China Belt & Road Initiative Brings 128GW Power Capacity: Wood Mackenzie

China Faces Challenges In Asian, African Power Markets: Wood Mackenzie

A latest report from Wood Mackenzie said that Chinese companies completed over 300 overseas power projects. This was despite challenges causing over 20% of projects to be cancelled or shelved.  The report said that these Chinese firms have made an estimated investment value of around US$200 billion, over these 300 projects. The East Asian country has reportedly installed 128 GW of power. This is equivalent to 1.3 times of Australia’s installed capacity in 2022.

However, challenges have emerged, leading to the cancellation or shelving* of over 20% of projects, the Wood Mackenzie’s report said. The report titled, ‘Belt & Road at 10: powering on through growing pains’ delves on different aspects of the Chinese power market and its global impact. 

The Wood Mackenzie report highlights the significant achievements and challenges these Chinese firms encountered in overseas power projects in the first decade of China’s Belt & Road Initiative (BRI). Asia has emerged as the primary destination for BRI power project especially as 199 renewable energy project which includes wind, solar, and hydro, have been completed, contributing to 68% of projects and 37% of capacity. It mentions that the share of renewables in newbuild capacity has increased significantly from 19% ten years ago to 47% in 2022.

the share of renewables in newbuild capacity has increased significantly from 19% ten  years ago to 47% in 2022.

Alex Whitworth, vice president, head of Asia Pacific Power and Renewables research at Wood Mackenzie, said, “Despite making progress, Chinese companies have faced significant challenges, particularly in developing markets. Of the 481 BRI projects that Wood Mackenzie monitored, 72 were either cancelled or put on hold after initiating them.”

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The cancelled or shelved projects had a capacity of 54 GW, which included 33 GW of coal, 12 GW of hydro, 6 GW of gas, 2 GW of solar, and 0.4 GW of wind. Coal power projects were the most affected, primarily due to changes in policy and increased political pressure to reduce carbon emissions. China’s ‘No new overseas coal power’ policy, announced in September 2021, has had a significant impact on the BRI project pipeline.

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Moreover, the cancelled or shelved projects had a capacity of 54 GW, which included 33 GW of coal, 12 GW of hydro, 6 GW of gas, 2 GW of solar, and 0.4 GW of wind. Coal power projects were the most affected, primarily due to changes in policy and increased political pressure to reduce carbon emissions. China’s ‘No new overseas coal power’ policy, announced in September 2021, has had a significant impact on the BRI project pipeline.

“The most common factors that led to the failure of overseas projects were the changes in policy and cost. Chinese companies faced more risks when developing greenfield projects, with a 27% rate of cancellation or shelving, compared to a 9% failure rate for pure EPC (engineering, procurement, and construction) turnkey projects,” Whitworth added.

The Wood Mackenzie report said that despite the challenges in policy towards coal and unstable environment, the outlook for Chinese overseas BRI power projects remains steady, with a pipeline of projects estimated at about 13 GW per year, and large potential upside for wind and solar. Renewables projects are a growing focus and account for 57% of 80 GW of planned capacity. Asia and Africa will remain the top two markets, accounting for 93% of the future projects.

“The BRI’s influence on power markets is set to grow, with a further 80 GW already under construction or at the planning stage. China is changing its overall strategy, so we expect to see more focus on renewables, and more direct investment than the bilateral lending that was more common in the early years of the BRI,” Whitworth concluded.