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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 energy (RE) in
China and India. Such a comparison is highly relevant because both countries face enormous rural
energy 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 energy 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 energy 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 energy 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 energy enterprises which, in turn, make a contribution to
local economic development. Although rural China possesses abundant energy resources and has
achieved remarkable progress in the development of RE, its current energy structure is primarily
based on non-renewable fossil fuels. This inevitably leads to the continuing depletion of these
energy resources and to emission of pollutants and greenhouse gases.
The problem of energy 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 energy 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 energy, 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 energy 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 energy, 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 energy. The
potential of wind energy 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 energy
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 energy 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 energy 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 energy in rural China can be divided into two categories: the utilisation of solar heat and the
production of solar-cells. Solar heat includes solar energy water heaters, solar stoves, passive-
type solar houses and solar energy dryers. Solar power has been the subject of major initiatives,
for example Hebei province has some 64 enterprises using solar energy 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 energy 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 energy 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 energy 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 energy in this table includes small
hydropower, marsh gas, solar, wind energy and geothermal energy
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 energy is huge. Indian activities cover all major RE sources relevant to this study including
biogas, biomass, solar energy, wind energy, small hydro power, energy 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)
Achievements
Type of Renewable Energy Source or
Product
Approximate
potential
Amount
Product
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 energy potential in India has been estimated at 45, 000 MW, the
states with highest wind energy potential being Tamil Nadu, Andhra Pradesh, Karnataka, Kerala,
Madhya Pradesh and Maharashtra. By 2000, wind energy production had reached 1267 MW,
accounting for 42.7 per cent of RE supply in India.
Currently, biomass contributes 14% of the total energy supply worldwide and 38% of this energy is
consumed in developing countries, predominantly in rural and traditional sectors of the economy.
Applications of biomass energy include thermal or heat, mechanical water pumping for irrigation
and power generation including village electrification, as well as industrial applications. Biomass
energy 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 energy 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 energy 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 energy, 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 energy
structure; to strive for innovation in processes and technology in order to achieve modernized
production, and to meet an energy target of up to 3.9 Mtce (including traditional application of
biomass energy), 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 energy 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 energy 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 low-
cost 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 energy: 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 energy: 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
The average import duty now stands at 23%. Renewable energy technologies
enjoy special low rates: of 3% for components of wind power plants, 6% for wind
turbines, and 12% for PV systems.
Reduction in
Value Added
Tax
The rate of value added tax (VAT) is 17%. VAT on biogas is only 3%, and VAT for
small hydro is 6%.
Low Interest
Loans
Specific low interest loans for rural energy development have existed since 1987.
The interest rate for large and medium biogas projects, solar energy 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
Subsidies provided by the central government usually support research,
development and demonstration projects for renewable energy.
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
energy
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 energy
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
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.
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 energy
office at county
level.
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
energy 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 non-
financial barriers for RE development. For example, the State Development and Technical
Commission requested proposals and subsequently awarded a contract for a polycrystalline thin-
film 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 energy 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 energy 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 energy
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
energy, 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 energy conservation plans, comprehensive utilization, and
RE policies and regulations. This division also promotes new RE and energy 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, grid-
connected 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 energy 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 energy needs, providing decentralised off-grid energy 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 energy 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 energy 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 energy are major goals for the Plan
period. Use of non-conventional energy 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 energy 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 energy 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 energy 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 energy generated from all RE sources. (See table 8)
Table 8 Polices Introduced/Incentives Declared by the State Governments
State
Wheeling
Banking
Buy-back
Third
Party
Sale
Capital
Subsidy
Other
Incentives
Andhra
Pradesh
2% of
energy
12 Months
Rs. 2.25/kwh
(5% esc., 1994-
95)
Not
Allowed
20% max.
(Rs. 25 lakhs)
Industry
Status
Karnataka
2% of
energy
2% per
month for
12 Months
Rs.2.25/kwh
(5% esc., 1994-
95)
Allowed
Maximum Rs.
25 lakhs for
backward
areas
No. electricity
duty for 5
years
West Bengal
2% of
energy
6 Months
To be decided
on case to case
basis
Not
Allowed
Madhya
Pradesh
2% of
energy
Rs.2.25/kwh (no
esc.)
Allowed
Same as for
other
industries
Maharashtra
2% of
energy
12 Months
Rs. 2.25/kwh
(5% esc., 1994-
95)
Allowed
30% (max. Rs.
20 lakhs)
Rajasthan
2% of
energy
12 Months
Rs. 2.89/kwh
(5% esc., 1999-
2000)
Allowed
No electricity
duty for 5
years
Tamil Nadu
2% of
energy
5% (12
months)
Rs. 2.70/Kwh
(no esc)
Not
Allowed
Gujarat
2% of
energy
12 Months
Rs.2.25/kwh
(5% esc., 1994-
95)
Allowed
H.P.
