A coming clean and green energy revolution in China should attract Nordic interest

by Jørgen Delman and Chen Yong, NIAS

In a situation where both China and the Nordic countries are eager to exploit the opportunities in the world energy and energy technology markets, the purpose of our recently published study, “Nordic Collaboration with China in Energy Research and Development”, was to point to ways in which Nordic research and development (R&D) institutions and companies working with energy research, technology, and innovations could collaborate with Chinese stakeholders and actors in energy R&D to address the key issues associated with China’s energy production and consumption. The study puts forward a series of strategic and specific recommendations on how Nordic collaboration under the Nordic Council of Ministers can engage with the Nordic countries, i.e. their government agencies, their organizations, and their companies, as well as with Chinese partners to promote a clean energy R&D agenda in China.

China’s energy sector

The study is set against the background that, while most of the developed countries are seeking ways out of the fossil-fuel trap, China, being the world’s second largest energy consumer and CO₂ emitter, tends to be further locked into it to meet its continued upsurge in energy demand. However, at the same time, strong concerns have been expressed both in China and internationally with regard to the challenges posed by the contribution of China’s surging energy consumption to environmental degradation and climate change.

As a consequence, a new interest in “clean” energy has emerged in China in recent years. The government has elaborated ambitious plans to reduce energy intensity and to increase the proportion of clean energy in the energy mix while not jeopardizing economic growth. To achieve these goals, the government invites cooperation from the international energy community. However, the Chinese political leadership is also arguing that there is a need to foster indigenous competence and capacity in relation to development of new technology. Clearly, China needs to find ways to make its energy system more sustainable, and China neither has the intention to reinvent the wheel, nor the off-the-shelf solutions that can be used immediately given the scale and complexity of the issues that the country is encountering. This situation presents interesting opportunities for more Nordic involvement.

Contents and focus

The study provides an overview and analysis of the Chinese energy sector, its policy and business environment, the associated innovation system, and, finally, international and Nordic activities in relation to the energy sector in China. These include more or less formalized government-to-government cooperation agreements and activities, university-to-university cooperation, government-private commercial promotion activities, and corporate R&D activities.

14 case studies exemplify how different international, primarily Nordic, and Chinese stakeholders cooperate with energy related policy and R&D issues and activities. The study also makes detailed recommendations for coordinated Nordic efforts in relation to the Chinese energy sector.

In view of the enormity of China’s energy sector, the authors primarily focus on a selected range of renewable energies that hold promises for China and where the Nordic countries would clearly have an interest in both R&D cooperation and the market opportunities. This should not be construed to mean that other opportunities in the energy sector are of no interest to the Nordic countries, e.g. China’s strong focus on the need to enhance energy efficiency across the economy.

Findings

The study finds that in order to stimulate the development of a cleaner energy sector, the Chinese leadership has formulated a string of policies, strategies, plans, and concrete targets to guide the future energy sector. Increased energy efficiency is now the top political priority and the growing energy demand should in principle be covered by national energy resources. The energy system should be exceedingly diversified with a strong focus on development of renewable energy. Environmental management is to be strengthened during both production and use of energy, and mutually beneficial international collaboration within the energy sector should be enhanced. The government has also set aside considerable funding to stimulate these developments.

For international players, considerable benefit can be gained from these developments. Huge investments are going into energy R&D in China. International actors may tap into these potentials as China is still keen on international collaboration and partnerships. The Chinese market also offers opportunities for a swifter move from R&D to commercialization of technologies on a large scale. The potential commercial returns are promising as the Chinese energy sector is growing rapidly, not least renewable energies. New business opportunities are emerging and Chinese actors are seeking partners to expand into promising new or existing worldwide markets for new energy technologies.

Opportunities for Nordic interests

Based on an analysis of the experience of a range of Nordic and other international stakeholders from the public, the university, and the corporate sectors as well as of multilateral agencies operating in the energy sector in China, the study identifies a number of opportunities for the Nordic countries to work on renewable energy R&D with China. First of all, there is considerable experience to build on. There is recognition in China of strong Nordic competences in renewable energy R&D and Nordic values and modes of collaboration are appreciated and respected. At this critical juncture in the development of China’s renewable energy sector, there are excellent opportunities to partner up with Chinese counterparts in the national and regional innovation systems to deal with the development of new renewable energy technologies in a huge and rapidly developing market.

