(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T01017R000606100001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: January 12, 2017
• Document Release Date: March 4, 2011
• Sequence Number: 1
• Publication Date: May 27, 1986
• Content Type: MEMO

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DATE l /8CP iLC
DOC NO Ef} M __~ a00_7
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Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
27 May 1986
Alternative Energy Sources: A Partial Answer to China's Rural Needs?
China's interest in developing alternative energy sources, such as
solar, wind, and geothermal power, stems largely from its supply problems
in the countryside. The demand for energy in rural areas is growing
faster than these areas' commercial (coal, oil, electricity) and traditional
(firewood, crop waste) energy supplies. Traditional sources of energy are
already overused, and although China has progressed in rural development
of commercial energy sources--including small local coal mines and
hydrostations--many rural areas lack these resources.
Although alternative sources alone will not solve the rural energy
problem, they can play a major role where other resources are inadequate
or impractical. Beijing is particularly interested in harnessing China's
considerable solar and wind potential, and has talked with US and
Japanese companies about acquiring appropriate technologies. We expect
China to seek technology transfers or coproduction agreements rather
This memorandum was prepared by Office of East Asian Analysis.
Information available as of 27 May 1986 was used in its preparation. Comments and
queries are welcome and may be directed to the Chief, Development Issues, China
Division, OE
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The Rural Energy Problem
China's peasants--80 percent of its one-billion-plus population--have long
depended on crop wastes and firewood for fuel. As the population has grown, these
sources have been increasingly diverted from use as fertilizer, animal fodder, and
building materials. In addition, as Chinese officials have acknowledged, widespread
deforestation has brought about severe soil erosion.
New Supplies.... To stem the growth in consumption of traditional fuels, China in
the 1960s and 1970s tried to develop rural sources of commercial energy--locally run
coal mines and hydropower stations--that would be more efficient and not tax national
networks that supply urban areas. Beijing also tried to protect and replenish forested
areas and promoted the use of biogas pits to provide methane for rural cooking and
By 1984, coal had become the largest source of energy in the countryside (see
table 1), and small hydrostations accounted for one-third of China's hydropower
capacity. Even so, traditional fuels as a group still accounted for half of overall energy
supplies and 90 percent of rural household consumption. Deforestation remained a
serious problem, and although biogas use enjoyed some success it provided less than 1
percent of rural energy needs.
...But New Demands As Well. The introduction of commercial sources of energy
in rural areas increased supplies, but these additions were offset by economic reforms
in the countryside that since 1978 have accelerated growth in rural energy demand.
Higher peasant incomes from private plots and sideline occupations have increased
demand for fuels for heating and cooking, and for electricity to power newly available
consumer goods, such as televisions, refrigerators, and washing machines.
More important, policies to develop township industry have created a rapidly
growing rural industrial sector whose demand for coal, oil, and power outstrips the
growth in rural supplies.' According to Chinese press, rural industry is not only growing
rapidly, but is concentrated in energy-intensive industries such as machine building and
cement. Furthermore, much of the present capital stock of rural industry consists of
older machinery and equipment salvaged from urban factories under renovation. Beijing
claims this equipment is incredibly wasteful; compared with urban factories, for example,
township metallurgical enterprises reportedly consume three and a half times as much
energy per unit of output. These factors combine to make rural industry a
voracious--and growing--consumer of rural power supplies.
And Shortages Get Worse. The shortfall in rural energy is now even larger than
the electric power shortage facing China's cities. According to press reports, Beijing
estimates that the annual shortfall facing rural industry and households is equivalent to
80 million standard tons of coal, twice the shortfall that idles one-fifth of China's urban
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Table 1
1983 Rural Energy Consumption (in million tons coal equivalent)
Total Rural Energy Consumption 420 MTCE
Commercial Sources 200
Coal 155
Local Mines 105
State Mines 50
Electricity 27
Oil 17
Noncommercial Sources 220 MTCE
Stalks/Crop Waste 111
Firewood 103
Dung 6
Alternative Sources (Biogas) less than 1 MTCE
Totals may not add due to rounding.
industry.
Furthermore, Beijing believes--and we agree--that, despite its best efforts, the
rural shortfall by the year 2000 could reach 200 million standard tons of coal, with
currently used traditional and commercial energy sources satisfying an even smaller
share of demand than they do now--72 versus 84 percent. The projections explain
China's interest in examining possibilities for introducing alternative energy sources in
the countryside.
