On China’s Shift To Renewable Energy
Tony Daltorio, the Investment U Research Team
When investing legend Warren Buffet makes an investment, it makes the front page… usually.
Somehow though, when Buffet took a 10% stake in BYD Ltd. ADR (PINK: BYDDY) – a small Chinese battery and electric car company – hardly anyone on Wall Street noticed.
Unsurprisingly, that wasn’t the smartest thing to do considering that BYD represented a tremendous investment opportunity in its infancy at the time.
The company started out in 1993 making lithium-ion batteries for mobile phones, and has since become one of the largest suppliers for big brands like Nokia and Motorola.
Then in 2003, it began producing passenger cars, including China’s best-selling sedan of 2009.
And the company expanded its horizons again more recently by combining its two businesses to develop battery-operated cars. It plans to begin selling its e6 electric sedan in the US next year.
But while that particular chance has passed by, other opportunities are still emerging.
PricerwaterhouseCoopers predicts China’s clean technology industry could be worth $1 trillion by 2015, a figure equal to 15% of the country’s forecasted economic wealth if Beijing goes forward with its promised sweeping environmental reform.
So far so good too, as China already pledged a third of its $586 billion fiscal stimulus package on clean energy spending, and a total $3 trillion to upgrade its power infrastructure by 2030.
China Need to Be Green
Loud as they were, China didn’t take the Copenhagen climate talk “protestors” into account when it pledged that 15% of its energy consumption will come from renewable sources by 2020.
Likewise, the communist country didn’t consider the plight of tiny island nations first when it pledged a 40% cut in carbon emissions.
That’s because China doesn’t need global warming activists making nuisances of themselves to recognize its need to shy away from polluting heavy industries while still stimulating domestic growth.
China now sees the entire green movement as a necessity for long-term survival rather than a political push to placate the masses.
Three decades of rapid growth have shoved the nation into the global spotlight as the third largest economy in the world… an impressive feat that came at a high price…
Today, China is the world’s second largest consumer of energy and the largest polluter of greenhouse gases, accounting for about one-fifth of global emissions. And unless it takes drastic steps to change, the red giant could easily contribute 63% of global emissions by 2020.
While China may or may not care about what that does to the larger environment, it definitely does recognize that having 20% of the world’s population and 18 million people migrating to cities each year results in devastating pollution that affects everything, including water and food.
China’s Green Industry
Knowing full well the dangers it created, the government has seized on green industries as an opportunity to become a technology leader without the normal hassle of time and patience.
With plans to build powerful solar and wind power industries in just a few years, it has also delved into every other form of energy efficient technology from batteries for plug-in cars to smart grid devices.
Consulting firm McKinsey predicts China will remain the world’s largest exporter of photovoltaics – technology that derives its power from solar energy – for at least the foreseeable future.
And if Beijing succeeds in raising wind capacity to 150 gigawatts by 2020 – eight times its current level – as it recently projected, China will become both the world’s largest market for installed wind power and its largest producer.
The government also plans to add nearly 200 gigawatts of hydroelectric power capacity over the next decade… a huge amount, considering how the Three Gorges dam produces only 20 gigawatts per year.
Admittedly, China could still face a bumpy road ahead in its pursuit to green dominance, since the government announced just back in September its decision to cut back on new solar and wind investments due to fears about overcapacity.
But that just opens up opportunities for investors to buy in at lower prices on solid companies such as Trina Solar ADR (NYSE: TSL), Yingli Green Energy ADR (NYSE: YGE) and Suntech Power ADR (NYSE: STP).
As for the battery industry that Warren Buffet bought into when he purchased shares of BYD Ltd., the market for lithium models could triple by 2015.
If so, that would match demand for the electric versions thanks in part to efforts by the Chinese government to roll out 500,000 low carbon-emitting cars by 2011, which would account for 5% of passenger vehicle sales.
An investment into BYD or other green Chinese companies may well add a lot of green to investors’ net worth in the years ahead.
Good investing,
Tony Daltorio
Any investment contains risk. Please see our disclaimer.
3 Responses to “On China’s Shift To Renewable Energy”
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Dear Sir
I don’t have any more recommende but i just need some of the information related to business and globle investment .
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Thanks you so much
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you forgot to mention vanadium;the other component of byd batteries. I know it must have been an oversight.
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Vanadium has been found in huge amounts in Madagascar by http://www.energizerresources.com If you are looking to invest in vanadium then check them out…. just announced resource estimate of over $30 BILLION in ground. Yet the stock on the TSX (EGZ) did nothing. No promotion or just no one knows what vanadium is good for.
PP
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