Challenges

Nordic players must be aware of the challenges in China. First of all, the Chinese stakeholders are mostly thinking “big”, while the Nordic stakeholders are often small in comparison. The Nordic countries do not have the same weight and influence individually as the EU and the World Bank. It is also worth mentioning that some of the Nordic interviewees were of the opinion that the development of the renewable energy sector in China is primarily, at this stage, driven as much by political considerations, i.e. environmental, security and climate concerns, as by the potential for investors to gain immediate profits from their investments.

Transfer of core technology to China is a key policy issue and often becomes a requirement in project negotiations and in relation to the ownership of proprietary rights. It will also be an important issue in the climate negotiations leading up to the COP15 climate summit in Copenhagen in 2009. There is no simple solution to the issue, and some international players choose to comply, whereas others stay away. Others still muddle along, and the lucky few have just the technologies that the Chinese side needs, almost no matter under which conditions.

Nordic R&D collaboration with China in energy?

There are some public Nordic and other international programmes in the Chinese energy sector, but there is room for more collaboration. Based on the analysis in the study, the authors argue that it would be timely to establish a strategic Nordic framework for collaboration with China within renewable energy R&D. The Nordic countries have competences that are in demand and where they would evidently benefit from access to the Chinese resource pool and a potentially huge market. Such a framework should be designed to coordinate and mainstream Nordic energy R&D in the Chinese energy sector. This would not only exploit Nordic synergies better and enhance the presence of Nordic energy expertise in China, it would also help the Chinese partners get a better picture of Nordic strengths within energy know-how and technologies as well as who would be the interesting partners.

Many Nordic stakeholders from the public and private sectors indicated to the authors that a Norden-China programme could add value to existing bilateral activities. Nordic and Chinese researchers are interested in collaborating with each other and Nordic companies operating in China have started to localize at least some of their research in the country. The R&D communities in the Nordic countries must be part of that process; otherwise they may be excluded from the Chinese R&D sector and a potentially huge market for clean energy technologies.

Strategic approach and a coordinated Norden-China programme

A number of strategic issues must be considered. First of all, a common Nordic platform would be able to harness stronger influence in China as well as more funding, which is essential to achieve success, but it would also allow the partners involved to get access to a considerable, often complementary knowledge pool in the Nordic countries and China respectively, as well as to each other’s research resources and infrastructure. Nordic stakeholders would get better access to a market with a strong focus on developing and integrating renewable energy in the energy mix and an ambition to become leader with regard to some key technologies.

A coordinated effort could facilitate the strategic positioning of the Nordic region and China at the frontier of the battle against unsustainable use of conventional energy sources and climate change. It could create a common understanding of and a framework for joint action to address common challenges in China, regionally as well as globally. The strategies of the relevant Nordic agencies would be fully in tune with this line of thinking and it is highly relevant for China. Effectively, Sino-Nordic partnerships in China could become building blocks in new global R&D and/or business strategies.

Furthermore, a Nordic-Chinese platform would heighten Nordic visibility and maximize Nordic knowledge dissemination in relation to our common challenges, i.e. the increase in energy demand, the need to improve energy security, and the common aspirations to mitigate climate change. The conditions for establishing a Norden-China platform in relation to R&D within renewable energy are mature and it would be possible to align a framework program with Nordic and Chinese policies.

The objectives of a joint programme should be practical and achievable while also being ambitious; it must also be clear which technologies or topics are in focus. The focus should be within the areas in which the Nordic know-how and research capacity are widely recognized and appreciated worldwide, thereby attracting Chinese attention and interest. Collaboration must be based on mutual recognition and institutionalization of mutual agreements, leading to mutual benefits through equal partnership in relation to ownership of research results and property rights. It is necessary to build a strong case to attract Chinese attention.

Nordic synergy and added value must be demonstrable, e.g. by building on existing programmes and infrastructures. Different organizations from the Nordic system and at the national level in the Nordic countries should be invited to participate and possibly be responsible for different components of the programme.