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Leadership Interest in Alternative Energy Sources
According to Embassy reporting, the State Council in 1984 created a
special committee--the rural energy leading group-- to assess energy
problems. Vice Premier Li Peng, an energy expert, heads the group. Other
participants include representatives from the State Planning Commission, the
State Science and Technology Commission, and the China Rural Development
Research Center. Although our information is sketchy, conversations between
Chinese officials and Western businessmen suggest that this group is behind
the current interest in alternative energy sources.
Nearly all of the interest expressed by the Chinese in alternative energy
sources has originated with the rural energy leading group. Most of our
knowledge of the group's activities and preferences comes from its contacts
with individual countries or vendors, including the United States, last year. We
think the leading group is probably still assessing which they visited rural
energy problems and will eventually take a more active role in advocating
policies or engaging in international negotiations.
Press reports indicate that some provincial governments have also set up
rural energy groups, and Beijing has apparently authorized them to deal directly
with foreign governments; for example, Denmark has signed a memorandum of
understanding with Tibet to provide feasibility reports on wind-powered
generators. Most contacts with foreigners, however, have been initiated by the
national-level leading group.
Addressing the Problem
To supplement their efforts with biogas, the Chinese are interested in various
solar, wind, and geothermal installations. Chinese officials have told US counterparts
that they are seeking international cooperation in developing technologies that are easy
to use and maintain, that are practical to build and use on a scale suitable for rural
operation, and that China can learn to manufacture and eventually export.
China has approached the United States Government with an interest in bilateral
cooperation in wind generators, and in the construction of a model village using
renewable energy sources. Both projects would use mainly existing technologies and
could provide ready--though small--sales for US firms. The Chinese, however, expect
firms to provide free goods and technology before they agree to purchase equipment or
know-how, which may dampen the interest of some firms.
China is also listening to Japanese proposals for the development of
solar-generated electricity (photovoltaic, or PV). PV equipment at present is prohibitively
expensive, but Japanese suppliers claim costs will drop to acceptable levels by the
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1990s. The Japanese have built a 0.5-megawatt (MW) prototype and plan a 1-MW unit;
in the meantime, they have donated a tiny experimental model now in operation in
Gansu. Japan hopes its cooperation with China will provide opportunities to experiment
with and perfect its solar-energy technology.
We believe alternative energy sources will take time to develop but can provide
power in many rural areas that lack access to coal, hydropower, or electric power grids.
They will at best, however, offset a fraction of expected rural shortfalls nationwide by
the end of the century--meaning China will still rely on more conventional commercial
and traditional energy sources.
We believe the United States has an edge in China's alternative energy market for
the next few years, because the technologies China wants from US firms are already
practicable. Japan could crowd the market if it is able to develop solar energy at a
competitive cost. In any case, the market is likely to be small; budget and foreign
exchange restraints will probably limit China's purchases to prototypes and technology
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Appendix A
Rural Energy Resources: Status and Plans
Firewood/Crop Wastes. China still hopes to reduce dependence on these
traditional fuels, at least in percentage terms. Much of China's firewood and biomass is
already being diverted from other valuable uses as building materials, fertilizer, or animal
fodder. To counter rapid forest depletion, China has tried to increase plantings and
projects for future fuel wood; but the emphasis is on slowing consumption growth.
China is also trying to improve the efficiency of consumption of biomass energy;
currently only about 10 percent of its potential energy is being extracted. In 1984,
Beijing began a campaign to promote the use of more efficient wood-burning stoves in
peasant households. According to the Chinese press, the new stoves use only half as
much firewood as the old models. About 25 million peasant households have replaced
their stoves in the last two years. Beijing hopes to have the new stoves in 100 million
peasant households by 1990, saving the firewood equivalent of 33 million tons of coal
per year.
Local Coal Mines. The sharp rise in China's local coal production actually led to
a lower free market price in 1985, though by press accounts it was still four times the
state price. Meanwhile, the government is engaged in controversy about the costs and
benefits of the smallest of the local mines (brigade level and below). These mines
produce coal quickly but are inefficient, skimming off the largest veins and making later
extraction of the remaining coal much more costly. Even so, Beijing expects local mines
of all sizes to contribute an increasing share of China's coal output through the 1980s.
Local mines will supply two-thirds of rural coal demand.
Small Hydrostations. Small hydrostations provide 8,500 megawatts (MW) of
China's 24,000 MW of hydropower capacity. They produce about 25 billion
kilowatt-hours of electricity per year, 42 percent of total rural power consumption.
