Renewable Energy in China’s Cross Hairs

By Emilio Iasiello

Introduction

In late October 2020, the Central Committee of the Communist Party of China held its Fifth Plenary Session to set outlines for the government’s new 14^th Five-Year Plan (covering the years 2021-2025). A communique was issued at its completion, highlighting the important challenges facing China, and providing broad insight into the priority policy areas China will be pursuing over the next five years, to include renewable energy, among others.[i]  Since focusing on the development of green energy industries, China has emerged as a global leader in this area with few peers.  China’s climb to the top in renewable energy underscores the importance Beijing places on its Five-Year Plans as critical enablers that ultimately fuel the growth of China’s economy. Renewable energy not only addresses the country’s notorious pollution problems but also demonstrates image-conscious Beijing’s intent to become a global leader in promoting green industries, and by extension, a global supplier of green energy technologies.[ii] As such, China will continue to leverage its intelligence-collection assets, particularly its cyber-enabled economic and industrial espionage to maintain its leadership role in renewable energy. In the past, Chinese espionage activities from state actors as well as Chinese nonstate actors against renewable energy companies to collect sensitive information for economic advantage have helped push them into bankruptcy. Based on the success of these activities, Beijing will continue to rely on these cyber intelligence assets to identify U.S. organizations and businesses involved in the renewable energy lifecycle and execute cyber operations against them with the intent to obtain information related to U.S. national-level policy; international political and/or economic agreements and treaties; corporate intellectual property and proprietary information; trade secrets; or other information Beijing deems important to collect to maintain its position as a leader in Green energy technologies. 

China’s Push to be a Renewable Energy Leader

China has emerged as a global leader in renewable energy and is currently the world’s largest producer of wind and solar energy,[iii] as well as the largest domestic and outbound investor in renewable energy.[iv]  According to the International Renewable Energy Agency, an intergovernmental organization that supports countries in their transition to a sustainable energy future, China and the United States were the top two countries based on renewable energy power capacity or electricity generation.[v]  Xi Jinping announced at a September 2020 United Nations General Assembly meeting that China will achieve carbon neutral status by 2060.[vi]  President Xi double-downed on this promise in December 2020, announcing that China will increase installed wind power and energy to more than 1.2 billion kilowatts by 2030.[vii]  But while these bold proclamations may seem boastful for a country that has not generally demonstrated ecological diligence, China has been on the forefront in the production of green technologies.

• Electric Vehicles.  China is increasing its production of electric vehicles (EV) and electric vehicle supply equipment (EVSE), a goal underscored by its Ministry of Industry and Information Technology in December 2019 when it announced that EV s would represent 25 percent of vehicle sales in China by 2025.[viii]  China’s push in this area began approximately a decade ago, and according to a global financial firm, over the next five years (2020-2025), China will likely continue to aggressively enter the global market, able to compete due to low material costs that could provide Chinese companies a marked advantage over foreign competitors[ix]  In 2020 alone, Chinese electric vehicle companies Nio, Li Auto, and Xpeng significantly increased their vehicle deliveries.[x]

• Solar.  According to the Global Commission on the Geopolitics of the Energy Transformation, as of 2019, China was the largest producer, exporter, and installer of solar panels, wind turbines, batteries, and electric vehicles in the world.  Japan, German, and the United States ranked second, third, and fourth, respectively.[xi]  As of early 2017, China owned five of the world’s six largest solar-module manufacturing companies and the world’s largest wind turbine manufacturer.[xii]  One business intelligence unit estimates that China’s efforts could create a USD 6.4 trillion investment in new solar and wind generation capacity, increasing photovoltaic capacity to 4,226 gigawatts by mid-century.[xiii] 

• Wind.  Building new wind capacity costs less than adding the equivalent in coal or gas plants in two-thirds of the world according to a UN Environment Program.[xiv]  Unsurprisingly, Beijing has identified wind power as a key growth component and has set a goal for wind power to reach 40 gigawatts by 2030 and 1,000 gigawatts by 2050.[xv]  The Global Energy Council corroborated these ambitions citing that China has installed more wind power capacity on both land and sea than any other country in 2019.[xvi]

