Innovation in China’s Renewable Energy Industry Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Engineering and Public Policy Long Thanh Lâm B.S., Mechanical Engineering, Massachusetts Institute of Technology M.S., Engineering and Public Policy, Carnegie Mellon University Carnegie Mellon University Pittsburgh, PA May, 2017 ©Copyright 2017 Long Thanh Lam ALL RIGHTS RESERVED Acknowledgements First and foremost, I would like to express my sincerest appreciation to my advisors, Inês and Lee, without whose support I would not be where I am today. Beyond critical guidance that has shaped my research program and academic scholarship, Inês has provided me with timely and invaluable intellectual and emotional support throughout my Ph.D. career – at its zenith, its nadir, and everything in between. From Lee, I have learned to be unafraid to ask big questions and think outside the box. I cannot even begin to describe the value of his indefatigable mentoring and unflagging encouragement over the years. I also would like to thank my committee members, Prof. Gallagher and Prof. Veloso, who provided helpful comments and feedback to make this dissertation better. This Ph.D. would not have been possible without the assistance of many, many individuals and organizations. I gratefully acknowledge the Carnegie Mellon Portugal program and the Portuguese Foundation Science and Technology and their staff, whose essential support allowed me to complete this dissertation. Special thanks to the Blakemore Freeman Foundation, NSF EAPSI program and to the organizers of the First China-US PV Youth Forum for making my expert elicitation study possible. I thank the faculty members in the TCE/SETChange program and in EPP for their intellectual guidance and support. While in China, Dr. Margolis, Prof. Sally Xu, Prof Joseph Yuan, and Prof. Xue Lan helped shape my research ideas and open important doors that led to fruitful results. Wang Xiaoting has been especially gracious and kind in teaching me the ins and outs of China’s solar PV industry. Many thanks to the staff at Católica – especially Pierre and Débora – and staff in EPP: Adam, Barbara, Debbie, Elisabeth, Kim, Patti, Steve, and Vicki. The food was great, but your company was even better. I’d like to extend my deep appreciation to the CMU Library staff, especially Roye, Ryan, and Sue, who were always so generous with their time and patience. A big shout out to my friends and colleagues for lifting the low and sharing the high moments of this years-long roller coaster ride: Ahmed, Brian, Chris, Darren, DL, Erin, Jeff, Kelson, Leslie, Nate, Octavio, Russ, Sara, Sina, Steph, Steve, Will, Yi, Yingjun, and many others in Pittsburgh; António, Mauro, and Vera in Portugal; Britta, Carla, Erin, Guangwei, John, Leid, Luciana, Namho, Paul in the SETChange family. Thanks to Kevin for the frozen yogurt and for the wisdom to know when to fight and ii when to quit. Serban, we should have taken the cork-filled jar. Filipa, you and our Olympia days will always have a special place in my heart. Aviva, Brock, Kristen, and Shuchi – you are forever my Pittsburgh rocks! IES CMU IUP XF Cuối cùng, tôi xin cảm ơn tình yêu and sự ủng hộ của ba Dung và mẹ Phượng trong nhiều năm qua. Cảm ơn chị Hai, Khanh, và bé Ngân, người luôn tin tưởng vào tôi và cũng là người tôi tin tưởng. iii Abstract This dissertation includes three studies that examine the remarkable rise of China’s renewable energy industry and its technological contributions to the global industry. China has emerged as the world’s largest carbon emitter by a large margin, and many of its cities experience high levels of air pollution. The Chinese government has turned to wind – and later solar – as alternative power sources to help decarbonize its electricity system and ameliorate increasingly urgent air pollution problems. Through these efforts, China has markedly expanded the share of renewable energy in its energy mix, and in the process absorbed a fair amount of relatively advanced technology, establishing itself as a competitive location to manufacture clean power equipment. In short order China has bolstered its international standing as a renewable energy powerhouse. The first study evaluates the question of whether China's wind industry has become an important source of clean energy technology innovation. Results indicate that while China has delivered enormous progress in terms of wind capacity, the outcomes were more limited in terms of innovation and cost competitiveness. Chinese wind turbine manufacturers have secured few international patents and achieved moderate learning rates relative to the global industry’s historical learning rate. The success of China’s transition to a low-carbon energy system will be key to achieve the global level of emissions reductions needed to avoid large negative consequences from climate change. The second study shows that China made progress in bringing down the levelized cost of wind electricity and cost of carbon mitigation. However, widespread grid-connection issues and wind curtailment rates caused much higher-than-anticipated costs of renewable energy integration. China has emerged as the global manufacturing center for solar photovoltaic products, and Chinese firms have entered all stages of the supply chain in short order. The third study provides detailed expert assessments of the technological and non- technological factors that led to the surprised success of China’s silicon photovoltaic industry. Expert judgments suggest that continued declines in in module and system costs and improvements in performance will allow solar photovoltaic to be competitive with fossil fuels in China. iv Table of Contents Acknowledgements ...................................................................................... ii Abstract .................................................................................................... iv List of Tables ............................................................................................ vii List of Figures ............................................................................................ ix List of Abbreviations ................................................................................... xi 1 Introduction ........................................................................................ 1 2 China’s Wind Industry: Leading in Deployment, Lagging in Innovation ............. 4 2.1 Introduction ...................................................................................................... 5 2.2 Literature review ............................................................................................... 8 2.2.1 Energy innovation systems ........................................................................................ 8 2.2.2 Patent as an innovation metric ................................................................................... 8 2.2.3 Learning rate ............................................................................................................ 9 2.3 Data and methods ............................................................................................ 11 2.3.1 Patent data and patent count ................................................................................... 11 2.3.2 Patent citation analysis ........................................................................................... 13 2.3.3 Learning rate .......................................................................................................... 15 2.4 Results ............................................................................................................. 17 2.4.1 Wind patenting activity ........................................................................................... 17 2.4.2 Patent citation likelihood ......................................................................................... 22 2.4.3 Learning rate .......................................................................................................... 23 2.5 Discussion ....................................................................................................... 26 2.6 Conclusion and policy implications ................................................................... 31 3 China's Wind Electricity and Cost of Carbon Mitigation are More Expensive than Anticipated ............................................................................................... 34 3.1 Background: Renewable energy integration in China ......................................... 35 3.2 Data & methods ............................................................................................... 36 3.2.1 Clean Mechanism and industry data ........................................................................ 36 3.2.2 Methods to estimate CF, LCOE, and CCM ............................................................... 37 3.3 Results ............................................................................................................. 41 3.3.1 Connected and unconnected capacity ........................................................................ 41 3.3.2 Curtailment ............................................................................................................ 41 3.3.3 Relationship between unconnected capacity and curtailed electricity ............................ 43 3.3.4 Capacity factors .....................................................................................................