Galicia looks to China for energy joint ventures

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By Song Ping (China Daily)
Updated: 2009-08-06 08:05

As the world's second largest energy consumer, China is drawing-up ambitious multi-trillion yuan investment plans to promote the uptake of renewable energy sources.

With interest in this sector never higher, many companies are now eyeing investment and acquisition opportunities abroad, particularly in the US and Europe. One, perhaps surprising, addition to this list of prospects is Galicia, an autonomous region in northwest Spain.

Faced with an expected exponential growth in world energy demands, Spain, as one of the world's market leaders in the field of renewable energies, has played a major role in Europe's development of clean energy sources.

Galicia has long been one of the foremost regions in terms of direct investment in renewable energies and is already home to a number of leading firms in the sector, including Gamesa, Vestas, Abengoa and T-solar. The appeal of this 29,574 sq km region lies in its unique combination of geographic, technical and socioeconomic advantages.

As Spain's leading wood supplier, the region's biomass production has been key to attracting investors in this sector. It is also very much at the forefront of wind power production - ranking as the fourth largest producer in Europe and the sixth largest in global terms.

Wind power in action: Spain's Galicia region is looking to find Chinese partners to expand its renewable energy initiatives.

The establishment of a Galician wind power sector cluster for companies operating in this field has made it possible to generate synergies that have had a knock-on effect in the rapid development of the local industry. Currently the region's domestic industry can provide up to 80 percent of the elements and services required to build a wind farm.

Galicia has also made full use of the rapid technological growth of its energy sector and has attracted considerable industrial investments, thanks to a series of decisive research and development (R&D) support policies, combined with a highly qualified workforce.

Businesses such as Abengoa, the company behind the world's first combined electrical energy and bio-fuel production plant, and T-solar, one of the leading developers of solar panel technology, are just two examples of companies that have driven Galicia to the very forefront of the renewable energies industry.

The appeal of an established industrial presence in this sector has been further enhanced by the ubiquity of its transport infrastructure. This includes a recently completed hi-tech port in Ferrol, a vital access point given Galacia's strategic positioning on many of the world's major "sea highways".

The Spanish Ministry for Industry and the Galician Institute for Economic Promotion have both been keen to boost the appeal of the region through a series of attractive incentive packages. This has included special programs such as the "Ferrol Plan", which gave investors in industrial locations access to nonrefundable grants of up to 30 percent and entitled them to 15-year loans at a zero interest rate.

The result of this innovative support for sustainable future energy sources has been to establish Galicia as a leading destination for investment projects in this burgeoning sector.

Opportunities

Renewable, clean and rapid implementation - all of these have combined to make wind energy an ideal choice for China to sustain its economic development whilst reducing pollution. This obvious synergy has made Galicia an attractive business proposition for many Chinese companies.

Jose Adega, a senior official at the Galician Institute for Economic Promotion (IGAPE), said: "Chinese companies can learn from our success story. We would welcome more Chinese companies to invest in both Galicia and the renewable energy sector."

As a result of its earlier successes, Galicia now plans to increase its wind power production. According to estimates by the Galician Institute of Energy, the renewable energy power produced domestically in the region will be around 10,000 megawatts (mW) by 2012. Due to the benefits of long-term planning, steady growth for this sector is still being predicted despite the current economic uncertainties.

According to Shi Lishan, deputy director of the new energy department, part of the National Energy Administration (NEA), China's installed wind power capacity is expected to exceed 30,000 mW by the end of 2010, up from 12,000 mW last year. In order to achieve this target, the country needs to invest at least an additional 100 billion yuan in the sector.

China now has the fourth largest wind power capacity in the world and the sector has witnessed 100 percent year-on-year growth over the past few years.

Shi said: "Among all the clean energy sources, wind power is developing the fastest these days. The 30,000 mW target is achievable given this rapid growth.

"By the year 2020, China will have a wind power capacity of 100,000 mW, accounting for around 10 percent of the country's total power generation capacity."

Currently, wind power accounts for around two percent of China's total power generation. Industry insiders say, by 2020, wind power will overtake nuclear power as China's third-largest source of electricity, after thermal and hydropower. In order to achieve this target, analysts in the sector have now urged Chinese wind power companies to look overseas to secure the necessary advanced technology and management skills.

Commenting on the opportunities open to Chinese businesses, Adega said: "During 2008 my team and I visited many provinces in China and discussed possible collaborations in the wind energy sector and associated projects. Many local governments showed considerable interest in future projects with Galicia."

More information is available at www.investingalicia.com.cn.

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