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A week in the life of the Chinese green machine

A week in the life of the Chinese green machine

29-11-2018 | Stunning statistics

China has long been seen as a land of contrasts, and none more so in its epic adoption of green energy.

  • Chris Berkouwer
    Chris
    Berkouwer
    Equity Analyst

The country is moving from being one of the most polluted in the world to a global leader in the adoption of wind and solar power, along with electric vehicle use and a commitment to phase out fossil fuels.

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What has happened?

In clean energy, China is now home to five of the world’s top six solar panel manufacturers and five of the top 10 wind turbine makers. It means that the country is now manufacturing enough 2m-by-1m sized solar panels to cover one and a half football pitches every hour. China now makes two wind turbines every hour, or almost 350 a week, installing 19,660 MW of capacity in 2017, higher than the 28-nation EU1.

In one week, China builds 1,900 electric buses for public use, which means that it places the equivalent of London’s entire bus fleet of 9,500 vehicles on its roads in just over a month. The country is also now the world’s largest manufacturer of electric cars, making 10,000 a week in 2018, or twice what is sold in the US.

Total spending on renewables amounted to USD 2.4 billion a week in 2017, with plans to raise this to USD 7 billion a week by 2020. Much of this is financed by green bonds; China issued USD 700 million worth a week in 2017, making it the second-largest green bond market in the world, after the US.

Why is it important?

Turning China green is hugely important for combatting climate change. The country’s rapid growth averaging 6.5% or more a year for decades has come at the expense of vast environmental damage, leading to cities so polluted it was impossible to see from one side of the street to the other.

And despite the significant advances made in the use of renewables, China still remains reliant on coal-fired power production, providing 62% of its energy in 2016 after peaking in 2014. As coal has been gradually phased out, the growth of China’s emissions decelerated during the 12th Five Year Plan (2011-2015), plateaued during the 13th (2016-2020) and is seen falling during the 14th (2021-2025).

While this has seen a focus on installing renewable energy capacity on a colossal scale, natural gas has also become far more important in steering China away from more carbon-intensive coal. China’s domestic natural gas production has more than doubled over the past decade, and yet production still cannot keep pace with demand, making it more reliant on Liquified Natural Gas (LNG) imports.

What does it mean for investors?

“As China shies away from coal, the demand for natural gas will rise,” says Chris Berkouwer, Portfolio Manager with Robeco Global Stars Equities. “Within China’s energy mix, the share of gas is targeted to almost double from today’s level to 15% by 2030. While renewables are grabbing the headlines, it is crucial to have more gas in the energy mix as well if we are to transition to a low carbon economy.”

“European integrated energy majors are very well positioned to cater for that transition. We expect China to increasingly rely on LNG imports to cope with seasonal gas shortages and strong demand growth. European players have established strong relationships with major Chinese energy companies and signed long-term contracts to supply LNG over the next 20 years.”

1 The statistics for this article are drawn from:
http://ieefa.org/wp-content/uploads/2018/01/China-Review-2017.pdf;
http://www.climatecentral.org/news/china-solar-farm-satellite-21182;
https://www.windpower.by/en/news/632.html;
https://www.cnbc.com/2018/09/03/china-electric-vehicle-market-is-poised-for-explosive-growth-expert.html;
https://www.globalcitizen.org/en/content/china-spends-three-times-as-much-on-renewable-ener/;
https://www.instituteforenergyresearch.org/fossil-fuels/coal/coal-dead-china/;
http://www.gasprocessingnews.com/columns/201808/ewanalysis.aspx

Stunning statistics
Stunning statistics

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