China's $700 Billion Clean Energy Plan

Source: investopedia

China has recently surpassed the United States to become the world's biggest energy consumer, according to new data from the International Energy Agency. The IEA reported that China consumed 2.252 billion tons of energy equivalents last year - nearly 4% more than the United States. China's breakneck economic growth has required vast amounts of energy, stemming from its heavy industry and infrastructure development. As a result, the Beijing government has taken on the task of balancing economic growth with responsible energy usage among its 1.3 billion people.

Jiang Bing, head of China's National Energy Administration, recently made an announcement that it will submit plans to develop cleaner energy, including nuclear power and gas from unconventional sources, in 2011 to 2020. Beijing plans to spend about 5 trillion yuan, or about $738 billion over next decade, developing cleaner sources of energy. Analysts estimate that China will require nearly 500 billion yuan annually in clean energy spending in order to meet the nation's lofty 2050 renewable goals. China has rejected pressures to cap its growth of fossil fuels consumption or reduce its emissions of carbon dioxide and other greenhouse gases. However, the nation has agreed to reduce the amount of carbon dioxide emitted based on gross domestic product output. This has pushed the country heavily into alternative sources of fuel.

While no formal plan has been adopted, China has already become a huge player in the alternative energy market. The nation has attracted more than $11.5 billion in capital for renewables development in the second quarter alone. This is more than the United States and the European Union combined. China built more wind turbines in 2009 than any other country and may install a record 18 gigawatts worth of wind turbines in 2010. The nation has already seriously committed itself toward its renewable energy goals. With the potential spending by Beijing, investors should take notice and plan accordingly.

Profiting From China's Spending
There are currently 60 nuclear reactors under construction in the world. About one-third of them are being constructed in China. According to the IEA, China had 16 nuclear reactors with a generating capacity of 15,220 MW. The Market Vectors Nuclear Energy ETF (NYSE:NLR) offers one of the better plays for nuclear energy's growth in China. The ETF holds nearly 40% of its assets in uranium miners, which will continue to benefit long after the reactors are built. The ETF also includes a 27% weighting toward Chinese companies. As Beijing has demonstrated with previous grants and loans, it does prefer domestic corporations. The iShares S&P Global Nuclear Energy Index (Nasdaq:NUCL) is another good choice in the sector.

Low cost of production and Beijing's pro-export driven policies have helped cement China as a premiere solar destination. While the rest of world faces austerity plans, the sun is shining on Chinese solar. Stocks such as Yingli Green Energy (NYSE:YGE) and LDK Solar (NYSE:LDK) will benefit from the continued expansion as will Claymore/MAC Global Solar Energy (NYSE:TAN), which has about 30% of its holdings in Chinese companies.

The portion of natural gas in China's energy consumption may increase to more than 8% by 2015, up from 3.9% currently. This increase could see U.S. producers of shale gas seeing green. First Trust ISE-Revere Natural Gas (NYSE:FCG) offers a concentrated portfolio of natural gas producers.

Finally, as overall plays on the growth of alternative energy, both the PowerShares Global Clean Energy (NYSE:PBD) and Market Vectors Global Alternative Energy ETF (NYSE:GEX) offer diversified ways to invest in this sector.

The Bottom Line
The potential spending from China on renewable energy is staggering. The government wants about 15% of its energy to come from non-fossil fuels by 2020. These renewable demands combined with a quickly growing economy will spur great spending in alternative development. The proceeding ETFs offer a long-term way to play the growth in China's energy use. That said, coal accounted for about 75% of the nation's electricity-generating capacity last year. The Market Vectors Coal ETF (NYSE:KOL) might not be a bad idea either.