Chinese companies have taken the Lead in Renewable Energy

How European companies can benefit from China’s rise in renewable energy

“Europe is very important to us. As a technology innovator, as a supplier and as a blueprint for  the energy transition,” says Felix Zhang, CEO and co-founder of Envision, in an interview with German newspaper Das Handelsbaltt in 2018. Envision is currently the second largest wind energy company in China and it is now looking towards the West. Felix Zhang is looking for promising investment opportunities – especially in Europe. Over the next three years, Envision plans to invest one billion euros in investments and acquisitions.

That hundreds of millions of Chinese people suffer from extreme air pollution is only one of several reasons for the Chinese government to push ahead with the development of low-emission technologies. Above all, China has seen the business incentive renewable energy brings in the global energy transition.

Global Expansion Strategy

To become the world’s leader in renewable energy, China spends more money on developing renewable technologies than any other nation. According to the McKinsey Global Institute, China spends more than USD 100 billion annually – that’s more than the US and Europe combined.

While the energy transition is stalling in Europe, Chinese eco-corporations are no longer only dominating the domestic market, but are expanding at a rapid pace on a global scale.

In order to secure technology and know-how for the strategically important industry, Chinese companies are pursuing an ambitious expansion strategy. According to the Institute for Energy Economics and Financial Analysis (IEEFA), in 2017 China invested USD 44 billion in renewable investments outside of China, in a total of 18 projects on the Belt and Road.

In 2016, a year earlier, it had been just eleven billion dollar deals. Tim Buckley, Director of the IEEFA, is confident that China is getting ready to take the lead in renewable energy, “China understands that renewable energy offers a huge economic opportunity.”

China’s rise in Photovoltaic

In 2015 China entered the European market with low-cost modules. Where previously German module manufacturers such as Solarworld, QCells or Phoenix Solar dominated the market, Chinese manufacturers such as Jinko Solar and Suntech have now taken the lead.

Today, not a single European company is among the top ten largest solar companies. According to figures from the International Energy Agency (IEA), 60 percent of all solar cells came from Chinese producers in 2017.

China’s wind energy industry is also becoming growingly competitive. Goldwin, a Chinese company, is currently the third largest wind energy company. Envision has already advanced to sixth place according to the current ranking of the largest turbine manufacturer by market research company FTI Intelligence.

For Envision CEO Felix Zhang, however, it is less about Chinese market domination, but rather about achieving a common goal: “We want 100% renewable energy supply. You cannot achieve this goal by thinking only within your country, but only through cross-border cooperation.

“Europe created renewable technology, but China industrialised it,” says Felix Zhang, adding that China has never been seen as a technology pioneer but that will change in the next few years.

This trend is also being observed by European solar companies such as the module manufacturer Solarwatt. “Chinese companies are no longer imitators,” says Solarwatt CEO Detlef Neuhaus: “In the future the standards of renewable energy won’t be set by Europe, but China.”

Electricity network as the key to success

Creating a renewable electricity network could be achieved with a technology in which China has already assumed a pioneering role: power lines with ultra-high voltage technology (UHV). These lose significantly less power than conventional high-voltage power lines during long-distance power transmission and could thus solve a fundamental problem of the energy transition: the transport of wind and solar power from climatically favourable locations to consumers. “In Europe, for example, UHV could be used to connect power grids across borders,” says IEEFA Director Tim Buckley.

The basics for the technology comes from Europe. Siemens and ABB pioneered the UHV development. However, as China was the only country interested in the construction of UHV power lines, European companies cooperated with the Chinese company State Grid. The State Grid Corporation of China, commonly known as State Grid, is the largest utility company in the world and has been ranked 2nd in the Fortune Global 500 List since 2016.

Meanwhile China has industrialised the technology and has been operating it successfully in her own country since 2009. Former US Secretary of Energy Steven Chu once called the breakthrough in UHV technology China’s “sputnik moment”, comparing it to 1957 when Russian astronauts took the lead in the US-Russian space race.

State Grid is now considered an expert in the field. With a billion customers, it is the largest network operator in the world. By 2050, State Grid wants to use its technology to realise its big vision: a power grid that connects countries around the globe. According to IEEFA, deals have already been made in Chile, Brazil, Russia, Portugal, Nigeria, South Africa, Pakistan and Australia.

