Yuan per set of 100 W wind power system or 16W PV system; total subsidy of 25 million Yuan of government funds. (2) 300,000 Yuan annual grant to support R&D. (3) rural office branches established in 56 counties, with government funds. (1) VAT for wind power, reduced from 8% to 3%. (2) Income tax exemptions for two years. (3) VAT surtax on PV of 10.69-4.43Yuan/16Wp- 21.6Wp. (1) Purchasing price of wind power n 1995: 713 Yuan/MWh (including VAT), 609 Yuan/MWh (not including VAT) (2) Incremental price shared by the grid and consumer together, grid bear 200 Yuan/MWh, the remaining subsidised through a surcharge on electricity tariff of 2.5 Yuan/MWh (1) 400 million Yuan has been arranged by SETC to support wind power. (2) loan from Government of the Netherlands was given by SPC to support wind power. Policy on land use: (1)impose land tax on occupied land (2) remit the income tax of the cultivated land user for 5 years (3) remit the land tax for 10 years for those using uncultivated land

Guangdong Qinghai Subsidize the extension of PV system at 300 Yuan/set. (2) R&D: more than 500 Yuan annually to support New Energy Res ch. Institute. (3) Institution capability: provide funding to most office at county level. The VAT collected at 20 Yuan/MWh; the income tax Collected at 51% Repayment with interest, with the price of attached electricity being 770 Yuan/MWh. The difference to be borne by the consumer. Impose additional fee of 2Yuan/MWh, part of which (900 thousand Yuan) is used to support the consumer to install PV system Wind power: collect charges on land usage according to the real areas occupied. Region Subsidy Policy Taxation Policy Price Policy Loan Policy Other Policies Xinjiang (1) to subsidise the extension project to offer subsidy to PV systems, small size wind power systems of 50-200 Yuan/system. (2) to subsidise R&D: over 1.0 millionyuan each year (3) support institutional capability development, provide overhead to most rural office at county level. (4) to subsidise consumer of PV systemwith 300 Yuan or 10% of the (1) Wind power: foreign owned or joint ventures with 10 or more years operation enjoy tax exemption for the first 2 years, tax reduction for the succeeding 3 years, and for the remaining 5 years the tax rate is 15%. VAT exempted for product exported. (2) PV system: the VAT and VAAT collected monthly, at 17% and 10% respectively; the income tax collected quarterly, at 15%-33%; the duty and VAT: exempt for international donation, others with 12% duty and 17% VAT. (1)Purchasing price, in 1995, 698 uan/mwh (including VAT). In Xinjiang, the price of grid electricity is 1.18 Yuan/kWh. 2)Incremental price shared by the grid and consumer together. Impose 0.02 Yuan/kWh on fee, in which 0.5 cent/kwh is used to 0.5 cent/kwh is used to subsidise the price difference of wind power and the remaining is covered by the grid. Wind power: collect charges on land usage according to the real areas occupied.

cost/set Gansu (1) Subsidise the extension of PV system: establish sun light fund subsidise 300 Yuan/set. (2) Subsidise R&D of PV. (3) Subsidise the establishment of technical supporting institutions The taxation policy on PV system is similar to Xinjiang, only the monthly VAT rate of non grant PV system is 25%. PV system: county government offer guarantee for SHS, the loan interest rate is 3%. The fund of discount is from addition fee of electricity: 3 Yuan/MWh; 20% discount is from government finance. Policy on land using (1) impose land tax on land real occupied (2) remit the income tax of the farm land user for 5 years (3) remit the land tax for 10 years for those using uncultivated land Source: The cooperation pr ogramme between US-China: Comparison of Renewable Energy Policies of China and the United States. It is worth noting here that the most economically developed of the provinces listed in table 6 ( Guangdong) possesses the fewest incentives for developing new RE resources. Economic Incentives for Renewable Energy Development Both central and local government in China provide various types of fiscal incentives for the RE sector, including import duty reduction, reduction in value added, reduction in income tax, favorable purchasing pricing, low interest loads and various subsidies.