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Insights into China and India's Water and Renewable Energy Market
Insights into China and India's Water and Renewable Energy Market
Depletion of Natural Resources and Energy Demands Show
Increasing Need for Renewables and Water Filtration
By Fei Wang www.China-AsiaStocks.com and
www.IndiaStockMarket.com January 2006
China and India's aggressive economic growth over the past two
decades have provided significant increases in the standard of
living for hundreds of millions of residents. This increase has
also produced environmental disasters: deforestation, flooding,
water pollution and land degradation continue to worsen. There
has been a dramatic increase in the demand for natural resources
of all kinds, especially water and energy in both these
countries, which creates opportunities for foreign investors
involved in the water and renewable energy sectors. However, due
to the differences in the composition of natural resources,
population structure, and political environment, opportunities
and challenges vary between countries. How do these differences
affect doing business in those two countries? Which country has
bigger potential for growth in these two industries?
Water Treatment
- Background
High density population in both countries, along with a move
toward urbanization and industrialization, has placed
significant pressure on their infrastructure and its natural
resources. According to the report from World Water Forum, in
China 60 million people are having difficulty getting access to
water, almost three times that number drink contaminated water
daily. 400 out of a total of 668 Chinese cities are having water
shortage problems, only 30% of which have had some wastewater
treatment. India's water quality is the second worst in the
world. According to India Asia News Portal, only 40% to 50% of
the Indian population has enough supply of water. The publics
have to get their own water from wells (see picture 1).
- Water Industry Opportunities
Many experts believe, after the oil and natural gas market
exploded that water will be the next oil for the following 20 to
30 years representing a considerable opportunity for growth in
this arena. China is planning to build 200 to 400 more power
plants, but there is not enough water to fuel these plants.
Opportunities clearly exist. According to a recent economic
survey, nations in the Middle East will need to invest an
estimated $73 billion in water desalination plants during the
next three decades in order to meet rising demand for domestic,
industrial and agricultural water.
This trend has already appeared in the US stock market. Many
water sector stocks are showing a very strong growth trend. The
American Stock Exchange(R) (Amex(R)) announced on Aug 11th that
it has begun publishing the Palisades Water Index (Ticker
Symbol: ZWI); a new index comprised of publicly traded companies
engaged in the global water industry. The index was created by a
venture between Hydrogen Ventures, LLC and WaterTech Capital.
When it comes to the China and India water market, Steve
Hoffmann, President of WaterTech Capital said: "Between India
and China, China has, at least at this point in time, better
natural water resources than India because water systems in
China are fairly extensive. India on the other hand, does have a
variety of surface water to draw upon, but a lot of their
surface water availability comes in the form of monsoons, and
many of them are lost during flooding. Therefore, relatively
speaking, between China and India, at this point, India is more
water stressed than China. Current situation with China is they
are spending an enormous amount of money on water
infrastructure, creating visibility from Olympics and other
publicity. I think also their economic situation puts them in a
better position right now than India. Fairly, the water industry
around the world thinks China is an enormous market. "
Renewable Energy in High Demand
- Background
Continued inflow of foreign investment and the improved standard
of living of both Chinese and Indian people have inadvertently
pushed up demand for energy. During the first half this year,
China produced 1.128 trillion KW electricity, while consumption
equaled 1.148 trillion KW, a shortage of 0.02 trillion KW.
According to a recent report by Jean Ku and Debra Lew from the
National Renewable Energy Laboratory (NREL), Shi Pengfei of the
China Hydropower Planning General Institute and William Wallace
of United Nations Development Programme (UNDP), more than
two-thirds of its provinces suffered blackouts last year due to
a shortage of generators, problematic coal and transport links,
and water shortages.
- Opportunities in Renewable Energy
Renewable energies, especially wind and solar, represent viable
solutions to the power shortage problems. "Strengthening the
development and use of renewable energies is a must for us to
address the increasingly serious energy and environmental
issues," China president Hu Jingtao said in a statement, "China
attaches great importance to...renewable energy and takes it as
one of the most important instruments for promoting social and
economic development," (quoted from The Wall Street Journal
http://online.wsj.com/article/SB113140558502290495.html).
