Chinese Cleantech Companies

Nick Hodge

Updated March 30, 2010

If Paul Revere were to make his fabled ride today, he would surely be warning us about the Chinese instead of the British.

The Chinese are coming. Perhaps faster than we all think.

And they’re doing it with a not-so-secret plan to grow their economy with cheap energy.

They already manufacture most of our goods. Now they’re growing a domestic energy industry that will allow them to do it even cheaper, while continuing their rapid growth.

Up for Grabs: $94.7 Million Per Day

In all seriousness, China is way ahead in the energy race.

They know there’s not enough oil left to sustain long-term economic growth. I imagine they chuckle when hearing us talk about Alaskan and offshore sources, which combined and fully exploited would last us something like 3.5 years.

China is looking beyond oil.

Relying only on domestic energy is the only way to ensure a prosperous economy and a prosperous middle class.

That’s why China spent $34.6 billion on renewable energy in 2009, according to a just-released Bloomberg New Energy Finance report.

I did the math, and it works out to more than $94.7 million per day — twice what the U.S. spent last year.

China Cleantech Investment 2009

And I’m not talking about government investment. The report counted only "private investments in renewable energy projects, as well as money renewable energy firms raised in stock market offerings, venture capital and private equity deals."

But if they counted government investment, China would be even further ahead. They plant to invest $216 billion over the next five years.

The U.S. has set aside $80 billion.

And the consequences of our lagging investment can already be seen.

Trading China for OPEC

Last year, for the first time ever, China installed more wind turbines than the United States.

They’re gaining the technological edge. And so far, we’ve been happy to cede it to them. We’re even facilitating it to the tune of billions of dollars.

Chinese solar companies — which account for half the world’s supply — Yingli (NYSE: YGE) and Suntech (NYSE: STP), among others, have developed robust businesses here in the States.

Yingli set up coastal offices in New York and San Francisco last year. This January, they announced plans to build a $20 million production facility either in Phoenix or in Austin that will create 300 jobs.

We (the U.S. taxpayer) are giving them $4.5 million in stimulus funds to do it.

Suntech announced a North American Partner Program late last year that will offer selected dealers a co-marketing fund, training and services, financing programs, and priority access to its innovative product line.

That was just prior to announcing its first U.S. manufacturing plant would be located in Phoenix, have a capacity of 30 MW, and would begin production in the third quarter of 2010. That should make it cheaper to get Chinese panels on American roofs.

Meanwhile, our domestic players are seemingly treading water. One look at this chart says it all…

Chinese Solar vs. U.S. Solar

And the same is about to happen in other industries as well.

In the last few years, Chinese turbine maker Sinovel has surged from obscurity to a top five global wind producer. It already has its eye on the North American market, and has announced a half billion dollar IPO to fund that expansion.

Another Chinese turbine company, A-Power Generation Systems (NASDAQ: APWR), has been selected to provide turbines to a stimulus-funded wind farm in Texas, and is also building a U.S. plant.

Chinese utility China Guangdong Nuclear Wind Power is already dominating its namesake industries in the Middle Kingdom. And I recently heard firsthand from their president, Chen Sui, that they’re pursuing an aggressive U.S. growth strategy.

The Chinese are even making a move on our dilapidated electricity distribution system, the grid. The Wall Street Journal recently reported that "Duke Energy Corp. is in talks with State Grid Corp., China’s biggest electricity distributor, over a joint venture that may involve cooperating on power transmission lines in the U.S., according to two people familiar with the situation."

The WSJ continued: "The move shows how U.S. utilities are keen to tap China’s low-cost equipment and access to cheap credit to advance capital-intensive projects."

Keen is an understatement. Salivating is more like it. If we’re not careful, we’re going to supplant our OPEC addiction with a Chinese energy addiction. And as with foreign oil, plenty of money will be made.

In addition to the examples I’ve already given, the Chinese are also making big moves in the battery business. I helped investors profit from Hong Kong Highpower (NASDAQ: HPJ) over the past year, as it soared from less than $2.00 to almost $10.00.

Now, another Chinese battery company is about to make a similar run. Its lithium-ion batteries are already in electric cars and nearly all power tools in China. And they’re hybrid cars will go on sale in North America and Europe this year.

The gains will be similar to when Chinese solar companies took over their industry — only this time, you have a chance to get ahead of the curve.

Call it like you see it,

Nick Hodge


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