China Power Market Outlook to 2030 - Business Propensity ...eip.tri.org.tw/file/2/China_Power_Market_Outlook_to_2030.pdfChina Power Market Outlook to 2030 - Business Propensity Indicator

China Power Market Outlook to 2030 - Business Propensity Indicator (BPI), Market Trends, Regulation and Competitive Landscape

GDPE0513ICR / Published JUL 2011 Page 1

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China Power Market Outlook to 2030 - Business Propensity Indicator (BPI), Market Trends, Regulation and Competitive

Landscape Reference Code: GDPE0513ICR Publication Date: July 2011

Thermal Fuel is the Dominant Source in the Power Mix

The cumulative installed capacity for power in China was

977,019 MW (Megawatts) in 2010, and the thermal installed

capacity accounted for over 72% of installed capacity, that is,

705,779 MW. China has good domestic production of coal and

gas, which helps cater to the country‟s power requirements.

Coal plants are the dominating source of power generation in

the country. However, the government is trying to incorporate

clean coal technologies to its power production to reduce

carbon emissions from coal-fired plants.

Power Market, China, Cumulative Thermal Installed Capacity (MW), 2000-2010

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2000 2005 2010

Therm

al In

sta

lled C

apa

city (

MW

)

Source: GlobalData, National Bureau of Statistics of China, China Electricity Council

Continued Growth in Power Generation

Since the liberalization of the economy in China from the early

1990s, power generation in the country has been increasing at

a very fast pace to fulfill the industrial and commercial power

requirements of the country. During the forecast period,

electricity generation is expected to increase at a Compound

Annual Growth Rate (CAGR) of 11.3% from 1,377,891 GWh

(Gigawatt-hours) in 2000 to 4,011,219 GWh in 2010.

Power Market, China, Total Power Generation (GWh), 2000-2010

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

2000 2005 2010T

ota

l G

enera

tion (

GW

h)


Clean Energy in the Country

China has a lot of thermal installed capacity, especially in the

form of coal-fired plants, and as a result they have high carbon

emissions as well. Prior to 2005, there were very few renewable

energy power plants in the country; however, since then the

government has been encouraging the installation of a higher

percentage of non-thermal power plants in the country.

There is a lot of government support to increase the utilization

of non- thermal resources in the country. The new 12th Five

Year Plan (2011- 2015) draft was relased earlier this year, and

this plan includes a new target for cutting energy consumption

per unit of GDP (Gross Domestic Product) and also targets for

reducing carbon dioxide emissions per unit of GDP. The

government aims to increase energy consumption from non-

fossil fuel sources to 15% by 2020. There are compulsory

targets for generating utilities to generate power from non-

thermal resources as well. In April 2010, the new renewable

energy law took effect which included more detailed planning

and co-ordination of renewable energy with the country‟s

transmission grid planning as well. Such policies ensure that

there will be high growth in clean technology and renewable

energy in the coming years.




1 Table of Contents

1 Table of Contents .................................................................................................................................. 2 1.1 List of Tables .................................................................................................................................. 4 1.2 List of Figures ................................................................................................................................. 5

2 Introduction ........................................................................................................................................... 6 2.1 GlobalData Report Guidance .......................................................................................................... 7

3 Business Propensity Indicator Methodology .......................................................................................... 8 3.1 Methodology Adopted For Evaluating the Business Propensity Indicator for the Asia Pacific region

8 3.1.1 Capacity and Reserve Potential ............................................................................................ 8 3.1.2 Regulatory Scenario .............................................................................................................. 9 3.1.3 Investment Scenario .............................................................................................................. 9 3.1.4 Transmission and Distribution (T&D) Infrastructure ..............................................................11 3.1.5 Macro Economic Scenario ....................................................................................................12 3.1.6 Competitive Scenario ...........................................................................................................13

3.2 Methodology Adopted to Arrive at a Final Rank.............................................................................14 4 Power Market, China, Business Propensity Indicator ...........................................................................17

4.1 Capacity and Reserve Potential .....................................................................................................18 4.2 Regulatory Scenario ......................................................................................................................18 4.3 Investment Scenario ......................................................................................................................19 4.4 Transmission and Distribution Infrastructure .................................................................................19 4.5 Macroeconomic Factors ................................................................................................................20 4.6 Competitive Scenario .....................................................................................................................20 4.7 Conclusion .....................................................................................................................................21 4.8 Power Market, China, Business Propensity Indicator Ranking ......................................................22

4.8.1 Present Ranking ...................................................................................................................22 4.8.2 Future Ranking .....................................................................................................................23

5 China Power Market Analysis, 2000-2030 ...........................................................................................24 5.1 Demand and Consumption Scenario .............................................................................................24 5.2 Import and Export Scenario ...........................................................................................................25 5.3 Power Consumption, 2000-2030 ...................................................................................................26 5.4 Cumulative Installed Capacity, 2000-2030 ....................................................................................28

5.4.1 Cumulative Installed Capacity by Type of Power Plant: Percentage ....................................28 5.4.2 Cumulative Installed Capacity: Total Value, 2000-2030 .......................................................29 5.4.3 Cumulative Thermal Installed Capacity, 2000-2030 .............................................................32 5.4.4 Cumulative Hydro Installed Capacity, 2000-2030 .................................................................34 5.4.5 Cumulative Nuclear Installed Capacity, 2000-2020 ..............................................................36 5.4.6 Cumulative Renewable Installed Capacity, 2000-2030 ........................................................38

5.5 Power Generation, 2000-2030 .......................................................................................................40 5.5.1 Thermal Power Generation, 2000-2030 ...............................................................................43 5.5.2 Hydropower Generation, 2000-2030 ....................................................................................45 5.5.3 Nuclear Power Generation, 2000-2030 ................................................................................47 5.5.4 Renewable Power Generation, 2000-2030 ...........................................................................49

6 Power Market, China, Top Active and Upcoming Projects ...................................................................51 6.1 Active Power Projects ....................................................................................................................51

6.1.1 Top 10 Active Thermal Power Projects ................................................................................51 6.1.2 Top 10 Active Hydropower Plants ........................................................................................52 6.1.3 Top 10 Active Nuclear Commercial Reactors .......................................................................53 6.1.4 Top 10 Renewable Power Projects ......................................................................................54

6.2 Upcoming Power Projects .............................................................................................................55 6.2.1 Top 10 Upcoming Thermal Power Projects ..........................................................................55 6.2.2 Top 10 Upcoming Hydropower Projects ...............................................................................56 6.2.3 Top 10 Upcoming Nuclear Commercial Reactors .................................................................57 6.2.4 Top 10 Upcoming Renewable Power Projects .....................................................................58

7 Power Market, China, Regulatory Structure .........................................................................................59 7.1 Regulatory Structure, Overview .....................................................................................................59 7.2 Restructuring of Power Market ......................................................................................................59 7.3 Latest Reforms Aim at Increasing Competition ..............................................................................59 7.4 Policies to Support Lower Carbon Technologies ...........................................................................60




7.5 Proposals between China and European Union to Strengthen the Carbon Capture and Storage (CCS) Projects ...............................................................................................................................60

7.6 Development Plan for Renewable Energy .....................................................................................60 8 Power Market, China, Infrastructure .....................................................................................................61

8.1 Infrastructure Overview ..................................................................................................................61 8.1.1 Infrastructure Overview, Grid Interconnection ......................................................................61 8.1.2 Infrastructure Overview, Infrastructure Development ...........................................................61 8.1.3 Infrastructure Overview, Transmission Line Lengths, 2000-2020 .........................................62 8.1.4 Infrastructure Overview, Distribution Line Lengths (Ckm), 2000-2020 .................................63

9 Power Market, China, Competitive Landscape: Snapshot of Top Five Power Companies ..................64 9.1 Market Share of Major Power Generating Companies ..................................................................64 9.2 Key Companies in the Chinese Power Market, China HuaNeng Group ........................................65

9.2.1 China HuaNeng Group, Company Overview ........................................................................65 9.2.2 China HuaNeng Group, Business Description ......................................................................65 9.2.3 China HuaNeng Group, SWOT Analysis ..............................................................................66

9.3 Key Companies in the Chinese Power Market, China Datang Corporation ...................................69 9.3.1 China Datang Corporation, Company Overview ...................................................................69 9.3.2 China Datang Corporation, Business Description .................................................................69 9.3.3 China Datang Corporation, SWOT Analysis .........................................................................71

9.4 Key Companies in the Chinese Power Market, China Guodian Corporation .................................74 9.4.1 China Guodian Corporation, Company Overview .................................................................74 9.4.2 China Guodian Corporation, Business Description ...............................................................74 9.4.3 China Guodian Corporation, SWOT Analysis .......................................................................75

9.5 Key Companies in the Chinese Power Market, China Huadian Corporation .................................77 9.5.1 China Huadian Corporation, Company Overview .................................................................77 9.5.2 China Huadian Corporation, Business Description ...............................................................77 9.5.3 China Huadian Corporation, SWOT Analysis .......................................................................78

9.6 Key Companies in the Chinese Power Market, China Power Investment Corporation ..................82 9.6.1 China Power Investment Corporation, Company Overview ..................................................82 9.6.2 China Power Investment Corporation, Business Description................................................82 9.6.3 China Power Investment Corporation, SWOT Analysis ........................................................83

10 Appendix ..............................................................................................................................................86 10.1 Market Definitions ..........................................................................................................................86

10.1.1 Power ...................................................................................................................................86 10.1.2 Installed Capacity .................................................................................................................86 10.1.3 Active Installed Capacity.......................................................................................................86 10.1.4 Electricity Generation ...........................................................................................................86 10.1.5 Thermal Power .....................................................................................................................86 10.1.6 Hydro Power .........................................................................................................................86 10.1.7 Nuclear Power ......................................................................................................................86 10.1.8 Renewable Energy Resources .............................................................................................86 10.1.9 Generation Company ...........................................................................................................86 10.1.10 Electricity Consumption ........................................................................................................86 10.1.11 Transmission Network ..........................................................................................................86 10.1.12 Interconnector .......................................................................................................................86 10.1.13 Transmission and Distribution Loss ......................................................................................87

10.2 Abbreviations .................................................................................................................................87 10.2.1 Coverage ..............................................................................................................................88 10.2.2 Secondary Research ............................................................................................................88 10.2.3 Primary Research .................................................................................................................88

10.3 Contact Us .....................................................................................................................................89 10.4 Disclaimer ......................................................................................................................................89




1.1 List of Tables

Table 1: Ease of Doing Business-Categories and Subcategories ...........................................................10 Table 2: Scoring Methodology for the Parameters ..................................................................................15 Table 3: Best Score for Present and Future Scenario ............................................................................16 Table 4: Power Market, China, Breakdown of Electricity Consumption, By Sector (%), 2009 ................24 Table 5: Power Market, China, Total Annual Imports and Exports (GWh), 2000-2009 ...........................25 Table 6: Power Market, China, Power Consumption (GWh), 2000-2030 ................................................27 Table 7: Power Market, China, Cumulative Installed Capacity (MW), 2000-2030 ...................................30 Table 8: Power Market, China, Cumulative Thermal Installed Capacity (MW), 2000-2030 ....................33 Table 9: Power Market, China, Cumulative Hydro Installed Capacity (MW), 2000-2030 ........................35 Table 10: Power Market, China, Cumulative Nuclear Installed Capacity (MW), 2000-2030 .....................37 Table 11: Power Market, China, Cumulative Renewable Installed Capacity (MW), 2000-2030 ................39 Table 12: Power Market, China, Power Generation (GWh), 2000-2030 ...................................................41 Table 13: Power Market, China, Thermal Power Generation (GWh), 2000-2030 .....................................44 Table 14: Power Market, China, Hydropower Generation (GWh), 2000-2030 ..........................................46 Table 15: Power Market, China, Nuclear Power Generation (GWh), 2000-2030 ......................................48 Table 16: Power Market, China, Renewable Power Generation (GWh), 2000-2030 ................................50 Table 17: Power Market, China, Active Thermal Power Plants.................................................................51 Table 18: Power Market, China, Top 10 Active Hydropower Plants .........................................................52 Table 19: Power Market, China, Top 10 Active Nuclear Commercial Reactors ........................................53 Table 20: Power Market, China, Top 10 Active Renewable Power Plants ................................................54 Table 21: Power Market, China, Top 10 Upcoming Thermal Power Plants ..............................................55 Table 22: Power Market, China, Top 10 Upcoming Hydropower Plants ...................................................56 Table 23: Power Market, China, Top 10 Upcoming Nuclear Commercial Reactors ..................................57 Table 24: Power Market, China, Top 10 Upcoming Renewable Power Plants .........................................58 Table 25: Power Market, China, Transmission Line Lengths (Ckm), 2000-2020 ......................................62 Table 26: Power Market, China, Distribution Line Lengths (Ckm), 2000-2020 .........................................63 Table 27: Power Market, China, Installed Capacity Share of Major Power Generating Companies (%),

2009 ..........................................................................................................................................64 Table 28: China HuaNeng Group, SWOT Analysis, 2010 ........................................................................66 Table 29: China Datang Corporation, SWOT Analysis, 2010 ...................................................................71 Table 30: China Guodian Corporation, SWOT Analysis, 2010 .................................................................75 Table 31: China Huadian Corporation, SWOT Analysis, 2010 .................................................................78 Table 32: China Power Investment Corporation, SWOT Analysis, 2010 ..................................................83 Table 33: Abbreviations, ...........................................................................................................................87




1.2 List of Figures

Figure 1: Weightage Assigned to the Six Factors (%),2000-2020 ...........................................................14 Figure 2: Power Market, China, Business Propensity Indicator ...............................................................17 Figure 3: Power Market, China, Business Propensity Indicator Ranking .................................................22 Figure 4: Power Market, China, Breakdown of Electricity Consumption, By Sector (%), 2009 ................24 Figure 5: Power Market, China, Total Annual Imports and Exports (GWh), 2000-2009 ...........................25 Figure 6: Power Market, China, Annual Power Consumption (GWh), 2000-2030 ....................................26 Figure 7: Power Market, China, Cumulative Installed Capacity (MW), 2010 ............................................28 Figure 8: Power Market, China, Cumulative Installed Capacity (MW), 2000-2030 ...................................29 Figure 9: Power Market, China, Installed Capacity Comparison of 10 Asia Pacific Countries(MW), 2010-

2020 ..........................................................................................................................................31 Figure 10: Power Market, China, Cumulative Thermal Installed Capacity (MW), 2000-2030 ....................32 Figure 11: Power Market, China, Cumulative Hydro Installed Capacity (MW), 2000-2030 ........................34 Figure 12: Power Market, China, Cumulative Nuclear Installed Capacity (MW), 2000-2030 .....................36 Figure 13: Power Market, China, Cumulative Renewable Installed Capacity (MW), 2000-2030 ................38 Figure 14: Power Market, China, Power Generation (GWh), 2000-2030 ...................................................40 Figure 15: Power Market Outlook, China, Annual Generation Comparison of 10 Asia Pacific

Countries(MW), 2010-2020 .......................................................................................................42 Figure 16: Power Market, China, Thermal Power Generation (GWh), 2000-2030 .....................................43 Figure 17: Power Market, China, Hydropower Generation (GWh), 2000-2030 ..........................................45 Figure 18: Power Market, China, Nuclear Power Generation (GWh), 2000-2030 ......................................47 Figure 19: Power Market, China, Renewable Power Generation (GWh), 2000-2030 ................................49 Figure 20: Power Market, China, Installed Capacity Share of Major Power Generating Companies (%),

2009 ..........................................................................................................................................64




2 Introduction

Since 1979, China has reformed and opened its economy to the world. The liberalization of the country‟s

markets occurred in the 1990s and 2000s. Historically, the country has averaged a growth rate of 10%

and all the industries have been booming in the country. China presents as the most promising Asia-

Pacific market for majority of the power generation and equipment market along with other industries. The

country‟s rapid industrialization has increased the demand for power from energy-intensive industries.

In 2002, in line with the power reform plan, China‟s electricity generation was separated from grid

operations and separate entities were created to govern each. The generation assets of the State Power

Corporation were split into five newly created generating companies known as the Big Five, namely, the

China Datang Corporation, the China Guodian Corporation, the China Huadian Corporation, the China

HuaNeng Group and the China Power Investment Corporation. The transmission and distribution assets

were separated into two major grid companies, namely, the State Grid Corporation of China (SGCC) and

China Southern Power Grid Company Limited. In 2003, the State Electricity Regulatory Commission

(SERC) was established by the State Council, which is responsible for developing laws and regulations

and performing administrative and regulatory duties for the national power industry. The National

Development and Reform Commission (NDRC), under the State Council, is a macroeconomic

management agency. Its major functions include approving major power projects and formulating plans

for the development of the energy sector.

The accelerated development of China‟s renewable energy industry has been promoted by a combination

of government encouragement and market guidance. The government of China has developed various

financial and regulatory initiatives to promote renewable energy sources. The main regulatory policy

framework for renewable energy in China is based on the national development plan and the Renewable

Energy Law. The Law, effective from January 1, 2006, set an obligatory target that 10% of China‟s power

capacity should be generated from renewable energy sources by 2010.

The SGCC, a state-owned corporation, is the largest electricity transmission and distribution company in

China. It operates with five subsidiaries, namely, North China Grid Company Ltd, Northwest China Grid

Company Ltd, Northeast China Grid Company Ltd, East China Grid Company Ltd and Central China Grid

Company Ltd. China Southern Power Grid Company Limited is the state-owned enterprise for power

transmission, covering China's five southern provinces of Guangdong, Guangxi, Yunnan, Guizhou and

Hainan. China has wide-ranging cross-regional interconnections and is moving towards a nationwide

interconnected grid system. There are seven inter-provincial power networks, namely, Northwest China,

Northeast China, East China, Central China, North China, South China and Sichuan and Chongqing.

There are also five independent provincial-level power networks, namely, Xinjiang, Hainan, Shandong,

Fujian and Tibet.

