Chinese Clean Energy Roll-Out to Beat Targets

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In a new report released this week, specialist information and research provider New Energy Finance forecasts that China’s clean energy industry will outstrip even the ambitious targets being set by the country’s National Development and Reform Commission (NDRC). Renewable energy will supply up to 19.0% of the country’s needs by 2020, but will require total investment of $267 billion - around 50% more than forecast by the NDRC.

China is already the world’s leading producer of energy from renewable sources, using it for 7.7% of its Total Primary Energy Supply*, although the largest proportion of this comes from large-scale hydropower projects, including the controversial Three Gorges Dam.

New Energy Finance analysis shows that current trends and policies could see up to 19.0% of China’s energy being supplied from renewable sources by 2020, against a national target of 15.0%** (see Figure 1). Biofuels production will reach 27.7bn litres, meeting 9.1% of China’s transport fuel requirements.

Development of China’s clean energy provision on this scale will require a total investment of $267 billion, against the NDRC’s forecast of $179 billion over the coming 15 years (seeFigure 2).

Highlights of China’s future clean energy development include the following:
• Coal will remain at the heart of China’s power generating system, but efficiency will improve dramatically as it shifts from older to current and next generation technologies. Carbon Capture and Storage will also play a role.
• China is planning to build 30 new nuclear power stations between now and 2020, providing it with up to 4.0% of power demand.
• China is one of the few countries in the world with a standalone Energy Conservation Law. This is aimed at capping the country’s energy use at twice 2000’s level as the economy grows by a factor of four by 2020.
• China is currently in eighth place worldwide with just 1.3GW of wind capacity. The NDRC has recently increased its target for 2020 from 20.0GW to 30.0GW. We believe that as much as 54.0GW could be installed by then, making China one of the world’s leaders. The country is undertaking an aggressive programme to develop a wind turbine supply chain with aggressive targets for local content.
• China is already the world’s leader in passive solar energy (for water and space heating), but has very little installed solar PV capacity. It is currently importing solar-grade silicon, wafer and cells and exporting PV modules. We see this situation changing as China invests aggressively across the value
* Excluding traditional biomass
** Excluding nuclear power
Coal, Oil, Gas and Nuclear RE - NDRC History and Target RE - NEF Forecast
7.7% in 2005
By 2020:
NEF Forecast - 19%
vs.
NDRC Target - 15%
chain, including a major push into refining solar silicon. China is developing its solar PV sector as an export industry, but in the later years of the period to 2020 it will install up to 5.3GW of capacity, against the NDRC target of just 2.0GW.
• China will continue to develop its hydropower sector, growing it from 115GW capacity now to 300GW by 2020, from both large-scale and mini-hydro projects. The only threat to this development lies in the country’s increasingly erratic rainfall records.
• Biomass power generation capacity will develop rapidly from 2.3GW to 27.0GW as it moves from traditional rural use of biomass to modern technologies, either for power generation or local production of biogas for cooking and heating.
• China is already a leader in marine energy (power from waves and tide). Although we expect this sector to be slow to develop, China will maintain its position, developing up to 3.0GW of capacity by 2020.
• With very few domestic oil reserves, China is already the world’s third-largest producer of bioethanol. The biofuel industry will grow very rapidly, first in traditional then in cellulosic ethanol. But it is in the production of biodiesel that China could excel, piggybacking on its investment of up to $25 billion in coal-to-gas plants to turn biogas into diesel using the Fischer-Tropsch process.
• China will continue research on hydrogen and fuel cells, but other than a few demonstrator projects, we do not envisage substantial roll-out of these technologies in China before 2020.
• China is a signatory to the Kyoto Protocol, but not bound by it to reduce its carbon emissions. After a slow start China has become the largest source of emissions credits under Kyoto’s Clean Development Mechanism, by which projects in the developing world can generate credits to cover emissions within Europe or other countries bound by Kyoto.

Michael Liebreich, CEO and Founder of New Energy Finance, said: “It is common for commentators to regard China and its dramatic economic growth as part of the world’s climate change problem, not part of the solution. China’s growth is allowing it to invest enormous sums in clean energy. We see the Chinese Government as more committed than most Western Governments – both to rolling out clean energy aggressively domestically and also to building an export industry.”