(see table 5-6) Strategic Measures of Government Supporting R&D. Central government supports RE by establishing R&D strategy and planning for the RE industry and funding many R&D projects directly. R&D initiatives include the following three major areas: (1) Support various RE research institutes and research projects. (2) Target specific technologies for improvement and provide necessary training. Incomplete figures suggest that more than 100 million Yuan will be used for this purpose during the Ninth Five- Year Plan. (3) Subsidise RE demonstration projects. For example, central government invested 7 million yuan in four PV generation stations (total capacity 85 kw) during the Eighth Five-Year Plan. Market Development Strategy for Renewable s The implementation of market development activities related to RE are just beginning in China. One approach is for the government to establish a revolving loan fund to support RE applications. For example, the municipal government of Shanghai has set aside 10 million Yuan for funds to advance biogas applications within the city limits. China has also introduced initiatives to reform business practices as a means of reducing nonfinancial barriers for RE development. For example, the State Development and Technical Commission requested proposals and subsequently awarded a contract for a polycrystalline thinfilm PV manufacturing facility through a bidding process, to achieve one of the Ninth Five-Year Plan targeted technology improvement programs. A recent project involving an anaerobic treatment plant for urban waste-water in Yiwu Xian, Zhejiang Province employed a similar bidding

process to award the final construction contract. Reforming business practices can result in lower costs and better quality RE projects. Strategic Management of Renewable Energy Development. In order to achieve effective strategic management of RE development, the government has developed new legislation concerning RE issues and implemented this through various departments. In 1995 the government promulgated the Electric Power Act, the first Chinese law discussing policy, clearly stating that the Chinese Government supports the development of RE. The new law advocates the use of rural hydropower resources, solar, wind, geothermal, biomass and other for rural electrification and power generation. The Ministry of Electric Power (MOEP) in 1996 issued the "Parallel Operation Regulations for Wind Power Generation." which requires the power grids to allow interconnection and parallel operation of wind farms, and that the power grids must buy all the electricity thus generated. It further specifies that the purchase price should include production costs, repayment of debt and interests and taxes, together with a reasonable profit. The difference in prices between that of wind and the average market price should be borne by all the customers of the power grid, not only the customers closest to the RE projects. The 1998 Energy Conservation Act emphasizes the importance and strategic role of using RE in order to reduce emissions and to protect the environment. The Chinese government departments participating in the development of RE technology are as follows: Ministry of Agriculture (MOA) The Environmental Protection and Energy Department in the Ministry of Agriculture has been terminated and only two divisions the Energy and Biological Divisions have been kept. The Energy Division, which is mainly in charge of rural environmental and electrification issues, grants 10 million Yuan each year, to support RET dissemination and demonstration projects. The Energy Division s main responsibilities are to analyse RE use and promote sustainable development in the rural areas, with emphasis on biomass and solar/thermal technologies. Ministry of Science and Technology (MOST) The Ministry of Science and Technology, formerly known as the State Science and Technology Commission (SSTC), manages national science and technology research projects. The High and New Technology Development and Industrialization Department is in charge of regulating and organizing science and RET projects. The MOST and SDPC jointly formulate the Five-Year Plan for science and technology. MOST also organizes and implements RE research projects and promotes its technological institutions. In addition, MOST develops national policies regarding research of new and high-technology development and planning. Small Turbine Association While having no governmental function, it has taken over the main functions of the former Ministry of Machinery with regard to domestic manufacturing of small wind turbines. (The Ministry of Machinery was eliminated in government restructuring.) State Development Planning Commission The SDPC is a comprehensive economic management commission that formulates the National Economic Development Plan, the Five-Year Plan, and the National Long-Term Program. In addition, the organization approves all project investments. The Basic Industry Department is responsible for drafting the state development strategy for, transportation and raw materials. In addition to formulating long-term policies, the department will also monitor and analyse the status of basic industry development and spearhead all-important national projects. The Foreign Capital Utilization Department is responsible for approving joint ventures and foreign funded projects in China, and for allowing Chinese currency to be converted into hard currency. State Economic and Trade Commission The SETC manages national economic operations, regulates enterprise operations and approves technology transfer projects.

