China is now the world's largest investor in renewable energy having eclipsed both Germany's and the United States' spending in the last year. Renewable energy is at the heart of the latest (twelfth) five year plan for the development of China, and there's been an explosion in companies focusing in the sector. Solar, Wind, Hydro and even Geo Thermal have become big business for the Middle Kingdom, and foreign investors are rushing to get in on the act. However much of the money flowing into the sector may not be wisely spent, the question is how to identify opportunities from major risks?
Solar
A good look at the fundamentals suggests that many of the smaller players are likely to go out of business, particularly those who only offer production capacity without any significant research and development divisions. Larger more established players should be able to ride out the storm though and benefit from the closure of smaller players by buying up facilities and equipment at fire sale prices.
As production is currently far cheaper in China than elsewhere, the best bets are global companies (owned by any of the major renewable energy countries) with production facilities in China and strong research and development facilities in Europe, the US or China.
Wind
With China committed to large investments in offshore beginning in Shanghai later this year, it's likely that the main spend on this technology is likely to originate in the Middle Kingdom and favour large companies either locally owned or joint ventures with strong government ties.
Smaller producers are likely to suffer, particularly with higher levels of scrutiny promised for farms that were previously not vetted due to their low production capacity.
Hydro and Geo Thermal
Nick Kellingley is the managing editor of China Strategic Monitor, http://www.chinastrategicmonitor.com
CSM is a newsletter and consulting service for finance and technology companies looking to invest in China. We offer insight into key verticals; New Energy, Automotive and Coal & Steel as well as bespoke reporting services and consultancy.
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