Green China 2020indianstrategicknowledgeonline.com/web/China_Energy_36.pdf · China Energy...

Global Strategy

Global Challenges

Executable Solutions

France Houdard

Managing [email protected]

February 2011Copyright © 2011 Exolus. All rights reserved.

Green China 2020Corporate Strategy: What will a Green China look like in the Future?

http://www.exolus.com/


1Copyright © 2011 Exolus. All rights reserved..

Solar Energy – World’s Largest Solar Research Institute

American Corporation sets up World’s Largest Solar Research Institute in China

President Obama, State of Union Address, January 2011:

… yes, but Who made this Private investment?

Company: Applied Materials

From: United States (AMAT: US)

Investment: USD300 million

Functions:

- R&D, Engineering, Product Demonstration, Testing

and Training for Crystalline Silicon and Thin Film Solar Module Manufacturing Equipment and Processes

- Entire Applied SunFab™ Thin Film Manufacturing

Line

- Complete Crystalline Silicon Pilot Process

Facility: 400,000 square feet

Source: All Publically Available Information , Company Website

“Just recently, China became home to the world's largest private solar research facility … ”



Investment in China Green Energy nearly Double that of United States

Source: Clean Energy Factbook, “Who is Winning the Clean Energy Race?”, 2009

0

5

10

15

20

25

30

35

40

34.6

18.6

11.2 10.8 10.4

7.4

4.33.3

2.6 2.3 2.1 1.9 1.6 1 0.9

Efficiency/Low Carbon

Biofuels

Solar

Other Renewables

Wind

US

D b

illio

n

Green Energy Investment

(2009)

China Today – World’s #1 Country for Investment in Green Energy



US

China

China Energy Consumption Overtakes the United States

Source: Central News Agency

0

500

1000

1500

2000

2500

2001 2002 2003 2004 2005 2006 2007 2008 2009

Energy Consumption (United States and China)

Millio

n T

on

s o

f O

il E

qu

iva

len

tChina Today – World’s #1 Energy Consumer



Table of Contents

China Energy Overview

- Today - China Energy Consumption in Global Context

- The Future - China’s Economic Growth – To become #1 Economy in 2020

- The Future - Forward Trend in Middle Class Growth

- The Future - Forward Trend in Mass Migration / Urbanization

- The Future - China’s Future Country-Sized Mega-Clusters

- The Future - China’s Energy Consumption to Grow by another 50% by 2020

Green Technology Trends

- Policy - China Places High Priority on Green Energy

- Cost Structure – Subsidies in Place to Drive Green Energy Development

- Investment – China Investment in Green Energy #1 in World

Corporate Burning Platforms: Innovation, Markets, Cost Reduction

- Innovation – Where are Key Nodes for Structuring R&D Platforms?

- Solar Energy – Projected Market Growth

- Solar Energy – Where are the Solar Energy Clusters?

- Solar Energy – Where is Manufacturing taking Place?

- Wind Energy – Projected Market Growth

- Wind Energy – Where is Manufacturing Taking Place?

- Hydro Energy – Projected Market Growth

- Hydro Energy – Where is Manufacturing Taking Place

China’s Economic Health and Report Card

- China Investor Confidence: China Ranks #1 as Most Attractive Investment Destination of Future

- Financial & Economic Health: China Balance Sheets - Banks, Enterprises, Households


CHINA ENERGY OVERVIEW



China Per Capita Consumption 1/6th that of United States

Source: BP Statistical Review and Economist Intelligence Unit

0

1

2

3

4

5

6

7

8

9

US China Russia Japan Europe* India

Per Capita Energy Consumption (2009)

Millio

n T

on

s o

f O

il E

qu

iva

len

t pe

r P

ers

on

Europe* refers to OECD Countries

Today: China Energy Consumption – Very Low on Per Capita Basis



China’s Economy: Doubles every 7 Years … Tripled most Recently

Source: IMF

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

China GDP (USD trillion)

