China targets green energy sales

World Future Energy Summit: Wen Jiabao's keynote speech at WFES highlights the importance of China in the renewables in the UAE, but also the need for improved communication.

In the scramble to profit from demand for clean energy, this city southwest of Beijing is promoting itself as a manufacturing center for solar, wind and other gear by transforming into a living showcase of environmental technology. AP Photo/Alexander F. Yuan
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Wen Jiabao, the Chinese premier, flies into Abu Dhabi for the World Future Energy Summit (WFES) today.

Having emerged as the factory of the world, China is now throwing considerable resources behind clean forms of power.

Mr Wen has decreed that 15 per cent of China's energy be generated from alternative sources by 2015 and has developed a programme of incentives and regulations, including preferential prices for alternative producers, to make the sector financially viable.

China is already the world's largest producer of photovoltaic panels and wind turbines, two engines of the alternative-power revolution.

It's production of renewable energy equipment has soared. In 2010, the country accounted for about 50 per cent of all solar-cell manufacturing, the equivalent of 8,000 megawatts. It has been estimated that this rose to 18,000 megawatts by the end of last year. As a plethora of companies added their products to the market, prices for panels plummeted by about 50 per cent last year alone.

Visitors to the WFES will be aware of China's influence on the market: its companies represent the largest contingent at the event, and more than 50 of them have pitched their stands in the exhibition centre.

China's role in the renewables sector has not gone unnoticed by Abu Dhabi, which has set a target for its own renewables sector to provide 7 per cent of its electricity by 2020. Cooperation with China is one plank in its strategy, according to Masdar, the capital's clean-technology company.

"Masdar has ambitious plans to further relations and cooperation with China in the acceleration, development and deployment of renewable energy and clean technology and is involved with China on a number of levels across multiple business units," said Sultan Al Jaber, Masdar's chief executive.

Masdar Capital, the company's investment arm, has invested US$15 million (Dh55m) in UPC Renewables, a Chinese wind-power developer. In addition, half of its solar pilot project in Masdar City, a 10 megawatt array, is powered by Chinese-made panels. But Masdar's plans to build its own solar panel manufacturing plant in Abu Dhabi have been dropped as prices have fallen and a substantial market in this region has failed to materialise.

Masdar's commitment to the Chinese renewables industry will be appreciated by Chinese solar companies, which suffered bad earnings last year and are locked in fierce competition with European, and particularly German, makers for market share.

The Germans have felt the heat of Chinese competition and have brought down the price of their panels drastically.

Jose Alberich, a partner at AT Kearney, said it was not just a numbers game for Gulf nations, most of which had yet to establish a legal and commercial framework to encourage investment.

Governments in the region want to foster a domestic industry alongside the deployment of renewable-energy projects, and China has yet to establish a sustained dialogue with the relevant entities in the Gulf.

"[Governments in the Gulf] are going for the integrated model," said Mr Alberich. "They want to do that because they think this is economic development. The only way to create jobs is by the integrated model."

US and European companies have been quicker to recognise this and are already working with Masdar, the Qatar Foundation and Saudi Arabia's King Abdullah City for Atomic and Renewable Energy, the institutions that will ultimately create renewables policy in their countries.

"I haven't seen that Chinese companies have found the entry. They are not talking to the right people. They are not in the right forums," said Mr Alberich.

However, Chinese companies are in talks to set up regional offices in Masdar City.

Mr Wen's visit will be another opportunity cement relations.