According to XU Yin-Chong, author of the book “Sinews of Power: The Policy of the State Grid Group” State Grid’s investments can be divided into two categories. On the one hand, direct investment where the Group builds and operates the national grid, for example in Pakistan. On the other hand, in cases such as Australia’s NSW Transgrid and Germany’s 50Hertz, in which the company from Xu’s point of view focuses on obtaining a profitable minority share.

But IEEFA Director Tim Buckley, who has been observing the Chinese energy sector for more than a decade, sees another difference. According to him, State Grids’ acquisitions are “puzzle pieces that form a long-term picture”. However, so far, the purchases have not been systematic.

“The company is starting to strategically approach acquisitions to spread its standards in network technology,” says Tim Buckley. With offers to buy companies such as the German network operator 50Hertz, State Grid was met with political resistance. “After all, this is critical infrastructure. Many countries treat this as a national security issue.”

State Grid plans billion dollar deal in Portugal

Other countries are more open-minded. In Brazil, for example, State Grid is already the largest network operator. In Europe, the Group has already made the entry and is Portugal’s largest shareholder of REN, Portugal’s state-owned network operator.

China Three Gorges (CTG) also wants to enter the Portuguese market. It was not until May that the energy company offered more than $ 9 billion for almost 77 percent of one of Europe’s largest energy companies, Energias de Portugal (EDP), which is heavily involved in renewable energy.

If the deal is successful, the Portuguese company would be entirely owned by Chinese shareholders – the remaining shares are already held by CTG. The case will show whether the European Union is willing to give a Chinese company sole control of a large company in one of the EU Member States.

For the Chinese entrepreneur and Envision CEO Felix Zhang, the concerns of Europeans are incomprehensible. “If one of the world’s leading energy companies wants to work with European companies, I’d view that as good news. After all, Europe could profit from the knowledge of the other countries. Perhaps Europe could also benefit from the determination of Chinese companies in the energy transition. Europe’s industry once had the dream of cross-border electricity grids.”

The name of the European cross-border electricity grid was Desertec. The brilliantly designed large-scale project would supply Europe with Saharan power via the Mediterranean Sea and make coal-fired power stations superfluous in Europe. Yet, it appears that the desert dreams have failed. Most European technology and construction companies such as Siemens, Bosch, Eon or Bilfinger have already turned their backs on the project. In the end, the companies lacked the stamina to complete such a momentous program. Among the last remaining shareholders of the project is still a Chinese network operator: State Grid.

China’s renewable energy sector has undergone drastic changes in the past years. Chinese companies are now increasingly becoming global players in the renewable energy sector and are taking the lead in research and development of new technologies. Having become such a key player in the sector, European companies must take China into consideration when planning their own growth and expansion. If you are interested in exploring the opportunities China presents for your company in the renewable energy, please contact us.

1.76 million cars but no traffic jam? In the metropolis of Wuxi, China is testing connected driving

The city of Wuxi shows how China plays a leading role in autonomous traffic – thanks to government support and international technology.

Connected driving is already part of everyday life in Wuxi.

A drive through most Chinese city centres consists of blocked roads, concerts of honking motorists and long queues, yet in the new centre of Wuxi none of this can be seen. Traffic is running smoothly.

This is a minor miracle. The number of cars in the metropolis northwest of Shanghai has doubled since 2011 to more than 1.76 million. However, the Chinese are testing the networked driving of the future in this part of the city centre. Unhindered traffic flow, improved safety and efficiency are the main goals of the highly-equipped traffic technology.

Cars, buses, traffic lights and electronic signs are networked, share traffic information and warn of potential hazards. The cars are connected to the infrastructure and the other road users via the LTE mobile network. In Wuxi, the world can marvel at how China wants to get involved in connected driving at the top of the world.

The project has the backing of the Chinese government. Also involved are German companies that contribute important technological know-how. Last Monday (10 July), China and Germany signed an agreement during their intergovernmental consultations to expand cooperation and exchange in autonomous driving.

Audi technology for better traffic flow

Audi brought “Traffic Light Information” traffic technology to Wuxi, allowing data exchange between cars and traffic lights. By knowing how long the green light will last, drivers can adjust their speed accordingly.

The traffic lights use information forwarded by vehicles to calculate whether it should switch faster or slower in order to improve traffic flow. According to Audi’s calculations, such a system could reduce CO2 emissions by 15%.

The first trial for Wuxi began last September at six intersections. Now Wuxi is in the second testing phase. By the end of July, one sixth of the city will be equipped with the special LTE and 220 traffic lights with radio modules.