The demand from the industrial sector has witnessed the highest growth in recent years in China.

Increased demand from energy-intensive industries, along with increases in the standard of living,

progress in rural electrification and a decline in rural electricity prices, and an increase in consumption in

the residential sector, have rapidly increased power consumption in the country. The cumulative installed

capacity of China was 977,019 Megawatts (MW) in 2010, with thermal sources accounting for over 72%

of installed capacity. The increasing demand is being met by the installation of new generating capacity.




2.1 GlobalData Report Guidance

The report comprises an executive summary capturing the key growth trends in the China power

market.

The next chapter covers the methodology to Business Propensity Indicator for the country.

The next chapter covers the Business Propensity Indicator analysis of the country from 2000-2020

The next chapter covers the demand and consumption scenario of the market, import and export

scenario, and the power consumption patterns from 2000-2010 with forecasts to 2030.

This is followed by cumulative capacity and power generation information and the segmentation by

source of energy from 2000–2010, with forecasts to 2030.

The following chapter provides information on the top active and planned power plants, segmented

by the source of energy.

The chapter on regulatory structure describes in brief the power regulatory structure, prominent

policies and policies influencing the future of the power market.

The chapter on infrastructure shows data on the electricity transmission infrastructure and future

development plans.

The last chapter describes the competitive landscape of the country‟s power market, with a complete

description and SWOT analysis of the top companies in the market.




3 Business Propensity Indicator Methodology

3.1 Methodology Adopted For Evaluating the Business Propensity Indicator for the Asia Pacific region

The business propensity indicator is evaluated for 17 countries in the Asia Pacific region. This indicator is

arrived at based on detailed analysis of each of the countries on six key factors, which are likely to have

a huge impact on the growth of the power industry in that country. This analysis is further scaled down

wherein a series of parameters under each factor are analyzed. These parameters have been identified

on the basis of GlobalData‟s understanding of the power market and discussions with industry experts

across a broad spectrum of the power supply chain.

The seventeen countries are evaluated on factors such capacity and reserve potential, the regulatory,

economic, investment and competitive scenarios, and the transmission and distribution infrastructure for

both the current and future, thereby identifying investment potential in the power sector in each country.

Each of the seventeen countries in the region are ranked from 1 to 17 based on the scores for the future

scenario. The current scenario scores help in understanding the prevalent power market in that country.

The six key factors identified to arrive at the business propensity indicator for a country are as follows:

3.1.1 Capacity and Reserve Potential

The capacity and reserve potential as a factor evaluates the country on certain key parameters such as

energy security and its reliance on a number of technologies to meet its power requirements. The final

outcome attempts to analyze the country‟s energy and power independence.

There are four key parameters that are evaluated in order to arrive at a final score of this factor. These

are as follows:

3.1.1.1 Total Installed Capacity

Installed capacity in a country is an indicator of the total size of the power sector.

Current Scenario (2010)

This parameter evaluates the current installed capacity in the country.

Future Scenario (2020)

This parameter evaluates the forecasted installed capacity in the country.

3.1.1.2 Compound Annual Growth Rate (CAGR) of Installed Capacity

The CAGR of the installed capacity is an indicator of the rate of development and investment in the power

generating capacity of the country. A higher CAGR of installed capacity indicates strong investments in

the generating capacity of the country.

Current Scenario (2000-2010)

This parameter evaluates the growth of installed capacity in the country over the last decade.

Future Scenario (2011-2020)

The parameter is an indicator of the likely rate of growth in the generating capacity foreseen for the

country over the coming decade.




3.1.1.3 Power Diversity Mix (2010)

This parameter evaluates the level of power diversity mix in the country. It looks at the number of

technologies used for power generation in the country and the total percentage of the highest technology

in the total capacity mix in order to evaluate this parameter. Strength of power diversity mix indicates the

countries reliance on a number of technologies and fuels to meet its power needs.


In the current scenario this parameter looks at the number of technologies used in the country to generate

power and it also evaluates the percentage of reliance on the largest technology as of 2010.


This parameter looks at the technology dependence on various fuel sources for power generation in the

future. A country‟s dependence on a single technology to meet its future needs is also considered while

evaluating this parameter.

3.1.1.4 Reserve Potential

Setting up of power plants in a country depends, to a large extent, on the fuel reserves that the country

possesses. The fuel reserves in a country help in evaluating whether the country has the current and the

potential resources to be able to meet its power needs. The final outcome helps in evaluating the

country‟s self sustainability to meet its power needs.


In the present scenario this parameter evaluates the present fuel reserve potential in the country as of

2010.


In the future scenario this parameter evaluates the future fuel reserve potential in the country as is

expected in 2020.

3.1.2 Regulatory Scenario

The regulatory scenario of the countries is evaluated on the basis of two parameters, namely the

regulations pertaining to power generation and transmission and emission specific regulations. In the

future, the intentions of the government on these two parameters have been analyzed.

3.1.3 Investment Scenario

The investment scenario in a country looks at the investment opportunity available in the power sector. In

order to arrive at this, the investments made by both the government and private sector are considered.

The parameters evaluated to arrive at a score for this factor are as follows:

3.1.3.1 Foreign Direct Investment (FDI) in Power

The percentage of FDI allowed in a country‟s power sector is an indicator of the investment scope for

foreign players. The higher the allowed percentage of FDI the better is the investment scenario for foreign

players in the country‟s power sector.

Present Scenario (2010)

The parameter evaluates the FDI allowed in the power sector as of 2010


This parameter evaluates the intent for FDI in the power sector for the country in the future

3.1.3.2 Governmental and private investments in the power sector

This parameter evaluates the investments made by the government and the private players in the

country‟s power sector. For the future scenario, any plans or intentions to invest in the power sector are

captured to evaluate this parameter.




3.1.3.3 Ease of Doing Business

The ease of doing business is a global ranking exercise on 183 countries conducted by the World Bank.

This parameter averages the country's percentile rankings on 10 topics, made up of a variety of

indicators, giving equal weights to each topic. 1 is the highest rank (highest ease of doing business) and

183 is the lowest rank (Ranked lowest on ease of doing business). The various categories considered for

ranking the countries are:

Present Scenario (2009) (Pre recession Scenario)

This ranking indicates the pre recession ranking of the countries.

Future scenario (2011) (Post recession Scenario)

This ranking indicates the post recession ranking of the countries. These rankings are also a good

indicator of the country‟s future ease of doing business.

Table 1: Ease of Doing Business-Categories and Subcategories

Categories Subcategories

Starting a business Procedures, time, cost and paid-in minimum capital to open a new business

Protecting investors Strength of investor protection index , extent of disclosure index , extent of director liability index and ease of shareholder suits index

Dealing with construction permits

Procedures, time and cost to obtain construction permits, inspections and utility connections

Paying taxes Number of tax payments, time to prepare and file tax returns and to pay taxes, total taxes as a share of profit before all taxes are paid

Employing workers Trading across borders

Registering property Procedures, time and cost to transfer commercial real estate

Enforcing contracts Procedures, time and cost to resolve a commercial dispute

Getting Credit Strength of legal rights index, depth of credit information index

Closing of business Recovery rate in bankruptcy

Starting a business Procedures, time, cost and paid-in minimum capital to open a new business

Protecting investors Strength of investor protection index, extent of disclosure index, extent of director liability index and ease of shareholder suits index

Dealing with construction permits

Procedures, time and cost to obtain construction permits, inspections and utility connections

Paying taxes Number of tax payments, time to prepare and file tax returns and to pay taxes, total taxes as a share of profit before all taxes are paid

Employing workers Trading across borders

Registering property Procedures, time and cost to transfer commercial real estate

Enforcing contracts Procedures, time and cost to resolve a commercial dispute

Getting Credit Strength of legal rights index, depth of credit information index

Source: GlobalData, Doingbusiness.com




3.1.4 Transmission and Distribution (T&D) Infrastructure

The robustness of a country‟s transmission and distribution infrastructure is a strong indicator of the

strength of the power sector in that country. A strong infrastructure indicates a stable market for

investment in the generation side of the power sector.

This factor evaluates the following parameters to arrive at a final score for the factor.

3.1.4.1 Existing Transmission and Distribution Infrastructure

This parameter evaluates the existing T&D infrastructure in the country. It takes into account whether the

country‟s available infrastructure is able to meet its present requirements. It is indicative of the robustness

of the T&D infrastructure.


It evaluates the robustness of the existing T&D infrastructure in the country.


The parameter evaluates the upcoming T&D infrastructure in the country and its impact on the power

sector.

3.1.4.2 Transmission and Distribution Interconnections

Interconnections are a strong indicator of the country‟s ability to meet its electricity demand, either peak or

normal load through imports. The existence of a strong network of interconnections also allows the

country to participate in inter-regional power pools, thereby generating additional revenues.

3.1.4.3 Electrification Ratio

The electrification ratio is the ratio of households with an electricity connection to total households in the

country. The countries are compared on the electrification ratio and ranked in descending order. A high

electrification ratio indicates high electricity penetration levels, made possible by the existence of robust

transmission and distribution networks. A country with a better transmission and distribution infrastructure

will have a higher probability of generating more electricity in the future, if other needs such as fuel

resources and financial requirements are met. Hence, for the purpose of this study the countries with

higher electrification rates are ranked higher.

3.1.4.4 T&D Losses

The transmission and distribution losses are the amount of power lost while getting transmitted from one

point to another. These include losses in transmission between sources of generation and points of

distribution and in the distribution to consumers, including pilferage.

High transmission losses in a country signify a poor transmission infrastructure and loss of revenue to the

utilities and other entities operating in sale of electricity. Hence for this study, countries with greater

transmission and distribution losses have been ranked lower.




3.1.5 Macro Economic Scenario

Macro economic factors are indicative of the behavior of the economy as a whole which in turn will

determine the growth of the power sector in the country. As such, certain parameters including population

growth, Gross Domestic Product (GDP) growth, and political scenario are analyzed to understand the

performance of the economy.

3.1.5.1 Actual Consumption and CAGR of Consumption

This parameter is indicative of the actual consumption and the rate at which electricity consumption is

growing in the country. This helps in understanding the consumption pattern in the country and how it is

going to change in the future. A high rate of growth indicates that the necessary steps may be taken by

the governments of the respective countries to increase electricity generation. This makes countries with

higher consumption and high growth rates more attractive.


The electricity consumption in the country as of 2010 is evaluated along with the CAGR of electricity

consumption over the last decade.


The electricity consumption expected in the country as of 2020 is evaluated along with the CAGR of

electricity consumption forecasted over the coming decade.

3.1.5.2 CAGR of GDP

GDP, which is the most accurate snapshot of the economy as a whole, will determine the pace of

development in the power sector.

Present Scenario (2005-2010)

CAGR of GDP for the last five years is calculated


CAGR of GDP forecasted for the next five years is calculated

3.1.5.3 Actual population and CAGR of Population

This parameter is indicative of the actual population per square km in the country and the rate at which

the population is growing. Growth in the population is indicative of the growth of the power sector in the

country.

Present Scenario (2000-2010)

Actual population per square km in the country as of 2010 and population growth over the last decade.


Actual population per square km expected in the country as of 2020 and population growth foreseen for

the next decade.

3.1.5.4 Political Risk

It is indicative of the stability of the government and policies favoring the country‟s economic

development. A stable government will result in cohesive policy which in turn will spur developments in

the power sector.


It indicates the stability of the government at present by underlying key policies favoring the development

of the power industry.


It indicates the forecasted stability of the government by considering likely policies that will influence the

development of the market.




3.1.6 Competitive Scenario

The competitive scenario factor evaluates the competition in the power sector of a country. This

parameter is important to understand the level of competition and hence the growth available in the power

sector of the country. This factor is evaluated keeping in mind the following parameters:

3.1.6.1 Entry Barrier

This parameter evaluates the barriers of entry in the power sector of the country. The higher the entry

barrier the more difficult it is for a new entrant to enter the market.


This parameter evaluates the barrier of entry in the power sector in the present scenario.


This parameter evaluates the barrier of entry that may impact on the market in the future.

3.1.6.2 Degree of Competition

This parameter evaluates the market structure in the power market of a country, such as the number of

competitors operating in the market and their installed capacity. It also evaluates the level of competition

in the power retail sector in the country.


The parameter evaluates the degree of competition and the retail power market in the present scenario in

the country‟s power sector.


The parameter evaluates the degree of competition foreseen in the future and the expected retail power

activity in the future in the county.

3.1.6.3 Power Equipment Market Competition

This parameter evaluates the competition in the country‟s equipment market. A higher level of competition

indicates a lower degree of monopoly and a low barrier to entry in the equipments market. It is an

indicator of the growth potential in the equipment market.


The parameter evaluates the degree of competition in the present equipment market in the power sector.


The parameter evaluates the foreseen degree of competition in the equipment market in the power sector

in the future.




3.2 Methodology Adopted to Arrive at a Final Rank

In order to rank the seventeen countries in the Asia Pacific region the following methodology has been

adopted:

Each of the factors has been assigned a weightage based on the level of impact each factor has on the

business propensity indicator of the country. These weightages have been arrived at based on a series of

discussions with industry experts across the supply chain. The weightages assigned are as follows:

Figure 1: Weightage Assigned to the Six Factors (%),2000-2020

0%

5%

10%

15%

20%

25%

Capacity and Reserve Potential

Regulatory Scenario

Investment Scenario

Transmission and DistributionInfrastructure

Macroeconomic Scenario

Competitive Scenario

Source: GlobalData

The factor, capacity and reserve potential of a country, has been assigned a strong weightage of 25%, as

it evaluates the existing and future growth in the country‟s installed generating capacity, which is expected

to have the biggest impact on the country‟s business propensity indicator. The reserve potential in the

country for the present and future scenarios is also evaluated. The growth of the power sector is largely

dependent on the reserve potential in the country as well as the growth of the existing generating

infrastructure and hence this factor will have a strong impact on the business propensity indicator of the

country.

The regulatory infrastructure factor in a country is assigned a weightage of 15%. This is because the

present regulatory reforms in the country as well as in the future are expected to drive the growth of the

power sector. Governmental regulations and incentives are expected to be one of the biggest drivers for

power sector investment.

The investment scenario factor in a country is assigned a weightage of 15%.This factor is evaluated on

the basis of investments allowed and driven by the government and the private sector in the country.

Larger investments will drive the growth in the country‟s power sector.

The transmission and distribution infrastructure factor is also assigned a weightage of 15%.This factor

evaluates the robustness of the transmission and distribution infrastructure to facilitate growth in the

power sector.




The macro economic factor is assigned a weightage of 15%. This factor evaluates the economic growth of

the country. Economic development of a country largely impacts on the growth of the power sector and

hence this factor has been assigned a strong weightage.

The competitive scenario factor has been assigned a weightage of 15%.This factor evaluates the level of

competition in the country‟s power sector and is an indicator of the growth opportunity in the power

industry.

Each parameter in the above mentioned factors has been evaluated from a scale of 1 to 6 with 1 been the

lowest score and 6 indicating the highest growth.

Table 2: Scoring Methodology for the Parameters

Score

1 Lowest

2

3

4

5

6 Highest

Source: GlobalData




The Best Case Scenario is as follows:

The final score for the present as well as the future scenario will be out of a total score of 20.

Table 3: Best Score for Present and Future Scenario

Factor Weightage Parameter Best

Score

Capacity and Reserve Potential 25%

Existing Installed Capacity 6

Power Diversity Mix 6

Resource Reserve Potential 6

CAGR of Installed Capacity 6

Regulatory Scenario 15% Regulatory for generation and transmission 6

Regulatory for emissions 6

Investment Scenario 15%

FDI in Power 6

Government and Private Investments 6

Doing Business Rank 6

Transmission and Distribution Infrastructure

15%

Existing T&D 6

Existing Interconnection 6

T&D Losses 6

Electrification Ratio 6

Macro Economic 15%

GDP CAGR 6

Population per sq. km, CAGR of population 6

Actual Consumption, CAGR of consumption 6

Political Risk 6

Competitive Scenario 15%

Entry Barrier 6

Degree of Competition in power generation, retail sector competition

6

Equipment Market 6

Total 20

Source: GlobalData




4 Power Market, China, Business Propensity Indicator

The following section analyses China on the basis of six factors in order to analyze the power market of

the country. The analysis focuses on both the present scenario of the market as well as the expected

future scenario. The factors which have been considered in the analysis are the capacity and resource

potential in the country, the regulatory mechanism in power sector, the investment scenario in the power

sector, transmission and distribution infrastructure, macroeconomic conditions and the competitive

scenario in the country‟s power sector.

Figure 2: Power Market, China, Business Propensity Indicator

1

0

1

2

3

4

5

6

Future Scenario

Bu

sin

ess P

rop

en

sit

y S

co

re

Present Scenario

Capacity and Reserve Potential

Regulatory Environment

Investment Scenario

T&D Infrastructure

Macroeconomic Scenario

Competitive Scenario

High Propensity Indicator

Medium Propensity

Indicator

Low Propensity Indicator

Low

Score

High

Score

Source: GlobalData

*The scores of individual factors cannot be compared among themselves as the final score for each factor

differs. This chart is indicative of the change in the factors in present and future scenario




4.1 Capacity and Reserve Potential

China is the main driver for the Asia-Pacific power market, with an installed capacity base of 977,019 MW

in 2010. During the period of 2000 to 2010, the installed capacity has been increasing at a Compound

Annual Growth Rate (CAGR) of 11.8% and as a result presenting various opportunities for huge

investments in the power sector. In the future, the country is expected to increase its installed capacity to

2,248,180 MW at a very high CAGR of 8.5%. The country employs all four technologies (thermal, hydro,

nuclear and renewable) with thermal sources accounting for over 72% of the total installed capacity. The

share of renewable and nuclear energy in the country‟s power mix has been relatively low. However, the

country is expected to increase the share of other technologies to diversify its portfolio. By 2020, thermal

installations are expected to account for just 64.8% of total installed capacity. The government has set

huge targets for increasing installation capacities for all types of power plants. The country aims to

increase the use of non-fossil fuel to 15% by 2020. This includes hydro, renewable and nuclear power

generated from domestic sources.

