During March 23 through 25, 2001, the Renewable Energy Finance Workshop was conducted in Shanghai in China. Financial and organizational support for the workshop was provided by the United Nations Development Programme/Global Environmental Facility (UNDP/GEF) Project called Capacity Building for the Rapid Commercialization of Renewable Energy in China, which also includes financing from the State Economic and Trade Commission, the Australian Aus-Aid Program, and the Government of the Netherlands. The workshop was co-sponsored by the World Wide Fund and the W. Alton Jones Foundation. The workshop was organized by the Center for Renewable Energy Development in the Energy Research Institute of the SDPC and by the Chinese Renewable Energy Industries Association.
The workshop was attended by more than 70 people representing mainly the renewable energy industry and financial institutions in China, but also included international representatives from investment groups, foundations, and renewable energy experts. The focus of the workshop was to provide forums for the exchange of information between the financial and renewable energy industry communities, especially regarding the needs and expectations from each sector with respect to investment opportunities and project development. The workshop represented the first time in China that the broad institutional and private investment companies in China met directly with renewable energy companies for the specific purpose of promoting renewable energy corporate and project financing. Heretofore, most investment outreach by the renewable energy community in China has been with the state banking sectors.
A multiple stakeholder approach was used to address investment and financing issues, although the focus was decidedly on the business communities, with less emphasis on direct government participation. The Chinese Renewable Energy Industries Association acted as a conduit on behalf of its membership between the stakeholders in the workshop and government policy makers. Additional important participation in the workshop included foundations such as the World Wide Fund (a co-sponsor), the W. Alton Jones Foundation, and the United Nations Foundation, as well as multilateral interest represented by the United Nations Development Programme and the Global Environment Facility. Representatives from several European countries and the United States were active contributors in the discussion sessions.
The opening session of the workshop included remarks from each of the sponsoring organizations and the foundations present, as well as Shanghai Jiaotong University and the China Science and Technology University in Anhui. The opening remarks were followed by presentations on domestic and international renewable energy markets by Li Junfeng of the Center for Renewable Energy Development and William Wallace of the UNDP/GEF Project. These presentations provided a common framework of understanding for the current stage of development of renewable energy markets in China relative to international development. Chen Hongmin, a Dean of the Shanghai Jiaotong University, provided an overview of money markets and venture capital in China and Kong Xinyu from the Shanghai Industrial Securities Company provided an overview of the securities markets in China and business financing.
The first discussion session of the workshop focused on industry presentations, which provided industry perspectives on the specific needs of renewable energy companies in China. Wu Gang of the Xinjiang Wind Energy Company, Hu Hongxun of the Guofei Green Energy PV Company, and Zhou Enguang of the Anhui Wuhu Guanghua Group provided presentations and discussion leadership. Several companies in the workshop indicated that they were initiating processes for listing on China stock exchanges to go public for the purpose of raising equity capital. Solar PV and solar water heating companies in particular are entering a manufacturing expansion mode and are looking for sources of loan or equity financing. Domestic wind turbine manufacturers also want to expand production for larger turbines using foreign technology transfer and the potential for large-scale wind farm development is high in China if project development barriers and financing can be managed.
Several international development topics were discussed, including the potential for green electricity using green pricing in the utility sector and voluntary public participation, presented by Gan Lin of WWF. Green electricity is a new topic to China but is currently being debated as a source of revenues for renewable energy deployment, especially for wind energy in urban centers. Ken Langer from the Global Environment Investment Group, Inc., which includes a partnership with large state owned company investors in Beijing, discussed using insurance instruments to mitigate risk of renewable energy investments, by packaging and managing the risk of multiple projects. This company is also developing investment opportunities for building-integrated photovoltaics and other solar and energy efficiency technologies in China. Debra Lew from the National Renewable Energy Laboratory in the USA also elaborated on the international foundations and investment companies, which have been established in Europe and the US to finance and promote renewables. The potential for establishing renewable energy investment funds in China is currently being explored by several financial institutions interested in working in China.
The most important session on of the workshop was a face to face open debate and exchange of information between companies and financial institutions. Some of the perceptions and issues emerging from this discussion session and previous presentations included the following. While renewable energy companies do not necessarily see themselves as high-risk ventures, they do fall into the investment category of high risk and therefore demand high return for equity capital. Capital that may be derived from venture capital funds especially will be expensive capital, yet companies are not necessarily ready or able to pay a high price for equity investments. Investment institutions in China, however, are open to investments in renewable energy projects, and several companies indicated they have made investments already, were currently exploring projects, or were interested in renewable energy companies and projects.
One major barrier to investment by banks and financial institutions is the lack of investment-grade paper; i.e., feasibility studies, project proposals, etc., that can justify loans or equity investments. There is, in turn, a lack of trained project developers in China, who possess the capacity to produce feasibility studies that meet stringent institutional standards for project evaluation. Renewable energy companies are gradually becoming more sophisticated, however, there is still a need to improve the business and financial management and practices of companies to reach levels required for inspection by financial institutions. Several foundations and private investment groups, nevertheless, expressed interest in principle in the idea of establishing renewable energy investment funds in China. Some private investment companies are strongly motivated by green image benefits.
The Shanghai Renewable Energy Finance Workshop was the first workshop of its type to be supported in China in anticipation that future forums will be created to continue the discussions initiated in Shanghai. In the UNDP/GEF Project future Investment Opportunity Forums will be conducted under the auspices of the Investment Opportunity Facility of the Chinese Renewable Energy Industries Association. The World Wide Fund and the W. Alton Jones Foundations are also interested in pursuing the facilitation of institutional investments in China.
