Beijing, July 27, 2022 – Greenpeace released a research report “Key Challenges and Responses for Chinese Companies’ Overseas Renewable Energy Investment” (hereinafter referred to as the Report). Based on literature research, interviews with practitioners of overseas renewable energy businesses from central state-owned enterprises, some financial institutions, and discussions with experts in two small-scale seminars, the report analyzes the main challenges faced by Chinese companies’ overseas renewable energy investment. It proposes specific recommendations to address these challenges from the perspectives of government, enterprises, financial institutions and industry associations.
Li Yuxiao, East Asia Project Director of Greenpeace, said: “In the context of global climate change response, more and more countries have set net-zero emission targets, providing good opportunities and policy environments for renewable energy investment. Increasing overseas renewable energy investment is the best solution for Chinese companies to fulfill China’s commitment to ‘strongly support developing countries in achieving green and low-carbon development in energy sector and halt building new overseas coal-fired power projects’.” However, there are still some difficulties at home and abroad that affect Chinese companies’ investment in overseas wind and solar projects. Relevant departments need to work together to solve these problems.”
Key challenges for Chinese renewable energy companies going global
The report points out that currently, China’s overseas renewable energy investment faces dual challenges from domestic and foreign environments.
Domestically: High financing costs, short financing terms, lack of innovation in financing models, insufficient insurance capacity to meet market demand, complicated approval procedures and lengthy processes for central state-owned enterprise projects, and insufficient mutual recognition of product standards between China and host countries – these issues are all constraining overseas renewable energy investment.
The report finds that obtaining reliable financing from financial institutions is key to whether an overseas renewable energy project can be implemented. Although the financing models for China’s overseas renewable energy projects are becoming diversified, the traditional shareholder financing model, i.e. the corporate guarantor model, still dominates. Compared with overseas coal power projects, overseas renewable energy projects have characteristics such as fast policy changes, short project construction cycles, relatively easy cashing out and exit, and fierce market competition. Therefore, financial institutions also have different risk assessment criteria for renewable energy. The report finds that bankability, stability and controllability of overseas risks are key indicators for overseas renewable energy projects to obtain financing.
Overseas: Energy project investment is affected by political barriers and security reviews. Host countries are raising local content requirements for renewable energy projects. The supporting infrastructure and absorption capacity of host countries also affect the advancement of China’s overseas renewable energy projects to some extent.
Specific recommendations to promote overseas renewable energy investment
The report recommends that government, enterprises, financial institutions and industry associations make joint efforts to address the main challenges faced by China’s overseas renewable energy investment.
Government level: Improve multilateral cooperation mechanisms for overseas energy cooperation, help host countries with capacity building, and resolve renewable energy absorption bottlenecks; implement systems and measures to optimize the overseas investment environment for enterprises.
Enterprise level: Central state-owned energy investment enterprises need to optimize overseas investment decision-making mechanisms; strengthen cooperation with private enterprises to complement each other’s strengths and achieve mutual benefits.
Financial institution level: Expand project financing and syndicated financing; expand project insurance coverage, scope and types to meet enterprises’ new business needs.
Industry association level: Give full play to the bridging and linking role; improve the ability to export renewable energy technology standards; strengthen industry self-discipline and establish red and black lists.
Li Yuxiao, East Asia Project Director of Greenpeace, said: “Only with the joint efforts of government, enterprises, financial institutions and industry associations can we further promote Chinese companies’ overseas renewable energy investment and fulfill China’s international commitment to support developing countries in achieving green and low-carbon energy development.”