The majority of fuel requirements in china are met by domestic fuel production. Coal is completely met by

domestic production and most gas demand is met through domestic production as well. The country has

very small amounts of liquified natural gas (LNG) imports that are required to meet the gas requirements

in the country. The uranium for nuclear reactors is imported. With the level of supply required by its

energy demand, however, there is a good chance that China will be a net importer of coal by 2020. This is

one of the main reasons for the country‟s focus on diversifying its energy portfolio and increasing the

share of other technologies in its power mix. Natural gas imports in the country will also increase in future

and so China is collaborating with Iran and other countries for a guaranteed LNG supply. China, being a

vast country, has a lot of potential in renewable energy, in terms of solar, biomass, wind, hydro and

geothermal power, which is expected to be capitalized on in order to maximize its renewable installed

capacity in future.

4.2 Regulatory Scenario

China has been undergoing market reforms in its power market since the early 1990s. Since then, China

has been trying to open the power market up to foreign players, increase investments and foster

capitalism in their economy. During the 2000s capacity installation increases were encouraged by the

government and as a result they have increased at a fast pace as well. Since 2003, the government has

looked into increasing the use of renewable energy in the country and has started setting targets for

increasing non-thermal resources. The government has also grown concerned over the level of carbon

emissions produced in the country. They have been shutting down inefficient, small power plants and

banned the construction of thermal power plants with capacity lower than 600 MW. The Chinese

government has also recently passed a regulation through which a part of electricity tariff would be

determined by the cost of generation. They have also introduced a system, where the country would be

divided into regions and the cost of each renewable energy installation would be different according to the

potential of each technology in each region. In March 2009, China opened 20% of its power market to

industries with high power consumption. These companies have been directly allowed to purchase power

from power generation companies.

The country is setting more stringent emission standards to reduce the emissions as well. At the end of

2009, China announced that it would reduce the carbon intensity of its GDP by 40-45% relative to 2005

levels by 2020. By 2020, utilities will be required to have 8% of their capacity and 3% of their power

generation from non-hydro renewable sources. In September 2007, the NDRC published a long-term

renewable goal report according to which, 30,000 MW of wind power, 30,000 MW of biomass and 1,800

MW of solar power were to be developed by 2020. The new renewable energy law took effect in 2010 and

this law included detailed plans for renewable energy and also addressed the issue of co-ordination of

renewable energy with the country‟s transmission grid planning. Various provisions like a guarantee of

renewable power purchase along with deadlines and penalties for non-compliance are included in the law.




4.3 Investment Scenario

China is a communist country with a closed economy, which makes it difficult prospect for investment.

However, due to the huge opportunities in the country and the amount of investment required there, it has

a very good investment scenario. In 2010 alone, the country recorded investment of $106 billion

(excluding investments in the stock market). The country has a 100% FDI allowance in certain types of

power generation projects and restriction in some other types. Traditional coal power plant installations

are restricted to FDI, however, renewable, hydro and gas- fired plants are open to foreign investments. In

2010, the country ranked 78 on the ease of doing business list. There is a high amount of investment from

the private as well as public sector in the country. In 2009, the country invested $34.6 billion in clean

energy, which was the highest investment for clean energy that year. There was an investment of $12.11

billion for Ultra high voltage (UHV) transmission lines during 2009 and 2010 as well.

Power equipment manufacturers are being encouraged in the country and research grants are available

for these companies. The government has also encouraged the foreign transfer of knowledge in the

power sector when building new technologies in the country. China is expected to be one of the major

markets for smart grid investments in the future. The government is also encouraging investment in green

grids and smart grids in the country. The government has finalized a proposal for a huge amount of

money for solar farms and rooftop panels in the country. Other than this, there are a number of carbon

capture and storage projects and other power projects that are being promoted in the country, and private

companies are investing in each of these.

4.4 Transmission and Distribution Infrastructure

China is 92% electrified and the government is concentrating on improving the country‟s infrastructure

and increasing power line lengths to fully electrify the country. The main power grids cover all the cities

and most of the rural areas. Recently, 500 kilo-volt (kV) grids have begun to replace 220kV grids. China

aims to have a strong smart grid in place by 2020. Between 2000 and 2020, the country‟s transmission

line length increased at a CAGR of 7.6%. In the future, between 2011 and 2020, the transmission line

length is expected to increase at a CAGR of 9.2%. The total distribution line length is expected to grow at

a CAGR of 8.6% between 2011 and 2020 from 18,738,429 circuit kilometer (Ckm) in 2011 to 39,501,312

Ckm in 2020.

The national transmission and distribution body recently commercially deployed a 1000kV ultra high

voltage line for a length of 640km. The target is to build 17,600 km of UHV lines by 2012. The extra-high

voltage technology of smart grids will facilitate smaller losses and long distance and high capacity

networks. According to the Chinese Electricity Council‟s investment plan around $390 billion would be

spent on grid construction by 2015. The target is to build three west-east and three north-south long

distance lines in the country. With the government‟s focus on increasing the number renewable energy

projects, the state transmission body has combined the aims in order to increase the number of

transmission grid connections with increasing the renewable installed capacity in the country as well. The

government aims to build an ultra high voltage transmission network that could fully absorb the non-fossil

fuel generated electricity available, and these plans would also help bring down the current transmission

loss level of 5- 6%.




4.5 Macroeconomic Factors

The GDP of China has been growing at a CAGR of 11.2% from 2005-2010, which is the highest GDP

growth in Asia-Pacific and one of the best worldwide. The population has experienced a CAGR of 0.67%

from 2000-2010. The growth of demand for electricity, along with GDP and population growth drove the

increase of electricity consumption in the country at a CAGR of 11.3% during 2000-2010.

In the future, the country‟s GDP is expected to increase at a CAGR of 9.5% from 2011-2015 and the

population at a CAGR of 0.6% from 2010-2020. Electricity consumption is forecast to increase at a CAGR

of 9.6% from 2011-2020, mainly to fulfill the country‟s internal demand and close the gap between

electricity demand and consumption in China.

The political risk in the country is high due to the communist leadership. The companies have to deal with

a closed government and with non-transparent policies and bureaucracy. The government has been

opening the country‟s markets up rapidly; but the required framework for healthy and stable foreign

investment does not exist. In the future, however, the political risk is expected to reduce once the country

is more open to capitalist markets and investment. Increased transparency in laws and policies, coupled

with acceptance of foreign establishment as part of the country is expected to happen over a period of

team.

4.6 Competitive Scenario

China is a communist economy and even though the power market is liberalized, the Chinese government

companies control most of the power generation assets in the country. The single power company was

liberalized into five big generation companies, which continued to own most of the generating capacity in

2010. Foreign investment in the country in terms of generating capacity is fairly limited. There is no retail-

level open market, and the prices are determined by the state and central bodies. However, in 2009, 20%

of the market was opened to retail where the companies could sell their power directly to the big power-

consuming companies in order to promote a retail market. The major entry barrier to the power market is

the weak enforcement of contract laws and other laws. This is a huge entry barrier for the foreign investor

especially, as the favoritism towards the local is high and there is a huge information barrier. But with

better contract laws and strengthening of other laws, this issue would be less of a barrier to entry into the

power market.

In terms of the power equipment market, the country has high levels of competition. The local competition

is very high and as a result international penetration is very low. Chinese suppliers, especially for boilers

and turbines, provide parts at cheaper prices and as a result dominate the market. The Chinese wind

turbine market is encouraged by the government‟s regulatory and policy framework. The government

encourages exports and has subsidies and other policies in place to encourage exports and research to

improve equipment technologies. Since 2006, it is estimated that the Chinese domestic wind turbine

market has increased by 100% every year. With the government‟s encouragement and further opening of

the markets, the competitive scenario in the country is very good in both scenarios.




4.7 Conclusion

It can be concluded on the basis of the above analysis that the power market in China is expected to

witness improvements in the future. Major driving factors for the Chinese power market are

macroeconomic factors and the competitive structure in the country as explained in the sections above.

The political scenario is expected to be better in the future due to country‟s increasing acceptance of

foreign investment and increasing number of policies aimed towards establishing foreign players in the

country.

The competitive scenario is expected to grow stronger in the country as well. This is mainly due the

country‟s encouragement of competition within the country. The various government support programs

that are available, along with the intent to establish more competitive pricing in each state to promote

renewable energy. Transmission and distribution in China scored slightly lower than the present scenario

in the future, because, even though there is huge investment in the future scenario to improve the

country‟s transmission and distribution lines, increase its electrification ratio and raise the number of ultra

high voltage lines, there are no concrete plans for developing new interconnections with other countries.

China has a strong power mix in the present scenario, with the presence of four technologies, a high

amount of domestic fuel resources and a very high capacity installed base. In the future, this is expected

to grow even further and with the diversification of its energy portfolio and lower dependence on thermal

installed capacity that is expected by 2020, the power mix in the future scenario is rated slightly better.

The regulations in place support improving the country‟s installed capacity, generation, energy efficiency,

renewable energy sources and reducing carbon emissions in the present scenario. This strong support is

expected to continue in the future as well, and as a result they score relatively similar on the scale.

China currently has a high level of competition, especially among local players, and is going to experience

a huge increase in terms of generating capacity and investment requirements in the future. This presents

huge potential for anyone looking to invest in the country. The country‟s power sector strongly affects the

world market and China is expected to continue to be the best economy for investment among the Asian

countries.




4.8 Power Market, China, Business Propensity Indicator Ranking

Figure 3: Power Market, China, Business Propensity Indicator Ranking

2

Bar Chart - Dual Back to Back

10.4

12.3

13.3

13.4

13.5

13.6

13.7

13.8

13.9

14.1

14.1

14.2

14.5

14.9

16.3

16.4

17.1

0 5 10 15 20

Afghanistan

Sri Lanka

New Zealand

Philipines

Kazakhstan

Pakistan

Malaysia

Thailand

Taiwan

Vietnam

Indonesia

Japan

Singapore

South Korea

Australia

India

China

Business Propensity Indicator– Future Scenario

8.3

10.2

10.8

11.2

11.3

11.4

11.7

12.4

13.1

13.1

13.2

13.3

13.5

13.8

14.9

15.6

16.3

0 5 10 15 20

Afghanistan

Sri Lanka

Philipines

New Zealand

Kazakhstan

Vietnam

Pakistan

Indonesia

Malaysia

Thailand

Taiwan

Japan

South Korea

Singapore

Australia

India

China

Business Propensity Indicator– Present Scenario

Country Scores Country Scores

The rating adjacent to each country are indicative of the total scores

for the country against the maximum score of 20

Source: GlobalData

4.8.1 Present Ranking

When compared with 17 other countries in the Asia-Pacific region, China ranks as the first in the present

scenario, followed by India and Australia. China has the largest capacity base in the region and the other

countries lag way behind in terms of their power mix. The country has an installed capacity of 978,742

MW in 2010, whereas India has an installed capacity of only 179, 037 MW and Japan with an installed

capacity of 240,923 MW. China has grown at a CAGR of 11.8% and it is the world‟s most populous

country. In terms of investments they significantly outperform other Asian countries.

China is ahead of the other Asia-Pacific countries in terms of GDP growth as well. They have invested

heavily in infrastructure, and like many other developed countries, they are investing in smart grid

technology and clean energy as well. China‟s investments in clean energy surpassed the USA‟s in 2010.

China is the strongest economy among the Asian countries, and their power market is bigger than any

other, which explains their being ranked first.




4.8.2 Future Ranking

In the future, China is expected to remain ranked number one. They will still have a huge population, high

GDP and a huge consumption CAGR. The country is expected to increase its generating capacity by

8.5% to meet its demand. The government‟s strong investment in clean energy and transmission is

expected to continue as well. Market competition is expected to be encouraged and improve. China‟s

transmission and distribution (T&D) is expected to increase at a CAGR of 9.1% in the next 10 years, and

due to the sheer size of the country the line length base growth is expected to be higher than in other

Asian countries like India and Australia. Compared to India, its closest rival, China ranks better in

transmission losses and electrification ratio as well. Compared with India, which is also rich in domestic

fuel resources, China is expected to import a much lower percentage of coal and natural gas in the future.

China scores higher than India on power mix, infrastructure and competitive scenario in the terms of

future opportunity. Compared with Australia, its other, second-closest rival, China scores higher on its

power mix, infrastructure and macroeconomic factors.




5 China Power Market Analysis, 2000-2030

5.1 Demand and Consumption Scenario

In 2010, China recorded electricity consumption of 3,446,451 GWh. The majority of the electricity was

consumed by secondary industry users, who accounted for 74.7% of electricity consumption. Secondary

industries include areas like mining and quarrying, manufacturing, production and the supply of electricity,

water and gas and construction. The power consumed by the residential sector accounted for 12.2% of

the total power consumed. Tertiary industries accounted for 10.7% of the total electricity consumption,

which includes service sectors like consumer services (like the hotel and leisure sector), producer

services (like finance and real estate), distribution services (logistic, storage, wholesale) and public

services. The primary industries, which include agriculture, forestry, animal husbandry, fishery and

services that support these industries, accounted for the remaining 2.4% of the power consumed.

Figure 4: Power Market, China, Breakdown of Electricity Consumption, By Sector (%), 2009

Secondary industry,

74.7%

Total power

consumption of urban

and rural residents,

12.2%

Tertiary Industry,

10.7%

Primary Industry,

2.4%

Source: GlobalData, China Electricity Council

Table 4: Power Market, China, Breakdown of Electricity Consumption, By Sector (%), 2009

Sector Percentage (%)

Secondary Industry 74.7%

Total Power Consumption of Urban and Rural Residents 12.2%

Tertiary Industry 10.7%

Total Power Consumption of Urban and Rural Residents 12.2%

Primary Industry 2.4%

Source: GlobalData, China Electricity Council




5.2 Import and Export Scenario

China is a net exporter of electricity. China‟s total power exports stood at 10,300 GWh in 2000 whereas

imports were a mere 1,546 GWh in the same year. In 2009, China‟s total electricity exports increased to

17,386 GWh. On the other hand, imports stood at 6,006 GWh. China has signed two contracts with

Russia for the import of electricity to northern provinces in China. Vietnam is one of the major countries

importing electricity from China, and in 2006 it increased the amount of electricity purchased from the

Yunnan province and it was agreed that the purchase of of additional electricity would continue till 2011.

The electricity imports from Russia saw a steep surge in 2009, which was consumed by the northern

Heilongjiang province in 2009.

Figure 5: Power Market, China, Total Annual Imports and Exports (GWh), 2000-2009

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Year

Import

/ E

xport

(G

Wh)

Source: GlobalData, Energy Information Administration (EIA)

Table 5: Power Market, China, Total Annual Imports and Exports (GWh), 2000-2009

Year Total Imports (GWh) Total Exports (GWh)

2000 1,546 10,300

2001 1,800 10,400

2002 2,300 10,704

2003 2,975 10,339

2004 3,400 9,476

2005 5,011 11,194

2006 5,389 12,271

2007 4,251 14,566

2008 3,852 16,644

2009 6,006 17,386

Source: GlobalData, Energy Information Administration (EIA)




5.3 Power Consumption, 2000-2030

Total electricity consumption in China was 3,446,451 GWh in 2010. During 2000 to 2010 the electricity

market grew at a CAGR of 11.3% from 1,177,885 GWh to 3,446,451 GWh. During the forecast period

(2011 to 2030), the market is expected to grow at a CAGR of 8% and increase from 3,786,173 GWh to

16,314,510. This means that by 2030, electricity consumption is expected to increase to 16,314,510

GWh.

Figure 6: Power Market, China, Annual Power Consumption (GWh), 2000-2030

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

To

tal C

on

sum

ption

(G

Wh

)





Table 6: Power Market, China, Power Consumption (GWh), 2000-2030

Year Consumption (GWh)

2000 1,177,885

2001 1,314,628

2002 1,459,260

2003 1,678,717

2004 1,958,219

2005 2,194,990

2006 2,528,817

2007 2,833,002

2008 3,016,550

2009 3,137,212

2010 3,446,451

2011 3,786,173

2012 4,159,382

2013 4,569,378

2014 5,019,788

2015 5,514,596

2016 6,034,543

2017 6,603,514

2018 7,226,131

2019 7,899,710

2020 8,636,076

2021 9,214,385

2022 9,831,419

2023 10,489,773

2024 11,192,213

2025 11,941,692

2026 12,741,359

2027 13,553,621

2028 14,417,664

2029 15,336,790

2030 16,314,510

Source: GlobalData




5.4 Cumulative Installed Capacity, 2000-2030

5.4.1 Cumulative Installed Capacity by Type of Power Plant: Percentage

The cumulative net installed capacity of China is dominated by thermal power, which contributed 72.2% in

2010. The country has domestic sources of gas and coal and it uses this to fulfill its entire power

generation requirement. The country has a lot of hydro potential as well and this accounts for 22% of the

total installed capacity. Renewable energy and nuclear reactors accounted for 4.7% and 1.1% of the total

installed capacity in 2010.

Figure 7: Power Market, China, Cumulative Installed Capacity (MW), 2010

Thermal

72.2%

Hydropower

22.0%

Nuclear

1.1%

Wind

4.3%

Biomass

0.3%

Solar PV

0.1%

Source: GlobalData




5.4.2 Cumulative Installed Capacity: Total Value, 2000-2030

The cumulative installed capacity for power in China was 977,019 MW in 2010. Historically, the

cumulative installed capacity increased from 321,255 MW in 2000 at a CAGR of 11.8% by 2010. Thermal

fuel sources – coal, oil and gas – were the highest contributors, with a combined share of 72.2% or

705,779 MW of the total installed capacity in 2010. Hydropower came a distant second, with a share of

22% or 214,477MW of the total installed capacity. Nuclear power and renewable energy sources,

including solar, wind, geothermal and biomass, contributed 1.1% and 4.7% respectively.

