Shanghai, 8 January 2019 – Speaking on the second day of the 19th UBS Greater China Conference (GCC), UBS analysts estimated that China will derive 40 percent of its power capacity from renewable energy by 2045.
Alex Liu, China renewable energy and environmental services analyst at UBS Securities said: "In light of the progress made in the installation of largely wind and solar installations, which have been above market expectations over the longer term, we believe that it is possible that China will reach a 40% renewable energy share by 2045."
Liu was moderator of a panel titled, 'A beautiful China: Exploring environmental protection and renewable energy strategies'. "Solar and wind power generation costs have fallen by more than 80% in the past 10 years in China. But the key question is whether and when solar and wind power can achieve grid parity; in other words, operate without dependence on subsidies and be cost competitive versus other sources of power," he said.
"In terms of corporate strategy, if companies can reduce the cost of production and installation faster than their peers, they can generate excess return and additional market share. Historically, those companies that have expanded capacity before the upcycle begins, have dominated the sector. China plans to increase its capacity share of renewables (solar and wind) in the total supply mix from 17% in 2017 to 40% in 2045," added Liu.
The challenges and opportunities facing China were previewed on day one of the GCC by Dr. Maria Zuber, Vice President for Research, EA Griswold Professor of Geophysics at the Massachusetts Institute of Technology (MIT) and Co-head of MIT Media Lab, Space Exploration Initiative and Lead on the MIT Action Plan on Climate Change. Dr. Zuber said China's efforts were a good investment because they could save $340 billion in health care costs in coming decades - four times the cost of fighting climate change. For instance, if left unchecked, the North China Plain could face deadly heat waves by century's end.
"The consequences of not meeting climate commitments are fairly drastic, but meeting those commitments will have a very positive effect," Zuber said.
"Global sustainability is the first rule of ecology," believes Julie Hudson, a Senior Research Analyst with UBS in London and author of the "ESG Keys: 100 Questions for 2019" research report published in December 2018.
"Having identified 100 pivotal questions and 10 themes that are actually or potentially dominant in the field of ESG and Sustainable Investing, we opted to frame our investment topics for 2019 in question form. The decision was, in part, prompted by the increase in the speed and complexity of changes in the context of surrounding markets. Of course, there are currently more questions than answers but by considering them in aggregate, the extent to which the topics are interconnected became very clear," said Hudson.