China has a key role to play in Central Asia's transition to renewable energy
Energy has been the anchor for the cooperation between China and Central Asian countries over the past 30 years. Their interaction in the energy sector is now rapidly diversifying from hydrocarbons to higher value-added renewable energy.
China has become the undisputed world leader in sustainable development and applying green technologies to reduce its carbon footprint, as it topped the world rankings in both scientific development and clean technology applications. Last year alone, the country invested $546 billion in solar and wind energy, electric vehicles and batteries, almost four times more than the United States. In 2021, China produced 96.8 percent of the world's silicon wafers, 85.1 percent of the photovoltaic cells, 79.4 percent of the polysilicon, 74.4 percent of the solar panel modules, three-quarters of the world's batteries, 70 percent of the cathodes, 85 percent of anodes and more than half of the EVs worldwide.
By prioritizing the supply of its domestic market, China has quickly become the largest foreign investor in renewable energy as well. Between 2013 and 2020, under the Green Belt and Road Initiative, China's development institutions alone contributed about 20 percent of total global renewable energy financing.
In Central Asia, fossil fuels comprise 95 percent of the total energy supply. To meet their commitments under the Paris Agreement on climate change, countries must make a responsible transition to renewable energy sources. According to experts, the region will require a massive investment of $1.41 trillion between 2020 and 2050 to maintain its energy system.
The most significant Chinese investments, amounting to hundreds of millions of dollars, are being made in constructing solar and wind power plants in Kazakhstan, the Kyrgyz Republic and Uzbekistan. For example, Chinese companies such as Universal Energy, Risen Energy and SPIC have become major investors in solar and wind power plants in Kazakhstan. Meanwhile, Chinese electric vehicle manufacturers are rapidly penetrating the Central Asian market. For example, BYD and UzAuto will produce their latest EVs in Uzbekistan.
The first Summit of Heads of State of China and the Central Asian Countries held in Xi'an in May gave further impetus to bilateral and multilateral cooperation between China and Central Asia. Major decisions were made in political and economic cooperation. Among other areas, the emphasis was placed on collaboration on sustainable development, climate change and joint efforts to move toward carbon neutrality. The signed documents specifically defined the obligations of the parties to coordinate the development of the latest renewable energy sources, stimulate the generation of clean energy and develop scientific and technical cooperation in the field of green innovations.
It is worth emphasizing that the declared prioritization of sustainable development in no way means a decrease in the level of cooperation between countries in the traditional energy sector, including collaboration in the supply of hydrocarbons. China's principle of "technological neutrality" means that it will support all kinds of clean and low-carbon technologies in the energy sector, which also ensures the efficient use of fossil fuels. This principle distinguishes the announced policy from the more radical measures some Western countries take that deny the possibility of using hydrocarbons in the energy transition. It led to the current artificial energy crisis, especially acute on the European continent.
From the analysis presented, one might think China is trying to monopolize the transition to green energy in Central Asia. But taking a deeper look at this topic, it becomes clear that renewable energy development reflects the region's multi-vector policy. It is known that the European Union occupies the first position in foreign direct investment in Central Asia, followed by the United States and Russia, with China in fourth place. In addition, multilateral development banks such as the World Bank, the Asian Development Bank and the European Bank for Reconstruction and Development, and numerous bilateral donors such as the United States Agency for International Development, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, Japan International Cooperation Agency, Korea International Cooperation Agency and others, are active in the region. But there is no doubt that China is increasingly important as a long-term partner in Central Asia. Given the above-mentioned facts, this position will be further strengthened and deepened in sustainable development.
The designated cooperation will have a mutually beneficial format. The region's countries will benefit from competition between China and other international players in developing and implementing clean technologies, as this will reduce the cost of their implementation. On the other hand, Chinese companies and financial institutions will learn more about the specifics of working in overseas markets and other jurisdictions. They will learn more about how to apply international standards in their projects and become more internationally competitive. To benefit from such competition, the countries of Central Asia must do their best to create a favorable business environment, become attractive for FDI, and effectively regulate their energy markets.
In summary, we can say that China has become one of the essential "players" in the energy system of Central Asia and, most likely, will remain so. China's goal of becoming a world leader in the energy transition and its approach to achieving this goal will also be tested in the region. It will contribute to the development of green growth in the area.
Source: China Daily Global
