Jun Ying is the Country Manager and Head of Research, China. Jun's responsibilities include managing the research and analytical work of the China Team, which provides the latest insight into this emerging clean energy market.
Clean energy has been one of China's biggest success stories of the past decade, even in the context of remarkable growth in all sectors. China is now the world's largest market for wind power. By next year, it could be the world's largest annual market for solar energy as well. However, just as clean energy rose rapidly in a decade of exceptional expansion, so will it feel the effects of changes in economic conditions.
China's economy has slowed in the past year, with everything from official economic growth rates to the Purchasing Managers' Index, to rail cargo volume pointing to slower growth. There is another more immediate indicator which the public can use: The air quality in large Chinese cities.
On a recent visit to Shanghai, I found the air quality to be much better than I expected, and certainly better than in Beijing. As local friends explained, Shanghai's skies are an indirect benefit of sluggish economic activities in one of China's export-oriented growth hubs. The trade from those areas, of course, include billions of dollars in clean energy products.
China's clean energy industry is not exempt from the domestic economy's slowdown, either. Onshore wind installations peaked last year at 20GW, and we expect only 17.5GW this year. Manufacturers in everything from wind turbines to lithium-ion batteries face overcapacity and low margins. Some companies will succumb to market pressures, and some overseas investors have closed down in China and may leave the market, perhaps forever.
But we do have reasons to retain a degree of optimism about China's clean energy future. Besides the 17.5GW installations this year, Bloomberg New Energy Finance projects that China will build more or less 17GW of new onshore wind capacity a year for 2013-15, which will keep the country as the world's largest wind market.
We believe, too, that China is likely to be the biggest solar market in the world next year as equipment costs continue to fall and the solar electricity price meets the point of unsubsidised competitiveness with conventional power.
From a foreign company's perspective, China may still be deemed a market too big to ignore. We still see no shortage of new generations of new and existing foreign firms looking to China to drive future growth.
The Chinese government is also keeping policies in place to drive the clean energy industry forward. The central government has released various 12th Five-Year plans related to clean energy, together with a draft design for the country's first Renewable Portfolio Standard (RPS), which is expected to be put in place later this year or in early 2013.
There is also interest in taking market-based mechanisms to individual cities and provinces. Seven pilot emissions trading schemes will launch next year. If they are properly implemented and lead to meaningful trading, thesetrading systemscould lead to significant changes in energy and carbon landscapes.
Those benefits would be felt in the local air as well. On a "blue sky day" in Beijing, I can see the Forbidden City from my desk. On a day with heavy pollution, I can see only a few hundred metres. The scope and scale of China's environmental issues has never been clearer. At the same time, market and policy solutions are also clearer than ever. Hopefully, China can find that a clean energy economy, export growth and cleaner air can all go together.
BY: Jun Ying, Bloomberg New Energy Finance
