Whilst the China power sector is set to remain in a league of its own, storm clouds are gathering on the horizon.
(PRWEB UK) 30 August 2013
Business Monitor has just released its latest findings on China’s power sector in its newly-published China Power Report. Business Monitor believes that whilst the China power sector is set to remain in a league of its own, storm clouds are gathering on the horizon. According to Business Monitor's Country Risk analysts the Chinese economy is likely to enter recession over the coming months. Despite record new credit issuance in recent months, the manufacturing sector has once again entered contraction, and high household savings rates by no means suggest that consumer demand will remain unscathed. As such, a slowdown in power demand appears to be on the cards. Moreover, Business Monitor note that rising coal prices are once again a key threat to the profitability of power generation companies operating in the domestic segment.
In terms of fuel mix, conventional thermal sources plays a key role and are expected to continue to dominate electricity generation in the coming years, as many projects under construction or planned will use coal or gas and China intensifies its efforts in prospecting and exploitation of conventional oil and gas resources. In particular, while other sources of power will play increasingly important roles, coal-fired sources of electricity dominate, and will continue to dominate, the electricity mix in China over the course of Business Monitor’s 10-year forecast period. Yet, they remark that rising coal prices are once again a key threat to the profitability of power generation companies operating in the domestic segment and Chinese utilities have placed collective pressure on the government to moderate proposed restrictions on imported coal, highlighting the difficulties China has in balancing the interests of its mining and power sectors as growth slows.
Aside from short-term considerations, and whilst it should be kept in mind that China will remain in a league of its own, macroeconomic and sector-specific factors also point to an equally moderate long-term outlook. In particular, Business Monitor highlights that while the energy white paper published in October 2012 should not be taken at face value, the substantial emphasis the document puts on conservation, energy efficiency and emissions reduction is certainly significant, and could influence the electricity markets.
That said, some more positive recent developments in the market discussed in the report include:
Guodian Group has secured approval from the Chinese environment ministry for the construction of a 314 metre-high hydroelectric dam on the Dadu River in the Chinese province of Sichuan. The hydroelectric plant, which will be the tallest facility of its kind in the country, is likely to entail a total investment of US$4bn. The plant will have a power generation capacity of 20GW. It should be noted that the plant, expected to be completed in more than 10 years, received approval despite environmental concerns.
Chinese company Shandong Electric Power Construction No.2 Company (SEPCO2) has entered into a construction and erection contract with Huaneng Shandong Power Generation Company, a regional subsidiary of China Huaneng Group. The contract is for the balance of plant for the Huaneng Laiwu's power plant expansion project with a power generation capacity of 2,000MW.
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