An Energetic Solution

An Energetic Solution

The United Steelworkers (USW) union recently fi led a comprehensive trade case under Section 301 of U.S. trade laws. The petition alleges illegal activities by China in five key areas, including restricting access to critical materials, prohibiting export subsidies, domestic content subsidies and trade distorting domestic subsidies. The United States Trade Representative announced a probe into Chinese policies and practices in the renewable energy sector. After a Section 301 investigation is initiated, the case can be settled through bilateral negotiation or through the World Trade Organization.

On November 4, Li Jun feng, Deputy Director of the Energy Research Institute of the China National Development and Reform Commission, shared his thoughts about the trade disputes w ithBeijing Reviewreporter Wang Hairong. Li is also Secretary General of the China Renewable Energy Industries Association.

Beijing Review: The USW union fi led a Section 301 w ith the U.S. Government,petitioning for investigation into China’s green energy policy. How do you view the case?

Li Junfeng: There are underlying reasons prompting the United Steelworkers to file the petition. First is the sluggish U.S.economy. The unemployment rate is high,and some workers’ interests are adversely affected. The union represents the workers.This is understandable.

The Obama administration has been busy addressing the econom ic crisis. The government has been preoccupied w ith medical insurance and financial sector reforms. There has been no significant improvement in the economy. The result of the recent midterm election in the United States demonstrates the American people are not satisfied w ith some of the work done by the government.The dissatisfaction is partly vented upon the Chinese Government, and partly vented upon the U.S. Government.

Both the Chinese and U.S. Governments subsidize clean technologies. W hat is the difference between the subsidies?

Both countries subsidize clean technologies. China has learned many policies and practices from the United States. The U.S.Energy Foundation has sponsored Chinese Government officials to study American energy policies. Currently, China is still in the learning stage. The policies of the two countries do not differ significantly. The case is not only that China has subsidized the sector,the United States has not.

The clean energy sector in the United States has not developed as fast as that of China recently. The United States used to be the world leader in solar photovoltaic(PV) production and deployment. It was fi rst overtaken by Germany, then by Japan and now by China. That is because the political system in the United States has caused discontinuity in its policy. Different government adm inistrations may have different policies.Now after the midterm election in the congress, the Obama adm inistration may face more obstacles in its clean energy policy. In this aspect, the two countries are not comparable.

The Obama adm inistration’s stimulus package included more than $5 billion for clean energy, while the Chinese Government’s financial support is smaller,and most of the funds have not reached the clean energy sector.

We hope the trade disputes w ill disappear. Clean energy is a fledgling industry,and needs support. Countries across the world all subsidize it.

Are foreign firms in China discrim inated against while bidd ing for clean energy projects in China? An American study shows that foreign firm s’ share in China’s w ind power market has shrunk,yet their sales volume has increased. W hat do you think of that?

There is no discrim ination in the bidding process. It is price competition. Bids for w ind power concession projects are evaluated according to a price score and a technology score. Usually foreign fi rms do well in the technology score, but not in the price score. If they fail to w in a bid,that is probably because their prices are too high. I have not seen any bid-securing declaration that favors Chinese domestic producers.

U.S. companies have a fairly large market share in China’s w ind power market.For instance, General Electric (GE), a top w ind turbine producer in the world, has sold a large number of w ind turbines in China.The Chinese market is GE’s largest overseas market.

China’s clean energy market is expanding, especially in w ind power generation. In 2005, the installed w ind capacity in China was only a little more than 1 m illion kilowatts (kw), now it exceeds 30 million kw.

CATCH THE W IND: A w ind pow e r generation p ro jec t in Hexig ten Banne r, Inner Mongo lia Au tonom ous Region. In 2009, to ta l insta lled w ind capac ity in the reg ion exceeded 5 m illion kw, the highest in China

The U.S. market has also grown very fast in recent years. GE focused on the U.S.market rather than the Chinese market because the U.S. market is very good.

GE produced about 5 m illion kw of w ind turbines each year, so ld about 4 m illion kw in the U.S. market, and the remaining 1 million kw to other countries,w ith half of the 1 m illion to China. GE’s performance in China’s market is pretty good. Its sales have grown several times in recent years.

Chinese com panies export a significant am oun t of solar PV cells and modu les. Does the Chinese Government subsidize all solar PV producers, or only export-oriented companies?

The Chinese Government does not subsidize solar PV producers, whether they export their products or not. China has a“Golden Sun” project, which subsidizes the users. Whoever installs solar power generating equipment can claim the subsidy. The projects of domestic companies or foreign companies, whichever w in the bid, are eligible for the subsidy.

Can you talk about China’s wind turbine exports?

W ind turbines produced in China are primarily to meet domestic needs. China has exported very few w ind turbines. Last year,China exported fewer than 20 w ind turbines worldw ide.

The USW union alleged China has requested foreign companies to transfer technologies. Do you think this request is reasonable?

This is a commercial behavior. It is bargaining in business negotiations. When two companies are haggling over the terms for cooperation, one puts out conditions, the other can accept or refuse the conditions. A deal w ill be made only when the two sides can both benefi t from it. Technology transfer is not a requirement by the government.The USW’s allegations do not make sense.

W ill the disputes affect China’s determ ination and policies to develop clean energy?

No. Both China and the United States are large energy consum ing countries. Both need to develop and support clean energy development, and should not fight for small profi ts. Now, China is moving faster in clean energy development. The United States should catch up, rather than slow ing China down.

Besides, in recent years, solar PV production in the United States has also grown significantly. In 2009, the global solar PV production was up 35 percent, and production from the United States was up nearly 40 percent.

It is true that grow th in China is faster than in the United States. Yet, the saying that China’s exports hurt the interests of U.S. solar PV producers is unfounded.

If the two countries wage a trade war,what will be the consequence?

A trade war w ill hurt both sides. Such a war will harm the United States more. Many technologies and equipment to produce solar PV and w ind turbines in China have been bought from the U.S. companies, such as Dupont, GE and First Solar.

Chinese solar PV producers have purchased more than $5 billion in equipment,accounting for about 80 percent of U.S.exports of such equipment. They also have bought more than $5 billion worth of polysilicon from the United States, creating more than 1,000 jobs in the United States.

If the two countries cooperate, both will w in. Fighting w ill do no good to anyone.That w ill also hurt the efforts to combat global climate change.

Last Novem ber, Ch ina and the United States announced a far-reaching package of m easures to strengthen cooperation between the two countries on clean energy. How does the cooperation hold up now?

The projects in the China-U.S. clean energy announcements are being launched or about to be launched. These projects are cooperation between the two governments.The governments set the platform for the private sectors to participate. The projects just started, and there has been no significant progress to my know ledge.