Although its title hints at an event led by Asia-Pacific countries, the Europeans were the most active players at the conference, held in the four-star Shanghai Worldfield Convention Hotel. Delegates came from 21 countries and regions, with about half of the total of just over 140 hailing from eight European countries: the United Kingdom, Germany, Finland, France, Austria, Belgium, the Netherlands and Switzerland. From the Asia-Pacific region, China, as the host of the event, sent a suitably large delegation of 60. Others came from India, Singapore, Mongolia, Taiwan and Hong Kong. Most economic crisis-hit countries, notably Japan, did not show up at all. Attendance from the United States was also low profile, with no major wind power company from that country present.
"The event feels the impact of the economy," said a staffer with the Hong Kong-based organiser, Alternative Development Asia, Ltd. "Because of financial troubles in much of the world, it has to be a smaller show." She compared it with a previous event held last year in Indonesia with 400 delegates and the presence of then Indonesian President Suharto at the opening ceremony.
The strong involvement of European companies was also evident at the three-day exhibition opened on October 14, one day ahead of the conference. Thirty-three companies specialising in renewable energy, financing, publishing and market consultancy were represented with stands. About ten of them were manufacturers and developers of wind power equipment.
Strong EU presence
Nine companies from the European Union took the largest stand facing the entrance of the exhibition hall. Among them were Vestas Wind System AB from Denmark, Nordex Balcke-Dürr GmbH from Denmark/Germany, Riva Wind Turbines from Italy, Neste Advanced Power Systems from Finland, and MeesPierson, a Netherlands merchant bank which diversified into wind power financing in 1996. The second largest booth under the name of ETSU/Renewable Energy from Britain accommodated 30 UK companies, five of which, including Dulas and Renewable Energy Systems were from the wind power industry.
"Europe has a leading position in renewable technology, and we are concerned about climate changes," said Pedro de Sampaio Nunes, director of the Energy Technology Directorate General XVII of the European Commission. "That's why we've brought a strong delegation to the conference." There was also optimism about the market potential and business opportunities in Asia. "Asia É is facing temporary problems, but it is the fastest growing region in the world. From our studies, this crisis will not affect the potential for growth in the long run, and will even promote the emergence of a stronger private sector in the energy field," said Nunes.
This European commitment to Asia was echoed among almost all participants from the old continent. As one of the keynote speakers, Tom Slesenger, task force manager of ETSU/Renewable from Britain, affirmed. "It remains to be seen whether these markets will evolve into the most dynamic and important in the next decade," he said. "But whatever the situation, the Asia-Pacific region is to require partnerships between companies in East and West when it develops its indigenous skills and exploits the potential of these markets. It would be totally wrong [for foreign investors] to back off. "
Financing Asia
Financing Asia's development of renewable energy was a major topic at the conference. Since the current crisis in Asia is primarily a financial one, both public and private financing sources are expected to be more prudent in future. "They will be more selective, that's clear," said Nunes. "But banks are still willing to fund good projects in the region that are sound and well prepared, especially in China, which will be the future market for renewables with huge development potential."
The point was also made clear by Dirk Meulemeester of MeesPierson NV bank at a discussion on day one of the conference. The bank that claims to have arranged the world's largest wind power financing in 1997 -- for the 107 MW Lake Benton wind farm in Minnesota, USA -- said that it now has a strong interest in China. In a detailed case study lecture on procedures to ensure financing safety in the country, Meulemeester, global head of the bank's energy division, referred to wind as a primary renewable. China, however, still needs a less complicated project approval process, quality wind data, improved contract terms and tangible government support to enable the wind power sector to grow faster, he added.
Conference delegates generally looked to public financing organisations to provide more support in renewables in developing countries. An Asian Development Bank officer said his bank has focused its activities for renewable development on the promotion of photovoltaic technology and wind energy which have proven to be "reliable, affordable and environmentally sustainable technologies" to provide electricity to about one billion people in Asia, who still have no access to electric power. As a follow-up move to its September 1996 loan of $100 million for renewable energy systems in India, the Asian Development Bank is expected to invest in wind power systems in China and help install hybrid systems in rural areas in the Philippines, said the bank's Energy Division senior project officer Edu Hassing.
India -- A learning experience
As the region's leader in renewable energy development, particularly in wind power, India's presence won deserved attention from the delegates. After more than 20 years' development, about 1300 MW of its power generating capacity, or 1.5% of the nation's total, is based on renewable energy sources, according to Ajit Kumar Gupta, adviser and head of the Power Group of India's Ministry of Non-Conventional Energy Sources (MNES).
With the world's fourth largest wind power program and a claimed 980 MW installed, India nonetheless believes that the wind dominated structure of renewables in the country will change in the long run. "It's unlikely that a single technology will predominate," said Gupta. He pointed out that in the short term wind energy is the most economical as the technology is already commercially competitive. But in the long run, modern biomass and solar energy seem more likely to dominate. According to India's long term plan, renewables will account for about 5% of the nation's total power base by 2020, and account for more than half after 2050.
