Under the severe threat of air pollution and the concern of global warming, China launched an ambitious energy reform over the past one and a half decades, aiming to invest and develop renewable energy to replace traditional combustive resources. China is determined to change towards a green and more sustainable economy, considering its rapid development of renewables such as solar and wind energy nationally. Not just inside the country, its overseas investments are also striking. China now leads in several indicators of market growth globally. As renewable energy development strongly relies advanced technology as well as global cooperation, China holds great expectations on its investment overseas on renewables, expecting to introduce advanced technology from advanced countries to its own national development on renewables, as well as to layout a new global energy supply network to complement its increasing energy needs.
Despite China’s claims of having a free market economy, and in many aspects it does qualify, it is still a socialist economy, and one of the key characteristics of it is “planning”. China’s Five-Year Plans (or Guidelines) function as the social and economic development initiative of the nation, define priorities of economic development and map industrial and socialistic growth targets. Currently in its thirteenth Five-Year Plan (FYP, 2016-2020), China further emphasises its industrial focus on developing renewables, not only on domestic infrastructures, but also on technologies, shares, funds and even complete projects in other countries. In addition, China also is engaged in strengthening its collaboration in international bodies such as the G20, reaching accords in significant conferences such as the COP 21, on the topic of environmental monitoring, as well as climate change adaptation and mitigation.
Through its overseas investments on renewables presented on this paper, we can get a glimpse of China’s ambition to establish a new global network of renewable energy supply, how it assists the gigantic emerging country to initiate its transfer from the “black” development approach into a more sustainable path, to strengthen its energy security nationally, as well as to present itself to the world with a better image and to gain more power the global politics round table.
2. China’s Perspectives from the Five-Year Plans
At the planning level, the 10th Five-Year Plan (FYP, 2001-2005) officially initiated China’s objective to reform its energy structure. Through this plan, the Chinese government aimed to send out a signal to the national and international market, to encourage R&D activities and to lay out infrastructure nationally, as well as to manufacture equipments for the international renewables market. In the 11th and the 12th FYP, the Chinese government had embarked on more accomplishable goals and collaborated closely with the development of each energy sector. After five years of taking the trade ride on the convenient World Trade Organisation express, China had accomplished its initial accumulation of both capitals and technology, and was ready to let the conversion to take off.
Differed from the 10th FYP’s wind power focus, the 11th Plan emphasised primary efforts to be engaged on the development of hydropower. This possibly was due to the urgent need to bring up the percentage of “clean” energy in a short period of time and to lower the negative impact of air pollution. On the other hand, the government needed to balance industrial development of different energy sectors, hydropower became the new focus not only as a means of clean energy resource, but also because the technology was mature and could be applied massively. Even though technically speaking, mega hydro power plants such as the Three Gorges Dam are not considered as renewable given its indispensable impact on the eco-environment, it is comparatively a much cleaner option.
The balance between wind and hydro power sectors was adjusted in the next plan. In the 12th Five-Year Plan, China expected wind power industry to become internationally competitive with its equipment manufacturing capability, China expects wind power industry to become internationally competitive with its equipment manufacturing capability. Besides, the 12th plan’s inclusion of climate change and environmental issues reflects China’s efforts on green energy to be “veritable and responsible,” China is increasing its engagement in renewable energy development.
3. Major Achievements During the 10th and the 11th FYP
China’s gigantic development needs maintained coal as the main primary energy source. Officially China surpassed the United States and became the biggest CO2 emitter in the world in 2007. In the mean time, under the guidance of the Five-Year Plans, China’s investments in clean energy kept soaring both nationally and internationally. Research from World Resources Institute (WRI) indicates that China had made at least 124 investments in solar and wind industries in 33 countries from 2002 to 2011, a result that responds approximately to the 10th and the 11th FYP period. Of the investments for which data were available, the cumulative value amounted to nearly €35 billion EUR in 54 investments, and the cumulative installed capacity added was nearly 6,000 megawatts in 53 investments. Of the 124 Chinese investments that WRI surveyed, 41 were in the wind industry, 81 in the solar industry, and 2 covered both the wind and solar industries. The majority of the investments went into the solar PV power plants and wind farms development, while a few investments went into manufacturing or sales support.
The number of investments rose steadily since 2005. The United States was the leading destination, accounting for 1/3 of China’s investments both in the wind and in the solar industries. Countries with a high level of solar energy penetration, such as Italy and Spain, attracted only solar investments from China; Germany also attracted mostly solar investments. The three developing countries to host the highest number of China’s investments were South Africa, Bulgaria, and Pakistan. The majority of the investments were in developed countries.