During the forecast period 2011-2030, China‟s cumulative installed capacity is expected to grow at a

CAGR of 6.3% to increase from 1,076,567 MW to 3,439,559 MW by 2030. Thermal fuel sources will

remain the highest contributors and are expected to increase their installed capacity to 1,991,728 MW by

2030, however, this will contribute only 57.9% of the total installed capacity. Hydro installed capacity

percentage will slightly increase its contribution to 22.9%. The share of nuclear and renewable energy

installed capacity is expected to increase to 4.7% and 14.5% by 2030 in China.

Figure 8: Power Market, China, Cumulative Installed Capacity (MW), 2000-2030

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Cum

ula

tive

In

sta

lled

Ca

pa

city (

MW

)





Table 7: Power Market, China, Cumulative Installed Capacity (MW), 2000-2030

Year Total Installed Capacity (MW)

2000 321,255

2001 340,456

2002 359,574

2003 393,525

2004 444,401

2005 518,728

2006 625,005

2007 717,105

2008 796,868

2009 887,181

2010 977,019

2011 1,076,567

2012 1,182,768

2013 1,300,752

2014 1,432,000

2015 1,568,996

2016 1,694,037

2017 1,822,004

2018 1,955,871

2019 2,098,235

2020 2,248,180

2021 2,345,377

2022 2,447,645

2023 2,553,432

2024 2,664,742

2025 2,781,933

2026 2,905,387

2027 3,029,012

2028 3,158,968

2029 3,295,669

2030 3,439,559





The chart below compares China‟s installed capacity with the similar 10 countries in the Asia- Pacific for

2010 and 2020.

Figure 9: Power Market, China, Installed Capacity Comparison of 10 Asia Pacific Countries(MW), 2010-2020

1


Installed Capacity (MW), 2020Installed Capacity (MW), 2010

Present Installed Capacity Future Installed Capacity

46,416

49,966

77,217

66,703

61,645

79,262

102,382

298,339

341,622

2,248,180

0 1,000,000 2,000,000 3,000,000

Pakistan

Malaysia

Indonesia

Thailand

Taiwan

Australia

S.Korea

India

Japan

China

22,785

26,602

35,249

44,792

48,915

58,223

74,554

166,862

289,770

977,019

0 500,000 1,000,000

Pakistan

Malaysia

Indonesia

Thailand

Taiwan

Australia

S. Korea

India

Japan

China

Source: GlobalData




5.4.3 Cumulative Thermal Installed Capacity, 2000-2030

Due to government reforms and rapid growth in electricity demand, the electricity market grew

significantly during the historic period (2000 and 2009) Between 2000 and 2010, the installed capacity

increased from 237,540 MW to 705,779 MW at a CAGR of 11.5%.

Since China currently has a strong installed capacity base, it is expected to grow at a relatively moderate

CAGR of 5.2% between 2011 to 2030, from 764,037 MW in 2011 to 1,991,728 MW by 2030. The thermal

power plant sector is dominated by coal-fired plants, mainly because of the high availability of coal in the

country. The country ranks number three for coal reserves globally and has approximately 13% of the

world‟s total reserves (as of 2009). However, the country is encouraging a higher number of combined

cycle plants and cleaner coal technology to reduce its carbon emissions. The country has a lot of

domestic coal and gas resources that are used to fuel its thermal installed capacity and this is one of the

main reasons why thermal is expected to remain a dominant resource. However, the country is reducing

its reliance on thermal power because at the current rate of economic growth they might become a net

coal-importing country by 2020. They import very small quantities of gas to fulfill their gas requirements in

the country.

Figure 10: Power Market, China, Cumulative Thermal Installed Capacity (MW), 2000-2030

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Th

erm

al In

sta

lled

Ca

pacity (

MW

)





Table 8: Power Market, China, Cumulative Thermal Installed Capacity (MW), 2000-2030

Year Thermal Installed Capacity (MW)

2000 237,540

2001 253,012

2002 265,547

2003 289,771

2004 329,483

2005 391,181

2006 483,809

2007 554,520

2008 601,300

2009 652,000

2010 705,779

2011 764,037

2012 827,148

2013 895,577

2014 969,708

2015 1,050,018

2016 1,123,974

2017 1,203,169

2018 1,287,971

2019 1,378,237

2020 1,474,857

2021 1,519,841

2022 1,566,196

2023 1,613,965

2024 1,663,191

2025 1,713,918

2026 1,766,192

2027 1,820,061

2028 1,875,573

2029 1,932,778

2030 1,991,728





5.4.4 Cumulative Hydro Installed Capacity, 2000-2030

In 2010, the country recorded a hydro installed capacity of 214,477 MW. Between 2000 and 2010, the

country‟s installed capacity grew at a CAGR of 10.5% from 79,352 MW in 2000 to 214,447 MW. China

has an exploitable hydroelectric capacity of 378 GW, which can produce 1.92 trillion kilowatt hours (kWh)

of power. The government is encouraging the exploitation of these resources as this would help reduce its

reliance on thermal power plants and also reduce the country‟s carbon emissions. There is a growing

need for fuel imports, which is expected to follow the country‟s rapid economic growth, which would be

alleviated as well due to reduced reliance on thermal installed capacity. Hydro installed capacity is

expected to grow at a strong CAGR of 6.6% between 2011 and 2030, recording an increase from 233,504

MW to 786,320 MW during the period. China has some of the largest hydropower projects in the world

and these are listed in the active power plant section later in the report.

Figure 11: Power Market, China, Cumulative Hydro Installed Capacity (MW), 2000-2030

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Hydro

Insta

lled C

apacity (

MW

)





Table 9: Power Market, China, Cumulative Hydro Installed Capacity (MW), 2000-2030

Year Hydro Installed Capacity (MW)

2000 79,352

2001 83,006

2002 86,075

2003 94,896

2004 105,242

2005 117,388

2006 128,570

2007 145,260

2008 171,500

2009 197,000

2010 214,477

2011 233,504

2012 254,219

2013 275,537

2014 298,643

2015 323,686

2016 350,830

2017 373,734

2018 398,133

2019 424,126

2020 449,755

2021 476,933

2022 505,753

2023 534,437

2024 564,747

2025 596,776

2026 630,622

2027 666,387

2028 704,181

2029 744,118

2030 786,320





5.4.5 Cumulative Nuclear Installed Capacity, 2000-2020

China‟s cumulative nuclear installed capacity in 2010 was 10,688 MW. The nuclear installed capacity has

grown from 2,278 MW in 2000 at a CAGR of 16.7% during 2000-2010. The country has always imported

uranium for its nuclear reactors, and the number of nuclear installations in China is expected to grow at a

CAGR of 14.5% between 2011 and 2030. This is mainly because the government is looking at nuclear

power as a good option to diversify its power mix away from thermal resources. By 2020, the country‟s

nuclear capacity is forecast to reach 50,968 GW and by 2030, it is expected to reach 161,354 GW. The

government has set a target of meeting 15% of the country‟s total energy requirements through non-

thermal resources by 2020. The government has also set a target of reducing the country‟s carbon

intensity by 40- 45% by 2020.

Figure 12: Power Market, China, Cumulative Nuclear Installed Capacity (MW), 2000-2030

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Nucle

ar

Insta

lled C

apacity (

MW

)





Table 10: Power Market, China, Cumulative Nuclear Installed Capacity (MW), 2000-2030

Year Nuclear Installed Capacity (MW)

2000 2,278

2001 2,278

2002 5,608

2003 6,308

2004 6,958

2005 6,958

2006 7,958

2007 8,958

2008 8,958

2009 8,958

2010 10,688

2011 12,418

2012 15,658

2013 23,878

2014 37,298

2015 47,728

2016 48,808

2017 50,968

2018 50,968

2019 50,968

2020 50,968

2021 57,193

2022 64,179

2023 72,018

2024 80,815

2025 90,686

2026 101,762

2027 114,192

2028 128,139

2029 143,791

2030 161,354





5.4.6 Cumulative Renewable Installed Capacity, 2000-2030

China's renewable energy sources, especially wind power, have recently gained momentum due to the

government's supportive policies. Renewable installed capacity has shown high growth in the last decade,

from 2,085 MW in 2000 to 46,075 MW in 2010. This capacity recorded a CAGR of 36.3% between 2000

and 2010; however, the majority of renewable capacity addition has only happened since 2005.

Renewable installed capacity is expected to increase at a CAGR of 11.2% between 2011 and 2030, from

66,608 MW in 2011 to 500,157 MW in 2030. According to NDRC plans from 2007, 30,000 MW of wind

power, 30,000 MW of biomass and 1,800 MW of solar power are required to be developed by 2020.

However, one of the major restraints for the country‟s renewable capacity is connection to the national

grid, but the government has various policies and plans in place to increase the green grid capacity in the

country. The state grid corporation in China is investing, along with smart grid technology, in upgrading

the infrastructure required for the country to meet its energy goals, which also includes connections

between all renewable plants and the national grid. The country‟s renewable installed capacity is also

being increased to contribute to the national plan of decreasing per GDP carbon emission intensity by 40-

50% in 2020.

Figure 13: Power Market, China, Cumulative Renewable Installed Capacity (MW), 2000-2030

0

100,000

200,000

300,000

400,000

500,000

600,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Renew

able

Insta

lled C

apacity (

MW

)





Table 11: Power Market, China, Cumulative Renewable Installed Capacity (MW), 2000-2030

Year Renewable Installed Capacity (MW)

2000 2,085

2001 2,160

2002 2,344

2003 2,550

2004 2,718

2005 3,201

2006 4,668

2007 8,367

2008 15,110

2009 29,223

2010 46,075

2011 66,608

2012 85,743

2013 105,760

2014 126,351

2015 147,564

2016 170,425

2017 194,133

2018 218,799

2019 244,904

2020 272,600

2021 291,410

2022 311,517

2023 333,012

2024 355,989

2025 380,553

2026 406,811

2027 428,372

2028 451,075

2029 474,982

2030 500,157





5.5 Power Generation, 2000-2030

Electricity demand in China is growing rapidly, and so an increase in its electricity generation is expected

over the forecast period 2011-2030. Generation is expected to increase by 14,368,140 GWh from 2010 to

2030.

China‟s electricity generation amounted to 4,011,219 GWh in 2010. During the period of 2000- 2010, total

generation grew from 1,377,891 GWh at a CAGR of 11.3%. In 2010, thermal power generation accounted

for 79.6% of the total power generated, followed by hydropower generation that accounted for just 15.9%

of the total power generated. Renewable and nuclear power contributed to a very low share of 2.5% and

2% of the total power generated. By 2030, the total power generated is expected to grow from 4,415,794

GWh in 2011 to 18,379,359 GWh by 2030 at a CAGR of 7.8%. The share of thermal power generation is

expected to reduce to 74.8% of the power generated in China, followed by hydropower, which is expected

to reduce to 12.1% of the power generated in 2030. Nuclear and renewable power generation is expected

to increase to 6.6% and 6.5% of the total power generated respectively in 2030.

Figure 14: Power Market, China, Power Generation (GWh), 2000-2030

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Tota

l G

enera

tion (

GW

h)





Table 12: Power Market, China, Power Generation (GWh), 2000-2030

Year Total Power Generation (GWh)

2000 1,377,891

2001 1,534,185

2002 1,710,215

2003 1,908,165

2004 2,198,266

2005 2,495,824

2006 2,861,389

2007 3,231,643

2008 3,384,343

2009 3,637,437

2010 4,011,219

2011 4,415,794

2012 4,865,202

2013 5,371,783

2014 5,953,748

2015 6,554,764

2016 7,085,285

2017 7,663,470

2018 8,269,008

2019 8,925,367

2020 9,632,775

2021 10,307,804

2022 10,991,412

2023 11,721,738

2024 12,501,997

2025 13,365,862

2026 14,250,865

2027 15,181,098

2028 16,174,724

2029 17,250,745

2030 18,379,359





The chart given below compares China‟s annual generation with the similar 10 countries in the Asia-

Pacific region for 2010 and 2020.

Figure 15: Power Market Outlook, China, Annual Generation Comparison of 10 Asia Pacific Countries(MW), 2010-2020

2


Annual Generation(GWh), 2020Annual Generation(GWh), 2010

Present Annual Generation Future Annual Generation

188,986

177,533

340,259

245,907

316,310

306,255

550,374

1,444,644

1,245,585

9,632,775

0 5,000,000 10,000,000

Pakistan

Malaysia

Indonesia

Thailand

Australia

Taiwan

S. Korea

India

Japan

China

96,967

115,438

154,236

156,407

235,942

245,606

432,725

832,196

1,101,477

4,011,219

0 1,500,000 3,000,000 4,500,000

Pakistan

Malaysia

Indonesia

Thailand

Australia

Taiwan

S.Korea

India

Japan

China

Source: GlobalData




5.5.1 Thermal Power Generation, 2000-2030

China‟s 11th Five-Year Plan for 2006-2010 planned to increase the country‟s power generation from

natural gas and other cleaner technologies in order to reduce carbon dioxide emissions from coal-fired

plants. However, new power plants with clean-coal technology are also expected to come online, which

will ensure the consistent growth of the thermal power generation. In 2010, thermal generation accounted

for 3,191,934 GWh of power generation. Historically, it had grown from 1,114,190 GWh in 2000 with a

CAGR of 11.1%. During the forecast period between 2011 and 2030, the market is expected to grow at a

CAGR of 7.5% from 3,500,555 GWh to 13,752,177 GWh. Thermal power generation is increasing rapidly,

in sync with the general capacity increases to meet the country‟s growing requirements for electricity.

Figure 16: Power Market, China, Thermal Power Generation (GWh), 2000-2030

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Therm

al P

ow

er

Genera

tion (

GW

h)





Table 13: Power Market, China, Thermal Power Generation (GWh), 2000-2030

Year Thermal Power Generation (GWh)

2000 1,114,190

2001 1,251,848

2002 1,406,588

2003 1,580,949

2004 1,795,925

2005 2,047,340

2006 2,369,600

2007 2,722,930

2008 2,767,018

2009 2,910,903

2010 3,191,934

2011 3,500,555

2012 3,839,477

2013 4,194,352

2014 4,582,454

2015 5,006,896

2016 5,420,504

2017 5,868,627

2018 6,354,148

2019 6,880,186

2020 7,450,123

2021 7,921,077

2022 8,421,802

2023 8,954,180

2024 9,520,213

2025 10,122,026

2026 10,761,883

2027 11,442,187

2028 12,165,497

2029 12,934,530

2030 13,752,177





5.5.2 Hydropower Generation, 2000-2030

The electricity generated through hydropower in China has historically increased from 243,130 GWh in

2000 to 639,108 GWh in 2010 at a CAGR of 10.1%. During the forecast period, power generation is

expected to increase from 680,650 GWh in 2011 to 2,216,653 GWh in 2030 at a CAGR of 6.4%. There

are a number of new hydropower plants planned and under construction and the top plants have been

listed under the top upcoming hydropower plants in the following chapter. China has a huge hydro

capacity that is untapped and a lot of hydro generation potential. In order to tap this potential and reduce

China‟s dependence on thermal fuel, the country‟s hydropower generation expected to increase at a

CAGR of 6.4%.

Figure 17: Power Market, China, Hydropower Generation (GWh), 2000-2030

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Hydro

pow

er

Genera

tion (

GW

h)





Table 14: Power Market, China, Hydropower Generation (GWh), 2000-2030

Year Hydropower Generation (GWh)

2000 243,130

2001 261,110

2002 274,570

2003 281,330

2004 350,009

2005 393,047

2006 431,428

2007 430,000

2008 522,423

2009 600,101

2010 639,108

2011 680,650

2012 724,892

2013 772,010

2014 822,190

2015 875,633

2016 934,175

2017 996,631

2018 1,063,263

2019 1,138,299

2020 1,218,631

2021 1,298,973

2022 1,384,613

2023 1,475,898

2024 1,564,979

2025 1,659,437

2026 1,759,596

2027 1,865,800

2028 1,978,414

2029 2,097,826

2030 2,216,653





5.5.3 Nuclear Power Generation, 2000-2030

China is actively pursuing generation from nuclear power plants as an alternative to the thermal power

plants that produce high levels of carbon emissions. Historically, nuclear generation increased from

16,000 GWh in 2000 to 77,941 GWh in 2010 at a CAGR of 17.2%. Between 2011 and 2030, nuclear

generation is expected to record the highest CAGR of 14.6%. China‟s nuclear generation is expected to

increase from 90,557 GWh in 2011 to 1,210,153 GWh by 2030 due to the increase in nuclear capacity

installations expected during this period. This would help increase generation from other sources and

reduce the share of thermal sources in the country‟s power mix, which in turn would help reduce the

country‟s carbon intensity.

Figure 18: Power Market, China, Nuclear Power Generation (GWh), 2000-2030

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Nu

cle

ar

Po

we

r G

ene

ratio

n (

GW

h)





Table 15: Power Market, China, Nuclear Power Generation (GWh), 2000-2030

Year Nuclear Power Generation (GWh)

2000 16,000

2001 17,000

2002 25,000

2003 42,000

2004 48,000

2005 50,000

2006 52,000

2007 63,000

2008 65,325

2009 65,325

2010 77,941

2011 90,557

2012 114,184

2013 174,127

2014 271,991

2015 348,050

2016 355,926

2017 371,677

2018 371,677

2019 371,677

2020 371,677

2021 417,512

2022 468,508

2023 525,733

2024 598,029

2025 671,073

2026 753,040

2027 845,019

2028 948,232

2029 1,078,431

2030 1,210,153





5.5.4 Renewable Power Generation, 2000-2030

Prior to 2005, the percentage contribution of renewable energy to power generation was very low. In

2000, renewable power generation only amounted to 4,571 GWh and it grew by a CAGR of 36.4%. In

2003, the government expressed interest in developing legislation for renewable energy in the country

and in 2005 the government passed a new renewable energy law. In 2005, a renewable energy

requirement was set, whereby renewable energy capacity was mandated to rise to 10% by 2020. The law

made it mandatory for grid operators to purchase resources from registered renewable energy producers.

