Chinese Energy: A Multi-pronged Approach
By S.R. Nunnally
In this article
The costal Jiangsu province is home to a lot of new energy developments.
The power will be sold to market for an annual $16.9 million.
China plans to triple generation by 2010 and it's already ahead of schedule.
Chinese Energy: A Multi-pronged Approach
Last Friday, I spoke to you about China's plans to build 30 new nuclear reactors to the tune of $50 billion… But nuclear energy isn't the only “new” way this country's increasing its energy-generating capacity.
Aside from coal, which produces between 70-80% of the country's electrical power needs, oil consumption is skyrocketing. But with persistent pollution and increasing competition for world supplies, China's looking for alternative sources of energy.
The costal Jiangsu province, bordering Shanghai to the north, is home to a lot of new energy developments.
The Jiangsu Guoxin Siyang Biomass Power Generating Company, Ltd. (a joint venture by Jiangsu Guoxin Assets Investment and Management Company and Jiangsu New Energy Development Company) just laid the corner stone of a new $39 million biomass power- generating project at the end of March.
The plant will use 220,000 tons of biomass waste a year to produce 200 GWh… or 100 times the peak power generation of the Hoover Dam, or 11 times the projected power generation of the Three Gorges Dam in Hubei province, China -- west of Jiangsu.
The power will be sold to market for an annual $16.9 million. The plant will provide the rural northern half of the Jiangsu province with approximately $6.5 million from the purchase of the biomass waste and 1,000 jobs in farming, transportation, fuel collection and fuel storage.
Chinese Energy: This Company Was Up More Than 1% Today
This is a huge boon to the area, as GDP in the northern agricultural half of the province is about half that of the prosperous southern cities.
But it's not the only thing Jiangsu's got going for it.
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Jiangsu Photovoltaic Industry Development Co., Ltd. manufactures polysilicon, and plans to increase its capacity to 2,100 metric tons next year and to 5,000 metric tons in 2009, making it one of the country's largest polysilicon producers.
In a 10-year agreement, this company will supply a solar cell and module manufacturer with semiconductor-grade polysilicon.
In fact, China has a myriad of solar power companies churning out materials and generation technologies. SolarBuzz.com lists 61 separate companies engaged in product manufacturing, wholesalers, or sales companies.
You've probably heard of Suntech Power (STP:NYSE)… This company's up more than 1% today.
Chinese Energy: Triple the Generation Capacity
Wind power is also a growing resource. China has several industrial scale wind farms. Last year, the National Development and Reform Commission approved five wind farms, one of which was slated for the Jiangsu province.
These five farms will be added to China's 43 farms with more than 1,800 turbines (half of which come from Denmark). It is estimated that $1.24 billion is being invested in China's new wind farms.
Actually, China has earmarked $5.8 billion for wind power capacity expansions. The country plans to triple generation by 2010, and it's already ahead of schedule.
Originally, China planned on having a capacity of 5,000 MW by 2010, but the industry predicts it will have that amount by next year. In response, China upped its target to 8,000 MW by 2010.
This is all part of a plan to have 5% of its energy demand met with renewable energy sources by 2010, and 10% of demand met by 2020.
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I'd say China's well on its way, and the available cash to help fund these projects will certainly benefit both investors and consumers.
Chinese Energy: Some Familiar Names
Aside from Chinese state-owned companies participating in this renewable energy boom, many European companies are involved -- particularly in wind power:
Vestas Wind Systems (VWSYF.PK)
Siemens AG (SI:NYSE) -- via the purchase of Bonus
REpower (RPW:XETRA)
Gamesa Corporación Tecnológica S.A. (GCTAF.PK)
Recognize any of these names? We've talked about all of these companies before. I've even recommended Vestas and Gamesa to my Material Profits members. We saw gains of 30.23% and 33.75% respectively from these two.
Of course, the ever-present General Electric (GE:NYSE) has a stake in China's wind market.
What this does is allow investors to play the growing -- and I do mean growing (it's one of the fastest-growing energy markets in China) -- RE industry and market in China in a number of different ways.
And diversity is good, as China is currently finding out with its multipronged approach to tackling its insatiable energy needs.
***
S.R. Nunnally is a commodities expert and technical analyst for Taipan Financial News. She is the editor of Material Profits, a monthly newsletter providing in-depth, cutting-edge research in the commodities sector. She is also the founder of Material Profits Wildcatter, employing an elite group of aggressive investment strategies.
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Related Resources
China: Construction Begins for $39 Million Biomass Power Plant in Jiangsu, China. - IndustrialInfo.com (Free registration required)
China: Installed capacity of wind power expected to top 5m kw next year. - Clean Development Mechanism
Quote: Suntech Power stock price and news releases. - Yahoo!Finance