The investment required is so substantial that New Energy Finance believes it can only be successfully raised if China continues to open up to the international capital markets, in particular relaxing its Qualified Foreign Institutional Investor (QFII) rules, or its future flagship clean energy suppliers will choose to IPO on overseas markets.

New Energy Finance will be presenting its analysis to interested investors at an all-day workshop on 27 September at London’s Marriott Grosvenor Square Hotel, in association with Euromoney Energy Events.

About the Report: “Interesting Times – Clean Energy Investment Opportunities in China”
New Energy Finance's inaugural report on the clean energy industry in China is an in-depth look at the opportunities and challenges facing the Western investor. It contains an up-do-date review of the policy and investment environment, proprietary growth forecasts for each sector of the Chinese clean energy industry, analysis of opportunities in wind, solar, biofuels and other sectors, and a look at the strategies being followed by key players. The report contains the following:
• Description of China’s energy infrastructure and the challenges it is facing;
• Outline of the policy environment and how it is likely to evolve;
• Explanation of the historic development of all sectors of the Chinese clean energy industry, and scenarios for their future development trajectories;
• Map of the supply chain for major sectors, including wind and solar, and a look at how they are likely to develop;
• Examination of the nature of likely opportunities for financial investors in venture capital, public markets and carbon.
• Summary of key developments since Jan 2005 and highlights the strategies of key players.

This definitive 107-page report contains 47 figures and 72 tables to help readers understand the investment trends in the sector. It is available in hard copy from New Energy Finance at a price of £1950.00 / $3610.00 / €2840.00 plus VAT (for UK customers).
Sectors Covered:
• Clean Coal
• Carbon Capture and Storage
• Hydro
• Biomass
• Hydrogen & Fuel Cells
• Venture Capital and
• Nuclear Power
• Energy Efficiency
• Wind
• Solar
• Geothermal
• Marine
• Bioethanol
• Biodiesel
Technology Investment
• Public Markets
• CDM & Carbon Finance

About New Energy Finance:

New Energy Finance is a specialist provider of financial information and analysis on renewable energy and low-carbon technologies. Our research staff of around 40 tracks deal flow in venture capital, private equity, M&A, public markets, asset-based finance and major grants around the world. New Carbon Finance, a division of the company, provides analysis and price forecasting for the global carbon markets.

Industry sectors covered include renewable energy (wind, solar, marine, geothermal, mini-hydro); bioenergy (biomass, biofuels); energy architecture (supply- and demand-side efficiency, smart distribution, power storage, carbon capture & sequestration); hydrogen & fuel cells; carbon markets and services. New Energy Finance covers all stages of investment, including venture capital, private equity, public markets, asset-based finance and M&A. The company has offices in London, Washington, New York, Beijing, Shanghai, New Delhi and Perth.

Services include the New Energy Finance Briefing (Global and US versions), the New Energy Finance Desktop, and the Newswatch service which keeps investors up-to-date with financial developments in the market. New Energy Finance also publishes reports on clean energy sectors and countries (most recently China), undertakes research and consultancy, and runs senior-level networking events and briefings.

In January 2005 New Energy Finance began publishing the world’s first global clean energy stock market index; since January 2006 the Wilderhill New Energy Global Innovation Index (ticker symbol: NEX) has been calculated and distributed by the American Stock Exchange.

For further information:
Michael Liebreich
CEO & Founder
New Energy Finance
71 Gloucester Place
London W1U 8JW
Tel: +44 20 7486 6760
michael.Liebreich@newenergyfinance.com

Chris Greenwood
Director of Operations
New Energy Finance
71 Gloucester Place
London W1U 8JW
Tel: +44 20 7467 2666
chris.greenwood@newenergyfinance.com

Jun Ying
Associate, China Insight
New Energy Finance
71 Gloucester Place
London W1U 8JW
Tel: +44 20 7467 3295
jun.ying@newenergyfinance.com

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Publication Date: 18 Sep 2006

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