In what looks like a counter offensive against the G7 over funding to cut fossil fuels, China has now put together a $13.8 billion package for the Philippines renewables sector, pushing solar, wind and energy storage from 9 separate Chinese companies. If it adopts a similar strategy for most of its belt and road countries, it would lead to huge global Chinese renewables installations.
This is perhaps the approach that China should take, investing directly in Asian and African infrastructure to give it political influence over policy, rather than its approach in Taiwan, which is basically to threaten invasion.
The Philippines has only just reached 100% of homes having electricity, but still less than 50% have clean cooking facilities, which implies the country could divert precious gas resources to cooking and water heating, rather than use it for the production of electricity. Today 78% of its electricity is coal, gas and oil, with about 1% each for solar and wind, and 10% for other renewables, but much of this is the burning of biomass.
Each person uses about 950 kWh of electricity a year, about 25% of what a modern western economy uses.
Those nine Chinese CEOs met and signed a deal with President Ferdinand Marcos Jr of the Philippines last week. The companies are mostly state-owned including Energy China, Hong Kong based China Power, SPIC Guangxi Electric Power, transmission group China Machinery Engineering, China General Nuclear, China Huadian Engineering and environmental engineering company China Tianying, as well as Dajin Heavy Industry and the Mingyang Group, which has wind power interests .
In recent Asia deals Vietnam and the G7 reached a $15.5 billion deal to cut coal usage after similar deals were struck between Europe and Indonesia and before that South Africa, in deals worth $8.5 billion and $10 billion respectively. In those deals half the money was from public funds and half from private investment loans. But we imagine that this China deal is partially funded by the Chinese government, just indirectly.
Philippines in February decided to open up public services to companies that are 100% foreign owned. Previously they had to be 60% owned by Filipinos. This was specifically changed to include electricity distribution and electricity transmission. This was extended to electricity generation and energy storage in November so now the entire renewables market is open and China has reacted first.
In September US hackles were raised over the State Grid of China taking a 40% stake in the National Grid Corporation of the Philippines. The new deal allows for both solar, wind and battery to be made in the Philippines, which will mean jobs for Filipinos, but also another foreign base from which Chinese firms can export overseas to places like the US.
The US Department of Commerce investigation into solar manufacturers in Cambodia, Thailand, Vietnam and Malaysia found that much of the PV made in those countries was in violation of the country’s anti-dumping and countervailing duty tariffs. We’re not sure if Philippines will now have to be added to the list, but we suspect so. Someone at the US foreign office must be being fired right now for not getting a counter offer in before the Chinese could land the deal.
The Philippines has published a target of 35% of renewable energy by 2030 and 50% by 2040 which means that some 52GW of renewable energy capacity will have to be installed over just 17 years, plus any growth in electricity that happens between now and then.
Local developer Solar Philippines said in August it plans to have a 4 GW single installation for solar which it is just about to start work on. We shall need a lot more of such deals, but this gives Chinese solar manufacturers a nearby neighbor to send overflow manufacturing to.