3x

2x

2x

ChinaOpens to the World

Applied to join GATT

Eliminated its dual exchange

rate

Accepted full convertibility for current account

transaction

Admitted to WTO

Hosts OLYMPIC

games

US

D (R

ea

l Ma

rke

t R

ate

s)

Today: China Remains the Fastest Growing Economy in World

8Copyright © 2011 Exolus. All rights reserved.. Source: World Bank

2009 GDP*

6,4 trillions

de $3,6 trillions

de $

$4.1 tr $3.8 tr$9.1 tr $14.2 tr

US China

India

$14.1 tr

JapanJapan

EU-27

France

UK

Germany

2020 GDP*

$30.0 tr$13.4 tr$28.8 tr $6.8 tr$29.6 tr

US

India

China

Japan

EU-27

France

UK

Germany

The Future: World Bank Projects China as #1 Economy in World by 2020

GDP* PPP-adjusted

GDP* PPP-adjusted


The Future: Forward Trend in Exploding Middle Class

China’s Middle Class: 400 million (2010) … 500 million (2015)

Middle Class Income Bands for Urban Population

Urb

an P

opula

tion (m

illio

ns)

Urban Household Income

(US$ – PPP-Adjusted)

Global > US$107,800

Affluent US$3,800 - 107,800

Upper Middle US$21,501 – 53,900

Lower Middle US$13,500 – 21,500

Poor < US$13,500

531

607

684

756

822

239

255

157106

73

53 170355 461

525

35

90

99

0

100

200

300

400

500

600

700

800

900

2005 2010F 2015F 2020F 2025F

531

607

684

756

822

Sources: Urbanization Rates, Population based on UN, World Urbanization Prospects 2007 ; MGI Consumer Demand 2008

Upper Middle Class

Lower Middle Class


The Future: Forward Trend in Mass Migration into Cities

China’s Urban Population: 600 million (2010) … 700 million (2015)

China’s Urban Population versus Rural Population

1.4 billion

1.3 billion

1.2 billion

1 billion

245381

531

684

822822

833

782

705

624

0

200

400

600

800

1,000

1,200

1,400

1,600

1985 1995 2005 2015 2025

57%49%40%31%23%

1.45 billion

Urbanization

Urban Population

(million)

Rural Population

(million)

Source: World Urbanization Prospects 2007

Popula

tion (m

illio

n)


The Future: Emergence of 10+ Mega-Cities the Size of Countries

Mega-City Profile: 60 Million Population + World-Class Infrastructure

Heilongjiang

Jilin

Liaoning

Hebei

BeijingInner Mongolia

Shandong

Jiangsu

Shanghai

Zhejiang

Fujian

GuangdongGuangxi

Hunan Jiangxi

AnhuiHubei

Henan

Guizhou

Yunnan

Sichuan

Chongqing

Gansu

Ningxia

Shaanxi

Shanxi

Qinghai

Xinjiang

Tibet

Tianjin

Mountains

China’s Emerging MEGA-CITIESMega-Cities

Mega-Corridors


Energy Consumption Doubled last Decade … 50% Increase this Decade

Source: Central News Agency

China Project 2020 Energy Consumption

(Million Tons of Oil Equivalent)

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Millio

n T

on

s o

f O

il E

qu

iva

len

t

100%

Increase

49%

Increase

The Future: China Energy Consumption to Increase by 50% by 2020



GREEN TECHNOLOGY TRENDS


Significant Growth Planned for Green Energy Development

Policy: China Places High Priority on Green Energy

Source: State Council, “New Energy Development Plan for China”, 2009

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2020 2030 2040 2050

15%

25%

32.5%

40%

Green Energy as a Percentage of Total Energy Consumption

(2010 – 2050)

Perc

enta

ge G

reen E

nerg

y


Significant Growth Planned for Green Energy Development

Source: State Council, “New Energy Industry Development Plan 2011-2020”

0

50

100

150

200

250

300

350

Hydro Wind Nuclear Solar Biomass

Gig

aw

atts

Installed Capacity „10

Targeted Capacity „20Installed and Targeted Capacities

(2010, 2020)