The Energy Division of the Energy Conservation and Comprehensive Utilization Department is responsible for formulating government conservation plans, comprehensive utilization, and RE policies and regulations. This division also promotes new RE and efficiency products and also organises environmental protection development and projects associated with environmental protection. In addition, the division controls millions of Yuan to be used for loans towards RE project development. In October 1996, the SETC signed an agreement with DOE outlining the cooperation between the two countries in bringing about the commercialization of RE technologies throughout China. State Power Corporation (SPC) The SPC is the primary entity responsible for administering all transmission and distribution of electricity in China. This state-owned company is primarily concerned with large-scale, gridconnected power generation throughout the country and is also very involved in formulating power related policies for the central government. The SPC, for example, was directly involved in implementing policies related to encouraging wind farm development. In addition, the SPC coordinates most resource assessment activities. Strategies for Renewable Energy Development in India Strategy Objectives for Renewable Energy in India The strategy proposed for India emphasises a gradual shift from non-re resources to renewable ones with increasing emphasis on demand management, conservation and efficiency. Development Objectives for Renewable Energy in India by 2012 The Indian Government has proposed draft RE policy and programme interventions required to achieve the goals of meeting the minimum rural needs, providing decentralised off-grid supply and generating grid quality power based on renewables. The draft also sets medium term goals to be achieved by the year 2012, which are: Achieving a 10% share for renewables in the new power capacity projected to 2012. In absolute terms, this would translate to the setting up of about 12,000 MW through Renewables. Deployment of Solar Water heating systems in one Million homes. Electrification by renewables of at least one quarter of 18,000 un-electrified villages Deployment of 5 million solar lanterns and 2 million solar home lighting systems Coverage of 30 Million households through improved Chulhas (wood stoves) Setting up of further 3 million family size biogas plants. In formulating the goals and strategies for these applications, the major objectives are: to enhance the diversity and security of supplies through the optimum utilisation of indigenous resources; to promote private-sector participation and competitiveness; to enhance the substitution of fossil fuels and augmentation of supply, supporting local and global environmental protection; to facilitate enhanced local participation, especially of women and NGOs; and to generate employment, particularly in rural areas. Development Objectives for Renewable Energy in India, 1997-2002 The Ninth Five Year Plan (1997-2002) clearly indicates that rural development and are major goals for the Plan period. Use of non-conventional is specifically mentioned. The various MNE programmes are likely to be strengthened and, as a result, there will be increased emphasis on RE using locally available resources. To this end, decentralized planning through IREP will continue and the various MNES technology initiatives (biogas, biomass, solar, wind etc.) will also continue -see table 7.

Table 7 Strategy Objectives for Renewable Energy Development in India, 1997-2002 National within 5 year plans (current one to 2002) State level targets and implementation Improved stoves (>20% efficiency) 120Mpotential 33M achieved @ 3M/yr Family biogas 12M pot., 3.1 M achieved 180k/yr Solar 150 MW by 2002 PV pumps @ 2,000/yr SHS @ 100k/yr -> 0.5 million by 2002 Lanterns @ 200k/yr Wind 120 GW potential, 1267 MW achieved, 1800 MW under discussion Small hydro 10GW potential, 1550 MW achieved Bagasse co-gen 3500 MW,273MW achieved (2), (1) referring to the Ninth 5-year plan Proposed 10% renewables as share of annual investment in power generation40 (3) Tax concessions such as equipment duties and investment depreciation. Subsidies (interest and capital) drive the programmes for each technology type. Soft loans available through the Indian Renewable Energy Development Agency (IREDA) Dedicated Ministry for Non-Conventional Energy Sources (MNES). Interim targets written into national economic development 5- year plans (2) MNES might welcome assistance to accelerate progress towards their long term potential targets Source: G8 Renewable Energy Task Force, Chairmen s Report, July 2001 Strategic Measures for Renewable Energy in India. The development of RE technologies, market and projects has been aided by a variety of strategy measures by the Indian government, MNES and states. Some major strategic measures, taken to encourage private/foreign direct investment to tap from RE sources, include provision of fiscal and financial incentives under a wide range of programmes being implemented by the Ministry and