• Hydro:  China’s hydropower capacity is larger than the total production capacity of all countries except for the United States and India.  In 2018, China’s dams produce 356.2 GW of electricity which is approximately 20 percent of the power mix.[xvii]  As China’s dam production in country has decreased due to its investment in solar and wind, its efforts to assist other countries in developing hydro power has not, particularly as hydro represents the most widely used renewable energy.[xviii]  China’s external hydro projects include Guinea and Pakistan, to name a few.[xix]

However, despite its efforts to lead a Green energy revolution, China has had difficult managing pollution levels, even as recently as the rise of the COVID pandemic.[xx]  Despite its lofty ambitions, China remains a primary coal consumer with consumption estimates expected to increase for the foreseeable future.[xxi]  According to a 2020 report by the Global Energy Monitor, China accounts for 28 percent of greenhouse emissions and half of coal power plants under construction.[xxii]  This will ultimately continually challenge Beijing’s ability of obtaining carbon neutral status by 2060, particularly under its current ability to support technology development and its implementation.[xxiii]

As the global community has espoused moving from fossil fuels to alternative renewable sources, Beijing has prioritized green technologies in the past two Five-Year Plans citing them as “strategic emerging industries.” These Five-Year Plans are blueprints that set the course to improve strategic industries for development to fuel its economic aspirations.  In addition to China’s recent Plenary Session that helped establish the focus of China’s 14^th Five-Year Plan (2021-2025), both the 12^th (2011-2015) and the 13^th (2016-2020) Five-Year Plans identified “green” energies as key developmental areas.[xxiv]

Additionally, China’s Made in 2025 plan also reflects its intent to move from being a “low-end manufacturer to a high-end producer of goods.”[xxv]  This includes producing more specialized end-products with a focus on technical innovation.  Specifically, Made in 2025 targets 10 strategic industries, with renewable energy having benefitted from this national-level dedication to advancing 10 strategic Chinese industries.  Such national-level thought articulated in the Five-Year Plans and treatises such as Made in 2025 provide guiding ideology and goals that are then implemented as policy down the chain and into the appropriate industries and sectors.  Beijing does not obfuscate its intentions.

However, while green energy advocates wreath China’s efforts with plaudits, there is increasing evidence to suggest that China’s quest for renewable energy supremacy may be slowing down.  According to a periodical tracking global environmental issues, there were signs that Beijing funding for green energy started to falter in 2019, making wind and solar facilities compete with other forms of power generation.[xxvi]  Additionally, even though China may be one of the largest clean energy markets in the world, wind and solar only accounted for 5.2 and 2.5 percent in 2018, respectively, according to an official from the International Energy Agency.[xxvii]  This may be especially worrisome for Beijing considering that in 2019 the United States’ renewable energy consumption surpassed coal for the first time in more than 130 years, and its renewable consumption grew for the fourth year in a row. [xxviii]

While fossil fuels are still the dominant energy sources in the United States, the growth in renewable energy – especially in wind and solar – are indicative that there is an appetite to rely more on these energy sources.  For example, in June 2020, U.S. wind, solar, hydropower, and storage associations met in Washington, D.C., and released joint advocacy principles to include advancing greater competition through fair market rules.  Included in this shared vision is the creation of mixed technologies for integrate renewable energy options.[xxix]  Additionally, 2019 tariffs levied against China by the United States encouraged U.S. manufacturing to step up its production, especially in solar panels in an effort to compete against China.[xxx]  Taken collectively, the intent is clear.  The United States’ renewable energy sector does not intend to rely on foreign suppliers to support its ascendancy as a green industry leader.  Such competition is exactly the type to encourage Beijing to increase focus on collecting against those U.S. companies involved in or developing new renewable energy technologies, as it has done in the past against companies Solar World and Westinghouse Nuclear (see below “Theft of Sensitive Information Leads to Consequences”.)

