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China’s Sustainable Energy Market 抓住 中国可再生能源的市场机 遇

Presented by: Chris Raczkowski 罗世琪 21 October, 2004. China’s Sustainable Energy Market 抓住 中国可再生能源的市场机 遇. Introduction.

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China’s Sustainable Energy Market 抓住 中国可再生能源的市场机 遇

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  1. Presented by: Chris Raczkowski 罗世琪 21 October, 2004 China’s Sustainable Energy Market抓住中国可再生能源的市场机遇

  2. Introduction Azure International is a specialized advisory and investment firm focused on the rapidly growing market for sustainable energy technologies in China. Our focus lies in sustainable technologies that are commercially viable today, or that have excellent near term market potential. Clients and partners include: • VC and Private Equity firms • Oil & Gas Majors • Utilities • Project Developers • Manufacturers • Banks • Large and small companies • Foreign and Chinese companies New Ventures 2004

  3. China’s Energy Situation • China second largest consumer of energy globally • China now second largest importer of oil (41% projected for 2004) • Demand growth is well above expectations • Shortage in generation capacity and transportation bottlenecks • Massive capacity expansion program announced • Energy consumption to double by 2020 • Transportation market exploding • Energy intensity per unit of GDP (PPP basis) very high • Efficiency improving but not fast enough IEA, 2004 New Ventures 2004

  4. Coal Nuclear 1.6% (Total installed capacity : 385 GW) Hydro 24% Gas 0.2% RE 0.2% China’s Energy Situation (cont’d) • Environmental degradation is becoming a national priority • China has 9 out of the 10 top most polluted cities in the world • International commitments – China 2nd largest GHG emitter • UNEP Director: “China’s economic goals ‘environmentally unachievable’” due to resource constraints • Fuel efficiency standards, emissions standards, LNG buses and taxis • China still highly dependent on coal >70%, mining costs increasing • Oil and gas resources are limited; Government is looking to diversify energy supply for economic, environmental and security reasons • LNG, purchasing of overseas assets • Renewables, other alternatives China’s Energy Mix New Ventures 2004

  5. Drivers for Sustainable Energy in China • Huge need for new energy resources to feed economic growth • Diversification from traditional fossil fuel due to local and global resource constraints (energy security) • Increasing environmental awareness • China central government preparing roll out of critical policy support • Increasing localization of world class sustainable energy technology capabilities in China (especially Wind and PV) New Ventures 2004

  6. Clean & Renewable Energy Technologies 燃料电池 太阳能热能 生物质能 地热能 风力发电 小水电 氢能 核能 太阳能光伏发电 New Ventures 2004

  7. Global Forecast for Renewable Energy – Medium Term Shell International, People & Connections - Global Scenarios to 2020, 2002. New Ventures 2004

  8. Global Forecast for Wind & PV – Near Term New Ventures 2004

  9. Renewable energy in China • Rapid growth from a very low base • False starts in the past • Energy bureau created in NDRC - Renewable energy has been put into the national energy strategy • Goal of 100GW of renewable energy capacity by 2020 ( ~10% of total capacity) • 2020 Goals: 20 GW of wind, 50 GW small hydro, 1-2 GW solar PV, 15 GW of biomass, and14GW of others • Large hydro well developed, continuing growth • The National’s People Congress has agreed to issue a renewable energy promotion law – draft being developed by CRED, Tsinghua University, and other partners under NDRC leadership New Ventures 2004

  10. Barriers to Adoption of Sustainable Energy Technologies in China • Higher upfront cost, subsidization of traditional energy (same as in developed countries) • Marketing • Awareness • Incomplete assessment of renewable resources • Lack of domestic suppliers • Standards and testing facilities problem for equipment • Poor linkages from R&D to commercialization • Lack of coherent and clear policy incentives • Restructuring of power industry – local versus national differences New Ventures 2004

  11. Sustainable Energy Stages of development of in China Introduction Maturity Decline Growth 1 4 3 5 6 2 7 8 9 Total sales 4 3 5 6 8 2 7 9 1 R&D 1 Nuclear 4 H2 7 Geothermal China 2 Natural gas 5 PV 8 Solar thermal International 3 IGCC 6 Wind 9 Small hydro New Ventures 2004

  12. International: Three basic types of policy tools: Mandatory market requirement (percentage of power generation required by renewables) RE tariffs Concession / project bidding Germany has generally been most successful due to strong public interest in clean energy development Many countries (US, Australia, UK, China) tending toward mandatory market requirements. China: Long history of central government support for RE (especially since 9th Five Year Plan). 2004 the government released first RE law draft for discussion. Wind, geothermal, small hydro and solar PV are expected to be important focal areas for China’s policy development. Draft law says “Grid must buy approved electricity generated by RE.” Draft law also regulates that “RE electricity price will be decided by different categories”. RE policy support China’s RE policy is developing toward international best practices. Goal is to have 10% RE electricity by 2020 New Ventures 2004

