Investors call on government to support renewables sector, which faces cash crisis as stock market woes intensify
By Ed King
China’s slowing economy spells bad news for a goal to deliver 20% of its energy from fossil free sources by 2030, according to one of the country’s leading experts.
Government data for August revealed factory production was 6.1%, below a forecast of 6.4%, while asset investments fell from the same period last year.
This week, two of China’s top stock markets in Shenzhen and Shanghai suffered their worst drops in three weeks, despite renewed efforts by Beijing to bolster investor confidence.
Fei Teng, an associate professor with the Institute of Energy, Environment and Economy at the influential Tsinghua University said the economic slump was hurting renewables developers.
“Most of their money comes from the stock market, so when it has problems generally they lose a very important financial channel and that’s what we have seen,” he told RTCC.
“Some investors in these industries tell us they believe it will be very difficult to achieve the 20% energy goal in the Chinese INDC [UN climate plan].”
Many developers believe the government will need to further intervene in the market, Teng added, to ensure solar and wind projects attract enough investment.
Leading solar manufacturers Yingli and Trina have both seen their stock market value fall in recent weeks, amid warnings exports could also start tumbling.
Gordon Johnson, an analyst at Axiom Capital Management told Bloomberg the sector was now “in trouble” due to its accumulated debt levels in the past few years.
“The problem is, they are making a huge bet on the continuance of interest from investors as well as the strength of Chinese stocks. Both of these things have essentially come to an end,” he said.
Renewables excluding hydropower make up around 1% of primary energy consumption in China, 2012 data from the US EIA suggests, but the sector is expanding rapidly.
The government wants to grow its solar sector from 13 gigawatts in 2013 to 100GW in 2020. Installed wind was 76GW in 2013, just smaller than the UK’s national grid capacity.
Coal provides over 60% of the country’s energy, the main factor in the country’s soaring greenhouse gas emissions profile in the past 15 years.
Still, fears a clean energy slump could spread beyond China are as yet unfounded, Dr Kamel Ben Naceur, head of the International Energy Agency’s sustainable technology arm, told RTCC.
“It’s the biggest market for renewables and the internal market is very big so it’s going to impact the internal market but really going outside would not be a significant impact in terms of costs,” he said.
A continued oil price slump would be likely temporary, he added, with costs per barrel rising against in 2016 and 2017.
“It’s not going to be a material impact in investment in renewables in the next few years,” he said.