China is seeking to establish a
leadership position in green technology despite continued global
economic volatility and slowing domestic growth, according to a
new industry report.
The China Greentech Initiative (CGTI), of which professional
services firm PricewaterhouseCoopers (PwC) is the strategic
advisor, offered those findings in its analysis The China
Greentech Report 2012.
Officials say that while the sector faces macroeconomic
challenges, Chinas overwhelming need for energy and environmental technology will continue to propel
rapid growth in greentech markets.
The report cites Chinas urgent needs in
energy and environment driving developments. The country now
imports over half of its oil, in addition to its overreliance
on coal, producing high emissions of carbon and other air and water
Chinas domestic conventional gas production is
described as stretched to the limit.
However, vast unconventional domestic gas reserves, including
shale gas and coal-bed methane, could ease Chinas gas
shortfall, which is expected to grow nine-fold by 2015.
The industry would then need to overcome major pricing,
regulatory, distribution and water challenges.
The basic fact is that to ensure energy security and
supply, China has no choice but to develop and use new forms of
energy to meet the growing and seemingly insatiable
demand, said Allan Zhang, director of sustainability and climate change
for PwC and a specialist in environmental policy and economics in China.
Technological advances over the years have made wider
use of unconventional gases possible, and opened up new sources
of energy supply, although many technical hurdles still
exist, he continued.
Companies with experience of advanced technologies, or
management skills in exploring coalbed methane projects on a large commercial scale
will be in a great position in the market.
The lack of experience and know-how of the Chinese
companies in dealing with unconventional energy such as shale
gas offer the European and American companies the
chance of riding on China's rapid development.
Other findings from the report include:
-- Private equity and venture capital
investments in Chinas private water sector increased from
$50 million in 2010 to $400 million in just the first four
months of 2011.
-- Wind and solar farms costs have fallen
dramatically: onshore wind farms in China can now be completed
for around RMB 7000/kW and photovoltaic (PV) system costs have
decreased from RMB 74,000/kW in 2007 to less than RMB 13,000/kW
in late 2011, with costs continuing to drop.
-- Though Chinas green building
market is small, building energy efficiency policies will
likely lead to rapid industry expansion over the next five
-- China in 2011 began the construction phase its 2009-2020
Strong and Smart Grid Plan, initiating the worlds largest
effort to build a reliable, efficient and smart grid.
Given the scale and rapid growth of Chinas energy
needs, to secure its energy supply, China has continued an
earlier trend of overseas expansion, with companies looking
abroad for energy deals in the areas of oil and renewable
energy, the report says.
The deals in 2011 also highlighted a new push for investing
in basic infrastructure, such as European water and power grid
utilities, to achieve asset diversification and financial
large State Owned Enterprises (SOEs) have accelerated the pace
of diversification in overseas expansion, said Mr. Zhang.
From a European point of view, their expansion overseas into
infrastructure investment has opened up more opportunities
through M&A, for European and American companies to
work with Chinese companies.
Even with significant growth in the past five
years, the China greentech marketing is only in its initial
phase, and uncertainties remain. Ambitious targets were set in
the 12th Five Year Plan for greentech development with billions
of government investment earmarked.
Foreign companies will need to develop sound
partnering strategies with major Chinese players and to be
flexible enough to cope with changes in policy or economics.
While the road ahead may be rocky, the long-term
outlook remains positive, added Gavin Chui,
Greentech leader of PwC China and CGTI strategic partner.
Chinas greentech sectors continue to grow and to
positively impact energy and the environment in both domestic and
For more details on the report, read the PwC release by clicking here.