Focus on formulation of regenerative energy law.

The Fourteenth Conference of the Tenth NPC (Nationol People's Congress) Standing Committee passed the "Law on Regenerative Energies" on Feb. 28. The law includes 8 chapters and 33 articles.

"The new law," said the secretary of the Regenerative Energy Committee, China Resources Comprehensive Utilization Commission, "will trigger deep-seated readjustments to the energy structure in China."

According to analysts, the new law will have an effect on the balance of interests in the energy sector. An expert who took part in drafting the law several times disclosed, "the Law on Regenerative Energies is intended to remove the defects in the energy structure in China."

Some experts also point out that many parts of the new law reflects the interests of the regenerative energy sector, but does not reflect the interests of oil enterprises.

Quick action in law formulation

It was not expected for the "Law on Regenerative Energies" to pass. Delegates from petroleum and petrochemical sectors are caught unawares, and seem to lack understanding of the law.

According to the chairman of Shandong Himin Solar Energy Group, however, the passing of the law was not beyond his expectations. In March 2003, the private enterpriser from Shandong, was elected delegate of the Tenth National People's Congress.

On the train to Beijing, he distributed a pamphlet called "Solar Energy can Make China Strong" in the hope that he could unite other delegates in proposing a motion of regenerative energies for legislation.

As a leader in competing for this cause, he got 56 delegates to sign their names for the motion, and was quite satisfied with it. "There are 6 academicians, 5 university chancellors and several presidents of well-known enterprise groups."

"I do not propagate enterprises and products. I only propagate solar energy--a regenerative energy," he said openly. According to reporters, Shandong Himin Solar Energy Group had already expanded its market influence to the whole country at that time.

In June 2003, the Conference of Chairmen of the NPC Standing Committee included the formulation of the "Law on the Promotion of Regenerative Energies" in the 5-year legislation plan and the 2003 legislation plan, and asked the NPC Environment and Resources Commission to draft it.

In August 2003 the NPC Environment and Resources Commission entrusted Tsinghua University to draft the version for soliciting experts' opinions.

One month later, the Regenerative Energy Development Center of the Energy Research Institute of the National Development and Reform Commission and the Regenerative Energy Commission of China Resources Comprehensive Utilization Association were entrusted by the NPC Environment and Resources Commission to hold a symposium on the legislation for the utilization of regenerative energies.

One year later, the draft of the "Law on Regenerative Energies" that was prepared to solicit opinions was officially formulated.

At the end of 2004, the Tenth NPC Standing Committee held the Thirteenth Conference to discuss the law.

On Feb. 28, 2005 the Fourteen Conference of the Tenth NPC Standing Committee passed the "Law on Regenerative Energies". On the same date President Hu Jintao signed the No. 33 Presidential Decree. The "Law on Regenerative Energies" will be implemented on Jan. 1, 2006.

Awareness in crises

Compared with the "Law on Oil" whose formulation has been delayed repeatedly, the formulation of the "Law on Regenerative Energies" has been relatively swift. According to experts, the issuance of the law has deep-seated factors.

First of all, the gap between the economic development and the energy supply in China has become increasingly pronounced. In a supply shortage of oil, natural gas, and power, the development of regenerative energies has special implications and needs legislation to help.

The total energy consumption in China reached a level as high as 1.97 billion tons of standard coal in 2004, an increase of 15% over the previous year. Crude oil consumption was 290 million tons of the total, with an increase of 16.8%. The total output of primary energy, however, was only 1.846 billion tons of standard coal in 2004.

Secondly, the energy structure in China today has many defects, and is in urgent need of readjustment.

As a matter of fact, some experts already realized in 2000 that fossil energy alone can no longer meet the energy demand in China. One of the solutions is to make a vigorous development of regenerative energies such as wind energy for power generation, solar energy, and biological energy.

The development of regenerative energies in China is however far from satisfactory. According to experts, the key factor for the slow development of regenerative energies is the lack of a powerful driving force.

Compared with primary energy, the production cost of regenerative energies is relatively high. Not only do enterprises have no initiative in making investments, even enterprises dealing with sales of energy products such as power grids and filling stations have no interest.

Therefore, the best driving force is using legislation to make a compulsory promotion of regenerative energies.