simplification of procedures for private investment, including foreign direct investment, in RE projects. The strategy measures are clearly directed towards a greater thrust on the overall development and promotion of RE technologies and applications. Incentives for Promoting Renewables. The MNES provides, as financial incentives, both interest subsidy and capital subsidy. In addition, soft loans are provided through the Indian Renewable Energy Development Agency (IREDA), a public sector company of the Ministry, and also through so me of the nationalised Banks and other financial Institutions, for identified technologies and/or systems (http://www.mnes.nic.in). The Government provides various types of fiscal incentives for the RE sector, which include: (1) 100% accelerated depreciation for tax purposes in the first year of installation. (2) Low import tariffs for capital equipment and most of the materials and components (3) Soft loans to manufacturers and users for commercial and near commercial technologies (4) Five year tax holiday for power generation projects; remunerative price under alternate power purchase policy by State Government for the power generated through RE systems, fed to the grid by private sector (5) Facility for third party sale of RE power (6) Financial incentives/subsidies for devices with high initial cost (7) Involvement of women, not only as beneficiaries but also for their active contribution in implementation of RE programmes

(8) Encouragement to NGOs and small entrepreneurs (9) Special priority for RE in North-Eastern region of the country; 10% of Plan funds earmarked for North-East towards enhanced and special subsidies and supply of garbage free of cost at the project site by State Governments, in respect of projects on recovery from municipal waste. (http://www.ciionline.org/policywork/index.html.) Some states have so far announced general policies for purchase, wheeling and banking of electrical generated from all RE sources. (See table 8) Table 8 Polices Introduced/Incentives Declared by the State Governments State Andhra Pradesh Karnataka West Bengal Madhya Pradesh Maharashtra Rajasthan Tamil Nadu Gujarat H.P. Haryana Kerala Wheeling Banking 2% of 2% of 2% of 2% of 2% of 2% of 2% of 2% of 2% of 2% of 2% of Buy-back 12 Months Rs. 2.25/kwh (5% esc., 1994-95) 2% per month for 12 Months Rs.2.25/kwh (5% esc., 1994-95) 6 Months To be decided on case to case basis Rs.2.25/kwh (no esc.) 12 Months Rs. 2.25/kwh (5% esc., 1994-95) 12 Months Rs. 2.89/kwh (5% esc., 1999-2000) 5% (12 months) Rs. 2.70/Kwh (no esc) 12 Months Rs.2.25/kwh (5% esc., 1994-95) 12 Months Rs.2.25/kwh (5% esc., 1994-95) 12 Months Rs.2.25/kwh (5% esc., 1994-95) 2%, 6 M Rs.2.25/kwh (5% esc., 1994-95) Third Party Sale Not Allowed Allowed Not Allowed Allowed Allowed Capital Subsidy 20% max. (Rs. 25 lakhs) Maximum Rs. 25 lakhs for backward areas Same as for other industries 30% (max. Rs. 20 lakhs) Other Incentives Industry Status No. electricity duty for 5 years Allowed No electricity duty for 5 years Not Allowed Allowed Allowed Allowed Allowed Source: MNES (http://www.mnes.nic.in/)

MNES R&D activities In order to accelerate the development for renewables, MNES has established R&D strategy and industrial R&D policy, constituted an R&D Advisory Committee and identified thrust areas in which R&D efforts are required. (1) R&D Strategy R &D for technology development of industry-driven and goal-oriented involvement of industry and scientific establishments Access to technological development elsewhere to avoid Reinventing the wheel Indigenous R&D for new and emerging technologies and improvement of available technologies Time-bound specific tasks for identified R&D activities to be assigned to recognised institutions, with clear understanding on the achievement of results. (2) R&D Advisory Committee The Ministry has constituted a SteeringCommittee consisting of eminent persons in the field of RE, Research, Industry, Academic Institutions etc. The R&D Advisory Committee evaluates and clears R&D projects submitted to the Ministry for financial support. (3) R&D Priority Areas The Ministry has identified priority areas and considers R&D proposals which are directly related to the activities/programmes of the Ministry and which hold promise for commercialisation in the near future. The priority areas cover mainly programmes such as Rural Energy, Solar Energy, Energy from Urban & Industrial Wastes, Power Generation - Wind, Biomass, Small Hydro; New Technologies-Chemical Sources, Hydrogen, Fuel Cell, Ocean & Geothermal Energy, etc. (4) Industrial R&D policy A profit making industry registered with the Department of Scientific & Industrial Research for inhouse R&D may submit an R&D project, in the prescribed form, to the Ministry for support. The industry is expected to share 50% of the cost of the project and the Ministry supports to the extent of the remaining 50%. A consortium of industry, academic institutions, research laboratories and R&D institutions, etc., may be formed to undertake an R&D project. The role and tasks of each member of the consortium