Policy: China Places High Priority on Green Energy


Subsidies in Place to Drive Green Energy

Cost Structure: China Places High Priority on Green Energy

Source: Wind Energy Information Center,

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Hydro Wind Nuclear Solar Biomass

RM

B /

kW

h

Subsidy

Net Cost

Cost of Electricity


Significant Investment in Wind and Solar Green Energies

Investment: High Investment Levels in Green Energy

Source: Bloomberg

0

5

10

15

20

25

30

Wind Solar Biomass & w-t-e Other renewables Energy smart

technologies

New Investment in China Green Energy

(2009)

US

D b

illio

n


Major Investment in Green Energy - Wind, Solar, Renewables

Investment: China Investment in Green Energy #1 in World

Source: Clean Energy Factbook, “Who is Winning The Clean Energy Race?”, 2009

0

5

10

15

20

25

30

35

40

34.6

18.6

11.2 10.8 10.4

7.4

4.33.3

2.6 2.3 2.1 1.9 1.6 1 0.9

Efficiency/Low Carbon

Biofuels

Solar

Other Renewables

Wind

US

D b

illio

n

Green Energy Investment

(2009)


BURNING PLATFORMS: Next Generation Strategic Optimization


Today’s Burning Platform: Markets and Innovation

Global Structural’ Cost Reduction … Revenue Growth

Cost Reduction

RESOURCES

Sales Development

Research

Sourcing

Production

Distribution

Marketing

Shared

Services

IT HR

F&A Procure

DRIVING Shareholder Value

PRODUCTION /

SOURCING

SALES &

MARKETING

Revenue Growth Innovation

RESEARCH &

DEVELOPMENT

SHARED SERVICE

CENTERS (SSC)

CONTRACTS, PAR

TNERSHIPS


Innovation: Where are Key Nodes for Structuring R&D Platforms?

“R” of R&D Seeks Universities … “D” Seeks Markets & Production

Heilongjiang

Jilin

Liaoning

Hebei


Shandong

Jiangsu

Shanghai

Zhejiang

Fujian

GuangdongGuangxi

Hunan Jiangxi

AnhuiHubei

Henan

Guizhou

Yunnan

Sichuan

Chongqing

Gansu

Ningxia

Shaanxi

Shanxi

Qinghai

Xinjiang

Tibet

Tianjin

Mountains

1

1

1

Wage Bands

Mega-Cluster

Mega-Corridors

> 10

> 50

> 150

R&D Centers

(# Operations)Research & Development Centers

(Number of Operations in Select Cities)

Source: UNCTAD, WIR


Innovation: China Mobilizes all Resources to Develop Talent

China Science and Engineering: 1.6 Million Graduates per Year

0

20

40

60

80

100

120

140

160

180

200 United States

China

United Kingdom

Japan

South Korea

Germany

Thousands

China

USA

University Natural Sciences Degrees(1985 – 2005)

Sources: National Science Board, Science & Engineering Indicators 2008


Energy Market: Where are Designated Provinces for Green Energies?

Solar –> West … Wind –> North … Hydro –> S West … Nuclear -> East

Green Energy Geographic Focus

Heilongjiang

Jilin

Liaoning

Hebei


Shandong

Jiangsu

Shanghai

Zhejiang

Fujian

GuangdongGuangxi

Hunan Jiangxi

AnhuiHubei

Henan

Guizhou

Yunnan

Sichuan

Chongqing

Gansu

Ningxia

Shaanxi

Shanxi

Qinghai

Xinjiang

Tibet

Tianjin

Source: National Development Reform Commission (NRDC); World Nuclear Association; Gao Hua Securities