Coordination should also be sought with other international programmes, e.g. the programmes of the European Commission. There is a strong drive amongst both Chinese and international players to set up centres and their activities must be coordinated or complement each other. In order to become successful, they must fit into China’s existing structures, otherwise they will not function.

Although not always linked directly to energy issues, the unique Nordic innovation tradition is something that the Nordic countries could offer to China, particularly in the wake of China’s promotion of an indigenous innovation strategy.

Specific proposals

The study proposes to consider three levels of cooperation/collaboration, ranging from small scale, over medium scale, to large scale collaboration. They could either integrate into a full-scale programme from the outset or develop through a more sequential or cascading approach.

1.      Small-scale collaboration: “Norden-China Renewable Energy R&D Expert Committee”

This proposal is based on the assumption that there is a wish to test the ground initially or that only limited resources are available. The aim is to become familiar with each other’s renewable energy research agenda and, possibly, develop a strategy and a plan for a joint framework programme. The program would organize an Expert Committee comprising top energy experts and officials from each side to discuss and identify which energy issues are most significant for China and the Nordic countries and which would be suited for R&D collaboration. Through a series of workshops and other activities, the Expert Committee would determine the need and elaborate the framework for further activities and/or a cooperative programme. In addition, seed funding for small-scale academic activities to stimulate more exchange or feasibility studies could be a part of this initial program.

2.   Norden-China Renewable Energy R&D Small Projects Facility

The goal is to move from the initial cooperation that would test the ground into activities with at least a five year perspective. The Small Projects Facility would aim at stimulating collaboration as well as exchange of expertise and information at a higher level with the aim to create common platforms with regard to policies, research, and development of specific technologies. The projects to be supported could comprise:

·          Creation of networks between Nordic and Chinese partners

·          Creation of a common virtual platform with a science and technology watch function, exchange of news and information about development in R&D in renewable energy in China and the Nordic countries, and activity watch Establishing a facility to support scholarly exchange, i.e. guest scholarships, workshops, conferences

·          Establishing a PhD facility for exchange, joint courses, and some trial joint sandwich PhD programmes establishing a start-up fund to test possibilities and opportunities for joint research programmes and/or R&D programmes including corporate stakeholders. This could start with financing of small-scale studies involving researchers and corporate stakeholders

·          A financing facility for workshops and conferences

·          Energy innovation games for students within business and technology

·          Training of Chinese Master’s and
PhD students in relevant subjects abroad

·          A facility in support of student exchange

·          The possibility of earmarking Chinese government stipends for Nordic students

·          Production of a series of TV programmes for Chinese TV on Nordic environment and energy to be shown on Chinese TV during World EXPO 2010

·          Nordic interventions at World EXPO 2010, e.g. presenting the results of joint Nordic and Chinese efforts within R&D in relation to renewable energy.

3.   Norden-China Renewable Energy R&D Programme

The third step would lead to large scale collaboration which should institutionalize Nordic-Chinese energy collaboration under a “Norden-China Renewable Energy R&D Programme” in order to be able to work towards common strategic goals through joint R&D initiatives. The following two initiatives are proposed under the “Norden-China Renewable Energy Program”:

·          A “Norden-China Renewable Energy R&D Council” would be an expansion of the proposed Expert Committee. It should aim at bringing together top expertise from the research sector, the corporate sector, and public bodies on both sides to identify common needs and demands, and regularly consult on and provide guidance for joint activities within the renewable energy sector, either defined broadly or limited to R&D in renewable energy. Ideas and guidelines for public-private partnerships could also be of interest.

·          Establishment of a “Norden-China Renewable Energy Innovation Centre” would promote Nordic R&D, projects, and investments and create synergy amongst different Nordic initiatives in relation to all types of renewable energy in China. This would also allow the Nordic countries to utilize each other’s expertise in both the public and the corporate sectors to promote comprehensive projects and solutions, e.g. in relation to China’s eco-cities or allow them to get specialist advice. The centre could also help establish procedures and channels for effective commercialization of joint research results.

