China's Renewable Energy Boom
Renewable energy is an increasingly hot topic in China and is a sector targeted for increasing amounts of government attention and investment before 2020. According to Solidiance's analysis, there are 3 key drivers behind the continued interest in this sector : China’s increasing demand for electricity, the need to reduce its reliance on coal for energy production, and the need to reduce its greenhouse gas emissions.
As the world's highest emitter of greenhouse gasses, China targets to reduce CO2 emissions by 40-45% from 2005 levels by 2020 and increase the use of renewable energies from around 9% of its current total energy mix, to 15% by 2020.
Installations of hydro power continued to rise in the period up to 2011, with China accounting for 22% of the total global installed hydro power capacity. Considerably the most effective renewable energy resource, hydro power sector is dominated by SOEs, although foreign firms are still plausible to invest in the sector regardless their capacity is largely limited due to government's firm control. Nonetheless, challenges such as the long development periods, associated social displacement and environmental concerns as well as the increasing difficulty in accessing potential development sites suggest that China’s investment in hydro power will decline after 2020.
Following years of unregulated growth, China still dominates the global wind energy market with 25% of total global installed wind capacity and is taking the opportunity to mature with the key industry trends that include consolidation and internationalisation. The government regulations and requirements increase, the overheated market begins to consolidate and power grid capabilities take time to catch up to meet the unharnessed production output of current installed capacity with key domestic players finally taking further steps onto the world stage.
China Cumulative and Newly Installed Wind Capacity 2005 - 2011 (Giga Watts)
Challenges lie on the development of the Chinese grid and the continued delays in successful coordination of government bodies in the development of offshore wind. Meanwhile, opportunities exist in the form of internationalisation (for local players), and the application of advanced technology to assist the predictability and grid connectivity of wind power (for foreign players).
China is now the fastest growing solar PV market in the world, with the government targeting total installed capacity to reach 21 GW by 2015 and 50 GW by 2020. However, the industry is overcrowded in which the strong firms suffer from problems of overcapacity, troublesome technological development processes and an international slowdown.
China cumulative and newly installed solar capacity 2005 - 2011 (Giga Watts)
The overcapacity may lead to increased competition and consolidation in the manufacturing market, with the excess components from the value chain being reinstalled domestically, increasing newly installed capacity but limiting opportunities for foreign investment. And according to our analysis, chief opportunities in the Chinese solar PV sector lie on domestic development, new technology R&D, and cost reduction.
Biomass and Biofuels
Biomass and biofuels represent a key potential future growth area for renewables in China, but it still needs to be noted that these are newly established areas which are supported by very poor infrastructures that limit the sector's short term growth. The opportunities lie on second generation biofuels, ethanol and energy produce from feed stock sources. Overall, industries are still at the early stages of development as they are currently being investigated for future potential.
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