During this period China had clearly shown a preference towards solar industry. This was probably due to technical reasons. According to the National Development and Reform Commission (NDRC), by the time of 2008, China was still lacking independent R&D capabilities and was relying on imports in order to obtain key technology and equipment, except for hydro, solar and biogas. There was a big gap in between Chinese and exterior competitors on the technological level and production capacity in the area mentioned above.
According to REN21’s (Renewable Energy Policy Network for the 21st Century) report, in 2009, China produced 40 percent of the world’s solar PV supply, 30 percent of the world’s wind turbines (up from 10 percent in 2007), and 77 percent of the world’s solar hot water collectors. China also added 37 GW of renewable power capacity, more than any other country in the world, to reach 226 GW of total renewables capacity. Wind power received more than 60 percent of utility scale renewables investment in 2009 (excluding small projects), due mostly to rapid expansion in China. Till 2014, China accounted for 63% of developing countries’ investment, while Chile, Indonesia, Kenya, Mexico, South Africa and Turkey each invested more than USD 1 billion in renewable energy.
China made the strongest and most consistent upswing in dollar commitments on renewables in the last decade. According to UNEP’s data, with an initial investment of just $3 billion in 2004, then multiplying this 13-fold by 2010 and another two and half times by 2015, China reached a record $102.9 billion with its total investments (see Figure 6). From 2014, China became the biggest renewable energy investor (excluding large hydro-electric projects), according to UNEP’s data, with a record of $83.3 billion, up 39% from 2013. Most of the investments resulted in vigorous improvement and are concentrated in the wind and solar industry. Wind power accounted well over two-thirds of the total gain, whereas solar power contributed around one-fifth.
By 2015, China represents 36% of the global total with its $102.9 billion total investment (as indicated in Figure 7), lifted an upswing of 17% from 2014. China alone contributed more investments than the United States and Europe’s together in this year.
3.1. Solar Power: Industry Emergence and Reshuffle
The solar industry went through its high and low time in the last decade. During this period, China raised its global competitiveness by lowering the production costs of PV materials. Unlike wind power, China’s solar industry relies on the international market. It flourished for a few years at the beginning, the price of PV panels decreased dramatically; but the industry then declined due to the United States and Europe’s antidumping and countervailing duty investigations, the financial crises and the reduction of industry subsidise in European countries.
China’s 12th Five-Year Plan provoked solar development domestically. It might have been a solution to try to save the solar manufacture industry. In August 2013, the Chinese government introduced new feed-in tariffs (FITs) to fuel the growth of distributed solar rooftop installations. The central government currently provided 20-year subsidies of RMB 0.42 (US$ 0.06) per kilowatt-hour (kWh) of output from distributed PV rooftop projects. Solar installed capacity therefore embraced rapid growth in the country.
In the last two years, excessive supply led to manufacturers worldwide either going bankrupt or they were acquired. In China, companies with strong assets reserves such as state-owned Huaneng Group and Datang Corp. survived; as a result they are now more cautious with new investments abroad, also try to diversify their investments to other areas such as hydro plants and new-energy vehicles.
3.1.1. Case Studies: Hanergy, JinkoSolar and CNBM
Hanergy is an informative example of Chinese private participants in the global solar market. As one of the rising stars praised for its technological acquisitions and innovation, Hanergy expanded itself rapidly through a bunch of overseas Q&A activities. According to data from its official website, in 2012, Hanergy purchased Solibro GmbH, a thin-film photovoltaic subsidiary of German PV solar cells manufacturer, Q-Cells, once the leading manufacturer in the world. Later in 2013, Hanergy purchased Global Solar Energy and MiaSolé, two American thin-film photovoltaic material producers. In 2014, Hanergy combined with another American photovoltaic startup Alta Devices. A series of Q&A events strengthened the company’s technological competitiveness. Hanergy’s stock price rose over thirtyfold during these three years, due to investor’s high optimism in its thin-film technology. However in 2015, Hanergy’s shares suffered an avalanche, plunging almost half of its total assets. An approximate loss of $1.58 billion dollars was revealed in its 2015 Annual Report. The company’s recovery has been lengthy. To save itself, the company has spread its assets in new-energy vehicles and will officially present them in June this year in the Shanghai New Energy Auto Show.
Avoiding antidumping and countervailing duty investigations is another motive for Chinese solar enterprises to invest outside. JinkoSolar for example, the world’s fourth-largest supplier of solar PV modules then, set up solar module factory in Cape Town, South Africa in 2014 as the first Chinese solar company to do so in Africa. The factory has an annual production capacity of 120MW. JinkoSolar invested a total of approximately $7.5 million US dollars in the factory which was expected to create 250 jobs.
Not just new start-ups, but large state-owned non-energy enterprises also wished to get a share. In 2014, China National Building Materials Group Corporation (CNBM), the largest state-owned enterprise engaging in cement and lightweight building materials acquired the core business of Germany-based thin-film and CIS producer, Avancis. CNBM has greatly expanded its activities in the field of wind energy and photovoltaics in recent years. In 2007, Sinoi GmbH, a manufacturer of rotor blades for wind turbines and in 2012, the CTF Solar GmbH, a manufacturer of thin-film solar modules, were both acquired in Germany.
