Green Innovation in China

China's Wind Power Industry and the Global Transition to a Low-Carbon Economy

Joanna Lewis, Joanna I Lewis

• Publisher: Columbia University Press
• Year: 2012
• eBook ISBN: 9780231526876
• Topic: Politics & International Relations
• Subtopic: Asian Politics
• Index: Politics & International Relations

As the greatest coal-producing and consuming nation in the world, China would seem an unlikely haven for wind power. Yet the country now boasts a world-class industry that promises to make low-carbon technology more affordable and available to all. Conducting an empirical study of China's remarkable transition and the possibility of replicating their model elsewhere, Joanna I. Lewis adds greater depth to a theoretical understanding of China's technological innovation systems and its current and future role in a globalized economy.

Lewis focuses on China's specific methods of international technology transfer, its forms of international cooperation and competition, and its implementation of effective policies promoting the development of a home-grown industry. Just a decade ago, China maintained only a handful of operating wind turbines—all imported from Europe and the United States. Today, the country is the largest wind power market in the world, with turbines made almost exclusively in its own factories.

Following this shift reveals how China's political leaders have responded to domestic energy challenges and how they may confront encroaching climate change. The nation's escalation of its wind power use also demonstrates China's ability to leapfrog to cleaner energy technologies—an option equally viable for other developing countries hoping to bypass gradual industrialization and the "technological lock-in" of hydrocarbon-intensive energy infrastructure. Though setbacks are possible, China could one day come to dominate global wind turbine sales, becoming a hub of technological innovation and a major instigator of low-carbon economic change.

1

Green Innovation in China

China’s energy system has significant global implications. Now the world’s largest emitter of greenhouse gases, China has become the focus of scrutiny as the imperative to address climate change has gained international support. At the core of the climate change challenge is China’s energy sector, the world’s single largest source of emissions.

As the biggest coal-consuming and coal-producing nation in the world, China is perhaps an unlikely place to find a burgeoning wind power industry. Yet today China is the biggest wind power market in the world and builds almost all its wind turbines at home. China’s wind power capacity has increased over a hundredfold in the past decade (from 344 MW in 2000 to 44,733 MW in 2010).¹ Just a decade ago the country had only a handful of wind turbines in operation—all imported from Europe and the United States.

The story of China’s rapid rise in the global wind power industry provides valuable insight into the country’s domestic energy strategies and global positioning, and into the evolving nature of technology transfer and diffusion around the world. While China’s advances in clean energy may now be heightening global trade tensions, they also may in time help the world address the challenge of climate change. Alongside other green, low-emissions technologies, wind power offers an affordable option for reducing the carbon footprint of the electricity sector.² While there are some technical challenges to dramatically increased deployment of this technology, many of which China is experiencing firsthand, none is insurmountable.

This book examines how China developed a world-class domestic wind power industry. Elucidating China’s innovative ability in a strategic, global, and green industry, it finds that China is now doing more than just replicating technologies innovated elsewhere and manufacturing them inexpensively; it is in fact investing in and succeeding at green innovation. China is beginning to serve as a center for global technological innovation—innovation achieved by both domestic and foreign firms—and green innovation from China could play a crucial role in the global transition to a low-carbon economy.

China’s emergence as a green energy leader comes at a time when energy is at the top of most national security agendas, and when climate change is being linked to extreme weather events and disasters.³ Given global concern about the impact of China’s rapidly increasing energy needs on global supplies and its ability almost singlehandedly to change the global climate system, it is worthwhile to understand how and why Beijing has embraced green innovation. Renewable energy technology development is now positioned at the core of China’s overarching national economic plan and supported by its industrial policy.⁴ Cooperating with China to bring green innovations to market presents an opportunity for nations to build partnerships with an emerging global superpower.

