Climate and Energy

China emerges as global clean energy leader

China to become unrivalled clean power leader and eyes Latin America as an attractive investment

Chinese companies are poised to accelerate investment in clean energy technology globally and fill the void left by such major economies as the US, new data shows.

A new report from the Institute for Energy Economics and Financial Analysis (IEEFA) reveals that China invested a record US$32 billion in overseas renewable energy and related technologies last year, marking a 60% year-on-year increase in spending.

Between 2015 and 2021, China will install around a third of the world’s total wind energy, solar and hydroelectric generation capacity. While the China-led Asia Infrastructure Investment Bank (AIIB) and the Export-Import Bank of China (China Exim Bank), look set to lead electricity-sector transformations across Asia, China Exim Bank and China Development Bank are well positioned to capitalise on Latin America’s renewables boom.

The scale and growth of this investment suggests that China is ready to embrace the role of global clean energy leader with US clean energy policy uncertain under Donald Trump, who will be inaugurated on January 20.

“The US is already slipping well behind China in the race to secure a larger share of the booming clean energy market. With President-elect Trump talking-up coal and gas, prospective domestic policy changes don’t bode well,” said Tim Buckley, director of energy finance studies Australasia at IEEFA.

“If the US is serious about stimulating manufacturing-based growth, this isn’t a sector to turn your back-on,” he added.

China is already a leader in terms of domestic investment in renewable energy. On Thursday 5, an announcement from China’s National Energy Administration (NEA) revealed that China will plough 2.5 trillion yuan (US$361 billion) into renewable power generation by 2020, as part of its five-year economic development plan (The 13th Five-Year Plan), as it shifts its domestic market away from dirty coal power towards cleaner fuels.

Part of China’s latest phase of “Going Global” dovetails its energy export strategy with plans to build a series of trade and infrastructure networks across Asia reaching as far as Europe, under the banner of “One Belt One Road” or the “New Silk Road”.

This means that China will become the world’s largest employer of green energy jobs globally. The International Energy Agency’s World Energy Outlook for 2016 estimates that Chinese firms hold 3.5 million of the 8.1 million renewable energy jobs worldwide. This compares to the 769,000 jobs dependent on renewables in the US.

The bulk of Chinese investment in wind and solar energy installation has gone to the US, Germany, Italy, Australia and South Africa. In terms of new markets, Latin America is currently one of the most attractive regions for renewable energy development and Chinese companies are already invested heavily in Mexico, Brazil, Argentina and Chile and elsewhere in the region.

Chinese banks are the largest investors in Latin America’s energy sector having lent over US$33 billion to the region in the between 2005 and 2014, over three times that supplied by the World Bank. Until now this has focused overwhelmingly on non-renewables.

In 2016, Tianqi Lithium, China’s largest lithium ion manufacturer, invested US$2.5 billion in acquiring a monitor stake in SQM of Chile, the world’s fourth largest lithium farm. Lithium, of which Chile, Bolivia and Argentina have sizeable reserves, is used to make batteries for electric vehicles. Over the next nine years global demand for the metal for battery use will double, according to IEEFA’s report.

In the other strategic area of grid transmissions, the State Grid Corp of China (SGCC or State Grid) last year pledged US$13 billion towards an energy and electricity share and distribution deal with Brazil’s CPFL Energia SA.

“China understands that renewables present huge commercial opportunity. Staggering domestic investment in a move to clean energy, compliments its active pursuit of commercial growth overseas,” Buckley said.  “As the US owned the advent of the oil age, so China is shaping-up to be unrivalled in clean power leadership today. The US may look back in regret in years to come.”

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