However, in view of the significant differences in policy, law, culture and economic performance between different countries and regions, this journey to the sea is not as simple as opening up a new "blue ocean", but a challenging process that needs to consider multiple dimensions and complexities. Source: Manager Magazine

Written by Jing Chuan

About 35 kilometers south of Abu Dhabi, the capital of the United Arab Emirates, lies the world's largest single photovoltaic power plant, the Al Dhafra photovoltaic power plant.

In Abu Dhabi's vast desert, boundless solar panels stretch out like a vast sea of mirrors, adding a touch of metallic hue to the year-round golden desert.

The new energy sector – which encompasses photovoltaics, wind energy, energy storage and hydrogen – is thriving in the context of the UAE's Energy Strategy 2050, which aims to increase the share of renewables in the total energy mix from 25% to 50% by 2050. Among them, the Al Dhafra solar project is an example of the successful implementation of China's new energy industry, relying on the mature and comprehensive industrial chain advantages of China's new energy industry.

In terms of project background and green development, the Al Dhafra solar project is developed under a public-private partnership (PPP) model, which is jointly owned by Abu Dhabi National Energy Company (40%), Abu Dhabi Future Energy Company (Masdar (20%), EDF Renewables (0%) and JinkoSolar (20%), and is built by China Machinery Engineering Co., Ltd. as an EPC.

In addition, the Al Dhafra solar project has installed four million JinkoSolar-based solar PV modules based on crystalline bifacial module technology, which can generate electricity to meet the electricity needs of about 200,000 households in the UAE and reduce carbon emissions by more than 2.4 million tons per year.

The Al Dhafra solar project is just a microcosm of China's new energy industry's expansion into overseas markets in recent years. On the whole, China's new energy enterprises in recent years to go overseas activities are quite active, especially in the field of power batteries and photovoltaics, many Chinese companies announced the construction of production bases in Europe, America, the Middle East, Southeast Asia and other countries, China's new energy industry has changed from "made in China, sold overseas" to "made globally, sold globally".

China's leading companies in the new energy industry have a vision to expand overseas markets, aiming to alleviate the current fierce "red sea" competition in China. However, given the significant differences in policy, legal, cultural and economic performance between different countries and regions, the journey of Chinese new energy companies to go overseas is not as simple as opening up a new "blue ocean", but a challenging process that needs to consider multiple dimensions and complexities.

Look inward, expand outward

At present, the advantages and challenges of China's new energy industry are more significant.

On the one hand, China's new energy enterprises are already in the leading position in the world in terms of technology, production efficiency and cost, Zhang Jianhua, director of the National Energy Administration, said, "China has built a new energy industry chain system with international competitive advantages, contributing more than 80% of photovoltaic modules and 70% of wind power equipment to the world." "On the other hand, the internal competition in China's new energy industry is intensifying, and the frequent price wars between enterprises have led to the dilemma of overall overcapacity.

Take China's photovoltaic industry as an example.

In October 2024, the heads of the seven leading photovoltaic companies (namely Li Dongsheng, Chairman of TCL, Liu Hanyuan, Chairman of the Board of Directors of Tongwei Group, Zhong Baoshen, Chairman of LONGi Green Energy, Li Xiande, Chairman of JinkoSolar, Gao Jifan, Chairman of Trina Solar, Zhu Gongshan, Chairman of GCL Group, and Lu Chuan, Chairman of Chint New Energy) gathered in CCTV's "Dialogue" program to write down industry keywords, comment on corporate performance, and discuss the three major issues of the industry.

From the keywords of these industry leaders, we can intuitively feel the severe challenges that the photovoltaic industry is encountering: performance thunderstorm, risks far better than in the past, asset sales, photovoltaic layoffs, industry-wide losses, who will be out, group heating, industry reshuffle, ice and fire ......

Although leading PV companies have accumulated rich experience in technology, production and operation management, the PV industry is still plagued by problems such as imbalance between supply and demand, declining product prices, homogeneous competition and declining performance.

For many Chinese NEV companies, they need to find a balance between "looking inward" and "expanding outward". We should not only pay close attention to the competition situation within the industry and the subtle changes in the industrial pattern, but also have the courage to "expand outward" and actively look for a relatively immature but huge potential international market. Expanding overseas markets can not only bring greater profit margins and business growth points for enterprises, but also make overseas markets an important incremental market to promote the sustainable development of enterprises.

Although the development of overseas markets is not new to China's new energy industry. However, the current international situation is becoming more and more complex, and green barriers are emerging one after another, and how to move towards globalization more steadily has become a difficult problem for enterprises.

McKinsey also pointed out that "in fact, the pain points faced by Chinese enterprises in the process of overseas expansion are often not hardware technology, but soft conditions such as strategy formulation, organizational talent management, business ecosystem and culture." New energy enterprises should always take into account key issues such as strategy, supply chain, ecosystem, financial guarantee and organizational structure in the process of planning and going overseas before going global. ”

China's new energy industry has undergone a profound transformation from product output to technology and experience output. At first, the markets of developed countries such as Europe and the United States were the main positions for the internationalization of China's new energy enterprises, especially the photovoltaic industry, which was mainly supplied to the European market in the early days.

Subsequently, in the face of the challenge of "anti-dumping and anti-subsidy" in the European and American markets, Chinese photovoltaic companies began to deploy production capacity in Southeast Asia, which not only effectively coped with trade barriers, but also promoted the reconstruction of the global photovoltaic industry chain, and Southeast Asia quickly became an important part of the global photovoltaic industry chain.