China hopes to at least double small hydro capacity by the year 2000, with consumers
paying all costs. China's promotion of small hydro is of course limited mostly to the
south and southwest, where there is hydropower potential. A 100-county experiment in
these regions promoting the development of locally financed small hydrostations is
mentioned in the press as proceeding on schedule.
Wind Power. China claims to have wind potential that in Inner Mongolia alone
totals 540,000 MW, nearly equal to China's entire hydropower potential but much more
difficult to exploit. China produces about 10,000 wind generators per year, mostly in 50
watt and 100 watt sizes, compared with US generators in the 300-to-1,000-kilowatt
range. Serious quality problems with China's wind power devices, however, have
restricted their popularity. Most, apparently, have had to be given away.
Solar. China claims its west and northwest include large areas that are among
the world's most suitable for solar power. Press reports to date, however, indicate that
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China has relied on solar power for little more than solar cookers in Gansu and for
agricultural hothouses in Tibet. China already has some limited abilities for domestic
production of solar cells and batteries.
Methane. Production of methane gas (biogas) from animal and vegetable waste
is a small but important source of rural energy supplies. China now estimates it has 4.5
million biogas pits, supplying energy for 20 million people, and hopes to double the
number by 1990. Methane pits work best in warmer regions but generally provide only
Supplemental source of fuel for heating and cooking. Press repo' ; indicate that
experiments with methane as a fuel source for thermal power plants generally have
been confined to urban areas, notably Tianjin.
Geothermal. China's practical sites for developing geothermal resources are
limited. Several hundred geothermal sites lie in the mountainous areas of Tibet, where
China has built a 7-megawatt power plant at Yangbajing, now being expanded to 22
megawatts; so far one 3-megawatt generator has been ordered from Japan, and is
scheduled for operation by February 1987. A geothermally heated greenhouse covering
12 acres is under construction, intended to become a key supply of vegetables for
Lhasa. Tianjin uses 356 wells to produce heat equivalent to 100,000 tons of coal per
year. Beijing has 98 wells tapping hot springs for heating, public baths, and
greenhouses.
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Department of State
1 - Peter Chase, Office of Chinese Affairs, Room 4318
1 - Chris Clarke, Bureau of Intelligence and Research, Room 8840
1 - William Newcomb, INR/EC/CER, Room 8448
1 - Dan Stein, Trade Development Program, State Annex SA-16,
Room 301, Department of State, Washington, D.C. 20523
Department of Treasury
1 - Mary Yee, Office of East-West Economic Policy, Room 4426
Department of Commerce
1 - Christine Lucyk, Office of PRC and Hong Kong, Room 2317
1 - Myna Stoltz, Country Policy Analyst, Office of East Asia and
the Pacific, Room 3820
Department of Energy - Forrestal Bldg.
1 - Lana Ekimoff, Office of International Affairs, Room 7G090
1 - T.K. Lau, Room 7A029
1 - Douglas Faulkner, Room GA257, Forrestal Building
Office of the US Trade Representative
1 - William Abnett, Director of China Affairs, 600 17th Street N.W.,
Washington, D.C., Room 300
Department of Agriculture
1 - Frederick Surls, Economic Research Service, GHI Building, Room 350
Defense Intelligence Agency
1-
1-
JSI-3A, Pentagon
JSI-3B, Pentagon
National Security Agency
1 - G732, Room 5A106
Central Intelligence Agency
2 - C/OEA/CH, Room 4G32
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1 - C/OEA/CH/FOR, Room 4G32
1 - C/OEA/CH/DEV, Room 4G32
1 - C/OEA/CH/DEF, Room 4G32
1 - C/OEA/CH/DOM, ROOM 4G32
1 - OEA/Production Officer, Room 4G48
1 - D/OEA, Room 4F18
1 - DDI, Room 7E44
1 - Senior Review Panel, Room 5G00
1 - PDB Staff, Room 7F30
1 - NIO/EA, Room 7E62
1 - C/PES, Room 7F24
1 - C/DO/PPS, Room 3D01
1 - FBIS/NEAAD/China Branch, Room 306, Key
1 - NEAD/CSTP, 304 Key Bldg
1 - OGI/SRD/PR, Room 3G31
1 - OGI/SRD/EM, Room 3G31
1 - C/EADRoom 5E18
1 - CPAS/ILS, Room 7G50
5 - CPAS/IMC/CB, Room 7G07
2 - Congressional Liaison, Room 7B02
10 - Author
1 - Chrono
OEA/CH/DEVI 04Jun86
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