"Social Capitalism" in Renewable energy generation: China and California Comparisons

With a population of over 1.3 billion people, demand for renewable energy is expected to grow to a USD $12 billion market in the near term. Under Renewable Energy Law (REL) in February 2005 in the People's Republic of China (PRC) passed by the National Congress, renewable energy projects will be able to receive a range of financial incentives starting in 2006, which will more than double the PRC current renewable energy generation from 7% to 15% by 2020. Most of the increase will be in hydroelectric generated power. Nonetheless, the nation and especially the provinces are moving rapidly to develop a wide range of renewable energy generation including solar, wind, geothermal and run of the river.

Because China practices “social capitalism” as expressed in it's recurrent Five Year National Plans since 1999, the national government and all the provinces have programs, unlike many western and industrialized nations, to “plan” and provide for infrastructures. This paper concerns only the energy infrastructure sector and renewable energy generation in particular. The planning process includes financial incentives and investments which are a major part of the Chinese law focused on “encouraging foreign investment industries”. The key part of the law is to guarantee long-term power purchase agreements with state owned and controlled “utilities”. In short, China may have gotten the economics of the energy sector correct in its concern for planning and finance.

The paper develops these energy infrastructure ideas along with the legal and financial requirements as “lessons” learned from the USA and especially California. These lessons now apply to China and allow it to learn from the American mistakes. Empirical data will be drawn from work done in China that examine the renewable energy generation and infrastructures and hence allow the RPC and its Provinces to “leap frog ”the mistakes of other developed nations. Further lessons will be learned from provinces and related infrastructures in China, such as water, transportation, environment, waste and telecommunications. More significantly, the USA and western industrialized nations may now learn from the Chinese.