- Solar Energy
China's production and application of solar energy heaters is
leading the world. A total of 52 mln square meters have been
applied in 2003, representing 40 percent of the total amount of
the world. Debra Lew, Senior Project Leader at NREL explains,
"China is the largest solar water heating market in the world.
The technology is already used extensively, but there is great
potential for them to expand use in the residential, commercial
and industrial sectors. Solar photovoltaics (PV) used to produce
electricity is also already widely used in China, especially in
rural areas to provide electricity. The government recently
installed nearly 20 MW to electrify all townships that were
previously unelectrified. Megawatt-scale projects in urban areas
are also being installed.." Lew also stated "Solar is also doing
well in India. India also has a large rural population that is
remote and difficult to electrify with conventional grid
extension. Solar has been used in India as well to provide
electricity to those remote areas."
China is Shell's (NYSE: RDS-A) largest solar market in the Asia
Pacific region today. In the last 10 years they have installed
more than 7 MWp of solar power in more than 50 projects.
According to Shell Solar Media Relations Officer Alexandra
Wright, "Shell Solar looks at a variety of matters when deciding
to pursue renewable projects (in China and India market),
including of course traditional business drivers such as
critical mass and regulatory regimes. Solar opportunities are
encouraging in both countries as we are looking to bring energy
to individual households, and investigating the potential for a
system that would power entire villages. Shell is now in the
second phase of the Xinjiang project which will power around 75
villages in China."
XsunX, Inc., (OTCBB: XSNX), a company focused on Building
Integrated Photovoltaics, anticipates a significant need for
alternative energy generation technology in developing countries
such as China and India. Tom Djokovich, CEO of XsunX, Inc
stated, "For XsunX, China with about 20% of the worlds
population and India with about 17% represent one of the more
compelling opportunities for sustained growth in the
utilization
of solar energy production. Additionally these two developing
countries are experiencing a significant increase in the demand
for electrical power. At the same time the developed and
developing parts of the world are competing for a finite amount
of fossil fuels to power growing demands. This has not gone
unnoticed by the governments of China and India. India's
government is preparing to embark on the development of major
national programs to promote the development of solar energy
systems in centralized and decentralized applications. While
China has enacted a renewable energy law designed to promote,
among other things, the wide scale use of PV technologies in the
design of buildings."
"In these developing nations the practicality and cost benefits
of deploying solar technologies in lieu of building mass
centralized fossil fuel powered generation plants, transmission,
and distribution systems can and should be viewed as an
investment in long term national energy security. At XsunX we
are working to complete the development of semi-transparent PV
thin films for use in glass building facades. The use of our
Power Glass® films as a building integrated PV technology could
find opportunities in China and India as these developing
nations work to leverage a myriad of technologies in building
energy security and independence," concluded Mr. Djokovich.
Suntech power Co. Ltd, a Chinese based solar power company has
also Identified opportunities for renewable energy in Asia. The
Company went public on December 14th this year through an IPO
becoming a shining light of solar energy stocks. Suntech Power
rose 34 percent to $21.10 in their U.S. market debut on
Wednesday, a day after pricing at the top of a recently raised
forecast (forecast range raised from $11-$13 to $13 - $15 on
Tuesday).
