Written by Susan Kraemer

This weekend the main Chinese legislature adopted an amendment to the renewable energy law, requiring that utilities must buy all the electricity produced by renewable energy generators. Utilities refusing would be fined up to an amount double that of the economic loss of the renewable energy company.

The big question is: for how much? Whether this would create a boom in renewable energy in China will depend on how much money companies could earn in the sales. So far, this figure is not in the news reports. This amount paid per kilowatt-hour produced is the key to the success or failure of Feed-in Tariffs to generate more renewable energy.

As we have seen with Feed-in Tariffs in other countries; when the price paid per kilowatt is too low, as it is in California, nothing happens. If it’s too low, it won’t act to spur the “electranet” that Al Gore proposed; which would have all of us making money off our rooftop solar arrays while contributing power to the grid.

California’s Feed-in Tariff averages out to only about the retail price of electricity, about 19 cents. This has proved not enough of an incentive to investors, with the result that few people even know it exists.

By contrast; in Germany it has been as high as three times the retail rate and spurred such a race to install solar, that by the end of last year Germany was literally running out of solar panels. The generous payments grew Germany from 44 megawatts in 2000 to 1,260 megawatts by 2007, and it is now phasing down. Spain’s 2007 Feed-in Tariff was so ambitious that it destabilized the global solar industry.

Coming on top of China’s dispatch in getting its grid simplified into one nationwide grid suited to carrying renewable energy in a mere two weeks, though ( which we in the US are unlikely to be able to achieve in two centuries, so Balkanized are all our grids), this startling move is worth watching. How generous China’s FiT turns out to be will have ramifications for the world economy.

Depending on the pricing; this law could spur burgeoning growth in renewable energy in China. Certainly, it will spur the development of storage options and intermittency-prevention innovations, like pumped storage, CAES, and so on. Uncoordinated growth in renewable energy could create a grid-management disaster.

Already, some of the rocketing investment in wind is currently wasted as China has lurched into huge renewable projects without the storage or spacing needed. Ideally, wind farms need to be spaced out over large areas to ensure constant supply.

This live-and-learn environment, though, is refreshingly speedy compared to our own bogged-down legislative process, battling opposition from too many “global-warming-is-a-hoax” Senators on the Right as well as environmentalists on the Left dwelling on desert animals while losing sight of the big picture: the urgent need to reduce fossil fuel use.

Despite its behavior at Copenhagen, China has actually done far more so far than any other nation to reduce greenhouse gases, with its draconian but effective One Child policy. Watch China’s actions, not its words.