China Recognized as a Leader

Beijing is continually reinforcing its leadership role in green technology development, which is evidenced by the global community’s willingness to partner with China.  Beijing’s Belt and Road Initiative (BRI), a massive infrastructure development program that stretches from East Asia to Europe via land and sea corridors, has been an instrumental vehicle in reaching out to foreign governments to collaborate with China in renewable energy projects such as those focused on wind, solar, and hydro, and in some cases, nuclear power.  This effort has been extremely successful thus far with Chinese companies are actively investing in global green energy projects, helping to soften perception that it is a global polluter.[xxxi]

But these overtures are not just appealing for developing nations; Europe sees the benefit of cooperating with Beijing as well.  Greece is actively pursuing potential collaboration committing to phase out coal by 2028 with the help of Chinee investment in its green energy sector.[xxxii]The European Union (EU) writ large sees potential in collaborating with China on renewable energy.  Established in mid-2019, the EU Energy Cooperation Platform is a group dedicated to enhancing cooperation on energy, to include clean energy, by encouraging trust and understanding.[xxxiii]  While China is viewed as an economic competitor and systemic rival by the EU, it is also a necessary partner, especially when it comes to renewable energy as combined, both are responsible for one third of global final energy consumption.[xxxiv]  Given the global push to address climate change, these are the issues that many countries will need to weigh and consider when engaging China.

China’s Cyber Espionage Apparatus

The U.S. government views China as an economic competitor and a leading strategic threat that wants to surpass the United States as the leading global power.[xxxv]  As such, its political, economic, and military progress is all designed to support the country’s rise and to influence, reshaping the world order to suit Beijing’s interest.  Cyber espionage has become a vital instrument in supporting all of Beijing’s national security objectives, exploiting targets for a variety of sensitive data and intellectual property that help give the government decided advantage over its adversaries.  As a leading cyber power, there is little doubt that China possesses the necessary tools and capabilities to inflict destructive and disruptive operations.  However, China exploits the cyber domain primarily to collect information, conduct surveillance, disseminate propaganda, and conduct influence operations.  The common thread running through all of these activities is China’s recognition that information, and not necessarily the technology that facilitates its production and processing, is the most vital component of its cyber operations.  Cyber espionage supports a variety of areas to include but not limited to bolstering its economy, supporting Chinese companies, modernizing its military, and sustaining Beijing as the premier regional leader.

The 2019 Director of National Intelligence Worldwide Threat Assessment identified China as the most persistent cyber espionage threat, and the most active strategic competitor against the U.S. government and corporations.[xxxvi]  This is unsurprising given China has been implicated in economic espionage campaigns for several years, a feat that the then National Security Agency Director and U.S. Cyber Command Commander said was the “greatest transfer of wealth in history.”[xxxvii]  According to a Department of Justice DOJ testimony before the U.S. Senate’s Committee on the Judiciary, from 2011-2018, more than 90 percent of the DOJ cases alleging economic espionage by or to benefit a foreign state involved China, and more than “two-thirds of theft trade secrets had a nexus to China.”[xxxviii]  Such intellectual property theft has caused nearly USD 600 billion in losses, per the U.S. Trade Commission in 2017.[xxxix]

China’s cyber-collection apparatus includes a broad range of actors from intelligence, military, civilian, commercial, and non-governmental entities.  U.S. DOJ indictments against Chinese actors revealed their associations and affiliations with the People’s Liberation Army, the Ministry of State Security (an amalgamation of the U.S.’ Central Intelligence Agency and Federal Bureau of Investigation), Chinese nationals involved in hacking, and front companies from which hacking occurred.[xl]  Chinese nationals living abroad, state-owned enterprises, tech companies, and foreign partnerships are also leveraged to collect information for Beijing.[xli]

