Clean Energy in China

Where's the Next Half a Trillion Dollar Opportunity?

Written by Brian Hicks
Posted October 7, 2008

The clean energy market in China will be worth $186 billion in about two years' time. Clean energy in China will be worth $555 billion—or over half a trillion!—in the next twenty years.

Knowing this, the U.S. government has been leading a clean energy and environment "trade mission" to China.

One of the results of that trade mission was the signing of a 10-year framework that will expand cooperation in areas such as clean electricity production and transmission, as well as efficient transportation.

According to David Bohigian, the U.S. Assistant Commerce Secretary"

The 10-year framework we put in place includes transportation technology, clean energy technology, clean water, clear air, and forestry and wetland protection. What we are doing now in the first year of the plan is to develop deeper relations and really build the trust that will make sure we meet our goals, such as China's five-year plan.

This, of course, is contrary to the popular notion that China is a neophyte in the area of clean energy. The Bush administration actually used China's lack of initiative regarding clean technology as their main reason for not ratifying Kyoto. Now, they're signing decade-long clean technology cooperation agreements with them. Go figure.

But despite the commonly held notion that China is behind the new energy curve, they actually have some very progressive energy policies and targets.

As the second-largest energy consumer behind only the U.S., the emerging Green Dragon is proving to be a hotbed of investment activity for clean technology.

Let's go over some of China's energy aspirations and take a look at how they're proceeding so far.

China's Clean Energy Goals

China, for as quickly as it's developing, is actually doing quite a good job in making sure policy keeps pace with growth.

With such a huge population—1.3 billion and climbing—and a growing thirst for energy, Chinese officials know they need to progress very carefully to ensure they have enough energy to sustain growth.

Yes, China is still heavily dependent on coal. But they're also the world's largest user of hydroelectric power, and they'll continue to dominate that arena upon the completion of the Three Gorges Dam, which is already producing copious amounts of power with more generators still to come online.

But China knows coal is dirty and finite. And they also know that nearly all the good hydroelectric sites have been exploited. So, almost by default, they know they need clean energy in China.

Here's how they're going to get it:

  • a renewable energy budget of $293 billion for the next 12 years

  • a 15% renewable energy target for 2020

  • a $205 billion environmental protection budget through 2010

  • a new "circular economy law" to take effect Jan. 1 that forces industrial enterprises to adopt water-saving technologies, strengthen management, and install water-saving equipment in new buildings and projects

So let's see what China's done so far.

Clean Energy in China*

Under this umbrella category, I'll cover the major clean energy industries in China, their current and projected growth rates and capacities, and any relevant investment opportunities in each.

Wind Energy in China

From 2000 to 2007, the capacity of wind energy in China grew from 346 megawatts (MW) to 5,912 MW. That's a total growth of 1,609% and a compounded annual growth rate (CAGR) of 50%!

Take a look:

chinese wind energy capacity 2000-2007

Between 2007 and 2012, the Chinese wind industry is expected to grow even faster, from 5,912 MW to 51,200 MW. That comes out to a surging 54% CAGR in for the next five short years. Check it out:

chinese wind energy capacity 2007-2012

Here are the largest wind companies currently operating in China, along with their 2007 revenue from wind installations in that country:

  • Goldwind Science and Technology (SHE: 002202), $928 million

  • Vestas Wind Systems (CPH: VWS), $641 million

  • Sinovel Windtec Co., $601 million

  • Gamesa Corporacion (MCE: GAM), $467 million

  • GE Energy (NYSE: GE), $293 million

Also ramping up wind business in China are Suzlon Energy (NSE: SUZLON), Dongfang Electric (HK: 1072), and Acciona (MCE: ANA).

Solar Power in China

Solar energy in China has been nearly as prosperous.

From 2000 to 2007, solar capacity in China grew from 19 MW to 100 MW. That's a growth of 426% and a CAGR of 26.8%.  Check it out:

chinese solar capacity 2000-2007

From 2007 to 2012, the Chinese solar industry is expected to grow even more, from 100 MW to 462 MW in five years— a growth of 362% and a CAGR of 35.8%.  Take a look:

chinese solar capacity 2007-2012

Of course, this doesn't take into consideration the massive amount of solar panels coming out of China that are used in other countries.

Other than Germany, China is the only other dominant producer of solar cells and modules. In fact, with their low production costs, China is expected to begin supplying an increased portion of European and U.S. solar materials.

Companies to watch here include Yingli (NYSE: YGE), Renesola (NYSE: SOL), Solarfun (NASDAQ: SOLF), JA Solar (NASDAQ: JASO), and Suntech Power (NYSE: STP).

Biofuel in China

By 2012, ethanol production in China will grow to 1.24 billion gallons. That's up from just 51.4 million gallons in 2000, or an increase of 231%.

Biodiesel production, for its part, will grow from 207.1 million gallons in 2007  to 2.5 billion gallons in 2012, an increase of 1,108%!

Companies to watch in the Chinese biofuel sector include China Sun Bio-Chem (SIN: C86), Asia Bio-Chem Corp. (CVE: ABC), New Oriental Energy & Chemical (NASDAQ: NOEC), China Clean Energy (OTCBB: CCGY), and Gushan Environmental (NYSE: GU).

Investing in Chinese Clean Energy

Indeed, the clean energy boom in China is just getting started.

For the past few years, China has been slowly building its portfolio of clean energy technologies.

Now, with a global pullback in stocks, the time is approaching to start adding these future gems to your portfolio.

China's appetite for energy is only going to surge upward, along with their booming population.

That fact, combined with China's rapid economic growth, the high price of oil, and concerns over energy security, make a perfect recipe for vast renewable energy market growth.

Not only will China be using their growing energy expertise to satiate its own demand, but it will also be exporting its technology to Europe and the U.S., as evidence by the already signed 10-year cooperation agreement.

Even though the global economy is in a downturn, prosperity will return to China. Getting in now, before the major growth kicks in, will surely prove to be a boon to any investor's portfolio.

With that in mind, Green Chip International is devoting a portion of its portfolio exclusively to clean energy opportunities in China.

You'll get in-depth research like this, along with up-to-the minute buy and sell recommendations. Take a few minutes to look over everything Green Chip International has to offer.

You can get a free book just for checking it out!

Call it like you see it,

nick hodge




*Statistics from GlobalData