In short, Chinese solar enterprises frequently conducted or got involved in Q&A actions during the last few years, not all of the acquisitions succeeded. Some of China’s biggest solar material manufacturers in 2012: Suntech Power filed for bankruptcy in 2013, LDK Solar went on with debts reorganisation from the end of 2015 and Yingli Solar started to reorganise its debts at the beginning of this year. To conclude, China’s Five-Year Plans are incentive in giving general guidance to the Chinese enterprises in the global solar industry. However, the fast changing market and the lack of insights are the two major reasons why they fell. The impact of the United States, Europe and India’s antidumping measures was negative. Time is required until the market balances the excessive PV supply and regulations related to solar material trades is consummated in each country.
3.2. Wind Power: Smooth Growth
Compared to the solar industry, wind power in China has had a much smoother growth curve, as the industry relies predominantly on the domestic market. Internally, China’s newly installed wind power capacity reached a record high of 32.97 gigawatts in 2015. Chinese turbine manufacturers started investing out in around 2011, when interest rate in domestic installations dropped. Goldwind, for example, started its technological cooperation with Vensys Energy, a leading German manufacturer of gear-less wind turbines in the megawatt and multi-megawatt class from 2004. In 2005, a “joint” turbine sample was developed. Then in 2008, 70% market share of Vensys was acquired by Goldwind. The acquisition strengthened the company’s technological competitiveness; later in 2010 it entered the US market, investing $198 million in the Shady Oaks Wind Farm in Illinois.
Goldwind grew to be the third biggest turbine manufacturers in the world in 2014, according to REN21’s data. Currently it runs projects in the United States, Europe, Australia, South Africa and in Latin America. Four out of the top ten biggest manufacturers of wind turbines were Chinese by the end of 2014 (as indicated in Figure 10).
China General Nuclear Power Group (CGNP), China’s biggest nuclear power generator, entered Europe’s renewable energy market, snapping up three UK wind farms from French utility EDF in 2014. The purchase encouraged many other large-scale energy enterprises to invest out. The China-CEE (Central and Eastern Europe) Fund and Israel-listed Enlight Renewable Energy invested 1.3 billion zlotys ($406 million) to buy control of two Polish wind projects (Wroblew and Project 2, developed by GEO Renewables), totalling 250.5 megawatts in installed capacity. China-CEE will hold 49.9 percent and Enlight 50.1 percent in the joint venture.
To conclude, Chinese outward investments on wind power projects are concentrated in developed countries and regions, such as Europe, Australia and the United States. This is possibly due to a preference over destination country’s political stability, economy development and the openness of their policies, given wind projects involve with massive amount of money and the investment return period is usually lengthy.
3.3. Energy-Saving and New Energy Automobiles
China strives to develop new energy vehicles and to ameliorate its notorious air pollution in cities. With a generous subsidy investment of about 37 billion yuan ($5.6 billion) allocated into the new-energy vehicle segment over the past five years (according to Gao Feng Advisory Co.), China is now the biggest new energy auto market in the world. As China’s energy-saving automobile development took place much later than its foreign counterparts, many auto enterprises started by investing out, intending to introduce the key technologies needed for massive production for the Chinese market.
In 2012, the State Council issued the document Planning for the Development of the Energy-Saving and New Energy Automobile Industry for the period of 2012-2020. The paper served as a detailed indication to the industry, including a technology roadmap, main objectives and the establishment of an appropriate marketing and service system. The plan specifically encouraged auto companies, universities and research institutions to engage in international cooperation on cutting-edge technology / global R&D joint research and outsourcing in the field of energy-saving and new energy vehicles.
Beijing Automotive Industry Group Co., Ltd. (BAIC) recently set up R&D centres in Silicon Valley, Aachen, Germany, Barcelona and Tokyo, aiming to use collective wisdom for its new energy vehicle development. In 2014, BAIC acquired 25% of the market shares of Atieva, an American provider of core systems for New Energy Vehicles. In 2014, Geely, a Chinese multinational automotive manufacturing company acquired Emerald Automotive, a British enterprise dedicated in electric car research. In 2015, Geely announced the plan to invest £250 million and construct a new factory for London’s taxi companies. This factory will be used to produce the next generation of electric and low-emissions taxis. These are just two of the many investors planning a global layout of core assets in order to get a bigger slice in this profitable industry filled with future prospects.
3.4. Hydro Power
(For hydro power’s industry development details, please refer to the chapter: “Investments in Portugal.” Note: Given most of China’s hydropower investments are on large-medium scale hydro plants, they are not listed here as renewable energy).