The diversity of these multi-faceted collection operations often results in overlapping activity between groups or individuals, making it difficult to ascertain if these are coordinated or competing activities.  Further complicating matters is the diverse areas of collection that are used to support national security, policymaking, scientific research and technology, and any other area from which China wants information.[xlii]  It has been hypothesized that since the national-level Five-Year Plans are indicative of the areas in which China wants to excel, it’s logical to presume these are areas of important intelligence interest.  This has borne out as a correlation can be made between the types of industries that have been targeted in the United States in the last few years and the strategic emerging industries that China has highlighted for development.  In February 2007, China National Defense News defined cyber warfare as the “use of network technology and methods to struggle for an information advantage in the fields of politics, economics, military affairs, and technology.”[xliii]  These are all areas that have been touched by Chinese cyber espionage.

Chinese global cyber espionage activities have targeted a wide variety of U.S. industries in all sectors.  According to a CNBC Global Chief Financial Officer 2019 survey, one in five U.S. companies reported that they had their intellectual property stolen by Chinese hacking during the previous 12 months.[xliv]  This emphasizes Beijing’s continued reliance on using cyber espionage as a cost-effective, far reaching collection capability against any and all targets of interest.  Some of the more notable incidents involving Chinese cyber operations against the Energy Sector or energy organizations include:

• In 2019, the DOJ charged a General Electric (GE) engineer and a Chinese businessman with stealing tech secrets with the intention of passing them onto the Chinese government.  The sensitive information involved proprietary files involving design models, engineering drawings, configuration files, and material specifications having to do with various components and testing systems associated with GE gas and steam turbines, per the DOJ indictment.[xlv]

• Also, in 2019, the U.S. Department of Energy warned energy companies about a China-linked hacking campaign as part of an effort to share more intelligence with private sector stakeholders.  The advanced warning came on the heels of a2018 DOJ indictment of two Chinese nationals that conspired to hack into organizations including those in the energy sector.[xlvi]

• In January 2016, Chinese company Sinovel stole intellectual property from the U.S. energy company American Semiconductor (AMSC).  According to a U.S. news source, Chinese cyber espionage actors sent a spoofed e-mail purporting to be from a member of AMSC’s board to other board members.  The e-mail subject line harvested a headline from a 2012 renewable energy article “A Harsh Winter for China’s Wind Industry and Its Leading Turbine Manufacturer: Sinovel” to entice recipients into accessing an attachment that was embedded with malware.[xlvii]

• In September 2012, Canadian energy company Telvent disclosed that Chinese hackers had breached its internal firewall and security systems, installed malicious software and stole project files related to one of its core offerings – OASys SCADA – a product that helps energy firms combine older IT technologies with new “smart grid” technologies.[xlviii]

• In 2011, a computer security company published a report detailing suspected Chinese hacking activities against the energy sector that had been transpiring since 2008/2009.  The campaign utilized a variety of attack techniques, including social engineering, spear-phishing, Windows vulnerability exploits, Active Directory compromises, and remote administration tools.[xlix]

Not a Harmless Crime: Theft of Sensitive Information Leads to Consequences

Chinese cyber espionage activities have had some serious consequences for compromised victims in the energy field.  In 2017 and again in 2018, Solar World filed for bankruptcy citing competition from China being a primary factor.[l]  Notably, in 2014, Solar World Americas asked the Department of Justice to investigate Chinese hackers affiliated with its military for breaching their networks in 2012 and stealing business documents and trade secrets.[li]  Also in 2017, Westinghouse Nuclear filed for bankruptcy three years after the same Chinese hackers conducted cyber espionage against it networks.[lii]  Westinghouse lost sensitive e-mails and confidential proprietary technical and design specifications for piping.[liii]  The Westinghouse incident drew concern from the highest levels of the U.S. government that China would attempt to purchase the company, a worrisome thought as China has been trying to expand its nuclear-energy power.[liv]  Given Beijing’s interest in remaining a global renewable energy leader, and based on the aforementioned activity targeting energy organizations, it’s clear that cyber espionage’s execution and exploitation provides Chinese companies with substantial competitive advantage.