From 5,437 GWh in 2005, the electricity generated grew to 102,236 GWh in 2010. The high increase in

the power generated by renewable energy is expected to continue during the forecast period as well. The

power generated is expected to increase from 144,032 GWh in 2011 to 1,200,376 GWh in 2030, at a

CAGR of 11.8%.

Figure 19: Power Market, China, Renewable Power Generation (GWh), 2000-2030

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Renew

able

Pow

er

Genera

tion (

GW

h)





Table 16: Power Market, China, Renewable Power Generation (GWh), 2000-2030

Year Renewable Power Generation (GWh)

2000 4,571

2001 4,227

2002 4,057

2003 3,886

2004 4,332

2005 5,437

2006 8,361

2007 15,713

2008 29,577

2009 61,108

2010 102,236

2011 144,032

2012 186,649

2013 231,294

2014 277,113

2015 324,185

2016 374,680

2017 426,535

2018 479,920

2019 535,205

2020 592,344

2021 670,242

2022 716,489

2023 765,927

2024 818,776

2025 913,326

2026 976,346

2027 1,028,092

2028 1,082,581

2029 1,139,958

2030 1,200,376





6 Power Market, China, Top Active and Upcoming Projects

6.1 Active Power Projects

The top power projects of all sources combined contributed 94,299 MW in 2010. This translated to 9.7%

of the total installed capacity in 2010. The top 10 hydro installed capacity accounted for 5.1% of the total

installed capacity, followed by top thermal power plants that account for 3.5% of the total installed

capacity. The top nuclear and renewable power plants accounted for 0.9% and 0.3% of the total installed

capacity in 2010.

6.1.1 Top 10 Active Thermal Power Projects

The cumulative installed capacity of the top 10 thermal power projects in China was dominated by coal-

fired power plants with 33,710 MW in 2010. This accounted for 4.8% of the total thermal capacity in the

country.

Table 17: Power Market, China, Active Thermal Power Plants

Power Plant Database

State Total Installed Capacity (MW)

Power Plant Type

Fuel Category

Plant Operator Year Online

Huaneng Yuhuan Power Plant

Zhejiang 4,000 Steam Turbine

Coal Huaneng Power International, Inc.

2007

Tianjin Beijiang Electric Power Plant

Tianjin 4,000 Steam Turbine

Coal State Development and Investment Corp.

NA

Houshi Power Plant

Fujian 3,660 Steam Turbine

Coal Huayang Electric Power Equipment Co., Ltd.

1996

Tuoketuo Power Plant

Inner Mongolia

3,600 Steam Turbine

Coal

Datang International Power Generation Company Limited

NA

Suizhong Power Station (Phase I & II)

Liaoning 3,600 Steam Turbine

Coal CSEC Guohua International Power Company Limited

2000

Panxian Power Plant

Guizhou 3,200 Steam Turbine

Coal

Guangdong Yuedian Group Co. Ltd.Guizhou Electric Power Corp

1995

Dalate Power Plant

Inner Mongolia

3,180 Steam Turbine

Coal Mengda Power Generation Co. Ltd.

1995

Beilungang Coal-Fired Power Plant

Zhejiang 3,000 Steam Turbine

Coal Zhejiang Beilun Power Generation Co., Ltd.

1994

Ningbo Power Plant

Zhejiang 2,800

Combined Cycle Gas Turbine (CCGT)

Gas Zheneng Ningbo Gas Power Co.

2008

Taicanggang Coal Fired Power Plant

Jiangsu 2,670 Steam Turbine

Coal

Jiangsu Taicanggang Environmental Protection Power Generation Co., Ltd.

NA

Source: GlobalData




6.1.2 Top 10 Active Hydropower Plants

The top 10 active hydropower plants accounted for 49,351 MW of hydro installed capacity in China in

2010. This active capacity accounted for 22% of the total hydro installed capacity in 2010. The Three

Gorges hydropower plant is the largest power plant in the country, with a capacity of 18,200 MW, which

accounted for 8.5% of the total hydro installed capacity in China in 2010.

Table 18: Power Market, China, Top 10 Active Hydropower Plants

Name of Dam/Station

River/Basin Owner Rated

Capacity (MW)

Year Online

Three Gorges Yangtze China Three Gorges Corporation 18,200 2009

Longtan Hongshui Longtan Hydropower Development Co., Ltd. 6,300 2010

Changtan Jiaoling NA 6,000 1991

Laxiwa Yellow CPI Yellow Upstream Hydropower Development Co. Ltd

4,200 2010

Ertan Yalong Ertan Hydropower Development Company, Ltd. 3,300 2000

Gezhouba Yangtze NA 2,715 1988

Guangzhou PSP Phase I

Liuxi CLP Holdings Limited 2,400 1994

Guangzhou PSP Phase II

Liuxi NA 2,400 2000

Daliushu Yellow NA 2,000

Xiaolangdi Yellow The Yellow River Water and Hydroelectric Power Development Corporation (YRWHDC)

1,836 2001

Source: GlobalData




6.1.3 Top 10 Active Nuclear Commercial Reactors

The cumulative installed capacity of the top commercial nuclear reactors in China was 8,540MW in 2010.

The top 10 nuclear reactors accounted for 79.9% of the total installed capacity in the country.

Table 19: Power Market, China, Top 10 Active Nuclear Commercial Reactors

Reactor Operator Present

Capacity Net (MW)

Owner Main Contractor Status First Power Year

Ling Dong 1 (Ling Ao Phase II)

China Guangdong Nuclear Power Group

1000

China Guangdong Nuclear Power Group;

China Nuclear Power Engineering Co., Ltd;AREVA NP;

Operable 2010

Daya Bay 2 (Guangdong 2)


944


GE Energy;AREVA NP;

Operable 1994

Daya Bay 1


944


GE Energy;AREVA NP;

Operable 1993

Ling Ao 1


938


GE Energy;AREVA NP;

Operable 2002

Ling Ao 2


938


GE Energy;AREVA NP;

Operable 2002

Tianwan 1 China National Nuclear Corporation

933 China National Nuclear Corporation;

Atomenergo JSC; Operable 2006

Tianwan 2 China National Nuclear Corporation


Atomenergo JSC; Operable 2007

Qinshan III-1 Qinshan Nuclear Power Company


Atomic Energy of Canada Limited;

Operable 2002

Qinshan III-2 Qinshan Nuclear Power Company


Atomic Energy of Canada Limited;

Operable 2003

Qinshan II-1 Qinshan Nuclear Power Company


China National Nuclear Corporation;

Operable 2002

Source: GlobalData




6.1.4 Top 10 Renewable Power Projects

Wind farms dominated the top 10 renewable power projects, with a cumulative active installed capacity of

2,698 MW in 2010. The top 10 wind farms in the country accounted for 5.9% of the total renewable

installed capacity in the country.

Table 20: Power Market, China, Top 10 Active Renewable Power Plants

Wind Farm Name

State/Province or Sea/Water Body

Total Installed Capacity

(MW)

Wind Farm Owner Wind Farm Developer

Year Online

Laofengkou - Goldwind

Xinjiang 549.5 NA Beijing Tianrun New Energy Co., LTD.

2008

Gansu Guazhou Wind Farm

Gansu 300 China Longyuan Power Group Corp Ltd.

Gansu Longyuan Wind Power Co., Ltd

2009




2010




2010

Tongliao Taihe Wind Power Project

Inner Mongolia 249.5 China WindPower Group Limited

Tongliao Taihe WindPower Ltd.

2009

Ganhekou V 201MW Wind Farm Project

Gansu 201 Gansu Diantou Dingxin Wind Energy Development Co. Ltd

Gansu Diantou Dingxin Wind Energy Development Co. Ltd

NA

Inner Mongolia Jingneng Saihan Wind Power project

Inner Mongolia 200 NA Beijing International New Energy Co.,Ltd.

2009

Qian‟an I Wind Farm

Jilin 200 CLP Holdings Limited CLP Holdings Limited

2010

Danjinghe Wind Farm

Hebei 200

China Energy Conservation Investment Corporation;Hong Kong Energy (Holdings) Limited

CECIC HKC Wind Power Co., Ltd.

2009

Alataw Wind Power Project

Xinjiang 198 China Guodian Corporation

China Guodian Corporation

2009

Source: GlobalData




6.2 Upcoming Power Projects

The top upcoming power projects in China will account for 117,144MW of upcoming capacity additions. Of

this, hydro accounts for the majority with 59.3%, followed by thermal, which accounts for 20.8% of the

total capacity. Nuclear and renewable power‟s upcoming capacity account for 9.5% and 10.4%,

respectively.

6.2.1 Top 10 Upcoming Thermal Power Projects

The top 10 upcoming thermal power plants account for a total installed capacity 24,400 MW. This

accounts for 20.8% of the total top upcoming planned projects among all technologies in China listed in

the report.

Table 21: Power Market, China, Top 10 Upcoming Thermal Power Plants

Power Plant Database

State Status

Total Installed Capacity (MW)

Power Plant Type

Plant Operator Year Online

Ningdong Energy-Chemical Base Thermal Power Plant

Ningxia Planned 4,400 Steam Turbine

Huadian Power International Corporation Limited

2020

Huadian Yuheng Power Plant Phase II

Jilin Under Construction

4,000 Steam Turbine

NA NA

Cangnan Power Plant Phase I

Zhejiang Planned 2,000 Steam Turbine

China Resources Power Holdings Co., Ltd.

2014

Zhengning Power Plant Phase 1

Ganshu Planned 2,000 Steam Turbine

China HuaNeng Group

2014

Guangdong Zhuhai Power Plant Phase II

Guangdong Under Construction

2,000 Steam Turbine

Guangdong Yuedian Group Co. Ltd.

2013

Xinxiang Power Plant

Henan Planned 2,000 Steam Turbine

China Power Investment Corporation

2013

Nanning Power Plant-Phase II

Guangxi Planned 2,000 Steam Turbine

Guodian Nanning Power Generation Co., Ltd.

2012

Laizhou Power Plant

Shandong Under Construction

2,000 Steam Turbine

Huadian Power International Corporation Limited

2012

Zhejiang Jiaxing Power Plant Phase III

Zhejiang Under Construction

2,000 Steam Turbine

Zhejiang Jiahua Electric Power Co., Ltd

2011

Guandong Pinghai Power Plant Phase II

Guangdong Planned 2,000 Steam Turbine

Guangdong Yudean Group Co. Ltd

NA

Source: GlobalData




6.2.2 Top 10 Upcoming Hydropower Projects

The cumulative installed capacity of the top 10 upcoming hydropower projects in China is 69,412 MW.

China Three Gorges Corporation is the owner of 41,962 MW of the top 10 upcoming plant projects.

Table 22: Power Market, China, Top 10 Upcoming Hydropower Plants

Name of Dam/Station

Status River/Basin Owner Installed

Capacity (MW) Year Online

Xiluodu Under Construction

Jinsha China Three Gorges Corporation

14,112 2015

Baihetan Under Construction


13,050 2020

Wudongde Under Construction


8,400 2015

Xiangjiaba Under Construction


6,400 2013

Hutiaoxia Under Construction

Jinsha NA 6,000 2015

Nuozhadu Under Construction

Lancang Yunnan Lancangjiang Hydro Development Co. Ltd.

5,850 2017

Jinping II Under Construction

Yalong Ertan Hydropower Development Company, Ltd.

4,800 2016

Xiaowan Under Construction

Lancang Yunnan Huaneng Lancang River Hydropower Co. Ltd.

4,200 2012

Jinping I Under Construction

Yalong Ertan Hydropower Development Company, Ltd.

3,600 2014

Guanyinyan Jinsha

Under Construction

Jinsha Datang Guanyinyan Hydropower Development Co. Ltd

3,000 2015

Source: GlobalData




6.2.3 Top 10 Upcoming Nuclear Commercial Reactors

The top 10 upcoming nuclear commercial reactors show a cumulative capacity addition of 11,182 MW.

Table 23: Power Market, China, Top 10 Upcoming Nuclear Commercial Reactors

Reactor Operator Owner Main Contractor Status Year Online

Total Capacity

Haiyang 1 Shandong Nuclear Power Company, Ltd.

China Power Investment Corporation;

State Nuclear Power Technology Corporation Ltd

Under Construction

2014 1250

Haiyang 3 Shandong Nuclear Power Company, Ltd.

China Power Investment Corporation;

State Nuclear Power Technology Corporation Ltd

Planned NA 1250

Fangchenggang (Hongsha) 1



China Nuclear Power Engineering Co., Ltd

Under Construction

2015 1087

Fangjiashan 1 Qinshan Nuclear Power Company



Under Construction

2013 1087

Fangjiashan 2 Qinshan Nuclear Power Company



Under Construction

2014 1087

Fuqing 1

CNNC Fujian Fuqing Nuclear Power Co., LTD


China Nuclear Engineering & Construction Corporation

Under Construction

2013 1087

Fuqing 2




Under Construction

2014 1087

Fuqing 3




Under Construction

2015 1087

Fangchenggang (Hongsha) 2




Planned 2016 1080

Hongyanhe 1




Under Construction

2012 1080

Source: GlobalData




6.2.4 Top 10 Upcoming Renewable Power Projects

The top 10 upcoming renewable power plants account for a cumulative capacity addition of 12,150 MW.

Wind technology is expected to drive the installed capacity additions in the future, followed by solar. Wind

farms account for the largest number of top 10 renewable power plant projects and account for 9,150 MW

of upcoming capacity. Solar installed capacity accounts for 3,000 MW of the top 10 upcoming capacity

additions.

Table 24: Power Market, China, Top 10 Upcoming Renewable Power Plants

Plant Name Technology State/ Province

Planned Installed Capacity

Status Plant Developer

Ningde Wind Farm Wind East China Sea

2,000 Planned

China Energine International (Hldgs) Ltd;Fujian Mindong Electric Power Co., Ltd.

Ordos City Solar Park

Solar Inner Mongolia

2,000 Planned First Solar, Inc.

Pingtan Offshore Wind Farm

Wind East China Sea

1,500 Planned NA

Lufeng Jiahu Bay Offshore Wind Power Plant

Wind South China Sea

1,250 Planned Guangdong Baolihua New Energy Stock Co., Ltd.

Bohai Bay Offshore Wind Farm

Wind Yellow Sea 1,000 Under Construction

NA

Hebei Offshore Wind Yellow Sea 1,000 Planned NA

Golmud City Solar Plant

Solar Qinghai 1,000 Planned China Longyuan Power Group Corp Ltd.

Yuxi - China Guangdong Nuclear Power Group

Wind 800 Planned China Guangdong Nuclear Power Group

China WindPower 800 MW Jilin Wind Project

Wind 800 Planned China WindPower Group Limited

Guodian Offshore Wind Project

Wind 800 Planned NA

Source: GlobalData




7 Power Market, China, Regulatory Structure

7.1 Regulatory Structure, Overview

The electricity market in China has undergone major reforms and restructuring in the past decade to

create effective regulation. Power plant ownership has been separated from grid operators, regional

markets have been developed and an independent electricity regulator has been established.

The NDRC formulates the energy sector‟s development plans and it approves the major projects in the

power sector.

7.2 Restructuring of Power Market

In 2002, in line with its power reform plan, China‟s electricity generation was separated from grid

operations and separate entities were created. The single entity of the State Power Corporation was split

into five different generation companies that currently own the majority of China‟s power installed

capacity. These companies, known as the Big Five, are the China Datang Corporation, the China

Guodian Corporation, the China Huadian Corporation, the China HuaNeng Group and the China Power

Investment Corporation. The transmission and distribution assets were separated into two major grid

companies, namely, the SGCC and China Southern Power Grid Company Limited. In 2003, the SERC

was established by the State Council, and this council is incharge of developing laws and regulations and

performing administrative and regulatory duties for the national electricity industry.

7.3 Latest Reforms Aim at Increasing Competition

China introduced reforms to the power sector in the first half of 2009. These reforms allow generation and

sales prices to be determined by market forces but leave power distribution and transmission prices to be

fixed by the government.

The reforms address the mechanism used for determining the price of renewable energy power

generation. For the purpose of distribution, wind energy has been divided into four wind resource regions

by the NDRC. Based on the division, benchmark prices have been fixed for each region. This has been

done to focus on developing regions with significant wind resources and to reduce the investment needed

and the operating costs of wind power generating plants.

The reforms aimed at increasing the direct transactions between power users and power generation

enterprises. In March 2009, 20% of China‟s power sales markets were opened to industries with high

power consumption and these companies were allowed to purchase power directly from power generation

companies.

The reforms looked into rectifying the system of preferential power prices. The government prohibits local

authorities from reducing on-grid power prices or power sales prices without proper sanctions.




7.4 Policies to Support Lower Carbon Technologies

China has been one of the fastest growing industrial economies in recent decades. This rapid

industrialization has forced it to address the issue of carbon emissions. The National Energy Conservation

objective, which requires a reduction of fossil fuels‟ contribution to the country‟s total power generation,

has already been incorporated in the medium and long term (to 2020) national plan. Various policies have

been proposed, such as replacing small thermal units with large units in 2007 and increasing renewable

power‟s contribution to the total generation. The successful implementation of these policies will lead to

the closure of many oil-fired and small coal-fired power plants. China announced in December 2009, that

it would reduce carbon intensity of GDP by 40-45% relative to 2005 levels by 2020.

