BALLARD’S POWER PLAY IN CHINA’S GREEN URBAN INITIATIVE
The recent inroads by Burnabybased Ballard Power Systems Inc. and other green-tech players in the Asian market underscores China’s efforts to make its cities more sustainable as they grow even larger, observers say.
On Thursday, 10 Chinese-built buses powered by Ballard-manufactured hydrogen fuel cells went into service in the southern city of Yunfu, 200 kilometres northwest of Hong Kong. Last month, 12 similar buses went into service in Sanshui and Foshan. Ballard says they have “zero tailpipe emissions” and low fuel consumption of 6.5 kilograms of hydrogen per 100 kilometres.
“Together, these are the largest deployments of zero-emission fuel cell buses in China’s history, but represent just the beginning of market adoption,” said Randy MacEwan, Ballard’s CEO. In a statement, he said Ballard is positioned for more growth in China’s “dynamic” sustainable urban-transport sector.
Ballard’s vision highlights the large scale of China’s urban renewal program. In its latest five-year development plan, the Chinese government identifies energy savings and new-energy vehicles as industries targeted for growth.
Part of the reason, Asia experts say, is that China is planning an intensive urbanization drive — increasing the urban population in the country from 55 per cent last year to 60 per cent by 2020. Without including sustainable measures, creating such large “super urban clusters” would be impossible.
“That’s 100 million people resettling in the next five years to large urban centres,” said Yves Tiberghien, director of UBC’s Institute of Asian Research.
“You could see that, in Beijing in the ’90s, they were going largely with cars, so they built all those massive ring-road highways. But since about 2005, the focus has really gone to subways massively; in Beijing, they are adding a new line almost every year. They are trying to do this type of thinking across all aspects of urban life.”
Guy McAree, director of investor relations at Ballard, has said the company is well aware of this shift. The $17-million deal announced last year to provide 300 fuel-cell buses to the Foshan-Yunfu area is a reflection of the company’s pivot to meet what they see as market with enormous growth potential.
“The Chinese are seeing tremendous growth in their urban population, so they have very large cities that are getting even larger,” McAree said. “They have problems with pollution, as we all know. So they are looking ways to start addressing that in a significant, high-impact kind of way.”
Foshan-Yunfu is part of the Pearl River Delta in southern China, one of three mega-cities that have plans to become more integrated as urban clusters. The three centres already have staggering populations — Jingjinji (Beijing-Tianjin-Hebei) has 109.6 million, the Pearl River Delta (Guangzhou-Shenzhen-Hong Kong) has 120 million, and the Yangtze River Delta (Shanghai-Nanjing-Hangzhou) 115 million.
Ballard’s stock price has responded accordingly, hitting a one-year high of $3.28 on the TSE on Oct. 3. But challenges remain for the company, which continues to record operating losses, and revenue in 2015 fell 18 per cent from 2014. For this year, it reported a loss-per-share of six cents for the first quarter and four cents for the second quarter.
And while some analysts list the stock as a buy, at least one — Zacks Investment Research — last week downgraded the stock to a “hold,” according to several market publications.
McAree said, however, that one thing Ballard is looking at in China is the “knock-on” effect — the potential of other Chinese municipalities hearing about the success of Ballard-fuelled buses in Foshan and engaging the B.C. firm for their own green goals.
“It’s entirely possible, because the sheer scale of the opportunity there is dramatic,” he said. “So we’ve been focusing on certain partner companies that are initially focused on certain provinces in China, but if we have success in one province, it can absolutely ripple across other provinces and open up new markets.”
Tiberghien said that one of the features of China’s economic development model since 1980 has been for the central government in Beijing to set goals and overall objectives, then letting provinces and municipalities experiment and compete with each other for results. The ruling Communist party has a system to rank how local officials did in hitting targets — and often uses those rankings as a guideline for promotion.
“Once there’s a catalyst at the top, everybody’s competing to get it done,” he said. “It’s a cutthroat competitive environment, but it does allow for a lot of innovation.
“It goes back to the Deng Xiaoping model. In the last 30 years, why China has been successful is essentially because they’ve always supported experimentation. Small local ideas are tested in two or three locales, then the central government tries to spread the model by giving incentives. It’s always enabling local innovation and competition; it’s quintessential on Chinese development, and it has now moved to sustainable urbanization.”
Ballard is scheduled to announce its third quarter financial results after the markets close on Oct. 25.