Saturday, March 18, 2006

Indian firm taps China's appetite for green energy

Indian firm taps China's appetite for green energy

Pallavi Aiyar

Suzlon holds ground-breaking ceremony for its factory in Chinese port city Tianjin


The factory is scheduled to begin operations in August
Tianjin facility to include a learning and development centre
The company has already two contracts in China

BEIJING: While January's agreements on Sino-Indian cooperation in hydrocarbons have been grabbing the headlines of world-media, real collaboration has begun in another less high profile, but potentially significant area: that of renewable energy.

The Pune-based wind turbine manufacturer, Suzlon Energy, held a ground-breaking ceremony on Wednesday for its factory in the eastern Chinese port city of Tianjin. The $60 million investment that Suzlon is making in its China factory is the first by an Indian company in the Chinese energy sector and one of the largest by any Indian firms in China.

The demands of China's burgeoning economy have led to a gargantuan appetite for energy. The mainland recently overtook Japan to become the world's second-largest consumer of energy, after the United States. Coal, which, as in India, provides around 70 per cent of China's energy, needs to be phased out if the country is to meet its commitments to the Kyoto Climate Control Protocol.

Faced with a combination of soaring energy needs and endemic air pollution, China has made it a priority to aggressively develop renewable energy technologies. Since January a new law on renewable resources has come into effect aimed at ensuring that by 2020, 10-12 per cent of the country's total energy mix will come from renewable resources.

The goal is to have 130 GW of installed renewable capacity within the next 15 years. At present, China's renewable energy consumption accounts for only three per cent of the total.

The new law obliges grids to purchase the more expensive renewable energy at prices fixed by the government.

The extra costs will be borne by consumers as a result of slightly higher prices for power. In meeting its renewable energy goals the Chinese government is encouraging foreign investments and collaboration, a chance that India's Suzlon has pounced on.

Suzlon is not only India's leading manufacturer of wind turbines, it is the fifth largest such company in the world. "Given China's huge potential in wind and encouraged by the provisions of the new renewable energy law, we decided to enter this market,'' said Paulo Fernando Soares, Chief Representative Officer for Suzlon in China.

China's current installed wind energy capacity stands at some 1,260 MW, but according to government targets this must be scaled up to 5,000 MW by 2010 and 30,000 MW by 2020.

China's potential for on-shore wind energy is, in fact. a weighty 250 GW, compared to India's 45,000 MW. However, India already has an installed capacity of 4,500 MW.

The majority of renewable energy programmes in China, including wind, are now being set up in collaboration with European firms. For India, which started developing its wind energy market much earlier, this is a window of opportunity.

Foreign companies investing in renewables in the mainland are eligible for tax breaks and other benefits. However, there is a 70 per cent localisation clause.

Hence, Suzlon's decision to set up a manufacturing facility in China.

The factory, scheduled to begin operations in August, will manufacture rotor blades, generators and control panels and will have an annual capacity of 600 MW for all components.

Suzlon has already two contracts in China for 50 MW of equipment each, both to be installed in 2006, in the Inner Mongolia Autonomous Region and Shandong province.

According to Mr. Soares, Suzlon's plans for the Tianjin facility include a learning and development centre that will "facilitate the transfer of the company's experience and knowledge — and help in developing skilled and educated manpower in China."

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