7.5 Proposals between China and European Union to Strengthen the Carbon Capture and Storage (CCS) Projects

The European Union (EU) undertook initiatives that would mitigate risks arising from carbon emissions in

China by working with it towards the reduction of greenhouse gas emissions. The EU had developed the

COoperation Action within CCS CHina (COACH) project, which focuses on strengthening the cooperation

between the EU and China in climate mitigation programs. COACH is a specific technical research project

aimed at supporting CCS programs in China. COACH aims to establish large-scale coal-based energy

facilities with zero carbon emissions. A major part of the funding for the COACH project comes from the

EU.

China‟s Near Zero Emissions Coal (NZEC) technology for the production of power uses carbon capture

and geological storage and the project is being pursued with the EU‟s support. China‟s NZEC will receive

technological support from Europe‟s existing demonstration CCS projects and facilities. With appropriate

funding from the EU, China expects to complete the first commercial scale NZEC project by 2015. The UK

has already provided much-needed technical expertise through the exchange of information on CCS.

British scientists are working with their Chinese counterparts to build CCS facilities.

China and the EU are also working with each other in order to strengthen the clean energy projects being

pursued by China. The project is called the Clean Energy Development Mechanism (CDM) and is being

funded by the EU to achieve its climate change objectives.

7.6 Development Plan for Renewable Energy

The government of China took financial and regulatory initiatives to promote renewable energy sources in

the 2000s. The main regulatory policy framework for renewable energy in China includes the national

development plan and the Renewable Energy Law. Since 2006, the Law requires that 10% of power

capacity is generated from renewable energy sources by 2010. In September 2007, the National

Development and Reform Commission published the medium and long term plan for developing

renewable energy in China. According to NDRC, 300,000 MW of hydropower, 30,000 MW of wind power,

30,000 MW of biomass and 1,800 MW of solar power were required to be developed by 2020. Along with

this there were requirements of solar water heaters and biofuels development as well.

The new 12th

Five Year Plan is expected to be release soon, and this plan will include a new target for

cutting energy consumption per unit GDP and also reducing carbon dioxide emissions per unit of GDP.

The plan set an obligatory target for developing various renewable energy sources, requiring the

percentage of the total energy consumption by renewable energy (share of non-fossil fuels) sources to

rise to 15% by 2020.

By 2020, utilities will be required to have 8% of their capacity and 3% of their power generation come from

non-hydro renewable sources. The new Renewable Energy Law took effect in 2010 and this law included

detailed plans for renewable energy and also addressed the issue of the co-ordination of renewable

energy with the country‟s transmission grid planning. Various provisions like a guarantee of renewable

power purchase along with deadlines and penalties for not following the provision have been added. New

revisions that allow the government to supplement the renewable energy fund from general revenues

were also put in place. New tariffs for wind power that vary according to region were introduced, which are

different based on the regional strength of wind power. The biomass feed-in tariff‟s were also amended

and increased from $0.0037/kWh to $0.0052/kWh.




8 Power Market, China, Infrastructure

8.1 Infrastructure Overview

The SGCC, a state-owned corporation controlled by the State Council, is the largest electricity

transmission and distribution company in China. It operates with its five subsidiaries, namely, the North

China Grid Company Ltd, the Northwest China Grid Company Ltd, the Northeast China Grid Company

Ltd, the East China Grid Company Ltd and the Central China Grid Company Ltd. The China Southern

Power Grid Company Limited is the other state-owned enterprise covering China's five southern

provinces of Guangdong, Guangxi, Yunnan, Guizhou and Hainan.

8.1.1 Infrastructure Overview, Grid Interconnection

China has wide-ranging cross-regional interconnections and is moving towards a nationwide

interconnected grid system. There are seven inter-provincial power networks, namely, Northwest China,

Northeast China, East China, Central China, North China, South China and Sichuan and Chongqing.

There are also five independent provincial level power networks, namely, Xinjiang, Hainan, Shandong,

Fujian and Tibet. The main power grids cover all the cities and most of the rural areas. Recently, 500kV

grids have begun to replace 220kV grids. China aims to have a strong smart grid in place by 2020. The

ultra high voltage technology of smart grids will facilitate smaller losses and long-distance, high-capacity

networks.

Currently, power is transmitted in three directions. There are three 500kV Direct Current (DC)

transmission lines to the East China Grid are the High-Voltage Direct Current Three Gorges-Shanghai

line, the High-Voltage Direct Current Three Gorges-Changzhou line and the High-Voltage Direct Current

Gezhouba-Shanghai line. The 500kV Direct Current transmission line to the South China Grid consists of

the High-Voltage Direct Current Three Gorges-Guangdong line which supplies power to Guangdong.

Finally, there is a 500kV Alternating Current (AC) transmission line to the Central China Grid.

8.1.2 Infrastructure Overview, Infrastructure Development

The national plan for medium and long term was formulated in 2007 by the NDRC. This plan emphasized

on increasing the country‟s grid capacity by connecting all existing and upcoming power plants to the

national grid. The State Grid Corporation had planned to invest $12.11 billion in UHV transmission lines in

2009 and 2010. According to the Chinese Electricity Council‟s investment plan, around $390 billion will be

spent on grid construction by 2015. The aim is to build at-least three west-east and three north-south long

distance lines in the country. The government aims to build an ultra-high-voltage transmission network

that could fully absorb the non-fossil fuel generated electricity.

Electricity transmission projects of 500kV direct current (DC) and 750kV alternating current (AC) have

already been completed and have been in operation since 2005. New electricity transmission projects

involving 800kV DC and 1,000kV AC ultra high voltage lines are currently ongoing. The ultra high voltage

grids are expected to be the core focus of investment for transmission and distribution. According to

national grid company, China will have a high-voltage transmission capacity of nearly 300 million kW in

the near future. It is expected that the investment might reach about CNY270 billion in the future. The

country is expected to increase their renewable energy grid connectivity throughout the country and also

improve the grid capacity to meet the expected capacity additions.




8.1.3 Infrastructure Overview, Transmission Line Lengths, 2000-2020

China‟s transmission line lengths according to their voltage levels and the expected line length forecast

until 2020 are given below. In 2010, the country had 1,362,377 Ckm of transmission networks, with the

majority of the lines being of 110kV and 35kV voltage levels. The total line length is expected to grow at a

CAGR of 9.2% between 2011 and 2020.

Table 25: Power Market, China, Transmission Line Lengths (Ckm), 2000-2020

Voltage Level

Year 1000kV 110kV 220kV 330kV 35kV 500kV 750kV 800kV (DC) Total

2000 0 195,001 122,597 8,524 309,056 25,910 0 0 661,088

2001 0 220,051 135,935 9,177 322,153 31,486 0 0 718,802

2002 0 245,263 145,331 10,031 335,804 37,433 0 0 773,862

2003 0 273,363 155,377 10,964 350,034 44,502 0 0 834,240

2004 0 304,682 166,117 11,985 364,867 52,908 0 0 900,559

2005 0 339,590 177,600 13,100 380,329 62,900 141 0 973,660

2006 0 355,517 193,997 13,975 387,593 73,394 141 0 1,024,617

2007 0 376,752 216,159 15,493 401,226 96,574 141 0 1,106,345

2008 0 401,310 233,558 16,717 408,649 107,993 630 0 1,168,857

2009 640 423,281 255,657 18,738 431,021 121,368 1,388 1,438 1,253,531

2010 736 458,386 276,861 20,292 450,725 143,285 10,152 1,940 1,362,377

2011 846 496,404 299,823 21,975 471,329 169,160 11,319 2,618 1,473,474

2012 973 537,575 324,690 23,798 492,876 199,707 12,619 3,533 1,595,771

2013 1,119 584,948 353,303 25,895 516,816 237,503 14,069 3,993 1,737,646

2014 1,287 636,495 384,437 28,177 541,918 282,452 15,771 4,513 1,895,050

2015 1,480 692,585 418,314 30,660 568,240 335,908 17,678 5,949 2,070,814

2016 1,702 753,617 455,177 33,362 595,840 393,654 19,816 7,843 2,261,011

2017 1,958 820,027 495,289 36,301 624,781 461,326 21,974 8,906 2,470,562

2018 2,251 892,290 538,935 39,500 655,127 540,632 24,366 10,114 2,703,215

2019 2,589 966,296 583,633 42,777 685,076 631,156 27,018 11,486 2,950,031

2020 2,978 1,046,439 632,039 46,324 716,394 736,837 29,796 13,043 3,223,850

Source: GlobalData




8.1.4 Infrastructure Overview, Distribution Line Lengths (Ckm), 2000-2020

In 2010, China had 17,303,314 Ckm of distribution line network. The total line length is expected to grow

at a CAGR of 8.6% between 2011 and 2020 from 18,738,429 Ckm in 2011 to 39,501,312 Ckm in 2020.

Table 26: Power Market, China, Distribution Line Lengths (Ckm), 2000-2020

Year Total Length (Ckm)

2000 7,175,117

2001 7,500,000

2002 8,139,536

2003 8,833,606

2004 9,586,860

2005 10,404,345

2006 11,582,236

2007 12,893,477

2008 14,353,166

2009 15,978,109

2010 17,303,314

2011 18,738,429

2012 20,292,572

2013 22,080,803

2014 24,026,617

2015 26,143,902

2016 28,447,766

2017 30,954,653

2018 33,682,453

2019 36,476,035

2020 39,501,312

Source: GlobalData




9 Power Market, China, Competitive Landscape: Snapshot of Top Five Power Companies

9.1 Market Share of Major Power Generating Companies

Five generating companies contributed 43.4% of China‟s total installed capacity in 2009. The other 56.6%

was contributed by other companies. The China HuaNeng Group was the leading player with a market

share of 10.7% of the total installed capacity. It was closely followed by the China Datang Corporation,

with a market share of 10.3%. The third position was taken by the China Guodian Corporation with a

market share of 8.4%, followed by the China Huadian Corporation with 7.9%.

Figure 20: Power Market, China, Installed Capacity Share of Major Power Generating Companies (%), 2009

China HuaNeng Group,

10.7%

China Datang

Corporation, 10.3%

China Guodian

Corporation, 8.4%

China Huadian

Corporation, 7.9%

China Power Investment

Corporation, 6.1%

Others, 56.6%

Source: GlobalData, Company websites

Table 27: Power Market, China, Installed Capacity Share of Major Power Generating Companies (%), 2009

Company Name Share (%)

China HuaNeng Group 10.7%

China Datang Corporation 10.3%

China Guodian Corporation 8.4%

China Huadian Corporation 7.9%

China Power Investment Corporation 6.1%

Others 56.6%

Source: GlobalData, Company websites




9.2 Key Companies in the Chinese Power Market, China HuaNeng Group

9.2.1 China HuaNeng Group, Company Overview

Huaneng Power International, Inc. (HPI) is an independent power producer. The company along with its

subsidiaries develops, constructs, operates and manages large thermal and hydropower plants across

China. It owns around 17 operating power plants and has controlling interests in 13 operating power

plants and minority interests in five operating power companies. In 2009, its total domestic power

generation was 203.520 billion kWh. HPI also operates a power plant in Singapore. The company is

controlled by Huaneng International Power Development Corporation (HIPDC) and Huaneng Group,

which hold 42.03% and 8.92% of its shares, respectively. It is headquartered in Beijing, China.

9.2.2 China HuaNeng Group, Business Description

9.2.2.1 Business Overview

Huaneng Power International, Inc. is a power company engaged in the investment, construction,

operation and management of power plants based on conventional as well as renewable sources of

energy. It supplies electricity to customers through the grid companies where the operating plants are

located. It focuses on scientific development, conserving resources and protecting the environment. In

China, HPI owns around 16 domestic operating power plants, one in Singapore, and also has controlling

interests in 13 operating power plants. The company‟s electricity generation business encompasses the

Northeast China Grid, the North China Grid, the Northwest China Grid, the East China Grid, the Central

China Grid, the South China Grid and Singapore. Its power plants are located in the provinces of

Liaoning, Hebei, Shanxi, Shandong, Henan, Fujian, Jiangsu, Zhejiang, Guangdong, Jiangxi, Gansu, and

Hunan. In addition, it also has power plants in the Shanghai and Chongqing municipalities.

The company‟s power plants include the Dalian Power Plant, Dandong Power Plant, Yingkou Power

Plant, Yingkou Cogeneration Power Plant, Fuzhou Power Plant, Shang‟an Power Plant, Nantong Power

Plant, Nanjing Power Plant, Taicang Power Plant, Huaiyin Power Plant, Jinling Power Plant, Jinling Power

Plant Phase II, Shidongkou I, Shidongkou II, Shanghai CCGT, Shantou Power Plant, Haimen Power Plant

Phase I, Dezhou Power Plant, Jining Power Plant, Weihai Power Plant, Xindian Power Plant and many

others.

The majority of the company‟s power plants are coal-based; however, it also operates hydropower plants

and a few gas-based plants. The company, in line with the government‟s policy on renewable energy, is

focusing on building and expanding high efficiency/low emission supercritical, ultra-supercritical and

cogeneration units. It also promotes the usage and development of renewable energy on the basis of

commercial viability. It is emphasizing the acquisition, development, and expansion of plants based on

alternative energy sources.

As of December 2009, the company has various projects under construction that include: Huaneng

Kangbao Wind Power Plant in Hebei Province, with a total installed capacity of 49.5 MW; Huaneng

Yongzhou Xiangqi Hydropower Station and Huaneng Yueyang Power Plant Phase III in Hunan Province,

with a total installed capacity of 80 MW and 1,200 MW respectively; and the construction of three power

plants in Gansu Province with a total installed capacity of 199.5 MW, 201 MW and 101 MW. It is also

involved in the construction of a co-generation plant, a desalination plant and a wastewater treatment

facility in Singapore which is owned by Tuas Power Ltd (an indirectly owned subsidiary of HPI), with a

total installed capacity of 165 MW and capacity to supply up to 1000t/h of steam; its commercial operation

is expected by 2012.

In March 2009, the company acquired 65% stakes in Huaneng Qidong Wind Power Generation Co., Ltd.

from Huaneng New Energy Industrial Holding Limited Company. It also acquired 55% equity interest in

Tianjin Huaneng Yangliuqing Co-generation Limited Liability Company; 100% interest in Yunnan

Diandong Energy Limited Company, Yunnan Diandong Yuwang Energy Limited Company, Shandong

Zhanhua Co-generation Limited Company, Jilin Luneng Biological Power Generation Limited Company

and Qingdao Luneng Jiaonan Port Limited Company; as well as 60.25% interest in Fujian Luoyuanwan

Luneng Harbour Limited Liability Company, 58.3% interest in Fuzhou Port Luoyuanwan Pier Limited

Liability Company, 73.46% interest in Luoyuan Luneng Ludao Pier Limited Liability Company, 53% in




Luneng Sea Transportation Limited Company, and 39.75% interest in Fujian Luoyuanwan Luneng

Harbour Limited Liability Company.

9.2.3 China HuaNeng Group, SWOT Analysis

9.2.3.1 Overview

HPI is a power generation and service company involved in the development, construction, and operation

and management of large power plants across China. HPI owns and operates 17 power plants and has

working interests in 13 operating power plants and minority interests in over five operating power

companies across China. The company‟s heavy dependency on coal for power generation could

adversely affect its operations. Also, weak liquidity and high expenses are some of the key issues facing

the company. Furthermore, adverse economic conditions and stringent regulations are the major

challenges against the company. Nevertheless, the company can explore growth opportunities by

focusing on renewable energy sources for power generation.

Table 28: China HuaNeng Group, SWOT Analysis, 2010

Strengths Weakness

Strengthening Operations through Power Assets

Average Growth Prospects

Established Player in China

Expanding Market Share in Sector

Efficient Use of Resources

High Indebtedness

Limited Liquidity Position

Dependency on Coal

Limited Operating Margin

Limited Investor Confidence

Opportunities Threats

Focus on Alternative Energy Sources

Positive Outlook of Chinese Economy

Strategic Agreements

Increasing Input Costs

Stringent Regulations

Challenging Economic Conditions

Source: GlobalData

9.2.3.2 China HuaNeng Group Strengths

Strengthening Operations through Power Assets

The company is one of the largest independent power producers based in China. Moreover, HPI

commenced commercial operations of new generating units with a total installed capacity of 5,832 MW,

including Huade Wind Power Plant, with an installed capacity of 49.5 MW. HPI is one of the largest power

generating companies in China. During 2009, HPI's total domestic power generation from all operating

power plants amounted to 203.520 billion kWh, with an increase of 10.23% compared to the previous

year. Furthermore, the company's annual average utilization hours of coal-fired generating units was

5,220 hours, compared to the average rate of 381 hours among coal-fired generating units in China.

Through such power generating assets, the company will strengthen its operating performance.

Average Growth Prospects

The company‟s achievements during the year enabled it to record revenues of CNY76,710.98m as

compared to CNY67,728.73m in 2008, an increase of 13.3%. Its CAGR in revenue was 17.62% during

2005-2009. This was above the Power Generation sector average of 13.76%. A higher than sector

average revenue CAGR indicates that the company outperformed the average sector growth and gained

market share over the last four years. Additionally, HPI's operating margin was 11.96% for the fiscal year

ended 2009. This was above the S&P 500 companies‟ average of 7.26%. A higher than S&P 500

companies‟ average operating margin may indicate efficient cost management or a strong pricing strategy

by the company. This was due to significant increases in power generation recorded by the company‟s

Yingkou Power Plant, Yuhuan Power Plant, Qinbei Power Plant and Shang‟an Power Plant. In addition,

the company's return on equity (ROE) was 11.7% for the fiscal year ended 2009. This was above the

Power Generation sector average of 8.7%. A higher than sector average ROE may indicate that the

company is efficiently using the shareholders' money and that it is generating high returns for its




shareholders compared to other companies in the sector. Through such financial performance HPI can

enhance its marketing efforts and maintenance program gradually, supporting financial stability.

