Chinese firms are showing a growing interest in Europe’s energy landscape. In a tender for the concession of 24% of Greece’s power grid operator ADMIE, Chinese interest was significant.
China entered the race for a stake in the Greek grid through two giants, the State Grid Corporation of China (SGCC) – which was also present in the first tender for 66% of ADMIE – and China Southern Power Grid, which was not expected to weigh in as it does not meet the basic condition of the tender for participating in the European interconnection system of ENTSO-E. However, the company has expressed an interest in entering a consortium with one of the other companies that does fulfil the tendering conditions.
Beijing’s European energy strategy
The Chinese interest has been associated with Beijing’s strategy to gain stakes in Europe’s energy infrastructure projects. Beijing has expressed an interest in acquiring a 17% stake in Greece’s Public Power Corporation (PPC) – whose tender will follow ADMIE’s – as well as in the joint construction of new electricity units with PPC in Greece and the Balkans.
The Chinese have also shown an interest in the renewable energy sources sector, especially projects that concern the connection of power to the Greek islands to the continental network. They appear disposed to finance the cable for the connection of Crete with the Greek mainland, along with other investment plans for the interconnection of the Cycladic islands, which will enable optimal utilization of the Greek Island’s rich renewable resources including wind and solar. The US$310 million project to connect the Cyclades islands to Greece’s mainland power grid is expected to save the country US$129 million. [Greek Islands Connect to Mainland Power Grid But How Sustainable Is It?]
If Chinese interest continues, and given that the final criterion for chosen bidder for ADMIE is the price offered, it will be challenging for the European bidders, Terna and RTE, to rival the Chinese companies. In the previous tender for 66% of ADMIE and with the grid operator’s valuation at just over €900 million, SGCC was ready to offer more than €600 million , reaching up to €800 million under certain conditions, while Terna offered €300 million.
China’s ‘grow global’ strategy
Simon Bevan, head of the China-Britain Services Group at Grant Thornton in the UK, views China’s growth interests as a “much bigger strategic interest.”
He explains: “Cleantech is very much in the China five-year plan as a strategically important industry, as it seeks to move up the value chain from being the world’s contract manufacturer. This is partly because the country needs to clean up its industrial waste output domestically. Also, it is seen as the way forward globally, so there is a market for it.”
This means that companies in the sector can expect targeted help from the Chinese government and banks.
Bevan adds: “China also has a ‘grow global’ strategy. This is at least partly to de-risk the domestic economy by investing the country’s US dollar surplus abroad and probably also includes a Chinese desire to grow its international profile in a non-military, ‘imperial’ sense. Hence their greater economic and diplomatic influence is being seen.”
Foreign policy backs foreign investment
China consumes 23% of the world’s energy, more than any other country. Its primary energy demand has almost tripled from 1,161Mtoe in 2000 to over 3,000Mtoe in 2013, driven by high-speed industrialisation and urbanisation.
China’s quest for the energy resources needed to feed its fast-growing economy has become a major driving force behind Chinese foreign policy. The country’s energy security master plan has been endorsed by an active ‘Going Out’ strategy which is aimed at encouraging Chinese companies, backed by significant foreign-exchange reserves, to expand their businesses worldwide.
China’s booming exports in the wake of its admission to the World Trade Organisation (WTO) in 2001 and the global financial turmoil since 2008 boosted China’s foreign investment. Nearly $400 billion of China’s total $870 billion investment worldwide has been in energy. According to the International Energy Agency (IEA), between 2011-2013 China invested $73 billion in assets in 40 countries in the Middle East, North America, Latin America, Africa and Asia.
As the leading player in the global energy market, China’s commercial interests and decisions when it comes to its energy portfolio will affect not only the competition for energy sources, but also global energy prices. More importantly, China’s low-carbon policies will determine the future of renewable technologies, innovation and investment in the world, and the success of global climate change efforts.