4. Investments in Portugal
Portugal’s centuries-old links with Brazil and Africa are highly appealing for Chinese energy
companies. Since 2011, Chinese vestments have occurred in different sectors in Portugal, with a
special emphasis on the energy and public utilities sectors. Connecting with Portugal can help China
explore the clean energy market in South America, Europe and Africa. Similarly, China’s fast growing
economy, active investment activities and flexible banking system are attractive to Portugal,
especially under the circumstance of the financial crises. Portugal is eager to attract Chinese
investments into the country via its historical connection – Macau, as well as to benefit from being the
middle man between China and other Portuguese-speaking countries in South America and Africa.
The coupling of EDP Portugal and China Three Gorges company is a sterling example.
According to the EDP’s report, in December 2011, CTG, an entity 100% owned and fully supported
by Chinese Government, won the bidding for its 21.35% stake (780,633,782 ordinary shares) in EDPEnergias de Portugal S.A. with an offer of €2.7 billion. CTG therefore gained an adequate
representation (4 members) at the General and Supervisory Board and committed to a 4 year lock-up
& standstill period. During 2012-2015, CTG invested €2 billion in 34-49% of the equity stakes in
operational and ready-to-build projects (as indicated in Figure 11). In return, EDP strengthened its
According to the Wall Street Journal, Portugal sold its assets as part of the €78 billion bailout 28
agreement it entered into with the European Union and the International Monetary Fund. Under the
terms of the rescue, Portugal had committed to cut government spending and its budget deficit. For
the same reason, 25 percent (€592 million) of REN’s (Redes Energeticas Nacionais SA) stake in was
sold to State Grid International of China by Portugal’s government in 2012.
The deal marked the first time a mainland Chinese firm acquired a significant stake in a southern
European company. The transaction opened doors to EDP’s renewable-energy assets in Brazil, a key
In December 2013, CTG and EDP Brasil signed a memorandum of understanding (MoU) for the joint
development of clean energy generation projects. It includes the sale to CTG of: i) 50% of the
Cachoeira-Caldeirão hydro project (219 MW, located in the Minas Gerais State in southeastern
Brazil) for Brazilian Reais $294 million of equity contributions and assuming the reimbursement of
costs incurred so far; ii) 50% in Jari hydro project (373 MW, located at the Jari River, a watercourse
dividing the Brazilian States of Amapá and Pará in the Amazon region) for a value of Brazilian Reais
$490 million and an additional Brazilian Reais $81 million of equity contributions.
According to Enerdata, in 2014, CTG acquired from EDP Brazil a 33.3% stake in Terra Nova, a
joint venture of EDP (66.6%) and Furnas (Eletrobras, 33.3%), which in December 2013 won the
concession for the construction of the 700 MW São Manoel hydropower plant on the border between
the states of Mato Grosso and Pará, on the Teles Pires River.
During 2015, EDPR sold 49% of Polish and Italian assets totalling 598 MW. The transaction scope
covered 392 MW in operation in Poland and 100 MW in Italy with an average age of 4 years, as well
as 107 MW under construction. This transaction made up parts of CTG’s deals with the Brazil and
Portugal agreement in 2014 and 2012 respectively. Additional investments were completed in 2015
through the sale to CTG of non-controlling interests in wind farms in Brazil. To attain a 49% interest
in the Brazilian wind farms, CTG will carry out investments totalling Brazilian Reais 385 million,
including contributions of capital that have already been made and future contributions amounting to
Brazilian Reais 86.8 million for construction projects.
Following CTG and State Grid China’s success, many other investments were pursued in Portugal by
Chinese investors with deep pockets – SINOPEC, Beijing Enterprises Water Group (BEWG),
Huawei, Bank of China, Industrial and Commercial Bank of China (ICBC) and China’s Fosun
International Ltd, comprising a total amount of more than €10 billion in Portugal until May 2015.
5. The 13th FYP: Planning for a Greener Economy
China had succeeded in meeting or even exceeding the environmental goals in the 12th Five-Year
Plan period. To demonstrate that non-fossil energy sources are becoming a more important part of the
Chinese economy, the new planning requires greater reductions in the emissions of many pollutants,
and a total energy consumption cap of 5 billion tons of “coal equivalent”. At the same time, it requires
more focus to be put on air quality, pointing it as the principal environmental concern. The new plan
also heavily emphasises the need to improve water and soil quality, setting the improvement of
ecological environmental quality as a major target. In specific terms, the 13th FYP stablished the
strategic status of the energy-saving and new energy automobile industry. Given China’s achievements in accomplishing energy and environmental goals during the 12th FYP, targets for the new period make clear that China intends to deepen the transition to clean energy and
low carbon development in the next five years.
(to be continued in Part 2)