China’s $7 trillion energy reform sparks battery rush – 6/29/2023 – Market

Chinese companies, from food manufacturers to tech startups, are rushing into the country’s energy storage sector, spurred by massive state spending on President Xi Jinping’s plan to achieve energy independence.

The number of Chinese companies registered as energy storage companies has more than doubled in the past three years to nearly 109,000, according to data from business information provider Aiqicha.

Yijing Wang, founder of 2060 Advisory, a Hangzhou-based investment consultancy focused on cleantech, said there had been a “gold rush”, with a “drastic” increase in the number of entrepreneurs, state-backed investors and the private sector. interested in battery technologies and projects.

“We’ve seen this change in just two or three years. It’s an industry that already existed … but it wasn’t attractive,” she said.

Energy storage, which includes large batteries for grid-level storage, is seen as a key pillar in reforming China’s energy system after Xi pledged to cut net carbon dioxide emissions to near zero by 2060 and peak. of carbon before 2030.

Goldman Sachs predicts that energy storage, a sector now opened up by China’s energy policies, will form part of a more than $7 trillion infrastructure investment opportunity by 2040.

However, there are fears of a boom and bust cycle in batteries as inexperienced people seek state funding. In recent years, tens of thousands of companies have started to develop electric vehicles and computer chips, after the sectors were prioritized for funding by Beijing. The race for energy storage has the same characteristics.

In one example, China’s largest paste food maker Nanfang Black Sesame Group said in March that Jiangxi Xiaohei Xiaomi Food, a wholly owned subsidiary of the Shenzhen-listed company, would shift its food business to energy storage and invest 5 billion yuan (R$ 2.56 billion) in the construction of a lithium battery production base.

The battery technology supports the world’s biggest polluter’s plan to reduce its use of coal and use large amounts of solar and wind energy. They provide backup when renewable energy sources don’t produce enough electricity.

Goldman predicts that China will need approximately 520 gigawatts of energy storage by 2030, with up to 410 GW coming from batteries. This reflects a 70-fold increase in battery storage levels in 2021.

Nikhil Bhandari, Goldman’s co-director of clean technology and natural resources research for Asia-Pacific, described energy storage as the “key enabler for uninterrupted renewable energy” in China.

Wang of 2060 Advisory noted that many business people in China are encouraged by the certainty provided by Xi’s commitments on climate change. It contrasts with the regulatory uncertainty that has plagued growth industries that were once popular with investors, such as consumer-focused services and technology, as well as education.

There is also the broader picture of slowing global economic growth and a weakening of forecasts for the pace of China’s post-pandemic recovery, reinforcing the feeling that it has become harder for investors to find bright spots in the Chinese economy, she said.

Neil Beveridge, an analyst at Bernstein in Hong Kong, said “overcapacity remains the biggest risk” faced by investors buying into China’s battery value chain, although he noted that scale and technology are also likely to “limit long-term winners to a select group of companies”.

Beveridge further pointed to US policies to reduce reliance on Chinese clean tech manufacturers, including battery makers. He said that China’s isolation on the international stage appears to be among “investors’ biggest concerns”.

“Although China has lost the US market, it still dominates other markets and will be a major player in Europe,” he added.

Translated by Luiz Roberto M. Gonçalves