Japan’s full of wind, but China could blow away the competition
- President Xi Jinping promises the UN that China will be carbon neutral by 2060 and wind farms will be a major component of its clean energy drive
- Meanwhile, dirty Japan is looking to clean up its act also with offshore wind power generation
HERE COMES THE FILTH
CARBON NEUTRAL CHINA
Energy analysts are probably right to focus primarily on wind and solar generation. At the moment, those renewables cannot be relied upon to provide a base load, as their output comes in bursts: solar electricity only when the sun shines and wind turbines only when it’s breezy. A grey day or a still night means no power. But improving battery technology certainly has the potential to make them a credible, large component of the power grid.
Countries’ plans for alternative energy are presented at the biannual United Nations Climate Change Conference. The next one, COP26, will be held in Glasgow in November, with 200 world leaders due to attend and present plans for how to limit global warming to well below 2 degrees Celsius above pre-industrial levels.
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BLOW LIKE THE WIND
China currently has a little over 220 gigawatts of wind power capacity, and industry analysts are speculating that between 36-45GW will be added each year, an increase in the order of 18-20 per cent each year. However, industrial firms in the wind power business see it differently.
Some 400 Chinese wind power developers and turbine manufacturers are calling for 3,000GW of installed capacity by 2060 to meet Xi’s goal, which would require the installation of at least 50GW per year over the next five years, and then around 60GW annually after 2025. That would be a dramatic leap from the 26.8GW added in 2019. If borne out, the Chinese are going on a spending spree.
In Asia, there is likely to be another push for renewables as environmental, social and corporate governance considerations return to investors’ minds when the winter smog descends. We can expect increasingly bold statements at COP26, especially from the Japanese who are constantly under fire for not dealing with their own pollution issues and are still backing coal adoption in developing Asia. This could be the opportunity for Japan’s Minister for the Environment ShinjiroōKoizumi to announce a policy shift.
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DIRTY JAPAN
There are three wind turbine technologies to consider: fixed on land, fixed in water, and floating. China and the US have the world’s largest installed bases of fixed wind turbines, and Britain leads in offshore turbines – fixed and floating. Floating wind turbines have advantages over those that are land based or fixed to the seabed, especially for countries like Japan which sit atop earthquake zones and lie in the path of typhoons. In the event of a tsunami, a floating turbine just bobs over the top of the waves. Maintenance is also easier, as floating turbines on pontoons can be swapped out and towed to a yard for service or repairs.
The Japanese are gearing up their wind turbine design game, having lagged both the Chinese and British. Firms are importing offshore wind turbine technology from Europe as well as developing their own, as they see a lucrative export growth market in Asia.
We may see Asia’s wind business dominated by the Chinese when it comes to land-based wind farms and the Japanese for offshore installations. The business is likely to see sustained growth as the appetite declines for dirty power generation equipment that burns fossil fuels.
Neil Newman is a thematic portfolio strategist focused on pan-Asian equity markets