A deputy director of the NPC Environment and Resources Commission points out that with firm support from state policies, the regenerative energy sector in China will develop markedly in the next few decades, and regenerative energies will become major substitute energies after coal, oil, and natural gas. It is possible for China to increase the proportion of regenerative energies consumed to 10% of the total primary energy consumption by 2020.

Compulsory measures in legislation

Most experts think that the legal support which is most needed in the development of regenerative energies is the support of compulsory quotas. That is to say, in the production and consumption of primary energy, a certain proportion of regenerative energy products must be produced and consumed.

Experts said, "The most essential support is to guarantee the access to regenerative energy products to the sales network." Taking compulsory measures to force primary energy sales enterprises to sell regenerative energy products has become a common understanding among experts.

After repeated discussions and debates, the "Law on Regenerative Energies" has adopted the proposal concerning market support which was brought forth by experts, and defined compulsory provisions.

Such compulsory provisions have raised great disputes in enterprises dealing with the sales of oil products, as well as in the power sector, because they are in competition with those enterprises dealing with regenerative energy products.

Experts said, "As monopoly enterprises, especially large state oil companies have the responsibility to promote the development of the regenerative energy sector. If these sectors were open, there would be no need to force them to perform social responsibilities. The reality is, however, to the contrary."

Sharing responsibilities

In order to encourage monopoly enterprises, such as state oil companies, to support the regenerative energy sector, should we transfer the high cost of regenerative energy products to consumers? In a recent symposium, experts had heated debates on this issue.

Some experts think that if the cost is transferred to consumers, regenerative energy products would likely meet resistance in the market. Ethanol gasoline disseminated in Henan and Jilin is an example. More experts think that both enterprises and individuals have the responsibility to disseminate regenerative energy products.

The final trend of legislation is that the responsibility of industrial support should be shouldered by enterprises, but the cost should be borne by consumers. The "Law on Regenerative Energies" has defined compulsory provisions to guarantee this concept of legislation.

According to experts, such detailed punitive provisions are intended to ensure space for the subsistence and development of regenerative energies, and to avoid the discriminative exclusion from monopoly enterprises.

Difficulty in implementation

In the "Law on Regenerative Energies" the State Council is authorized to take charge of the implementation of the law. Legal experts think that such an arrangement is intended to guarantee the authoritativeness of the law. Local energy departments will also be in charge of the implementation in local regions.

It is explicitly stipulated in the "Law on Regenerative Energies" that energy departments of the State Council are in charge of organizing and coordinating nationwide surveys on regenerative energy resources. Survey results should be made public.

Such a provision expresses the determination of the central government to function transparently. It can also help overcome challenges in implementation in areas such as capital, market, and technology.

China formulated the "Law on Energy Conservation" a decade ago and the law has produced little effect in the past 10 years. According to analysis by experts, one reason for such a result lies in the actual conditions in China. The other is the over-generalization of the law. There are no specific schemes, and the social impact is not big. If the central government makes survey results public, relevant departments will be urged to take action.

Experts think that the mobilization of social forces can promote the development of the regenerative energy sector from a small and weak sector to a sector which is large and strong.

It is reported that China Resources Comprehensive Utilization Commission, the National Development and Reform Commission, and the National Environmental Protection Bureau have organized relevant forces to start commercial functioning of regenerative energies. They hope to strengthen this sector by using market forces, and especially private capital.

Although various economic elements are encouraged to make investments in the regenerative energy sector, experts are worried about the problem of capital.

To ensure the profit margin of regenerative energy products, some experts and enterprises once submitted reports to the State Council requesting the formulation of exclusive market policies. In fact the proposal is already adopted by the state in the dissemination of ethanol gasoline, but the result is not satisfactory.

An expert from the National Development and Reform Commission expressed, "there is still a long way to go for regenerative energy products in terms of technology, quality, and price. Problems can not be solved just by passing a law." Many difficulties such as those mentioned above have to be overcome in the implementation of the law.

[GRAPHICS OMITTED]

Major Regenerative Energies in China

Variety                  Main application
Wind energy              power generation
Solar energy             power generation, heating
Water energy             power generation
Biomass energy           fuel
Energy crop              fuel
Biological liquid fuel   fuel