China has emerged as one of the world’s fiercest competitors for energy investment driven largely by the size of its energy needs and the strong level of Government funding committed throughout the life of energy projects, according to research by Built Asset Consultancy, EC Harris.
China ranked at 4 out of 10 in a comparison of individual country energy policies relating to fossil fuels and renewable energy sectors, behind the USA, France and Germany, and 6th out of 10 in relation to the nuclear sector. The comparisons were drawn across key determining factors including government policies and incentives, business environment and growth predictions in GDP, FDI and electricity consumption.
Encouraging a diverse energy mix is key to a strong environment for foreign investment in a country’s energy sector. The majority of countries studied are encouraging investment across their total energy mix via policy, fiscal and infrastructure incentives.
China is the world’s largest investor in renewable energy projects having invested an estimated USD$120-160bn between 2007 and 2010. There has been massive growth in wind energy installed generating capacity, especially in the north of the country where installed capacity has grown 40 fold since 2005. Electricity from wind represents 20 per cent of total electricity generated in the northern region, which is on par with ratios in Norway and Denmark. Solar power in rural areas is expected to grow by 20-25 per cent annually.
In terms of the nuclear power segment, China currently has 11 nuclear reactors and is planning to increase capacity tenfold by 2050. China is currently constructing or planning 57 nuclear plants and is considering building an additional 76. Foreign involvement in the nuclear and fossil fuel segments is limited to JVs with local companies to provide technology transfer and design consulting, which Chinese entities remain the facility owners, project managers and main contractors.
According to Paul Stapleton, Head of Energy at EC Harris, despite these huge growth projections, China’s 4th position reflects the slow implementation of legislation and financial incentives to support foreign investment. “China’s greatest appeal to investors in all energy segments is the sheer size of the country’s energy needs which provide opportunities of scale in each segment. Nonetheless, investors must contend with a risky operating environment, patchy legislation implementation and few financial incentives outside of the renewable segment,” he said.
Jonathan Berney, Head of Client Solutions at EC Harris, added, “There is no question on demand. However, our experience is that foreign investors can harness the lessons of others in order to de-risk market entry, particularly in partner selection which we see as the dominant approach to investing in energy projects going forward.”
About the research
EC Harris conducted a comparison of energy policies across key geographical locations, benchmarking investment opportunity in fossil fuels, nuclear and renewable sectors based on key determining factors such as government policies and incentives, business environment and growth predictions in GDP, FDI and electricity consumption.