Established Player in China

The company is an established player in the Chinese energy segment. It is one of the largest independent

power producers based in China. HPI has established operations in 17 provinces of China, including

Jiangsu, Zhejiang, Guangdong, Jiangxi, Gansu, Hebei, Shanxi, Shandong, Henan, Fujian, Hunan,

Shanghai, and the Liaoning and Chongqing Municipalities. The company‟s electricity generation business

covers the South China Grid, the Northeast China Grid, the North China Grid, the Central China Grid, the

Northwest China Grid and the East China Grid. The company‟s main presence is in China, which is one of

the fastest growing economies in the world. The company‟s strong presence in China will provide a good

platform for future growth.


The company's CAGR for revenue was 17.62% during 2005-2009. This was above the power generation

sector average of 13.76%. A higher than sector average revenue CAGR indicates that the company

outperformed the average sector growth and gained market share over the last four years. The company

may have achieved this growth due to better competitive positioning or superior products and service

offerings compared to other companies in the sector.

Efficient Use of Resources

The company's ROE was 11.7% for fiscal year ended 2009. This was above the power generation sector

average of 8.7%. A higher than sector average ROE indicates that the company is efficiently using the

shareholders' money and that it is generating high returns for its shareholders compared to other

companies in the sector.

9.2.3.3 China HuaNeng Group Weaknesses

High Indebtedness

The company's balance sheet reflects a high level of indebtedness. HPI recorded long term debt of

CNY85,066.87m in the fiscal year ended 2009, a significant increase of 23.5% over the fiscal year ended

2008. Further, the total debt of the company increased over 18.2% to CNY1, 29,148.39m. As of

December 31, 2009, the debt to equity ratio of the company was 306.6. This reflects the high leverage of

the company and could lead to a deterioration of its debt coverage ratios. High debt increases the interest

payment obligations of the company and could limit the company‟s ability to raise funds through debt for

future expansion projects. Also, it makes the company more vulnerable to the upturn in the economy and

market.

Limited Liquidity Position

The company's current ratio was 0.41 at the end of fiscal year ended 2009. This was below the power

generation sector average of 1.43. A lower than sector average current ratio indicates that the company is

in a weaker financial position than other companies in the sector.

Dependency on Coal

HPI generates the majority of its power through utilizing coal as a source of fuel. Coal is a scarce and

costlier fuel when compared to non-conventional sources of energy such as wind, solar and hydro. Any

inability to procure the required amount of coal at the right price could see the net generation of its plants

severely impacted. Furthermore, high dependency on thermal energy increases the cost of production

and affects the profit margins of the company. Due to the significant increase of coal prices in 2009, the

company‟s fuel cost increased significantly and as a result lead to losses for the company. The coal

purchase price for HPI, including transportation costs and miscellaneous expenses, averaged

approximately CNY525.14 per ton. The company should focus on clean fuel sources for power generation

so that dependency on thermal energy can be minimized and the generation capacity of the company

increases.




Limited Operating Margin

The company's operating margin was 11.96% for the fiscal year ended 2009. This was below the power

generation sector average of 14.61%. A lower than sector average operating margin may indicate

inefficient cost-management or a weak pricing strategy by the company. However, the company's

operating margin increased 1,379bps over 2008, which indicates that the management has been focusing

on profitability.

Limited Investor Confidence

The company was trading at a price/earnings (P/E) ratio of 9.99 at the end of fiscal year ended 2009. This

was below the power generation sector average of 16.35. A lower than sector average P/E indicates that

the company may have lower growth prospects compared to other companies in the sector. Investors

may be expecting limited earnings growth in the future compared to the other companies in the sector.

9.2.3.4 China HuaNeng Group Opportunities


The company is focusing on alternative energy sources for power generation such as nuclear, wind and

solar. Renewable sources of energy like wind, solar, and hydro are comparatively cheaper and cleaner

compared to conventional sources such as coal and gas, and as a result, power generation from these

sources can bring down the cost of the company and make it more efficient. Also, the company could

utilize the fiscal incentives and schemes which are designed to encourage the increasing usage of

renewable energy sources. These incentives and schemes range from preferential tariffs or tax credits for

renewable energy projects to framing taxing schemes for those who contribute to the emission of carbon

dioxide. Subsequently, a focus on renewable energy would add diversity and low-cost energy to HPI‟s

power supply portfolio.

Positive Outlook of Chinese Economy

China's national economy continues to develop at a notable pace. There has been growth in Chinese

heavy industry, which has pushed up the demand for electricity. The accompanying commercial and

industrial development is expected to drive demand for energy-related products and services in China.

HPI is one of the largest power producers in China. The company can leverage its existing Chinese

operations to expand its market share and record stronger top-line growth.

Strategic Agreement

During the fiscal year ended 2009, the company entered into a transfer agreement with Huaneng New

Energy Industrial Holding Limited Company (Huaneng New Energy), a subsidiary of Huaneng Group. HPI

acquired nearly 65% equity interest in Huaneng Qidong Wind Power Generation Co., Ltd. for a

consideration amount of CNY103m. HPI completed the acquisition process of Qidong Wind Power, with a

generating capacity of 91.5 MW. Through such strategic agreements, the company can utilize the

opportunity for increasing its generating capacity with renewable resources thereby increasing its profit

margin.

9.2.3.5 China HuaNeng Group Threats

Increasing Input Costs

The company uses raw materials such as coal and steel in its production process. Coal prices have been

very volatile in recent years. In addition, the construction of power-generating assets consumes large

quantities of steel. Rises in steel prices would have a major impact on the company‟s operating costs.

Higher raw material costs increase the production costs for companies, which force them to either raise

the prices of their products by placing the burden on the consumer, or to take the burden themselves by

absorbing the higher costs and decreasing profit margins. Thus, the rise of raw materials may have a

material effect on the product cost and further operations of HPI.





HPI‟s operations are subject to numerous local, national, and international environmental regulations.

Recently, there has been an increase in environmental concerns due to the issue of climate change.

China is bound by the Kyoto Protocol's guidelines to reduce greenhouse gas emissions by 5.2% every

year from 2008-2012. Increasing environmental concern has resulted in an increase in the demand for

power generation through renewable energy sources such as solar, wind and geothermal. This has

resulted in the shift of power generation from sources which cause pollution such as coal, gas and oil to

renewable energy sources. Decreases in the demand for power plants operated by fossil fuels will result

in a reduction in demand for products and services from these plants and could lead to financial loss for

the company. If this trend continues then in future the company may have to close these product lines and

services.

Challenging Economic Conditions

The ongoing crisis in the global financial markets and the world economy poses a serious threat to the

company. The adverse economic and financial market scenario across the world could severely affect the

company‟s cash flows, levels of indebtedness, credit ratings, liquidity and financial performance. In

addition, the economic slowdown has affected industrial activities in regions where the company operates.

As a result, the company could experience lower demand from its industrial and commercial customers.

For instance, due to the current global financial crisis and economic downturn, Singapore‟s economy is

expected to have a negative growth in 2009. As a result, power demand in Singapore is expected to

decrease. This would adversely affect Tuas Power‟s business and operations. Furthermore, volatility in

the market could pull down the value of the investment portfolio of the company, resulting in a decline in

its asset value. Also, due to uncertainties in the credit market, the company could face difficulties in

raising the capital required for its operations.

9.3 Key Companies in the Chinese Power Market, China Datang Corporation

9.3.1 China Datang Corporation, Company Overview

Datang International Power Generation Company Limited (Datang Power) is an independent power

producer. The company is engaged in the development and operation of power plants, the sale of

electricity and the repair and maintenance of power equipment and power-related technical services.

Datang Power also provides the repair and maintenance of power equipment and power related technical

services. The company generates electricity-utilizing sources such as coal, gas, nuclear, hydro and wind.

It is also focusing on the development of coal-to-chemical projects, coal mining and complementary

development of railway, port and shipping. Presently, the company manages over 100 power generation

companies. In 2009, the company and its subsidiaries generated 141.87 billion kWh of power, an increase

of 11.98% over the previous year. Datang Power through its subsidiaries operates across 18 provinces of

China. The company is headquartered in Beijing, China.

9.3.2 China Datang Corporation, Business Description


Datang International Power Generation Company Limited (Datang Power) is engaged in power production

and supply. It develops and operates power plants, sells electricity and thermal power and is also

engaged in the repair and maintenance of power equipment and power-related technical services. The

company is also involved in coal mining, coal-to-chemical projects, and the complementary development

of railway, ports and shipping. The company's major service area covers the BTT area and the eastern

coastal provinces in China, as well as other provinces and regions such as Yunnan, Chongqing and

Shanxi. In 2009, the company and its subsidiaries generated 141.87 billion kWh of power. It distributes

power across the power grids of North China, Shanxi, Inner Mongolia, Gansu, Zhejiang, Yunnan, Fujian,

Guangdong, Chongqing, Jiangxi, Liaoning, Ningxia and Qinghai. Datang Power operates in four

reportable segments that include power generation, chemical, coal, and all others. In the power segment,

Datang Power manages around 100 power generation companies, which are divided under hydropower,

wind power, coal-fired power, and other businesses. In the coal-fired power operations the company

manages 27 plants in Beijing, Tianjin, Chongqing, Hebei province, Shanxi province, Jiangxi province,

Zhejiang province, Fujian, Guangdong province, Yunnan province, Gansu province, Liaoning province,




and Inner Mongolia Autonomous Region. The coal-fired power plants accounted for 88.06% of the

company's total installed capacity. The hydropower business manages 12 power companies spread

across various provinces, which include Hebei, Sichuan, Yunnan, Chongqing, Inner Mongolia and

Qinghai. The hydropower plants accounted for 11% of the company's total installed capacity.

In the wind power business, the company operates six wind power companies across the Inner Mongolia

Autonomous Region, Shanxi province, Chongqing, Fujian province, and Liaoning province. The wind

power plants accounted for 0.94% of the company's total installed capacity. It also operates one nuclear

power company, Fujian Ningde Nuclear Power Company Limited, in Fujian province. In its coal operations

and other business, Datang Power operates 10 companies across Beijing, Hong Kong, Hebei province,

Jiangsu province, and the Inner Mongolia Autonomous Region.

In 2009, the company and its subsidiaries consumed 326.51g/kWh of coal and generated 141.87 billion

kWh, an increase of 11.98% from previous year. Datang Power's total on grid power generation was

133.552 billion kWh. Its subsidiaries provided an additional installation capacity of 5,645 MW. In addition,

the company's various emissions were 0.444g/kWh of SO2, 1.541g/kWh of NOx, 0.147g/kWh of ash, and

133g/kWh of waste water.

Under its chemical business segment, the company's Duolun Coal Chemical Project utilizes lignite coal

from the East Unit 2 of Inner Mongolia Shengli Coal Mine to convert methanol to propylene using

technologies such as the technology of vaporizing coal ash, the syngas purification technology, and large-

scale ethanol synthesis technology. In addition, Datang Power uses propylene polymerization technology

to produce coal chemical products. It provides 460,000 tons/year of polypropylene and other byproducts.

In the coal business segment, Datang Power has developed and constructed the Shengli Coal Mine East

Unit 2 in Inner Mongolia. The coal produced in this project is supplied to the company's coal chemical and

coal-based natural gas projects as raw materials. Its Phase 1 project has a production capacity of 10

million tons.

As of December 2009, the company is constructing 13 power plants. In 2009, the company began the

operations of two 300 MW units at Jinzhou Thermal Power Company, two 300 MW units at Fengrun

Thermal Power Company, two 660 MW units at Ningde Power Company, two 600 MW units at Daba

Power Company and one 300 MW unit at Zhangjiakou Thermal Power Company. In addition, it also

commenced three 150 MW units at the Gelantan Hydropower Station of Lixianjiang Hydropower

Company, three 95 MW units at the Jufudu Hydropower Station of Lixianjiang Hydropower Company,

49.5 MW at Zuoyun Wind Power Company, 49.5 MW at Faku Wind Power Company and 49.5 MW at

Liaoning Wind Power Company.




9.3.3 China Datang Corporation, SWOT Analysis

9.3.3.1 Overview

Datang Power is an independent power producer based in China. The company is focused on the

development and operation of power plants, the sale of electricity and the repair and maintenance of

power equipment and power-related technical services. However, weak liquidity and high expenses are

some of the key issues for the company. Adverse economic conditions and stringent regulations are the

major challenges against the company. Nevertheless, the company can explore growth opportunities by

focusing on renewable energy sources for power generation.

Table 29: China Datang Corporation, SWOT Analysis, 2010

Strengths Weakness

Strategic Position in the Market


Strong Growth Prospects

Increased Operating Expenses

Weak Liquidity Position

High Debt

Low Return on Equity


Increasing Demand for Electricity

Growing Chinese Economy



Intense Competition

Increasing Fuel Costs

Source: GlobalData

9.3.3.2 China Datang Corporation Strengths

Strategic Position in the Market

Datang Power is a leading independent power producer in China. With this strategic leading position in

the market, it develops and operates power plants, sells electricity and thermal power, and repairs and

maintains power equipment and power-related technical services. The company operates four main

plants, namely the Dou He power plant, Gao Jing power plant, Zhang Jia Kou power plant, and Xia Hua

Yuan power plant, and manages over 50 power generation companies. During the fiscal year ended

2009, the company through its subsidiaries added new installed capacity of 5,645 MW. Such a leading

position for the company in the market increases its reputation, thereby enhancing its financial

performance.


The company's CAGR for revenue was 27.76% during 2005-2009. This was above the power generation

sector average of 13.76%. A higher than sector average revenue CAGR indicates that the company

outperformed the average sector growth and gained market share over the last four years. The company

may have achieved this growth due to better competitive positioning or superior products and service

offerings compared to other companies in the sector.

Strong Growth Prospects

Datang Power‟s achievements during the year enabled it to record revenue of CNY47,744.11m in 2009,

an increase of 29.4% as compared to CNY36,900m during 2008. In addition to robust revenue growth, the

company witnessed a good level of increase in the total receivables from sales to CNY7,984.14m in the

fiscal year ended 2009. Additionally, the company was trading at a P/E ratio of 18.62 at the end of the

fiscal year ended 2009. This was above the power generation sector average of 16.35. A higher than

sector average P/E indicates that the company may have high growth prospects which are reflected in its

stock's premium pricing. Investors may be expecting higher earnings growth in the future compared to

other companies in the sector. Such a stable revenue position and efficient management of finances will

allow the company to pursue strategic capital investment opportunities in the future.




9.3.3.3 China Datang Corporation Weaknesses

Increased Operating Expenses

The company recorded an increase in operating expenses in comparison to the previous year. The total

utility operating expenses increased to CNY41,198.58m in 2009, an increase of 21.1%. The operating

cost principally increased due to maintenance and commercial expenses, depreciation and amortization

expenses. Such increases in the operating and administrative expenses are declining margins and

negatively affecting the financial performance of the company.

Weak Liquidity Position

In 2009, current liabilities of the company increased significantly over the previous year. The current

liabilities of the company as of December 31, 2009 were CNY41,393.74m, compared to current assets of

CNY16679.65m. Datang Power's current ratio was 0.4 at the end of the fiscal year ended 2009. This was

below the power generation sector average of 1.43. A lower than sector average current ratio indicates

that the company is in a weaker financial position than other companies in the sector. A weak liquidity

position is a serious concern for the company as it would affect its ability to meet its short-term

obligations. The performance of the company largely depends upon its cash position and its ability to

generate cash from operations. A lack of sufficient cash or cash equivalents would negatively affect the

working capital requirements of the company, which could hamper the company‟s operations.

High Debt

The company recorded long-term debt of CNY105,445.09m in the fiscal year ended 2009, a significant

increase of 52.8% over the fiscal year ended 2008. Furthermore, the total debt of the company increased

by over 21.5% to CNY132,381.12m. As of December 31, 2009, the debt to equity ratio of the company

was 6.03. This reflects the high leverage of the company and could lead to a deterioration of its debt

coverage ratios. High debt increases the interest payment obligations of the company and could limit the

company‟s ability to raise funds through debt for future expansion projects.

Low Return on Equity

The company's ROE was 6.2% at the end of fiscal year ended 2009. This was below the power

generation sector average of 8.7%. A lower than sector average ROE indicates that the company may not

be using its shareholders' money as efficiently as other companies in the sector and that it is generating

low returns for its shareholders compared to other companies in the sector.

9.3.3.4 China Datang Corporation Opportunities

Increasing Demand for Electricity

Electricity has been the fastest growing form of end use energy across the world from the past few years.

The

world‟s energy needs are projected to increase through 2030 on a continuous basis. This growing

demand will result in the net generation of electricity increasing at an average rate of 2.6% annually

through 2030. The coal-fired generation amounted for 41% of electricity supply in the world in 2005 and is

forecast to increase to 46% by 2030. Electric power generation from natural gas is projected to increase

to 8.4 trillion kWh by 2030. The demand for electricity in China is expected to rise at an average rate of

5.4% annually through 2030.

Growing Chinese Economy

China's national economy continues to develop at a continuous pace. The accompanying commercial and

industrial development is expected to drive demand for energy. The company, being one of the largest

power producers in China, can leverage its existing Chinese operations to penetrate its markets and

record stronger top-line growth.





The company should focus on alternative energy sources for power generation, such as nuclear, wind

and solar. Renewable sources of energy like wind, solar, and hydro are comparatively cheaper and

cleaner than conventional sources such as coal and gas, and as a result power generation from theses

sources could bring down the costs of the company and make its production more efficient. Also, the

company could utilize the fiscal incentives and schemes available which are designed to encourage the

use of renewable energy sources. These incentives and schemes range from preferential tariffs or tax

credits for renewable energy projects to framing taxing schemes for those who contribute to emissions of

carbon dioxide. Subsequently, a focus on renewable energy would add diversity and low-cost energy to

Datang Power‟s power supply portfolio.

9.3.3.5 China Datang Corporation Threats


The company‟s businesses are regulated by various national and local environmental laws and

regulations. These laws and regulations monitor the operations, products and other activities of the

company in the various jurisdictions in which it operates. The role of various renewable sources of energy

is increasing due to the growing importance of climate change, and also due to the government‟s

emphasis on carbon emission reduction. The company‟s earnings could be impacted by the regulations

concerning emissions, fuel consumption and safety. Any non-compliance with the regulatory limits could

lead to penalties and fines. In addition, the political conditions of the country may also affect the

company‟s business. The change in government policies and regulations could have a negative effect on

the company‟s growth and expansion strategies.