must be clearly defined. Consortium members will also be required to share at least 50% of the cost of the project. MNES funds will be released to the implementing institution in the consortium. The implementing institution will be responsible for the entire expenditure and for other terms and conditions of the project. An industry may join hands with the Ministry to entrust an R &D project to an institution/research laboratory or an academic institution. Funds in this case will be released to the implementing institution concerned, which will also be responsible for the entire expenditure and other terms and conditions. MNES support up to 50% of the cost of the project will be available. In the above three models, the industry/institution contributing 50% of the cost will have the right on commercialisation of the technical know-how (http://www.mnes.nic.in). Helping the Private Sector Create a Market for Renewables. A new policy of opening electricity generation to private participation was announced by the Indian central government in October 1991. To help the private sector create a market for RE, IREDA took a number of measures to

raise awareness among investors and banking institutions of the viability of RE technologies and to overcome the barriers of access to market for renewables. (1) IREDA-sponsored business meetings and training programmes attracted many participants from state agencies, investors and banking institutions. These meetings were supplemented by informational publications and media advertisements to help small and medium scale enterprises market their RE products. (2) IREDA developed and published several best-practice manuals on wind projects and investments, offered financial consulting services, and made project appraisals for developers. (3) IREDA developed a renewables sales and service infrastructure for solar PV systems and tested different service delivery models to overcome the barriers of lack of after-sales service and credit-delivery, which were hindering development of the rural market. (4) IREDA s efforts have also gone into encouraging private sector investment in wind farms and domestic production of wind turbine blades. By the late 1990s, dozens of domestic wind turbine manufacturers had emerged, many of them joint ventures with foreign partners. Many of these manufacturers featured the latest high technology turbine designs (Martinot, 1998). Strategic Management of Renewable Energy In India The government s recognition of the importance of increased use of RE to meet increasing demand in a sustainable and environmentally sound manner has enabled the earlier initiatives to be further extended. To provide focussed attention on RE development and its strategic management, the Government of India created CASE (Commission on Additional Sources of Energy) in 1980 and a separate department of Non-conventional Energy Sources in 1982, under the Ministry of Energy, at par with Departments of Coal and Power. In 1992, this Department was upgraded to the status of a Ministry, the MNES - to increase the deployment of RE technologies. This was done primarily to give more autonomy and focus to the department in decision-making and allocation of resources. Today India is in the unique position of having a dedicated Ministry for Non-conventional Energy Sources. The Ministry is the nodal agency of the Government of India for all matters concerning the promotion of non-conventional RE. The span of its activities covers policy making, planning, promotion and co-ordination of various demonstration and commercial programmes, designing and implementing fiscal and financial incentives, creation of industrial capacity, promotion of R&D and technological development, intellectual property protection, human resource development and international relations. The Ministry also deals with emerging areas such as fuel cells, electric vehicles, ocean and hydrogen. All multilateral and bilateral Government-to- Government linkages related to renewables are enacted through this Ministry. In order to provide financial support to the RE sector, the Ministry has set up within its fold a financial institution, viz., Indian RE Development Agency Ltd. (IREDA). Plan-wise outlay and actual expenditure for MNES is given in the following. (See table 9). Table 9 Planned Outlay on Energy (in Rs crore) Sixth plan Seventh Plan Eighth Plan (1980-85) (1985-90) (1992-97) Outlay Actual Outlay Actual Outlay Actual Energy 26535.4 30751.3 54821.3 61689.3 115561.1 128904.5 Power 19265.4 18298.6 34273.5 37895.3 79588.7 76725.8