China’s wind industry provides a compelling example of technological leapfrogging. It also demonstrates new models of technology transfer, the movement of technology, intellectual property rights (IPR), and knowledge across borders.⁵ Until recently the predominant model for foreign firms operating in China was to establish a jointly owned enterprise with a Chinese partner, creating a clear pathway for technology transfer to occur. But in the past decade a loosening of Chinese government restrictions on the ownership of foreign firms has resulted in far fewer joint ventures. Instead technology transfers increasingly are occurring between companies located in different countries with synergies along the technology development continuum; for example, German engineering design firms with little manufacturing ability and Chinese manufacturing dynamos with little innovative facility. China increasingly is not only a recipient of technology from industrialized nations but also the source of technology being transferred to other developing nations. While such technology transfers are commonly facilitated via licensing agreements, models of technology transfer in which the recipient of the transfer plays a far more active role, including mergers and acquisitions (M&A) and joint development, are prevalent.⁶

Access to networks for learning and innovation has also played a rarely examined but crucial role in the development of China’s wind industry.⁷ Beijing’s widespread use of policies that all but forced localization, including a government-mandated domestic content requirement for wind turbines and other financial incentives for locally based manufacturers, resulted in the shift of overseas wind power technology manufacturing to China without necessarily transferring IPR to Chinese firms. But as foreign firms relocated to China, they helped create a learning network within the Chinese wind industry. This allowed for the transfer of technical know-how to Chinese firms through several indirect but highly effective channels, such as the movement of skilled personnel between foreign and Chinese firms—both across borders and within the Chinese wind power community. Chinese firms have relied heavily on this learning network within China, in contrast to other emerging Asian wind technology firms that accessed global knowledge by constructing their own network of facilities and partnerships overseas. Many emerging wind power firms, however, have gained access to technology transfers through common knowledge sources, creating a network of IP being transferred throughout Asia and beyond.

While many seek to understand whether China is innovating or merely imitating, China’s capacity to innovate can be difficult to measure. The confluence of political, institutional, and economic characteristics that is unique to China⁸ creates a system for promoting and rewarding innovation that is inherently different from that of market economies.⁹ As a result, traditional science and technology (S&T) metrics, such as research funds invested or patents produced, are limited in their ability to capture the nature of the learning that is taking place in China’s emerging technology industries. The company case studies presented in this volume begin to fill in the gaps of our understanding about innovation in China. Additionally, they offer more nuanced characterizations of learning than traditional metrics provide.

These findings build on existing theories of the role of the state in innovation¹⁰ and promise to shape our broader understanding of China’s S&T capability and its innovative “niche” in the global economy.¹¹

The book begins with a close look at China’s energy system in order to understand the challenges it faces in transitioning to a low-carbon economy. It examines how China’s political leadership is addressing climate change, both at home, with domestic energy efficiency and renewable energy policies, and abroad, through participation in global climate change negotiations. It also analyzes how the emergence of domestic policy support for low-carbon development has contributed to a shift in China’s international positioning (chapter 2).

The next several chapters focus on one crucial low-carbon technology being developed in China: large-scale wind turbines. Chapter 3 explores the global origins of wind power technology and looks at how China’s national innovation system shaped the development of its wind industry. Expanding on the nature of China’s innovation system for wind energy, chapter 4 examines how foreign-owned firms brought their wind power technologies to China, and how Chinese companies assimilated foreign technology over the past two decades through both successful and failed partnerships. Chapter 5 provides an in-depth look at one leading Chinese wind company, Goldwind, and how it has been able to develop its own wind power technology. It also examines other models for technology development used by Chinese wind turbine manufacturers, as well as the ongoing challenges faced by this emerging industry.

Looking beyond China, chapter 6 compares the development of its wind power industry with that of the two other Asian emerging economy wind industry leaders, India and South Korea, focusing on the technology acquisition strategies among firms and the common sources of knowledge across the three countries. A comparison across these three economies—all of which are rapidly emerging as central players in the global wind industry—illustrates how late-comers to the industry have been able to use different models of technology transfer to build up their own technological expertise with varied success.

The final chapter turns to the relationship at the center of global discussions about clean energy and climate change—that of the United States and China. These two countries not only are the two largest economies, energy consumers, and greenhouse gas emitters but also are currently the two largest renewable energy (and wind energy) markets in the world. They share many similarities with respect to renewable energy resource endowments and development goals and face similar technical, political, and social barriers to scaling up the use of renewable energy. As a result, U.S.-China cooperation in clean energy technologies may play a crucial role in solving our global climate change challenge and improving the U.S.-China bilateral relationship. Chapter 7 recommends areas for expanded cooperation.

