FocusChina’s renewable energy field favours home team - US firm

18 May 2010 23:06  [Source: ICIS news]

HOUSTON (ICIS news)--Foreign investors may have an easier time getting into the renewable fuels game in China than in more conventional energy markets, but they will still find the field tilted to the home team’s favour, sources said on Tuesday.

Chinese regulators are keeping a close eye on foreign investment in the country’s oil, natural gas and coal markets, which the government considers integral for national security, said Hannah Ha, partner in the Hong Kong office of the US-based law firm Mayer Brown.

The renewable fuel sector is still relatively new and more open, but that does not mean it is fair, Ha said.

“Scrutiny on foreign investment might not be so great as for that toward the traditional energy sector,” Ha said. “But many competitors in this sector will be state owned, who may enjoy preferential treatment.”

China invested $34.6bn (€28.0bn) in renewable energy sectors in 2009, the vast majority of it in wind power, according to data from the Pew Charitable Trust. That compared with $18.6bn in the US and $22bn in the EU and the UK, regions where wind power was a smaller part of a greater mix of renewable energy sources.  

With that amount of money available in China, foreign companies hoped to be part of the action.

But Chinese state-owned enterprises (SOEs)- companies administered by the government - have been catching up in the technology race. At the same time, foreign companies have complained that home-grown companies are also benefiting from preferential treatment under the country’s buy local policy.

General Electric (GE), the world’s largest wind turbine producer, and its European rivals Vestas Wind Systems and Siemens AG saw their combined market share in China fall to 14% in 2009 from 71% in 2005 as more domestic companies caught up, according to data from Bloomberg New Energy Finance.   

The advantages the SOEs hold have given some foreign companies pause about entering what otherwise would be a very lucrative market, said Alex Klein, research director for renewable power generation at the anaylst group Emerging Energy in Massachusetts.

“ ‘A little gun shy’ would be an understatement,” Klein said. “It’s a huge market. But there’s no question that the China government is looking to exploit policies to bolster local businesses.

“The wind and solar market, where there have been a couple of key deals, has been increasingly concentrated on Chinese players with little room for foreign players,” Klein added.

Wind turbines are a growing market for epoxy resins, while photovoltaic solar cells are a growing market for companies such as DuPont, which expects to sell $1bn worth of them in 2011.

($1 = €0.81)

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By: Ben Lefebvre
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