These initiatives could be established as an outcome or they could incorporate the series of activities proposed under the first two types of initiatives. The proposed Renewable Energy Innovation Centre could implement the “Norden-China Renewable Energy R&D Programme” under the guidance of the “Norden-China Renewable Energy R&D Council”. Such a programme should provide funding for more comprehensive activities and projects of various types, such as:

·          Longer-term joint research or technology development programmes

·          Extensive academic exchange

·          Joint or collaborative research education, PhD stipends (including business PhD stipends), and regular exchange and joint supervision of PhD students

·          Establishment of a Norden-China PhD programme on energy management

·          Establish a programme for in-service training of Chinese researchers and teachers in energy programmes in the universities, both in energy systems management and in specific technologies.

4.   Norden-China Energy and Climate Change Programme

In view of China’s increasingly constructive engagement in the international climate mitigation regime and the particular role of the Nordic countries on the global level in this respect, the proposed “Norden-China Renewable Energy R&D Programme” could be expanded into a “Norden-China Energy and Climate Change Programme” which would include the previously proposed activities as well as the organization of additional projects and events that could reinforce the Nordic-Chinese partnership in relation to dealing with the effects of climate change. The following additional activities are proposed:

·          A “Norden-China conference on climate and energy – COP 15/Copenhagen and beyond”

·          Quick/brief projects on modelling to be used as an input for COP15 by both the Chinese and Nordic side. The proposed titles of the projects are: (1) Review on technology transfer in China; (2) application of sector based approach in China; a Nordic-Chinese workshop on technology transfer for climate change mitigation. The workshop would present and discuss the results of the studies proposed and put them in a global and national context.

The role of Nordic collaboration

Bearing in mind that a considerable number of scattered R&D activities in the renewable energy field are already being undertaken between the Nordic countries and China, the main role that Nordic collaboration could play would be to create synergy, to add value to, to explore new areas and venues that would encourage innovative R&D initiatives, and to source funding.

Finally, the study proposes that the Nordic system must mobilize the necessary political and professional support to move ahead. To be able to do so, it is suggested to establish two types of work forums:

·          A Nordic “China Renewable Energy R&D Ideas Factory” comprising key Nordic organizations such as Nordic Council of Ministers, Nordic Energy Research, NORDFORSK, Nordic Innovation Centre, NefCO, NIAS-Nordic Institute of Asian Studies, etc. They would discuss the study and how to move forward, i.e. develop an initial strategy and an outline of a roadmap for the implementation of the program. The group should be able to draw on Nordic and Chinese resource persons as appropriate.

·          A small secretariat must be established by the appropriate Nordic organizations to coordinate and implement the activities proposed and initially support the activities of the “Ideas Factory”. The staff in the secretariat should have experience with internal Nordic collaboration as well as collaboration with China. The secretariat should help the Nordic system mobilize the resources necessary to initiate a substantial collaborative program in renewable energy R&D with China.

Funding of Nordic-Chinese renewable energy R&D collaboration

The study discusses the issue of funding extensively. A program with small funding would not be feasible, considering the current Chinese and international initiatives in relation to renewable energy R&D in China. Therefore, Nordic collaboration will have to mobilize considerable funding resources through its own channels, through the national channels, and through co-financing from the stakeholders in a program, not least the Chinese side. At the same time, a principle of “smart” funding must be pursued, i.e.:

·          Establishment of a Nordic “basket fund” with contributions from different stakeholders in the Nordic system

·          Funding must be used to complement what is already happening

·          Funding of overlapping activities should be avoided

·          The principle of matching funds from the Chinese side should be applied to the extent possible, preferably in both kind and cash.

Jørgen Delman and Chen Yong. Nordic Collaboration with China in Energy Research and Development. First published in November 2008 by NIAS Nordic Institute of Asian Studies, Leifsgade 33, DK-2300 Copenhagen S, Denmark (ISBN: 978-87-7694-051-9). An electronic version can be accessed  here:

http://www.nias.ku.dk/news/documents/China_in_energy_RD_nos_08.pdf

http://www.nordicenergy.net/section.cfm?id=1-0&path=142

The study was commissioned by Nordic Energy Research.

Jørgen Delman is Director and NIAS and Chen Yong is researcher at NIAS. He previously worked with Stockholm Environment Institute.