While it cannot be ascertained that the ultimate intent behind these cyber espionage campaigns was to bankrupt either company, the fact remains that information stolen provided economic advantage to Chinese companies.  Moreover, evidence suggests that this type of activity directed against organizations involved in renewable energy projects is likely to continue.  As early as 2015 this activity may have been transpiring, per the testimony of one computer security company before a U.S. commission that tracked several Chinese hacking groups actively targeting Green energy technologies.[lv]  Therefore, as foreign companies develop their own advanced technologies to compete against China in this field, Beijing can be expected to direct part of its cyber-enabled collection apparatus against such targets in the hopes of obtaining insight into planning and development strategies to further fuel its economic aspirations.  Depending on the import of the desired information will dictate the types of tactics, techniques, and procedures (TTPs) used, as well as the frequency of the activity directed against its collection.

Conclusion

There is no indication that Beijing’s cyber espionage efforts will abate anytime soon, particularly as the international community maintains an unfavorable perception of China, according to October 2020 Pew Research.[lvi] Issues such as China’s COVI-19 response, trade frictions, and rampant intellectual property theft have contributed to China’s negative assessment by the global community.  These types of issues are catalysts for cyber espionage, especially when governments seek to obtain closed information about the political and economic intent and planning of foreign governments.  Key public and private stakeholders on such issues are typically in the crosshairs of Chinese cyber actors.

Elevating climate change to a global concern has garnered the support of governments throughout the world.  As such, implementing green energy approaches is integral into reducing carbon footprints and reliance on fossil fuels.  Leaders shepherding renewable energy gain a foothold in becoming not only an influencer in how green energy will be adopted, but also in supplying consumers with the requisite technologies.  China wants very much to be the leader of both and has identified renewable and green technologies in its impending Five-Year Plan (as it has the past two) as key components to its continued economic growth.

Since identifying renewable energy as a strategic industry, Beijing has propelled to a world leader in investing in these technologies, a curious development given China’s constant difficulties in reducing its carbon imprint.  There is growing evidence indicating that China uses cyber espionage to collect sensitive and intellectual property data to support its continued economic development.  Two incidents – one against Solar World and Westinghouse Nuclear, respectively – reveal what happens when Chinese cyber espionage targets an industry it wants to excel at.  In both instances, the proprietary information stolen was used to increase Chinese economic advantage, squeezing out competitors to the point of bankruptcy, while bolstering Chinese companies in the space.  Moreover, strategic concerns like “who controls power lines, intellectual property rights for technologies such as energy storage capacity and grid connectivity, and the availability of raw materials for constructing renewable equipment” [lvii] are the types of questions to which Beijing would like to know the answers.

With its latest Five-Year Plan ready for implementation, China again asserts its commitment to developing its renewable industry sector, suggesting that Beijing will continue to execute cyber espionage campaigns against foreign companies it deems a threat and/or is developing new technologies that compete against Chinese companies.  The types of information that could be viewed as having intelligence value are proprietary data, intellectual property, designs, future business planning, mergers and acquisitions, or global marketing campaigns.

It’s very difficult to provide advanced warning of potential nation state cyber-enabled activity against telecommunications targets.  Geopolitical concerns, economic jockeying for influence, and trade wars provide solid data points, but when it comes to network exploitation, stealth requires a surreptitious approach that won’t raise red flags.  That coupled with the sophistication that Chinese cyber actors have (although not always) employed in their operations puts them in an advantageous position.  Understanding China’s goals and Chinese cyber espionage TTPs helps renewable energy stakeholders identify the critical information assets that would be of value to these actors.  Because based on previous Chinese cyber espionage activity, one thing is clear: if Beijing finds an organization an intelligence and/or operational priority, it will expend the necessary resources to target the organization until it has achieved operational success.