  13. International: Wind power is the fastest growing grid connected electricity generating resource (> 25%/yr for last 10 years internationally). At the end of 2003, there was 40 GW total global installed capacity. Wind is expected to be an important contributor to the North American and European electricity supply (Germany produces about 5% of annual electricity with wind, Denmark about 20%). Wind Energy China: • 567MW of wind power capacity installed at end of 2003. • Total potential for on-shore wind energy resource in China is greater than 253,000MW • Concession Projects have been won for 600WM of wind power during 2003 and 2004 • Upcoming policy support may set off an investment rush similar to what Germany, Spain and some other countries have experienced (new RE law) New Ventures 2004

  14. China’s grid connected wind development China’s goals compared to Germany and US development shifted forward by 10 years US and German values have been shifted forward by 10 years. New Ventures 2004

  15. International: Solar PV has grown at a rate of about 30% for the last ten years. Total sales last year were about 500MW, but this is expected to double every 2.5 years. Shell and BP are leaders in solar PV, as they view this technology as an important and profitable technology during the 21st century. Industry focus is now on driving costs down via mass production and improved technologies. China: Most PV is currently installed in rural locations with no grid supplied power. Local manufacturing is straining to produce cells at internationally competitive prices, as much of the raw materials are imported at relatively high cost. This should improve greatly during the next 5 – 10 years. Shell and BP are already important suppliers of PV products for high profile projects in China. Very small market in China today; about 5 - 6MW sales in 2003 with cell production capacity of 74MW. Solar PV New Ventures 2004

  16. China’s solar PV development China’s goals compared to Germany and US development shifted forward by 12 years US and German values have been shifted forward by 12 years. New Ventures 2004

  17. China business opportunity – Wind & PV Business as usual scenario: Wind & PV revenues* 2004 – 2020: RMB 134 billion(wind - 96 billion) Revenues during 2010: RMB 6 billion (wind - 4.5 billion) Revenues during 2020: RMB 13 billion (wind - 10 billion) 60,000 direct jobs created by 2020 (minimum estimate based on EU industry structures) * Constant 2003 RMB value; $1.00 = RMB 8.27 New Ventures 2004

  18. An example: IGCC Gasifier (fuel)  gas turbine + steam turbine to spin generators + chemicals (syngas, hydrogen, etc.0 Potential Advantages of IGCC Higher thermal efficiency 40% - 55% vs. 40% or less for conventional coal Removes sulfur, Hg, and other contaminants before combustion, eliminating need for some pollution control equipment Accepts wider range of feedstocks and feedstock quality Easier to capture chemical by-products for sale (syngas, hydrogen, etc.) Less use of cooling water (~30%) than conventional coal “Clean” Coal New Ventures 2004

  19. International: The IDEA of hydrogen energy has attracted significant attention internationally – similar to dot.com companies in the early to mid- 1990s. Billions of dollars are being spent annually on hydrogen and fuel cell development by governments and companies. Hydrogen is expected to be used in fuel cells as well as in combustion engines and turbines. Hydrogen can be generated from fossil fuels or from renewable energy processes. China: There is considerable interest in hydrogen technology, but most activity has been in developing research papers and laboratory tests. China requires involvement from leading international experts and companies to quickly develop local capabilities. China has a huge opportunity to take a lead in hydrogen energy. China’s demands for new energy supply make it the most efficient location in the world for introducing the new infrastructure required to support hydrogen and fuel cells (which are closely related due to their mutual dependency). Hydrogen Hydrogen is not an energy source . . . it is an energy carrier. Major companies are supporting development of hydrogen technologies, as they see this as a potential replacement for oil & natural gas over the next 50+ years. New Ventures 2004

  20. Azure’s picks for investment “Hot Spots” Wind • Project development: key area for profitable IPP investment, but not in concession projects • Turbine/component production: large companies such as GE, Vestas, etc. will localize in China, and this will force faster development of high quality component suppliers PV • China could be the low cost manufacturing base for cells/modules within 5 years • Localization of sub-suppliers is a prerequisite, and business opportunity Clean Coal (IGCC, etc.) • Must be an important technology, as China will continue to be largely dependant on its coal resources for its primary energy supply. • Creativity needed to break the perceived and real higher cost vs. traditional coal power Biofuels for transportation • Opportunities exist for biofuels as “fossil fuel extenders” using ethanol and biodiesel Hydrogen • China must catch up to international levels, on the chance that H2 will be a key energy technology • Significant IPR issues are limiting international involvement today New Ventures 2004

  21. Technology Areas Energy Efficiency Demand Management Air quality monitoring and testing Air pollution reduction equipment and services Water treatment (industrial, commercial, and residential) Business Models Components Manufacture Distribution of Small Systems Project Developer RESCOs Innovative Finance Consulting Other Major Opportunities New Ventures 2004

  22. 联系方法Contact Information 北京市东城区东直门外小街甲2号,正东国际大厦B座 407, 100027 电话: +86 10 8447 9338 Fax: +86 10 8447 9339 电子邮件: chris.raczkowski@azure-international.com B-407 Grand Orient Plaza, Jia 2, Dongzhimenwai Xiaojie, Dong Cheng District, Beijing, 100027 Tel: +86 10 6566 0800 Fax: +86 10 6566 0800 Email: chris.raczkowski@azure-international.com New Ventures 2004

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