- Wind Energy
"Wind power has huge potential to address some of those (power
shortage) problems", said Lew, "India currently is out-
competing China in terms of wind power because of their
aggressive policies. With an estimated potential wind power
capacity of 250 gigawatts onshore and 750 gigawatts offshore,
China has world-class wind resource. But their installed
capacity of wind power was only 764 MW (see table 1) at the end
of 2004, far less than India, which actually has a much more
moderate wind resource. India leads the Asia market with an
installed wind capacity of 4200 MW. "
The critical factor that has led to this difference, according
to Lew, is the government policy. "Driving the development has
been the policy not the renewable energy resource. India's wind
resources are not as strong, but the government has been
developing its wind market much more aggressively, with
aggressive policies and financial incentives. However, China is
catching up; especially with the new renewable energy law that
comes effective January 2006. They (Chinese) have set very
aggressive targets for renewable energy to meet as a certain
percentage of power supply (10% of its power, with 20 GW of
wind, and 1 GW of solar by 2020. And in the recent Beijing
International Renewable Energy Conference the government
announced a new target of 15% RE by 2020 with no announcement of
specific breakdown). In the new law, China is going to institute
a 0.25RMB/kWh subsidy for wind energy which should help drive
development," described.
Table 1 Quoted from: Fuelling China's Development through Wind
Power
GE Energy is very optimistic about both China and India's
markets. Beijing Guotou Energy Conservation Company has selected
GE Energy as the turbine supplier for two new wind farms in
Hebei and Xinjiang provinces of China, announced GE at Power-Gen
Asia 2005. "China has a vast wind resource and an increasing
need for electricity," stated Robert Gleitz, General Manager of
GE Energy's wind segment in their news release. GE Energy has
also supplied steam turbine generators to all major power
utilities in India, which accounts for 10% of India's installed
thermal power generation capacity. "India offers very exciting
opportunities for the wind industry. With an untapped wind power
potential estimated at 45,000 megawatts, and strong interest in
adding renewable energy capacity, the country can be a
cornerstone for wind energy development across Asia," states
Gleitz.
Water and Renewable Energy Market's Future
Hoffmann believes that China's water industry potentially has a
brighter future than India's. He explains:" I definitely think
China has greater opportunities to mitigate their situation for
a number of reasons: as developing countries, both India and
China are very rural, although China I think they have a greater
urbanization rate than India at this point. In China, a lot of
income potentials are in the major cities and more people move
into cities. This is creating a fair amount of necessity on the
part of China at least to really evoke some large centralized
treatment and I think given that the Olympics will be there in
2008, they are certainly more visible and they will be quicker
dealing with their water situation than India may. Also, you can
see a fair amount of capital flow into China. A lot of global
water players (such as GE) are actively courting China to
partner in large centralized water treatment facilities. So I
think they are getting a flow of funds that you can say will
help them develop faster. Most importantly, from table 2, you
can see, based upon the United Nation's Population growth
statistic, over the period 1990 to 2025, India will surpass
China relative to water stress. This is primarily depends on
current population growth, because India right now has higher
population growth rate than China. The future of both countries
will be primarily dependent upon their future population growth.
If both countries can moderate their population growth, they
will certainly be in a better position from a water stress point
of view. "
Table 2: Quoted from WaterTech Capital
When it comes to which market will have brighter future in
renewable energy sector, Lew said, " (In terms of natural
resources), China definitely has better wind resources, and very
excellent solar resources in the north and west, but there isn't
a lot of demand out there, so it is hard to say how useful it
is." However, in terms of government policy, "India really got a
jump on the policy side, and this has attracted international
wind companies who manufacture turbines and blades there.
India's wind market is one of the top in the world now. On the
other hand, China's new law and new subsidy in 2006 will be a
huge boon to wind to China, "explained Lew.
Fei Wang
Fei Wang holds an Honors Bachelor of Commerce from University of
British Columbia Sauder Business School, with double major in
Finance and Marketing. She has experience in investment banking
and advertising in Canada, China and Korea, with a firm academic
background. Full
article:http://www.China-AsiaStocks.com/Articles/China_India_Wate
r.asp Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp
©Copyright InvestorIdeas 2006
About the author:
Fei Wang holds an Honors Bachelor of Commerce from University of
British Columbia Sauder Business School, with double major in
Finance and Marketing. She has experience in investment banking
and advertising in Canada, China and Korea, with a firm academic
background.
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