By 2019, the technology should work nationwide and be installed in about 100,000 cars.

In addition to Audi, the city, the network operator China Mobile and the network equipment supplier Huawei are involved in the project. It is promoted and supervised by the Ministry of Security, the Ministry of Industry and Information Technology (MIIT) and the Ministry of Science and Technology.

Cooperation between public and private sector is exemplary

“In terms of cooperation between government and private sector, Germany is far ahead,” says Michael Adick, head of the Chinese car division at Accenture. Kevin Li of Strategy Analytic, sees this as the strength of the Chinese project. “Connected driving is complex, it involves public and private data and has many players. The earlier they coordinate, the faster they can find common standards.”

Xiong Wei, who oversees technology giant Huawei’s Wuxi project, believes that, “If you want to grow networked driving, you need the support of a central government. Unfortunately, Europeans find it difficult to reach a consensus among different countries. But with China’s strong government, it’s easy.”

Audi managers in China made similar suggestions: “Europe could do so much more. But everything is discussed to death. China simply provides the better environment. That’s why we have to develop here.” Audi plans to expand its development department in China from 280 to 650 employees over the next few years. 200 of them are solely dedicated to work on networked and autonomous driving.

Technology and expertise are moving where demand exists: Audi has produced the “Traffic Light Information” for more than four years. So far, the manufacturer has already tested the system in Ingolstadt, Berlin and Las Vegas. But in Wuxi, it’s happening for the first time on a large scale and using the LTE instead of Wi-Fi.

This is facilitated by Huawei. “Not only do we want to offer solutions, we also want to build an ecosystem that in the long run can be used not only in China but worldwide. That’s why we have invited many foreign companies,” says Huawei manager Xiong. In the process, they have companies known for strong research and development.

Cities seek solutions to clogged roads

China’s systematic approach to mobility is outlined in the national “Medium to Long Term Car Development Plan”. It states that 10% of cars in China will be equipped with systems for connected driving by 2020. 25% of all cars entering the market are expected to be able to offer Level 4 or Level 5 driver assistants (make part or all of the driving decisions themselves) by 2025.

There are two approaches to advancing autonomous driving: either the car itself becomes smarter and makes decisions on its own, or decisions are made at a traffic centre that is networked with the infrastructure. China has shown to favour the second approach, because it allows better control of traffic flow. Clogged roads are a big problem in Chinese cities.

But the IT Ministry wants to test all options. In selected provinces in the north, for example, driving in icy and snowy areas is tested. Other cities are also involved in the project. But Wuxi is the most complex testing area – driving is not used in a sealed off test zone, but in the city centre.

In addition, all key decision-makers are involved from the start. This is important because not only the technology in the car is important in networked driving, but also communication with public infrastructure, telecommunications networks and other road users.

Decentralised initiatives and local experiments are popular testing methods of the Chinese government. China commonly approaches changes “from the point to the surface” – meaning if the project proves successful in the administrative practice of a region, nationwide laws are enacted and the projects implemented nationwide.

In China, plans are realised faster because the government has a vision, recognises Accenture consultant Adick. “Digitization does not just happen inside a company, it’s promoted along the entire value chain by the government”

Chinese are more open to new technology

Furthermore, Chinese citizens are generally more open to new technology. According to a study by Boston Consulting Group, Chinese are fundamentally more open-minded than Europeans when it comes to autonomous driving. 75% said they would sit in a robot car, compared with 45% of Europeans.

However, China has to catch up. Huawei manager Xiong admits that compared with the US, the technology of networked driving is still lagging behind. “But we’re narrowing the gap very quickly, because we’re investing a lot of resources, bringing all the players together and looking at how to use it. America does not understand that in connected driving, businesses can’t compete. It’s joint effort.”

“Cooperation has its advantages, but also pitfalls. You learn a lot from each other, reports, employees from Huawei and Audi. After all, one does not know each other’s industry so well. At the beginning of such a development it was not all about profit,” Xiong commented. “We want to bring the entire industry forward and the more data you can collect, the better you can do research.”

For taxi driver Wang Xiubao, all these developments have long become part of everyday life. Since last summer, a chip has been installed in his taxi’s window, which tracks how many cars are at a traffic light for how long. “I cannot wait to start the next phase of the tests,” he says proudly. “I think it’s good that we are worldwide at the forefront of this technology.”