Legend

Insolation > 5,000 MJ/m2/yr

Provinces with Nuclear Plants

Designated for Wind Power

Top Provinces for Hydro

http://www.google.com/imgres?imgurl=http://www.ysecrets.com/wp-content/uploads/rad-symbol-big.jpg&imgrefurl=http://www.ysecrets.com/2008/11/19/nuclear-waste-on-campus/&usg=__a3YFz6s33q2oGUXuUVRajOxe2kI=&h=300&w=300&sz=45&hl=en&start=2&sig2=MN_FWqkawK1J9NFM6HojkQ&zoom=1&itbs=1&tbnid=jUkrHksVi6Vn5M:&tbnh=116&tbnw=116&prev=/images?q=nuclear+reactor+symbol&hl=en&newwindow=1&sa=N&gbv=2&ndsp=18&tbs=isch:1&ei=7gtETfSbOoelcdPO5PEN








Solar Energy – World’s Largest Solar Research Institute

American Corporation sets up World’s Largest Solar Research Institute in China

President Obama, State of Union Address, January 2011:

… yes, and who made this private investment?

Company: Applied Materials

From: United States (AMAT: US)

Investment: USD300 million

Functions:

- R&D, Engineering, Product Demonstration, Testing

and Training for Crystalline Silicon and Thin Film Solar Module Manufacturing Equipment and Processes

- Entire Applied SunFab™ Thin Film Manufacturing

Line

- Complete Crystalline Silicon Pilot Process

Facility: 400,000 square feet


“Just recently, China became home to the world's largest private solar research facility … ”



Projected Photovoltaic Installations in China

Solar Energy – Projected Market Growth

Source: China Generating Equipment Market Analysis

19,531 23,853 28,854 35,080

43,181 54,122

69,457

91,092

121,949

164,404

221,789

298,451

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Me

ga

wa

tts

Cumulative Installed Photovoltaic Power Capacity

(2010 – 2020)



Solar Energy Cells - Projection in China

Solar Energy – Growth across Technologies

Source: GTM Research, trimmed by CEBM

60%

32%27% 25%

27%

43%

36%35%

13%

25%

37% 40%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2010E 2015E 2020E

CdTe

CIGS

Silicon-based Thin-film

Solar Energy Cell Market Projections



Solar Energy – Where are the Solar Industry Clusters?

Bohai Rim … Yangtze River Delta … Pearl River Delta … Western China

Photovoltaic Industry Clusters

Source: UNCTAD, WIR

Heilongjiang

Jilin

Liaoning

Hebei


Shandong

Jiangsu

Shanghai

Zhejiang

Fujian

GuangdongGuangxi

Hunan Jiangxi

AnhuiHubei

Henan

Guizhou

Yunnan

Sichuan

Chongqing

Gansu

Ningxia

Shaanxi

Shanxi

Qinghai

Xinjiang

Tibet

Tianjin

Wage Bands

Mega-Cluster

Mega-Corridors

> 10

> 50

> 150

R&D Centers

(# Operations)

Circum-Bohai-Sea Region

• Monocrvstalline Silicon• Wafer Processing

Yangtze River Delta

• Photovoltaic Cell• Module Research and

Manufacturers

Pearl River Delta

• Photovoltaic Downstream • Applicable Industries

Central and Western China

• Photovoltaic upstream• Polysilicon Industry


The Locations of Major PV Manufactures China

Source: SEMI

Beijing

TianjinBaoding

Weihai

Bengbu

Suzhou

Shanghai

NingboJiangxi

Fujian

Shenzhen

Haikou

Kunming

Dali

Chengdu

Harbin

Harbin Crona Solar Photo-electricity

China Light Solar

Soltech Corporation

Jinneng

BSTRPV

Solar Energy S&T

Topsola Green Energy

Ulica

SMIC

Suntech

Solar Electric Power

Cineng PV

GS Solar

Topray Solar

Jiawei

Hengyang Photovoltaic

Trony

Hainan Tianju

Polar PV Yingli Solar

Jing Ao Solar

Solarfilms

Ganneng Huaji Best Solar

Nuvo Solar Energy

Star Solar

Yunnan TianDa

Solar Energy – Where is Manufacturing Taking Place?

