Where are the future growth opportunities?

The Environmental Chamber of Commerce of the All-China Federation of Industry and Commerce has released the annual list of the top 50 fastest-growing environmental companies in China for the last four consecutive years. This article examines their development hotspots during the "14th Five-Year Plan" period.

In July 2021, the Environmental Chamber of Commerce of the All-China Federation of Industry and Commerce released the list of the top 50 Chinese environmental companies. Chen Yu, a professional consulting agency focusing on green development, revealed in their recently published report that Everbright Environment topped the top 50 list with a revenue of 361 100 million yuan. To feature in the top 50, businesses need to reach a revenue of more than 2.1 billion yuan, and more than 8.7 billion yuan to be in the top 10. 

Until recently, the scope of the environmental protection projects was mostly limited to the "traditional" environmental protection fields, which include water supply, air pollution control, and environmental monitoring. This time, the focus has shifted to clean energy.

The agency divided the environmental protection industry into six major segments, namely water technologies, solid waste, air pollution control, ecological restoration, “dual-carbon” technologies (energy-saving technologies), and green finance. The first four belong to the traditional concept of environmental protection, while the concept of “dual carbon” (peaking national carbon emissions before 2030 and achieving carbon neutrality before 2060) is relatively new, and it refers to clean energy, energy-saving technologies, carbon capture solutions, and green finance.

The agency discovered that companies from the top 50 list involved in water technologies, solid waste, and green finance account for 70%, 66%, and 52% respectively. Companies involved in ecological restoration and  "dual-carbon" technologies account for only 26%, 24%, and 4%.

What are some of the main reasons why the companies involved in water technology, solid waste, and green finance rank among the top 50?

In China, the water technology market is mature and relatively stable; solid waste is the largest market in China’s environmental protection industry, with the growth rate accelerating in recent years; green finance is the broadest field within the industry. Furthermore, urban sewage treatment, waste incineration, urban water supply, and industrial hazardous waste, are some of the sub-fields with the highest percentage in China's top 50 environmental businesses. These markets are worth hundreds of billions of yuan.

Where will future growth come from?

There is not much room left for growth in stable markets such as sewage treatment, waste incineration, and urban water supply. So where will the future growth come from?

Driven by the "14th Five-Year" Plan, many companies such as Everbright Environment and Capital Environmental Protection focus on "emerging" fields such as ecological restoration, green recycling, energy-saving, and low carbon technologies. The National Green Development Fund established last year proposed five major environmental investment directions which are air pollution control, ecological restoration, energy and resource conservation, and utilization, green transportation, and clean energy. A general conclusion is that the focus has shifted from "traditional environmental protection"  to "emerging environmental protection" fields (e.g. clean energy). 

Solid waste recycling

The solid waste recycling sector includes the recycling and disposal of 8 categories and 20 sub-categories of solid waste. It also includes services such as sanitation. The current total market size of solid waste recycling exceeds 2 trillion yuan, and it is expected to maintain a compound annual growth rate of 8% to 10% during the "14th Five-Year Plan" period.

The field of solid waste recycling is closely related to the circular economy, and it is considered one of the hottest topics related to carbon neutralization. Whether it is turning waste into electricity and heat or turning waste into products such as metal and fuel, the environmental and economic benefits are significant. 

However, it is important to make a distinction between the sub-sectors within the field of solid waste recycling. There is waste incineration, with the main sub-sector players being Everbright Environment and China Tianying. Organic waste management mainly revolves around kitchen waste, livestock, and poultry waste. Solid waste, industrial hazardous waste, and the waste that includes electrical appliances have many overlaps, and in this sub-sector, there is a lot of potential to tap into. 

Clean energy

Clean energy includes several sub-sectors such as photovoltaics, wind power, biomass energy, energy storage, hydrogen energy, and geothermal energy. The development of photovoltaics and wind power has been in full swing in recent years, and the capital market has paid great attention to them. In fact, during the promotion of distributed photovoltaics during the 13th Five-Year Plan period, many sewage plants have implemented photovoltaic solutions, and as a result, many environmental protection companies have entered this field. One such example is Veolia,  one of the world's largest environmental protection companies. Water, waste, and energy are the core of its business, with clean energy becoming an important source of revenue and profit recently.

The 14th five-year plan (FYP) for the energy sector has set a new goal – to peak national carbon emissions “before 2030” and achieve carbon neutrality “before 2060.”  This reinforced the direction of the environmental protection and other industries to align with the “dual carbon goals”, and made innovations in the environmental sector an indispensable part of meeting these goals. The “dual-carbon” goals have become one of the key drivers of the environmental sector in China. Therefore, more and more environmental protection companies began to focus on clean energy, such as Weiming Environmental Protection, Wangneng Environmental Protection, and Zhongchuang Environmental Protection, to name a few.

However, the technical requirements in the field of clean energy are high, especially in the fields of energy storage and hydrogen energy. Most of the sub-sectors of clean energy require high capital investment, therefore newly entered environmental protection enterprises will face challenges from technical, managerial, financial, and other aspects.

The "dual-carbon" includes technologies such as energy conservation, emission reduction, clean energy, "carbon sink" solutions or CCUS (carbon capture, usage, and storage), and long-term measures such as carbon trading. 

Industrial energy conservation and building energy conservation are both 100 billion yuan - worth of markets. However, because the targets are industrial businesses, residential complexes, and other relatively scattered groups, these services are often provided "according to local conditions", which is difficult to expand. Therefore many companies start to rather focus on energy-saving equipment, such as boilers and pumps.

Many environmental protection companies that specialize in industrial hazardous waste and industrial flue gas treatment consider tapping into the energy-saving market. Forest carbon sinks, CCUS, and other carbon sinks are emerging fields, and most environmental protection companies still don't fully understand them. After the "dual carbon" goal was proposed, energy-saving solutions and technologies became the hot spots, attracting the attention of a large number of environmental protection companies. 

This year WieTec joins hands with China Energy Conservation Association and China Environmental Protection Federation to present Energy-Saving China which will be held at the Shanghai National Exhibition & Convention Center at a later date this year. In the light of the “dual carbon goals”, the show will display environmental technologies, products, and solutions that are used in the energy-saving sector, as well as the business opportunities for the sector stakeholders.

2022 Energy-Saving China leverages Wietec’s fifteen years of excellent quality experience and the database of buyers. The exhibition is held concurrently with other WieTec trade shows that have already built a reputation over the years (such as Aquatech China) and are covered by established water industry media. The 2022 Energy-Saving China includes WieTec's high-quality database of buyers related to the wastewater plants, design institutes, steel/metallurgy/pharmaceutical/food/chemical/petrochemical/manufacturing industries, and environmental protection projects. E.g., the show includes the “Thousand Buyer Annual Meeting”, as well as the matchmaking meetings between suppliers, buyers, and VIP members from the WieTec database. Stay tuned for the new date and the event registration information. We look forward to meeting you there!