CHINA TO INTRODUCE GREEN ENERGY SUPPORT

UNCLAS SECTION 01 OF 02 BEIJING 001521 SENSITIVE SIPDIS STATE FOR EAP/CM SFLATT/JHABJAN STATE PASS USTR FOR STRATFORD, WINTER, MCCARTIN, READE, VENKATARAMAN, KEMP, MILLER, MALMROSE DOC FOR MELCHER, SAUNDERS; LORENTZEN AND SHOWERS (5130); HEIZNEN(6510) E.O. 12958: N/A TAGS: ECON EINV SENV CH SUBJECT: CHINA TO INTRODUCE GREEN ENERGY SUPPORT PLAN This cable is Sensitive but Unclassified (SBU) and for official use only. Not for transmission outside USG channels. ¶1. (SBU) Summary: China's National Energy Administration (NEA) has announced it will soon submit a support plan for the alternate energy sector. Although specific details have not yet been released, the plan will focus on more-efficient and alternative energies--particularly wind and solar-- and an Embassy contact estimated that investment in the new energy sector would reach RMB 4.5 trillion by 2020. Although some industry experts predicted the plan will turn China into a key market for solar equipment, the plan appears to emphasize domestically-available technology. End Summary. Emphasis on New Energy Technology -------------- ¶2. (U) At a June 1 press conference, Vice Chairman Liu Qi announced that NEA had completed a draft "Development Plan for New Energy" and would soon submit it to the National Development and Reform Commission (NDRC) and the State Council for approval. Liu explained that the government considered development of "new energy" an important economic development strategy and would greatly increase government investment in the new energy sector. Under the plan, improved technology would lower costs and help industrialize the new energy sector. Liu also emphasized that NEA would proceed cautiously and consider possible risks in their pursuit of alternative energy. Plan to Focus on Wind, Solar, and Biomass -------------- ¶3. (U) The plan outlines development goals for new alternative energies such as wind power, solar power, and biomass energy, as well as NEA's intention to improve efficiency and reduce emissions from traditional carbon-based energy sources through technologies such as clean coal plants and smart grid technology. An NDRC official emphasized that wind power generation, in particular, would be a key area of development. The draft plan calls for total wind power capacity to reach 150 GW by 2020, solar power to reach 20GW, and nuclear power to reach 80GW. The plan also addresses one of the main challenges for new energy development: connecting these alternative energy sources to the power grid. According an industry expert, the plan could transform China into a key market for the solar photovoltaic industry; changing it from the "world's factory" for the solar photovoltaic industry into the "world's market." Investment at Home and Abroad -------------- ¶4. (SBU) An NDRC official emphasized to us that China would increase new energy investments in China and overseas, thereby contributing to global energy production. He estimated the total investment in the new energy sector would reach RMB 4.5 trillion (USD 660 billion) by 2020, much higher than the previously planned RMB 3 trillion. Comment: A Market for U.S. Exports? -------------- ¶5. (SBU) China plans massive investments in alternative and clean energy. While there are likely opportunities for foreign firms, the Chinese plans emphasize localization and improved domestic production. In fact, part of the emphasis on solar and wind technology over other more capital- intensive solutions may be explained by the fact that these simpler technologies are more readily available in China, and have higher local content BEIJING 00001521 002 OF 002 levels. Most production in solar equipment production, for example, is dominated by local firms, with around 50 new Chinese companies expanding poly-silicon production lines with investment over RMB 100 billion (about USD 15 billion). Chinese government financing and purchasing regulations make it difficult for foreign producers to compete. Foreign companies as a result are not competing directly with Chinese manufactures for photovoltaic products, focusing instead on high- end, more value-added sectors such as design, R&D, sales and third party service. PICCUTA