By chronicling the history of wind power technology development around the world and China’s rise within the industry, this book provides a lens into China’s role in green innovation, Beijing’s evolving political positioning around energy and climate change, and the outlook for a global transition to a low-carbon economy.

2

China’s Energy and Climate Challenge

China has made unprecedented achievements in the past three decades.¹ Its economic growth rates have exceeded those of any other country in the world, enabling a tenfold increase in per capita income and lifting an estimated 400 million people out of poverty. While rising energy consumption fueled this rapid economic growth, the overall energy intensity of the economy has decreased, making China three times more energy efficient.

Yet these figures only begin to tell the story of China’s rise and its impact on the environment. While economic output has increased rapidly, the share contributed by energy-intensive products has also increased, causing the economy to become less energy efficient for the first time in decades. Rapid economic growth has also come at a great toll to the local environment. China’s environmental trends include deteriorating water quality, increasing water scarcity, escalating air pollution, increasing land degradation, and growing desertification. These environmental challenges affect the health and welfare of the current population, threaten the prospects for future generations, and challenge China’s ability to sustain economic growth rates in coming decades. Most sources of pollution in China can be traced back to energy use, and particularly to the country’s reliance on coal at the core of its energy system.

China must now decide whether it can continue to rely on its economic growth strategy of the past, which has come at the expense of its own environment. As the country has grown, its environmental challenges are no longer localized—they have global reach. While most greenhouse gas (GHG) emissions do not have direct local environmental or health impacts, the sources of these emissions—such as power plants, vehicles, and industrial facilities—also emit the air pollutants that cause more localized impacts. As a result, reducing the emissions of greenhouse gases can have both global and local benefits. As the impacts of rising global GHG emissions are more comprehensively understood, it is becoming increasingly evident that climate change will exacerbate many existing environmental problems and bring some new ones as well.

The Climate Change Impacts Facing China

We now know that human activity is altering the climate. Driven primarily by a century and a half of fossil fuel combustion, carbon dioxide (CO₂) concentrations in the atmosphere reached 390 parts per million in 2011, 39 percent higher than preindustrial levels.² Average global temperatures have risen by 0.76 degrees Celsius since the late 1800s, and the effects are evident in extreme weather events, changed weather patterns, floods, droughts, glacial and Arctic ice melt, rising sea levels, and reduced biodiversity.³ Average temperatures are projected to increase by another three degrees Celsius upon a doubling of carbon dioxide concentrations.⁴ In China the observed data show that the nationwide mean surface temperature has risen by 1.38 degrees Celsius over the past fifty years and is projected to further increase by 3–4 degrees Celsius by the end of this century.⁵ Even if all emissions were to stop today, the greenhouse gases already accumulated in the atmosphere will remain there for decades to come, resulting in more warming and stronger climate impacts.

China’s first National Climate Change Assessment Report, compiled by leading climate change scientists, stated: “It is very likely that future climate change would cause significant adverse impacts on the ecosystems, agriculture, water resources, and coastal zones in China.”⁶ Impacts already being observed in China include extended drought in the North, extreme weather events and flooding in the South, glacial melting in the Himalayas, declining crop yields, and rising seas along heavily populated coastlines.⁷ China’s leaders increasingly acknowledge such reports. For example, China’s former special ambassador for climate change, Yu Qingtai, stated that “climate change … is in fact a comprehensive question with scientific, environmental and development implications and involves the security of agriculture and food, water resource, energy, ...

Table of contents

• Cover 
• Half title
• Series Page
• Title
• Copyright
• Contents 
• List of Figures
• List of Tables
• Preface
• List of Abbreviations
• Chronology of Wind Power Development in China
• 1. Green Innovation in China
• 2. China’s Energy and Climate Challenge
• 3. China in the Global Wind Power Innovation System
• 4. The Role of Foreign Technology in China’s Wind Power Industry Development
• 5. Goldwind and the Emergence of the Chinese Wind Industry
• 6. Wind Energy Leapfrogging in Emerging Economies
• 7. Engaging China on Clean Energy Cooperation
• Notes
• Bibliography
• Index