Yantai

China Solar Power

Sopray Solar

Shaoxing

Langfang

ENN Solar

Shunfeng

Trina Solar

Nantong

Changzhou Wuxi

Eoplly

QS Solar

Best Solar

Suntech

Wuxi Shangpin

Crystalline-Silicon Solar Cells

Thin-Film Solar Cells

Canadian solar



China World’s Largest Manufacturer of Windmills

Wind Energy – World’s #1 Producer of Wind Technologies



Wind Turbine Market Projection 2020

Wind Energy – Projected Market Growth

Source: China Generating Equipment Market Analysis

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Me

ga

wa

tts

Wind Turbine Installation Capacity



Wind Turbine Manufactures in China

Wind Energy – Where is Manufacturing Taking Place?

Source: Status of Wind Energy in China, 2008

Beijing

Tianjin

Nanjing

Shanghai

Leqing

Zhongshan

Harbin

Liaoning

Xinjiang

Xi’an

Baotou

Chengdu

Xiangtan

Harbin Electric

DEC

Hafei Industry

SINOVEL

CASC

ACCIONA

SHANGHAI ELECTRIC

HeWind

Windey

China Creative Wind Energy

GE Energy

SUZLON

Gamesa

REPower

NORDEX

GOLDWIND

CSIC

XEMC

CSR

MINGYANG ELECTRIC

ENGGA

Guangzhou

Nantong

Hangzhou



World’s Largest Dam – Three Gorges Dam

Hydro Energy – World’s #1 Producer of Hydro Technologies

Three Gorges Dam

Total Capacity: 18,200 MW

Total Investment: USD31 billion



Water Turbine Generator Installation Capacity

Hydro Energy – Projected Market Growth

Sources: The 2nd International Conference on Hydropower Technology & Equipment, 2009

-

5,000

10,000

15,000

20,000

25,000

30,000

Me

ga

wa

tts

Water Turbine Installation Capacity



Water Turbine Manufacturers

Hydro Energy – Where is Manufacturing Taking Place?


Harbin

Tianjin

HangzhouShanghai

Lanzhou

FujianGanzhou

Chengdu

Jinan Fadian

STGCNanjing

Jinan

Resource Hydro

Harbin Electric

ALSTOM

NTC

TOSHIBA

ZHEFU

Fujian Nandian

Tonglu

DEC

LANZHOU ELECTRIC

TIANBAO HEAVY INDUSTRY

GANZHOU UNITE



China’s Economic Health … Report Card


Senior Executives Select China as Most Attractive in World

Investor Confidence in China #1 in World

0

10

20

30

40

50

60

Chin

a

Unite

d S

tate

s

India

Bra

zil

Russ

ia

U.K

.

Germ

any

Aust

ralia

Indonesi

a

Canada

Vie

tnam

Mexic

o

Pola

nd

Fra

nce

Source: World Investment Prospects 2009 - 2011

Top 14 Most Attractive Destinations for Future Investment

(2009 – 2011)%

Pe

rce

nt o

f R

esp

on

se

s


Healthy Balance Sheets – Banks, Enterprises, Households

USD2.85 trillion in Foreign Reserves … Insulation of Financial System … Clean Balance Sheets

China’s Financial System Healthy, Benefits from Insulation, Abundant Liquidity

China banks cleaned up in 1990s: Non-performing loans in 1997 averaged 40 – 50%; only 6% in 2007.

Financial institutions extended approximately USD1.4 tr in new loans in 2009; almost double that of 2008;

and USD1.2 tr in 2010, slightly down from 2009.

Forex Reserves Achieve Record High in 2010: USD 2.85 trillion

The Central Bank has accumulated over USD 2.85 trillion in foreign reserves.

The accumulation of large external surpluses means financial system enjoys abundant liquidity.

Clean Balance Sheets for Enterprises and Households

State Owned Enterprise net profits as share of GDP has grown from (-1%) in 1997 to (+4.3%) in 2007.

Record corporate profit growth over past 5 years (industrial profits rose 38 ppa); liability ratios declined.

Urban incomes have nearly doubled in past 10 years.

Source: Deutsche Bank; Standard Chartered; UBS; IMF; Other


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