In the race toward a green-powered future, there is one entrant that is surprisingly among the leaders – China. China has conquered a third of the world market for solar cells. China is also racing along a course to build 100 gigawatts of wind turbines by 2020, doubling again the global capacity for wind power, across vast stretches of Inner Mongolia and Xinjiang.
Whether China is going full speed ahead with their green agenda because it believes in global warming is irrelevant to investors. What investors do need to know is that China fears being caught short as the global scramble for diminishing resources begins in earnest. Therefore, they are very serious about green energy.
There have been two factors behind the recent, much-needed boost for the green energy industry. One has been the rebound in oil prices. Higher oil prices benefits clean energy companies by making them more competitive with conventional power.
The second factor boosting green energy companies has been the recent stimulus packages unveiled by governments around the world. HSBC has estimated that $512 billion of the global stimulus outlined so far will be devoted to green energy projects. The full effect of these stimulus packages on clean energy companies will be felt most from the end of 2009 through to 2011, which should be a profitable period for these companies.
Serious problems do remain for the clean energy industry, however. Many green technology companies require heavy investment in infrastructure and debt financing, which due to the credit crunch, is more difficult and more expensive to come by for these companies. The stock markets also remain a hostile place for green companies to get financing. There were only six IPOs globally for green technology firms in the first half of 2009.
Chinese firms in the green energy industry have had no such funding problems, however. They have access to almost free funding from China’s state banking system. While Western countries bail out their banks, China is spending a big chunk of its $600 billion stimulus on green technology projects and a smarter electric grid system.
It is in solar power that China has made the greatest strides. Suntech Power recently broke the world record for capturing photovoltaic solar energy, achieving a 15.6 percent conversion rate with a commercial-grade module. Trina Solar is about even in the race with America’s First Solar, the low-cost solar company that has already broken the cost barrier of $1 per watt with thin film based on cadmium telluride.
The Chinese trio of Suntech Power, Trina Solar and Yingli Green Energy all expect to be below 70 cents per watt by 2012. This brings the goal of “grid parity” with fossil fuels within sight. The future looks sunny for the solar industry in China as the government orchestrates a big switch into solar power for its own households with a feed-in tariff that lets people sell excess electricity to the grid.
American investors can easily participate in the Chinese solar industry with ADRs trading on the New York Stock Exchange. These ADRs include: Suntech Power Holdings ADR (NYSE: STP), Trina Solar ADR (NYSE: TSL) and Yingli Green Energy Holdings ADR (NYSE: YGE).
For something broader-based, an investor could buy a clean energy ETF that has a large portion (20%) of its holdings in Chinese companies, iShares S&P Global Clean Energy Index ETF (NYSE: ICLN).
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