Since 2010, China has been the largest consumer of energy in the world. As the country continues to develop, a rising middle class, more vehicles, urbanization and industry all require increased energy usage.
The South China Morning Post reported that“the direct cost of pollution accounted for 2.5 per cent of total economic output in 2010, but if damage to the ecosystem — including forests, wetlands and grasslands - was included, the losses added up to 1.54 trillion yuan, or 3.5 percent of that year's gross domestic product."
China's leadership has recognized the need to address this issue. According to Reuters, at Premier Li Keqiang's first press conference, he said, "we shouldn't pursue economic growth at the expense of the environment. Such growth won't satisfy the people."
The advancement of viable clean energy solutions will reduce carbon emissions and China's reliance on foreign countries for energy. It will also enable China's existing industries to continue growing while at the same time creating a new, innovative industry with higher-paying jobs. Globally, this will impact consumers, businesses, investors and the environment.
KPMG estimates that approximately 90 percent of China's energy comes from fossil fuels, with the largest source being coal. Reliance on coal is not sustainable. Coal production is water intensive and this will further stress China's already-depleting water resources.
At a September 2009 UN Summit, Hu Jintao, China's President at the time, said China's goal was to have renewable energy sources account for 15 percent of its energy by 2020. In 2012, renewables accounted for approximately 9 percent. According to data from the U.S. Department of Energy, 11 percent of the U.S.'s 2012 energy production came from renewables.
China has already made progress towards its 15 percent goal. Today, it has the most wind and hydro resources and is the the largest manufacturer of solar panels in the world. According to a PEW report, in 2012, China's clean energy sector attracted more than $65 billion ofinvestment — 30 percent of the G20 total. This capital was primarily allocated to wind and solar technologies.
Kangxi Grassland, about one hour outside of downtown Beijing
Combined, hydro and wind account for more than 95 percent of China's renewable energy sources today. Although China's solar capacity has a much lower base than wind and hydro, it is expected to grow seven fold and reach 50 gigawatt (GW) by 2020.
Sherry Zhang, research analyst at The China Greentech Initiative (CGTI), a Beijing-based collaborative platform of 100 plus companies and governments that identifies, develops and promotes greentech solutions and projects, said: "solar in particular will be the most promising [renewable energy] over the next one to three years."
The improving economics of solar are bettering its prospects. Dr. Mark Thurber, Associate Director of the Program on Energy and Sustainable Development at Stanford University, said "the decreases in solar costs are driven largely by China. A lot of these are the result of economies of scale and refinement of the manufacturing process, although a glut of supply has also played a role."
Biomass production is also expected to increase significantly and reach 30 GW in 2020. CGTI data show that in 2010 biomass accounted for 1% of China's total primary energy source.
China is taking a multipronged approach to addressing its energy shortage. According to Xinhua, China's official press agency, in March 2012, Wen Jiabao, former Premier of the State Council, said: "we will optimize the energy structure, promote clean and efficient use of traditional energy, safely and effectively develop nuclear power, actively develop hydroelectric power, tackle key problems more quickly in the exploration and development of shale gas, and increase the share of new energy and renewable energy in total energy consumption."
The Chinese government has introduced a multitude of measures to support the progress of renewables. Zhang said, "China has named 'new energy' — including solar, wind and bioenergy — as one of the seven new strategic industries. China hopes this can transform the economy from heavy industrialization to a more value-added clean manufacturing capability."
Given that the renewable energy sector is capital intensive, the Chinese government has offered subsidies and low or zero interest loans in this space.
Talking about how to foster industry growth, Nathaniel Bullard, Director of Content at Bloomberg New Energy Finance, a data and news company covering the energy sector, said: "it has mostly to do with the level of commitment that leads to scale. A huge advantage is enormous scale that allows manufacturers to get costs low. Government commitment and a stable demand scenario [are conducive growth factors]."