Public Disclosure Authorized Accelerating Innovation in Public Disclosure Authorized China’s Solar, Wind and Energy Storage Sectors Public Disclosure Authorized Smita Kuriakose, Joanna Lewis, Jeremy Tamanini and Shahid Yusuf Trade and Competitiveness Global Practice Public Disclosure Authorized Contents Acknowledgements .................................................................................................................... 4 Executive Summary .................................................................................................................... 5 Role of Government and Policy Recommendations .................................................................................. 5 Increase support for early-stage innovation .......................................................................................... 6 Design the domestic venture capital market to avoid pitfalls experienced by foreign peers ............... 6 Further leverage strong record at commercializing cleantech innovations ......................................... 7 Continue to focus on dynamic cost innovation ....................................................................................... 7 Take a more comprehensive approach to measuring innovation ......................................................... 7 Strengthen the political, regulatory and business environment for innovators ................................... 8 Connect China with global innovation networks .................................................................................... 8 1. Introduction .................................................................................................................... 11 China’s Energy Challenge .......................................................................................................................... 12 The Environmental Challenge .................................................................................................................. 15 The Role of Innovation for Green Growth ............................................................................................... 15 Government Policy Framework ............................................................................................................... 18 Energy efficiency and greening starting with the 11th Five-Year Plan ................................................... 20 2. Regulatory and Policy Frameworks for Renewable Energy in China .................. 22 Policy Rationale for Promoting Renewable Energy................................................................................ 22 Deployment Policies ................................................................................................................................ 22 Industrial Policies .................................................................................................................................... 24 Where Does China Stand Globally in Regulatory Framework for Renewable Energy? ....................... 26 Best Practices in Promoting Renewable Energy Deployment and Technology Innovation ................ 28 Supporting Early-Stage Technologies ..................................................................................................... 28 Supporting Advanced Innovation ........................................................................................................... 28 Supporting Large-Scale Commercialization and Deployment ................................................................ 29 Supporting Renewable Energy in China .................................................................................................. 29 Supporting Indigenous Innovation through Technological Catch-Up ..................................................... 31 Inefficiencies in the Policy Framework .................................................................................................... 32 Innovation in China’s Renewables Sector ............................................................................................... 33 Global Innovation Index .......................................................................................................................... 34 Global Cleantech Innovation Index ......................................................................................................... 37 3. China’s Wind Power Technology Sector .................................................................... 41 Leaders in China’s Wind Power Technology Sector ............................................................................... 42 Research and Development ........................................................................................................................ 43 Venture Activity .......................................................................................................................................... 43 Case Study: Goldwind ................................................................................................................................. 44 Technology Acquisition ........................................................................................................................... 44 Technology Innovation ........................................................................................................................... 46 Case Study: Guodian United ..................................................................................................................... 47 Technology Acquisition ........................................................................................................................... 47 Technology Innovation ........................................................................................................................... 48 China’s Role in Global Wind Power Technology Innovation.................................................................. 48 Assessing Technological Sophistication .................................................................................................. 49 1 Patenting Activity ................................................................................................................................... 49 Patent Citation Likelihood....................................................................................................................... 53 Other Measures ...................................................................................................................................... 54 Assessing Learning and Cost Declines..................................................................................................... 55 Assessing Quality .................................................................................................................................... 57 Case Study: Wind Turbine Test Centers (Denmark) .............................................................................. 59 Government Policy Support ........................................................................................................................ 60 Pricing and Subsidies .............................................................................................................................. 60 Technology Transfer and Localization Mandates ................................................................................... 61 Research and Development Programs ................................................................................................... 63 Industrial and Trade Policies ................................................................................................................... 63 Course Corrections and Lessons Learned ................................................................................................... 64 Electricity versus Capacity ...................................................................................................................... 64 Curtailment Woes ................................................................................................................................... 65 Technology Transfers in China’s Wind Industry ...................................................................................... 66 Technology Networks ............................................................................................................................. 67 Case Study: Siemens (Germany) ................................................................................................................. 69 Looking Ahead ........................................................................................................................................... 69 4. China’s Solar Power Technology Sector .................................................................... 70 Solar Power Development .......................................................................................................................... 71 Research and Development .................................................................................................................... 73 Venture Activity ...................................................................................................................................... 73 Case Study: First Solar (United States) ................................................................................................. 74 Leaders in China’s Solar Power Technology Sector ................................................................................ 75 Suntech: A Case Study