Although India has a wind power industry four-and-a-half times as large as China's, Indian delegates said they came to China to learn. The experience that China might be able to pass to India is privatisation, or a decentralisation of the energy industry, as Gupta put it. "There is a tremendous change happening in China in ownership and private initiative," he said. "The entire energy sector has been restructured in Beijing and more and more private enterprises have been given a central role." This may be true in almost all sectors in China -- except for in energy generation and transmission. At present, the country's electric power is still monopolised by the State Electric Power Corporation (SEPC), which in turn is still supervised by the Ministry of Electric Power. Limited privatisation has just begun to be authorised to small facilities in rural areas.
In the past five years, according to Gupta, the Indian government has made great efforts to facilitate energy generation. It plans to review subsidy policies to encourage entrepreneurs in the rural energy sector. The "right conditions" must be created for private renewables initiatives to prosper. "We've made some mistakes in the past in this regard," he said. "Maybe China doesn't need to repeat these mistakes and is able to bring about a higher level of efficiency with greater private initiative."
India means to attract more foreign investment to its renewable energy industry, toward establishing local production facilities and developing large projects. Relevant policies have become more flexible and liberal. According to Gupta, the country welcomes joint ventures and can also consider proposals for up to 100% equity ownership by foreign investors. "In this regard, India is a more mature market," comments Ian Fletcher, senior consultant of ETSU/Renewable Energy from Britain. "But China has a good chance to catch up."
Renewed Agenda for China
Those who had hoped to sound out Chinese decision makers on market policies and accessibility must have been disappointed at REAP'98, since they could hardly pull the few ministry officials from Beijing to dinner tables for a private conversation. Also, the appearance of Chinese speakers was often late and ephemeral. Most of them did not sit through a session and had to disappear during coffee breaks. When some speakers failed to show up, subordinates were sent to read a pre-prepared script, which even failed to stir audience interest in asking questions. Old habits seem to die hard in China. Everyone had a ready made welcoming message delivered almost with one voice, but when it comes to a specific question, each office will propose a solution by its own rules. Decision-making processes "are still murky," was the comment of one German businessman.
The highest ranking official invited was Deputy Director Bai Rongchun of the Department of Energy Conservation and Resources Utilisation under the State Economic and Trade Commission (SETC). SETC is a super ministry consisting of nearly a dozen former ministries and has a say in renewable energy development programs. Bai also talked of China's great potential for renewables, including 250 GW of theoretical wind power resources, and the government's policy of encouraging environment friendly energy industries. One policy breakthrough effective since the beginning of this year is that wind power and other renewables are listed in a government priority list for introducing foreign investment. Projects falling in this category are exempt from customs tariff and value-added tax when they import wind turbines.
China still promises to be a booming market for renewables. According to ETSU's Slesenger, it is set to increase from $2 billion a year now to $6 billion over the next decade. So far, China's installed wind capacity has reached 220 MW, with the recent completion of a 24 MW wind farm, jointly financed by three Chinese companies and by utility NUON of the Netherlands, at Nan'ao in Guangdong Province. Almost all China's capacity has been developed since 1992. Since 1995, when China announced its 1000 MW goal by the end of 2000, the wind power sector's annual growth rate has been over 50%.
Despite the rapid increase, nobody believes China will reach that goal within 26 months, with the best predictions postponing the deadline by some four to five years. Among many barriers is a lack of clear-cut policies ensuring grid accessibility. Neither is it clear who will make make up the price difference between that of new wind and that of existing cheaper thermal power.
Power purchasing agreements with government subsidies have been negotiated in individual projects in Inner Mongolia, Xinjiang Uygur Autonomous Region and Guangdong Province. These three regions are home to the bulk of China's wind capacity. But in general, subsidies are first given to state-owned local branches of SEPC, which monopolise the grid. Usually the monopoly is only willing to pass the subsidies onto wind farms it has a stake in, refusing to extend them to independents. This puts a damper on the incentive to invest. "Private investment in the wind power industry is virtually not allowed," said senior engineer Wu Yundong of Zhejiang Institute for Mechanical and Electrical Design. "Government policies should ensure that every wind farm can be connected to a grid at a reasonable price." Wu also argued for a sharp reduction of sales tax on wind generated electricity from 17% to 6%.
It is fair to say that China has been serious and ambitious with regard to wind power development. Under its Ride-the-Wind program conceived by the State Development Planning Commission, two multi-million dollar joint ventures with foreign partners -- Nordex Balcke-Dürr and Spain's utility subsidiary, MADE Renewable Energy -- have been established this year to produce wind turbines of up to 600 kW in capacity. The ultimate goal for these projects is to introduce technological know-how that China needs to make high quality and large capacity turbines. "These are long term investments," said Karl-Eugen Feifel, Asia-Pacific general manager of Nordex Balcke-Dürr.
While the commitment of European investors to the Chinese market may be long term, their patience could be tried beyond endurance if they have to wait too long for China to take the decisive and necessarily difficult steps towards a complete liberalisation of the market. It is hoped that the knock on the door and the messages of REAP '98 will find their way to bureaucracies in Beijing. The city is expected to be the venue for the 5th REAP next year.
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