A new law to encourage investment in renewable energy projects will take effect ...

A new law to encourage investment in renewable energy projects will take effect in China from 1 January 2006. The Chinese government is expected to provide a range of financial incentives to investors in renewable projects, including government grants to help with development costs, below-market loans and special tax treatment. The law will also require state-owned utilities to buy electricity from renewables projects, although the price they will pay for the electricity is one of the important details about the new law that have yet to be worked out. China continues to struggle with an inadequate electricity supply. Estimates currently put the electricity shortfall at some 80bn kW/y. Two fuel sources that are attracting increasing attention in China are solar and wind. The new law defines the types of renewable energy as wind, solar, biomass, geothermal, ocean energy and ‘etcetera’ - leaving the door open to developers of other technologies to apply for the same benefits for which the main renewables sector will qualify. The new law also directs Chinese banks and other financial institutions to provide low-interest loans for renewables projects. Banks are expected to be reimbursed for the interest rate subsidy by either the central or local government, depending on who approved the project for construction. Banks are also being urged to lend for longer terms than for other power projects. According to Hong Li, an associate at law firm Chadbourne & Parke in Beijing: ‘The enormous market in China will create many opportunities for foreign investors looking to develop renewable energy projects. The rate of increase in renewable energy consumption in China is currently 25% per year. Demand for renewable energy is expected to grow to a $12bn market in the near term.’

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