Green China surges ahead

China has surged ahead of the rest of the world in renewable energy, creating a “new world order” in the low-carbon sector, according to recently-published research.

The rapid growth of Chinese investment has prompted venture capital and private equity companies in Europe to call for more regulation and greater government assistance, warning that without such help, the European economy will fall behind.

China spent a record amount on its wind power industry in the last quarter, according to a report from Ernst & Young, the consultancy. The country’s spending on wind energy in the second quarter of 2010 amounted to about $10bn, or about half of the global total of $20.5bn.

“China has opened up a healthy gap from other markets. Cleantech, including renewable energy, represents a significant part of the country’s future economic growth plans,” said Ben Warren, energy and environmental infrastructure advisory leader at Ernst & Young.

“The level of wind energy being deployed in China shows what can be achieved with a carefully planned energy and industrial policy that elevates cleantech to a national strategic level. The Chinese solar industry is also fast becoming of great importance in the global marketplace.”
China came top of the consultancy’s league table, the “renewable energy country attractiveness indices”.

By contrast, the US is falling behind, owing to the “continued repercussions of the financial crisis, low gas prices, and the uncertain medium-to-long-term policy environment”, according to the report.

Ernst & Young also pointed to burgeoning investment in clean technology in countries such as South Korea and Mexico, which is hosting the United Nations climate change talks in Cancún. Romania and Egypt also boast fast-growing wind sectors, the consultancy noted.

Japan’s solar market could also grow at a healthy clip, thanks to the government’s climate policies, including a feed-in tariff subsidy for households. This could lead to four-fold growth in Japan’s solar panel market by 2020, from its 2009 level of Y487bn ($5.8bn).

Fears that the European Union risks losing out to other regions prompted the EVCA, Europe’s biggest private equity and venture capital industry association, to urge governments to take stronger action. For most of the past decade, the EU enjoyed a strong leadership position in the clean technology market.

The EVCA called for the EU to set a binding target to increase its energy efficiency by 20 per cent over the next decade; to adopt programmes mandating public procurement money to be spent on clean technology and supporting research and development; and to reduce policy uncertainty by setting out long-term measures, such as subsidy programmes.

The EVCA, representing nearly 1,300 European investment companies, said that early-stage investors had been instrumental in giving the EU its early lead in clean technology and were still keen to build up the industry – if they received the right kind of government response.

China’s investment across the whole clean technology sector reached $13.5bn in the third quarter of this year, compared with $8.4bn for Europe, the EVCA said.

“For an investment theme that did not exist 10 years ago, cleantech is already delivering highly successful returns,” said Patrick Sheehan, chairman of the EVCA’s environmental task force. “But without the right regulatory framework to significantly scale up investment, Europe risks not only missing crucial low-carbon targets but an immense opportunity to become a global powerhouse in a vast new energy economy.”

Source: FT

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