Can China Dominate Clean Energy?
I’ve just returned from China where the mood among industry leaders is optimistic and bullish on investments at home and abroad, even in the current environment of volatile commodity prices.
As part of its next five-year plan, China is going to push hard on reducing air pollution and growing renewables and nuclear. It will continue to drive innovation in new technology for power generation, including smart grid, solar panels, biomass, unconventionals, clean coal, fuel cells and, ultimately, nuclear fission for the next-generation nuclear plants.
At the same time, the globalisation of China’s energy state-owned enterprises (SOEs) and ongoing development of the ‘silk road’ economic belt between Europe and China will continue to intensify.
Today, China is the world’s biggest polluter, accounting for more than 22 percent of global energy consumption and more than 27 percent of emissions. But in the next couple of decades it can become the world leader in clean energy.
How, exactly can such a quantum shift be achieved?
It will be an enormous challenge and one closely connected with efforts to restructure the economy overall. But the government has already taken significant steps in this direction. For example, in 2013, China accounted for 21 percent of all global renewable investment, adding more than five times more wind and nearly twice as much solar as any other country. It has the world’s largest installed capacity of wind farms, it is the world’s leading manufacturer of solar photovoltaic (PV) modules, and produces more hydroelectricity than any other country. It has also managed to scale new nuclear – by building repeatable fleets of assets, it has reduced build time down to 56 months and is aiming for 48. Europe is struggling to get anywhere near this.
But the biggest commitment that I see is to cap emissions from coal plants by 2030, and perhaps earlier. Given that coal accounts for nearly 80 percent of the country’s electricity generation, if the world is going to see a breakthrough in carbon capture sequestration or carbon capture usage technology, it will come from the Chinese.
This is a long way from the discussions we were having in Copenhagen in 2009. So, COP21 in Paris in December will be interesting to watch.
The driver for reducing pollution is pressure from the population, especially in Beijing. But the number one problem with this is how to create 20 million jobs a year to keep the population moving from the countryside to the city. This is important repositioning for China.
So, what does this mean for the rest of the world?
China seeks to globalize its SOEs, but it needs to establish a global brand. Alibaba is an example, but I believe they want to do more. Oil and gas and utilities companies are definitely in scope and the US, Europe and Australia are priority targets. We’ve seen the acquisition of Nexen in Canada, there have been acquisitions in Malta, Portugal and Greece, and we will see more in Malaysia, Vietnam, Mongolia and Russia.
On US and Europe, watch for China to make more announcements in the coming months.
There can also be reciprocity, as other countries want to invest in China.
But unlike many other countries and commodities companies, the Chinese have the cash and they have the technology to carry out their investment objectives.
In the energy sector, China is already on the map as a serious global player. Can it ride the ‘silk road’ to become the global leader in clean energy over the next 15-20 years?