Petroleum 4300 8482.1 12627.7 16008.8 24000 40062.5 Coal 2870 3807.5 7400.6 7122.3 10507 10715.2 Non conventional 100 163.1 519.5 662.9 1465.4 1401.1 Ninth Plan 1990-91 1991-92 1997-98 1998-99 (1997-2002) Outlay Actual Actual Actual Actual 202340.7 17101.7 19733. 6 19156. 6 37296.2 124526.4 11387.8 14517. 9 6844 22065.8 74014.18 3592.1 3339.8 9682.7 11938 17575.23 1984.8 1709.6 2212.7 2624.8 3800.14 136.4 166.3 417.2 667.7 NB 1 crore=10 million Source. 1. Economic survey 1999-2000 Economic Division, Ministry of Finance, Government of India 2. Ninth Five Year Plan Table 7 indicates that actual expenditure for MNES in the non-conventional has increased since 1992. 4. COMPARISON OF STRATEGIES FOR RENEWABLE ENERGY DEVELOPMENT IN CHINA AND INDIA. Comparison of Strategic Objectives. Both countries have set their strategic objectives for rural renewables development by outlining and listing them in their National Five Year Plans during the different periods. Generally speaking, the strategic objectives of the development include the goals, thrust areas, directions and approach with action plans for the development. Goals and priority areas for the development of rural renewables in China are similar to those in India due to the similar background, resource conditions and infrastructure. The goals are to raise the conversion efficiency, reduce the production cost and increase the proportion of RE in the structure. The priority areas include wind, biomass, small hydro, solar, marsh gas and geothermal. The Indian strategic objectives for the development of rural RE have an identified direction and approach, which includes enhancing the diversity and security of supplies, promoting private-sector participation and competitiveness. In addition, they have included the participation of more women in the RE programme for their employment and empowerment. They are providing cost effective for water pumping, irrigation, drinking and rural electrification and all-round rural development through the Integrated Rural Energy Programme; furthermore, there are detailed action plans at state or local level. For example, India has clear guidance from the Government and a comparatively effective framework of legislation and fiscal polices for RE development. In comparison, the Chinese strategic objectives lack a clear direction and approach and detailed action plans at state or local level. The Chinese provision especially lacks a defined role for private enterprises in the production of rural RE. Comparison of Strategic Measures

A number of strategic measures have been taken by both countries to accelerate the development of renewables. Comparison of Economic Incentives International experience shows that government policy support is the key enabler in moving commercial RE development forward in its initial stages. Government-supported financial incentives, in particular, are important in helping to develop commercial markets and reduce the financial life-cycle costs of RE technologies. China and India use similar economic incentive options including government subsidies, tax incentives, price policies and the low interest loans and interest subsidies for publicly-leveraged market-driven deployment of RE technologies. However, there are some important differences between these two countries in the economic incentive options. 1. In China only, both central and local governments provide various types of fiscal incentive for the development of RE but neither offers production incentives for it. This results in a lack of domestic manufacturing capability in China. In India, however, in addition to central government and states, MNES provides economic incentives for the development of renewables, moreover, it has RE production incentives. As a result, a substantial manufacturing base has been created in a variety of RETs, placing India in a very competitive position, not only to export technologies but also to offer technical expertise to other countries. By the late 1990s, for example, dozens of domestic wind turbine manufacturers had emerged, many of these featuring the latest high-technology turbine designs. Although wind turbine blades are still largely imported, domestic production of blades has commenced and subsequently blades and synchronous generators have been exported to Europe. 2. In China, direct government subsidies to customers of RE and applications are a common policy option that is used to accelerate the development of the renewables market. Although direct government subsidies for renewables are effective in accelerating the RE market, there are several problems relating to government subsidies, one being the source and availability of funds. Government will have to make a large capital investment in order to stimulate significantly the development of RE markets; however, limited and long-term availability is uncertain because the funds for subsidy come from the government's general revenue. The strategy and objective of government subsidies are another issue who should receive the subsidies, what should be the level of subsidies, the developmental goal of subsidies and who will decide the levels? These are important questions that must be addressed. 3. In India, the MNES announced a new strategy and action plan in 1992 to replace subsidy-driven programmes by commercialisation. Financial incentives were trimmed and fiscal incentives, such as concessionary tax rates, along with soft loans, were introduced to encourage enterprise. Several RE technologies such as wind, solar thermal, solar photovoltaics and small hydro are now promoted on a commercial scale