Mixed energy forecast

Support for China's non-thermal energy industries appears to have gone up last year, not down, contrary to the assumption that the global credit crunch would dampen investment as well as energy demand.

However, many observers believe the picture may not stay as rosy this year if the government fails to lend official support to solar power and establishes global standards when it comes to wind power. Nuclear energy, however, is getting a big green light.

Statistics released by the China Electricity Council (CEC) early last month showed that last year's investment by the clean energy industries, especially for hydropower, nuclear power and wind power, went up by large margins against a global economic slump.

Investment in wind power and nuclear power infrastructure last year rose by 88 percent and 72 percent respectively over 2007, the CEC said. In contrast, the country's investment for the construction of thermal power plants declined by 22 percent year-on-year.

However, low crude oil and coal prices may make the pursuit of alternative energy less attractive.

"People might still have some interest in the renewables, but they are no longer crazy about them. The economic crisis will cause a decline in renewable energy project activity through 2009," said Zhou Tao, analyst with Great Wall Securities.

Doubled by the fact that China's energy demand went down dramatically as the global financial crisis slowed the economy, the "disadvantage" of costly clean energy would loom larger, said Zhou.

China's electricity consumption fell 8.6 percent from a year earlier in November and 3.7 percent from the same month the year before in October - its first such decline since 1999.

"In addition, they will be facing difficulties in raising funds from the lackluster stock market as well as the banks, which are tightening lending rules," Zhou said.

Good news is that the Chinese government recently promised to offer more support to the renewable energy industry.

A plan will be issued in the first half of this year for subsidies for power generation projects based on renewable energy in the second half of 2008, according to Huang Shaozhong, an official with the State Electricity Regulatory Commission of China.

From October 2007 to June 2008, subsidies of nearly 2 billion yuan were provided to 148 renewable energy projects.

The financial crisis has brought down prices and demand of raw materials, such as steel and silicon. "This is good news for the wind turbine and solar panel manufacturers," Zhou said.