FINANCE:

China is a major investor in overseas renewable energy projects

Apart from its traditional role as a high-volume manufacturer and exporter of solar modules and wind turbines to global markets, China is also a major direct investor in international renewable energy markets. It has at least $40 billion in renewable energy assets spread across the globe, according to a new analysis by the World Resources Institute.

The shift in China's business posture, based on investment data from 2002 to 2011, reveals a country no longer content to be a cog in the global clean energy economy while powering itself primarily with traditional forms of energy like coal, oil and gas.

Rather, WRI states, China is being propelled into global energy markets by both internal and external forces. Among them are Beijing's renewable energy targets of 15 percent by 2020 and 30 to 45 percent by 2050 as well as government policies enacted in the early 2000s encouraging Chinese firms to "go global" in their business strategies.

As a result, Chinese firms have made at least 124 investments in 33 countries' solar and wind power sectors since 2001, with more than half those investments coming in 2010 and 2011, according to WRI's working paper published this week.

Financial data obtained for 54 of those solar and wind power investments show much of China's focus has been on projects in the United States, Europe, Australia and South Africa, but it also has made large investments in developing countries like Pakistan and Ethiopia.

For 53 solar and wind energy projects where the government disclosed information on the size and scale of the projects, WRI calculated that Chinese firms had helped build roughly 6,000 megawatts of new renewable energy capacity worldwide. And that figure could be much higher when accounting for the roughly 70 projects for which there were no data available.

"If current trends and drivers are any indication, China's renewable energy investments will continue to grow over the coming years," researchers Yingzhen Zhao and Clifford Polycarp wrote in a summary of the research posted on WRI's website. "If accelerated and scaled," they added, "these investments can substantially contribute to building a global, low-carbon economy."

Solar investment focused on U.S., Europe

The largest recipient of Chinese investment over the past decade was the United States, which hosted 32 Chinese-backed renewable energy investments between 2002 and 2012, according to WRI, the majority of which were solar energy projects. The second-largest host country for Chinese renewable energy projects was Germany, with 15 projects, followed by Italy (11 projects), South Africa (seven projects) and Australia (six projects).

Of the two technologies analyzed by WRI -- solar and wind power -- Chinese firms have been more aggressive in developing an overseas solar generation market, with 81 of 124 Chinese-backed investments falling into the solar category, while 41 projects were in the wind sector and two were in both. Most of the projects were undertaken as joint efforts with one or more other firms, according to the researchers.

But China's aggressive posture on renewables has not fared well with some international competitors, including U.S. and European solar manufacturers that have argued that Chinese firms are benefiting from illegal government subsidies and routinely violate international trade agreements by dumping below-cost solar modules into overseas markets.

The U.S. government currently imposes import tariffs of up to 36 percent on Chinese-made solar equipment entering the United States, and the European Union last week said it would begin imposing preliminary duties of 11.8 percent on Chinese panels entering the 27-country trade zone. Without a settlement, the E.U. tariffs could increase to as much as 47.6 percent on some Chinese firms by later this summer (ClimateWire, June 5).

China responded by launching a government investigation into fair trade practices by European wine exporters, and a Chinese state media report said a similar investigation may be launched into European polysilicon materials being exported to China.

Helping wind and solar exports with cash

For both wind and solar power technologies, WRI said the primary driver behind China's growing overseas markets is that the country's manufacturing capacity exceeds domestic demand. But Chinese firms have also been attracted to countries like the United States with government policies that promote renewable energy development.

"The Chinese government's policy support and financial support -- mainly from state-owned banks that respond to government policy -- encourage this overseas investment trend," the report states.

"Host countries' policies have also attracted investments from China's solar and wind industries, either advertently through tax breaks, feed-in tariffs, or bilateral cooperation agreements, or inadvertently as a 'side-effect' of policies discouraging imports."

The report also notes that China is one of a handful of emerging economies that have increased their investment profiles outside their own borders, alongside India and Brazil. It added that "China was one of the few countries to increase its overseas investments through the global financial crisis in 2008."

Moreover, the rise of these developing countries' renewable energy sectors will be critical to achieving a tenfold growth rate for the world's low-carbon economy -- from $200 billion annually in 2011 to $2 trillion annually in the years to come, WRI said. That investment level will be necessary to hold global greenhouse gas levels to 450 parts per million, or keep global average temperatures from rising beyond 2 degrees Celsius over preindustrial levels, the report added.

Click here to read the WRI working paper.