China’s Big Energy Plan Will Create Winners… And Losers

China’s Big Energy Plan Will Create Winners… And Losers
Daniel Johnston

5 months ago2 mins

China’s already a world leader in renewable energy and is showing no signs of powering down: the government has a grand plan to achieve energy independence and is spending big to make it happen. Goldman Sachs estimates that China will plow over $7 trillion into energy transformation through 2040.

Thing is, renewable sources like solar and wind are fickle friends and power storage solutions (read: batteries) are key to ensuring that energy is available around the clock. That’s why, by the end of the decade, the world’s second-biggest economy is forecast to need 70 times the storage capacity that it had last year (medium blue, in the chart).

With that kind of demand out there, it makes sense that more businesses are racing to get a piece of the action and that the number of energy storage companies registered in China has more than doubled in the past few years. But there’s a downside to that too: the allure of sweet incentives seems to be attracting everyone and their dog into the sector, regardless of expertise. For example, Chinese puréed food producer Nanfang Black Sesame Group says it’ll shift part of its business from food to energy storage – what would be (at best) a questionable pivot in normal circumstances.

So while you might smell an opportunity here to buy into China’s battery supply chain, be careful where you step. All these new, inexperienced players could well inject some much-needed innovation into the race, but the likelihood is that most will end up falling by the wayside, with only a few crossing the finish line. For broad exposure to the sector, consider investing in ETFs, such as KraneShares MSCI China Clean Technology Index ETF (ticker: KGRN; expense ratio: 0.78%) or the Global X MSCI China Energy ETF (CHIE; 0.66%).



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