With the continuous development of the new energy industry, the pace of China's new energy enterprises going overseas has accelerated, and the cooperation model has become more diversified, from wholly-owned to joint venture, from single to borrowed. At the same time, the market layout is also diversifying, in addition to continuing to cultivate the European and American markets, but also actively expanding emerging markets.

Here, the two major overseas markets of the Middle East and Southeast Asia will be observed.

Focus on the Middle East and Southeast Asia markets

● The world's "oil depot" - the Middle East is accelerating the energy transition

For a long time, the Middle East has played the role of "the world's oil depot" in the global economy and trade.

Countries in the Middle East urgently need to wean themselves from their dependence on the oil industry and seek a shift in their economic development model in order to diversify their industrial structure. In recent years, Middle Eastern countries have gradually recognized the urgency of energy transition and have successively issued energy transition strategies at the national level. Driven by these top-level plans, the proportion of renewable energy generation in the Middle East is expected to increase in the future.

In addition, the Middle East also has abundant wind and solar resource reserves, which can develop large-scale centralized photovoltaic and wind power projects, and driven by the solar and wind energy industries, the energy storage and hydrogen energy industries also have great development potential.

More importantly, in recent years, the business environment of Gulf countries such as the United Arab Emirates and Qatar has been continuously optimized, which is reflected in the improvement of the tax system, the relaxation of restrictions on foreign investment shares, the strengthening of the protection of the rights and interests of foreign workers, and the introduction of new energy market policies.

According to KPMG statistics, in recent years, China's new energy industry has continued to explore multiple overseas models in the Middle East and North Africa (MENA) region. Among them, the overseas mode of the photovoltaic industry is relatively mature, mainly in the form of project investment, factory construction investment, etc., while the wind power industry is dominated by the export of wind turbines, and its competitiveness is at the world's leading level.

In the past year, Chinese companies that have invested in PV capacity projects in the Middle East and North Africa include JinkoSolar, Hainan Mining, TCL Zhonghuan, Junda, GCL Technology, Arctech, United Solar, Trina Solar, etc. However, unlike Chinese enterprises building factories in Southeast Asia and other regions, Chinese photovoltaic companies mostly adopt the joint venture model in the Middle East.

In July 2024, JinkoSolar (688223. SH) announced that it will jointly build a 10GW high-efficiency cell module project with a Saudi partner. The total investment in the project is expected to be approximately 3.693 billion Saudi riyals (US$985 million). The Saudi Arabia plant is Jinko's first overseas joint venture factory, and unlike other overseas factories, Jinko's first overseas joint venture factory in Saudi Arabia focuses on the transfer of technology and experience.

This "asset-light" form is compatible with local needs to a certain extent and reduces investment risks. However, this also means that companies face a more complex business environment.

Commenting on the partnership, JinkoSolar's Chairman Li Xiande said: "The cooperation between JinkoSolar and the Saudi Public Investment Fund (PIF) has been very good after a very long and arduous negotiation. For example, we will get a very considerable amount of technical expenses for exporting technology, regardless of the outcome of the project. In addition, the factory will have the advantage of localization. Of course, there are many challenges, including how to cooperate with so many funds, capital and local enterprises, how to build the construction of the entire ecological chain, and how to integrate into local culture. ”

The

strong financial resources and abundant resources in the Middle East can provide sufficient financial guarantee and resource support for large-scale investment projects, or will continue to attract Chinese new energy companies to settle in, and enterprises should also weigh the advantages and disadvantages of different entry models, and carefully choose to achieve effective integration of their own advantages and the local market.

● Southeast Asia market has great potential but different development

In recent years, Southeast Asian countries have formulated new energy development plans and policy frameworks to actively promote energy transition. Southeast Asia is not only geographically adjacent to China, but also an important area of the "Belt and Road" initiative, which provides a good external environment for Chinese new energy enterprises to go overseas in Southeast Asia.

At the trade level, Thailand, Vietnam, Malaysia and other countries have shown huge demand potential and become important markets for China's PV exports, but as the Southeast Asian market matures, competition will become increasingly fierce.

In addition to the photovoltaic industry, China's wind energy exports have also achieved rapid development in Southeast Asia. As a major market for China's wind energy exports, Vietnam's demand for wind power installations continues to grow. In the context of energy transition, the installed demand for wind power in other countries in Southeast Asia will also gradually increase, providing more market opportunities for Chinese wind energy companies. In addition, the energy storage market in Southeast Asia is still in the early stage of development, and the hydrogen energy and ammonia energy industry foundation is relatively weak, but this also provides an opportunity for Chinese new energy companies to introduce equipment production capacity.

At present, the proportion of coal-fired power plants in Southeast Asian countries is still large, and the level of electricity marketization and innovative technology is relatively low. These factors have led to many challenges in Southeast Asia's energy transition. At the same time, policies and regulations vary greatly between different countries in Southeast Asia, and energy policies may change, such as the adjustment or elimination of subsidy policies, which will affect the economic benefits and return on investment of projects. In addition, policy changes in different exporting countries and regions are highly uncontrollable and unpredictable, which will test the patience and flexibility of Chinese enterprises.  

References:

(1) "New Energy Enterprises "Going Global" Series: Sailing Southeast Asia", KPMG (2) "New Energy Enterprises "Going Global" Series: Sailing to the Middle East", KPMG (3) CCTV's "Dialogue" program "Believe in China Photovoltaics" recorded live content (4) The 7th Hongqiao Forum "New Energy Storage Drives Future Energy Transformation" sub-forum preview salon

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