2% of
energy
12 Months
Rs.2.25/kwh
(5% esc., 1994-
95)
Allowed
Haryana
2% of
energy
12 Months
Rs.2.25/kwh
(5% esc., 1994-
95)
Allowed
Kerala
2% of
energy
2%, 6 M
Rs.2.25/kwh
(5% esc., 1994-
95)
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 in-
house 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 energy 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 energy and hydrogen energy. 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
(1980-85)
Seventh Plan
(1985-90)
Eighth Plan
(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 energy
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 energy 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
energy 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 energy 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 energy 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
Comparison of R&D Measures It is the intention of both governments to support RE R&D. Both
countries have made substantial investment in the RE R&D fields and have established dedicated
RE research institutes. However, there are substantial differences between these two countries in
RE R&D. For example, India has a comparatively good framework for the RE R&D. It consists of
R&D strategy; industrial R&D policy; an R&D Advisory Committee and R&D thrust areas. MNES,
industry and the consortium consisting of industry, academic institutions, research laboratories and
R&D institutions participates in and supports these activities by sharing the cost of projects in
India. Furthermore, many states also actively participate and support R&D activities. In China
almost all RE R&D activities are carried out by the central government, local government and
industry rarely participate.
Comparison of Market Development for Renewables Both the Chinese and Indian
governments have initiated policies aimed at improving the non-technical infrastructure required for
commercializing RE technologies. The measures of both countries in developing the market for
renewables are discussed earlier. Experience has suggested that reduction of market barriers for
RE technologies is critical in commercialising them. This is more difficult than solving technical and
economic problems. Improvement in market infrastructure involves changes in electric system
operations and business practices which are country-specific. It will require continuous efforts by
both countries to overcome these barriers.
Comparison of Strategic Management
The strategic management of RE development differs considerably between the two countries.
The Indian government, through its various committees such as Fuel Policy Committee (1974),
Working Group on Energy Policy (1979), Advisory Board on Energy (1985), Energy Demand
Screening Group (1986), etc., formulated programmes aimed at rural RE and implemented these
through the Ministry of Non-Conventional Energy Sources, to achieve the goal of strategy
management for RE development.
The Indian strategic management model, in which the MNES is responsible for all matters
regarding strategy management for non-conventional RE development, produces a positive effect
in setting strategic objectives, 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 technology development,
intellectual property protection, human resource development and international relations. This has
increased the efficiency of strategy management for RE development and accelerated the
renewables development in India.
In China, however, strategic management of RE development has been divided between various
departments, such as Ministry of Agriculture (MOA), Ministry of Science and Technology (MOST),
Small Turbine Association, State Development Planning Commission, State Economic and Trade
Commission and State Power Corporation (SPC). This framework brings several problems,
including those of overlapping functions, multi-management, decentralized funds, duplicated
developments and divided policies, etc. This has, to some extent, weakened the ability of national
governmental intervention in RE development, hindering the development of RE in China.
The role of private enterprise and economic issues India has a more defined policy in this area
and it has been in operation for some time. Chinese policy, in comparison, is more fragmented and
there is comparatively little specific reference to the role of private enterprise.
Economic growth is of importance in China, not just to spread the fruits of economic progress, but
also to increase the opportunities for employment in such areas and mediate the loss of business
and other talent to the larger cities in the coastal area.
However, be it privately- or state-owned, new sources of renewable rural energy will provide
additional employment in those areas where sources of new employment are scarce. The creation
of new sources of energy may also provide a catalyst for local enterprise growth and, perhaps,
increased opportunities for attracting foreign direct investment. However, as Dasgupta (2002)
argues, the local conditions for new employment creation are rather more difficult than they at first
seem. Describing some Indian environmental experiences, he argues that often an enterprise
culture is missing, that entrepreneurs are inflexible, often not fully exploiting the opportunities
afforded by government incentives and local demand, that local skills are often of poor quality,
affecting technological absorption rates and the cost of setting-up. It seems that incentives are not
sufficient, a policy of assistance to small concerns is important, as in India. Chinese policy, if small
enterprises are to be embraced in the production of rural RE, will need to address such issues.
5. CONCLUDING REMARKS
Comparison of the strategies for renewables development of India and China clearly indicates that
there are similar and dissimilar options between India and China in their development strategies
for rural RE. These are reflected in the overall strategy objectives, various strategy measures and
strategy management for RE of the two countries.
Although only a fraction of the aggregate potential in renewables in these countries has been
utilised so far, both having made significant progress in developing RE resources. For example,
India has the largest decentralised solar energy programme, the second largest biogas and
improved stove programmes and the fifth largest wind power programme in the world, representing
more than two-thirds of the total wind power capacity in developing countries. A substantial
manufacturing base has been created in a variety of RETs, placing India in a position not only to
export technologies but also to offer their technical expertise to other countries. China has the
largest biogas and improved stove programmes with some 90% of world-wide installations. The
impressive achievements of the development for RE in both countries can, in the main, be
attributed to their own successful development strategies. The full commercialisation possibilities
of these advances have yet to be realized, however.
It is beneficial for both countries to continue to exchange and share their experiences and
successful strategies because of their similarities in size of rural population, rural area size, and
resource potential. They both have an increasing demand for RE due to the rapid development of
the rural economy and the need for protection of the rural environment. These experiences go
beyond the exploitation of and production of RE, they involve rural economic revival, as sometimes
has been the case in India.
Further development of private enterprise involvement in RE is still a question for both countries
but it is China, perhaps. that faces the most problems in integrating private energy production into
national energy production systems. The fact that India has built an exporting industry around
elements of RE is seen as significant.
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