China Secures World Bank Loan for Renewable Energy

February 20, 2006

Washington, DC [RenewableEnergyAccess.com]

Earlier this month, the World Bank approved an $86.33 million loan to scale up China's use of renewable energy as the country's demand for power increases.

The World Bank's Board of Executive Directors approved the follow-up project to the 2005 China Renewable Energy Scale-Up Program Phase 1, which would develop a large wind farm in the Inner Mongolia Autonomous Region and rehabilitate and develop selected small hydropower projects in Zhejiang Province.

The overall renewable energy scale-up program aims to develop the Chinese commercial market for energy suppliers to provide renewable energy to the electricity grid on a large scale in an efficient and cost-effective way. Renewable energy sources like wind power, solar power, and biomass have up to now been produced only in small-scale, pilot programs outside the main electricity supply.

"China's energy demands and its need to decrease air pollution make large-scale renewable energy development an important goal," said Noureddine Berrah, lead energy specialist for China. "The idea behind the program is to increase the commercial, large-scale use of renewable energy sources like wind, small hydropower, and solar energy so that they contribute to meeting the fast-growing electricity demand from homes, farms, and businesses."

As China's gross domestic product quadrupled from 1980 to 2000, its energy consumption more than doubled to about 1300 million tons of coal equivalent (Mtce). Projections for energy consumption indicate that fuel consumption could double or almost triple by 2020 (between 2,500 to 3,300 Mtce), even if energy efficiency efforts were increased. The follow-up project to the China Renewable Energy Scale-Up Project (Phase I) provides investment funds to help demonstrate success in large-scale renewable energy development by local renewable energy developers as other local investment funds take time to materialize.

A total of $67 million of the World Bank's investment would go toward the development of the 100 MW Huitengxile Wind Farm in the Inner Mongolia Autonomous Region, which is currently home to approximately 70 MW of wind generation capacity. An additional $19.33 million would finance the rehabilitation and development of selected small hydropower projects (not exceeding 10 MW) in Zhejiang Province.

The $86.33 million International Bank for Reconstruction and Development (IBRD) loan is a variable spread loan, which matures in 20 years with a 5-year grace period. The project, which is set to begin in April 2006, is expected to be completed in March 2010.