Intense Competition

The company operates in a competitive environment. Its key competitors include AES, CLP Holdings and

Huaneng Power, amongst others. It also competes with many independent power producers in the power

market. The competition is mainly driven by the increasing demand for energy needs from commercial,

government and residential customers. The demand depends on population growth, economic activity

and electricity prices. The administrative approvals are found to be insufficient to meet this increasing

demand in spite of the country facing an overall shortage in supply. Such intense competition could limit

the promotional activities of the company.

Increasing Fuel Costs

The company uses raw materials such as coal in the production process. Energy commodity prices are

highly volatile and are likely to remain volatile in the near future. The prices the company receives for its

power generation from coal and other fuels is dependent on various factors such as the supply and

demand for fossil fuels from the domestic and foreign markets, and the price and quantity of imports

varies from year to year. Any changes in these factors will adversely affect demand for the company‟s

product and its profitability. Thus, the rise of raw material prices may have a material effect on the product

costs and future operations of the company.




9.4 Key Companies in the Chinese Power Market, China Guodian Corporation

9.4.1 China Guodian Corporation, Company Overview

China Guodian Corporation (CGC) is engaged in the development, construction, operation and

management of power generating facilities and power supply in China. It is also involved in the

investment, construction, operation and management of businesses related to coal, power generation

equipment, new energy, transportation, high tech, environment protection, technological services and

information consultancy. CGC has 16 regional branch companies, 13 extra large subsidiaries and two

research and development institutes. Also there are four listed companies, namely, the GD Power

Development Co., Ltd, Inner Mongolia Pingzhuang Energy Resources Co .Ltd, and Ningxia Younglight

Chemicals Co.Ltd and Guodian Changyuan Power Development Co., Ltd. The company serves around

31 provinces of China.

9.4.2 China Guodian Corporation, Business Description


CGC is a power generation group that is principally engaged in the development, investment,

construction, operation and management of power generation and supply. The company principally

focuses on five areas, which include promoting clean coal generation, improving the scale and quality of

hydropower development, facilitating wind and solar power energy, developing comprehensive coal

utilization and enhancing high-tech industry development. CGC owns and maintains nearly 45 secondary

branches and sub-companies and over 300 subsidiaries. In addition, the company is also involved in the

investment, construction, operation and management of business areas relevant to its core business such

as coal, power generation equipment, new energy, transportation, high-tech, environment protection,

technological services and consultancy.

The company operates its business through two units, namely, Coal Industry and High-tech Industry. It

controlled an installed capacity of 85,268,000kW and controlled 13.8 billion tons of coal resources,

generating an annual output of 41 million tons of coal.

The company‟s sub-units under its high-tech industry division include desulfurization and de-nitration

technology, plasma oil-free ignition technology, distributed control systems (DCS) and wind turbine

manufacturing.

Desulfurization and de-nitration technology is engaged in coal-fired generation with reference units of over

45,120 MW in operation and 32,510 MW under construction. Plasma oil-free ignition technology is applied

for more than 250,000 MW and can realize the oil-free coal-fired power plant. The DCS is a technology

developed exclusively by the company and more than 800 sets have been adopted. The wind turbine

manufacturing unit is engaged in the complete manufacturing process of wind farms, including design,

equipment manufacturing, construction, operation, and maintenance.

During 2010, the company‟s total assets reached to a total of $68.5 billion and it was also listed in the

Fortune Global 500. In October 2010, the company signed a strategic cooperation agreement with

Jiangxi.




9.4.3 China Guodian Corporation, SWOT Analysis

9.4.3.1 Overview

CGC is engaged in the development, construction, operation and management of power generating

facilities and power supply in China. The company holds a diverse generation portfolio which sustains its

strong market position in Chinese provincial markets. The company is mostly dependent on thermal fuel

sources, which is a major area of concern. The growth in the renewable energy market and technological

innovation could lead to the growth of the company. The company's business also has risks associated

with high levels of competition and commodity price risks.

Table 30: China Guodian Corporation, SWOT Analysis, 2010

Strengths Weakness

Strong Foothold in the Market

Diverse Generation Portfolio

Dependency on Thermal Fuel Sources

Market Concentrated in China


Online Business Services

Growing Renewable Energy Market

Market Competition

Socio-Environmental Impact

Commodity Pricing Risk

Source: GlobalData

9.4.3.2 China Guodian Corporation Strengths

Strong Foothold in the Market

CGC operates as an important element of the power system of China. It is one of the largest state-owned

power generation groups in China. As of June, 2010, the company‟s total assets have reached to $68.5

billion. The company renders its services to over 31 provincial regions. Additionally, the company also

owns 13.8 billion tons of coal reserves with 41 million tons of annual output. It is the largest wind power

operator in Asia, and has been ranked fifth in the world. In addition, the company has ranked third globally

and first in the Asia for its tidal power generation capacity. Furthermore, CGC was listed in the Fortune

Global 500 companies list in July 2010. Such a strong position in the market reflects its vital role in

supporting and adjusting the energy balance of the country.

Diverse Generation Portfolio

CGC is involved in the production and sale of electricity and related products as well as also being

engaged in electrical services like transmission services. It has a diverse generation portfolio which

enables the company to better manage its business in the face of fuel price volatility. Such a diverse

portfolio of plants will help enhance its operational efficiency and market share in future.




9.4.3.3 China Guodian Corporation Weaknesses


The company generates the majority of its heat and electricity through thermal energy sources. CGC

generates the substantial portion of its power from coal and natural gas based plants. As of June 2010,

the company generated 84.14% of its total installed capacity from coal-fired plants. Coal is costlier than

non-conventional sources of energy such as nuclear, wind, solar and hydro. Any inability to procure the

required amount of coal and gas at the right price could severely impact the net generation of the

company. A high dependency on coal and gas increases the cost of production and affects the profit

margins of the company. The company should focus on clean fuel sources for power generation so that

dependency on coal can be minimized and the generation capacity of the company increases.

Market Concentration: China

The company mainly operates across the provinces of China, with a strong concentration over the region.

CGC‟s service operations are constrained to provincial area of the region, in terms of generation,

transmission and distribution channels. A high level of dependence on this market exposes the company

to the risks associated with market concentration. As a result, the company's business is more susceptible

to regional factors, which include changes in the economy, weather conditions, and demographics and

population, compared to more geographically diversified competitors.

9.4.3.4 China Guodian Corporation Opportunities

Online Business Services

CGC provides effective customer service to its consumers. It provides a timely response to customer

inquiries which leads to increased customer satisfaction. The company implements new initiatives to

serve its customers more efficiently. During 2010, the company improved its customer communications

technology with the introduction of e-business bill services. Through its new online service, the company

provides improved online services including simplified access to customer accounts; availability of

customer information up to 24 months; and, option to view multiple accounts with a single login. It has

installed an enhanced electronic billing system, or eBills, which allow timely and efficient response to

customer requests. Effective customer service helps the company achieve high customer satisfaction.

Growing Renewable Energy Market

The growing global renewable energy market could provide growth opportunities to the company.

According to in-house research, power generation from renewable energy sources (renewable) will

require a projected $5.7 trillion of cumulative investments from 2010 to 2035. China has emerged as the

leader in photovoltaic and wind power production globally, with accordingly higher investment needs.

Renewable energy is projected to account for about 55% in cumulative electricity generation by 2035,

from the current level of 19%, according to in-house research estimates. This growth is expected to be led

primarily by wind and hydro, followed by biofuels and about 2% from solar photovoltaic by 2035. Such a

positive outlook for the renewable energy market would allow the company to expand its market share

and provide a variety of opportunities.

9.4.3.5 China Guodian Corporation Threats

Market Competition

CGC operates in a highly competitive environment. Its key competitors include China Huadian

Corporation, China Datang Corporation, Yunnan Power Grid Corporation, and Yuxian Jinli Gas Co. Ltd.,

amongst others. It also competes with many independent power producers in the power market. The

competition is mainly driven by the increasing demand for energy from commercial, government and

residential customers. The demand depends on population growth, economic activity and electricity

prices. The administrative approvals are found to be insufficient to meet this increasing demand in spite of

the country facing an overall shortage in supply. Such an intense competition could limit the promotional

activities of the company.




Socio-environmental Impact

Failure to consider the environmental impact of its hydropower projects could lead to the company facing

litigation. Decisions about the development of hydropower projects are impacted by controversies over

their environmental and social effects. Analysis of both the benefits and impact of projects is challenging

and time-consuming, potentially draining the company‟s resources. The range of issues involved include

the enhancement of economic conditions of citizens, protection of lives and property from floods and

droughts, securing citizens‟ rights with regard to the expropriation of land to be inundated, and the

protection of the environment with regard to air, land, water, and biodiversity.

Commodity Pricing Risk

The company‟s operations and revenues are significantly dependent upon the prices and demand for

coal and natural gas. CGC's commodity risks are mitigated by the current ratemaking process in place for

recovering electric fuel cost, purchased energy costs, and the cost of coal. In the past, the energy

commodities prices were highly volatile. Moreover energy commodity prices are likely to remain volatile in

the near future. The prices the company pays for raw materials like coal and natural gas fluctuate a lot

depending on supply and demand of these commodities in the international markets. The frequent pricing

changes and imbalances could adversely affect the company‟s operations and profitability.

9.5 Key Companies in the Chinese Power Market, China Huadian Corporation

9.5.1 China Huadian Corporation, Company Overview

China Huadian Corporation (CHD) is a wholly state-owned energy and utilities company. It engages in the

generation, and production of electricity. The company also provides electricity related services to

numerous clients and customers. It focuses on the development of power related energy, such as coal

and conventional energy sources. In addition, it supplies relevant technologies services. CHD is

headquartered in Beijing, China.

9.5.2 China Huadian Corporation, Business Description


CHD engages in the production and supply of electricity and heat, and the development of power-related

primary energy. It is a state-owned enterprise formed through the integration of enterprises and

institutions that were previously owned by the State Power Corporation of China. It is one of the five

largest energy and utility companies in China. The company operates through 23 wholly-owned, 40

controlling and 21 participating affiliated enterprises. The company is mainly focused on generating and

supplying electricity and heat to its numerous customers. Apart from this, China Huadian develops power

from energy sources such as coal and conventional energy sources. It also supplies relevant technology

services. The company focuses on developing in four major industrial sectors, namely, Power Generation;

Coal Mining; Finance; and Engineering Technologies.

The company‟s Power Generation division focuses on hydropower generation, thermal power generation,

nuclear power, and wind power. The company‟s international Zouxian Power Plant has reached installed

capacity of 4,540 MW. The company‟s Wujiang hydropower plant has an installed capacity of 1,250 MW,

affiliated to CHD, which is the first large-scale hydropower plant built in the Karst region in China, and also

the first 1,000 MW-level hydropower plant in Guizhou province, China. Guizhou Wujiang Hydroelectric

Power Generation Co., Ltd in China is also planning to build capacity of 8,615 MW. The company has a

wind power generation with installed capacity of 120 MW.

CHD focuses on coal development and the construction of large-sized national coal bases. The company

operates coal transport and supply through roads and ports. Currently, the company has reached up to

87.5 million tons/year.

The company operates its finance division through Huadian Power International Co.,Ltd, Huadian Power

Co.,Ltd, State Power Nanjing Automation Co.,Ltd., Huadian Jinshan Power Co.,Ltd. and Guizhou

Qianyuan Power Co. This division takes care of mergers and reorganizations.




The Engineering Technologies division of the company focuses on building an industrial chain of wind

power generation, accelerating the research and development of key technologies and products of solar

power generation, biogas and coal-bed methane power generation.

The company‟s wholly-owned enterprises include China Huadian Engineering (Group) Corporation, Units

1 and 2 of Shangdong Huangdao Power Plant, Wangting Co., Ltd. in Suzhou State Hi-tech Development

Zone and China Huadian Corporation Guizhou Dalong Power Plant. The company's affiliates also include

internal settlement company such as, China Huadian Corporation Fulaerji Power Plant, Zhejiang Huadian

Wuxijiang Hydropower Plant and Jiamusi Power Plant. It also has affiliates in stock-holding enterprises

such as Huadian Power International Co., Ltd., Harbin No. 3 Power Generation Co., Ltd. and Huadian

Power International Co., Ltd. and Shiliquan Power Plant, among others; share participating enterprises

such as Ertan Hydropower Development Co., Ltd., Shandong Weifang Power Plant and Beijing Jingxi

Generation Co., Ltd.

The company‟s controlling enterprises include Huadian Power International Co., Ltd, Huadian Power Co.,

Ltd, State Power Nanjing Automation Co., Ltd. and Guizhou Qianyuan Power Co., Ltd. It also has

controlling shares in Yunnan Jinsha River Middle Reaches Hydropower Development Co., Ltd. with a

planned total installed capacity of 21,150 MW and in Wujiang Hydropower Development Co., Ltd.

The China Huadian Corporation and other Chinese investors planned to build a 2,400 MW power

generating plant in Indonesia with an investment of $2.1 billion.

In 2010, the company sold its 9.33% stake in Sewind, a joint venture of China Huadian Corporation and

Shanghai Electric Group (SEG). It specializes in the design, fabrication and sale of large-scale wind

power generation units. In November 2010, the company signed a Memorandum of Understanding with

Ruisai, the Minister of Cambodian Industrial and Minerals Energy Ministry for hydropower projects in

Cambodia. Based on the MoU, two hydropower stations will be developed and constructed by China

Huadian. In January 2011, the company signed a five-year, joint collaboration agreement with General

Electric Company for distributed energy combined heat and power (DECHP) projects in China that is

expected to boost the US exports and support thousands of US jobs.

9.5.3 China Huadian Corporation, SWOT Analysis

9.5.3.1 Overview

China Huadian Corporation (China Huadian) is a wholly state-owned energy and utilities company that is

focused on the generation and supply of electricity and heat. The company has a strong affiliate network

which enables the smooth operations of its businesses, which helps make the company a front runner in

the market. The drawbacks of the company are it being a state-owned enterprise and its lack of

diversification. A downturn in the Chinese economy and intense competition could pose threats to the

company's growth. However, the rising demand for wind and hydro power, coupled with the company‟s

expansion plans, will ensure its future growth.

Table 31: China Huadian Corporation, SWOT Analysis, 2010

Strengths Weakness

Strong Affiliate Network

Robust Business Operations

Healthy Operation of Power Plants

Lack of Diversification

Drawbacks of State-owned Enterprises


New Expansion Plans

Growing Hydropower Market

Growing Wind Energy Market in China

Intense Competition

Socio-Environmental Impact

Changes in Regulations and Policies

Source: GlobalData




9.5.3.2 China Huadian Corporation Strengths

Strong Affiliate Network

China Huadian comprises a portfolio of major affiliates which provides strong support for its development.

The company‟s wholly-owned enterprises include China Huadian Engineering Co., Ltd. (CHEC), which is

primarily involved in the design, manufacture, service provision and construction of projects in various

industries such as power, chemistry and metallurgy.; and units 1 & 2 of Shangdong Huangdao Power

Plant amongst others. Its internal settlement enterprises include China Huadian Corporation Fulaerji

Power Plant, Zhejiang Huadian Wuxijiang Hydropower Plant, Jiamusi Power Plant and Zhejiang Huadian

Wuxijiang Hydropower Plant. The company‟s stock holding enterprises include Huadian Power

International Co.,Ltd., Huadian Power International Co.,Ltd., and Huadian Power International Co.,Ltd.

Laicheng Power Plant amongst others. China Huadian‟s share participating enterprises include Shandong

Weifang Power Plant and Hubei Huangshi Generation Co., Ltd amongst others. Such a strong affiliate

network reflects the company‟s strong position in the market.

Robust Business Operations

China Huadian was formed through the integration of enterprises and institutions that were previously

owned by the State Power Corporation of China. It is one of the five largest state-owned organization

administrated by SASAC for the State Council of the People's Republic of China. The company‟s primary

business includes the generation and supply of power and heat to several of its clients and customers. It

is also involved in the business of developing power related to energy sources such as coal and

conventional energy sources. In addition, it supplies pertinent technology services. As of 2009, the

company‟s annual power output was 300 billion kW/h. The company also owns 1000 MV of ultra super-

critical units, with the largest single-unit capacity in China. It also has 600 MV of air cooling units, the first

of its kind in China, 600 MV of de-nitrification units, and 395 MV of natural gas-powered electricity

generation units. The robust business operations of the company reflect its strong customer base in the

market.

Healthy Operation of Power Plants

The company‟s power plants are distributed across 25 provinces and regions of China. Among all China

Huadian‟s power plants, 26 of them operate on a large scale and each of them have an installed capacity

of more than 1,000 MW. The strong and healthy performance of the company‟s power plants resulted in

an annual power output of 300 billion kW/h and total assets of CNY330 billion. The company manages the

operations of its power plants through its 83,038 efficient and expert management personnel. This reflects

the healthy position of the company in the market.

9.5.3.3 China Huadian Corporation Weaknesses

Lack of Diversification

China Huadian is primarily engaged in the business of producing and supplying power and heat. It

develops power related energy such as coal and also supplies pertinent technological services to its

customers. The company has limited operations, while its competitors have a very broad diversified

business portfolio. For instance, China Datang Corporation, one of its competitor, is involved in various

businesses including development, investment, construction, operation and management of power

energy; organization of power production and sales; manufacture, maintenance and commissioning of

electric power equipment; development and consultation of power technology; management of the state-

owned assets invested by the state and owned by the company; contracting and consulting of electric

power engineering and environmental protection projects; and exporting equipment and materials

required by overseas projects amongst others. This might increase business risks to the company.




Drawbacks of State-owned Enterprises

China Huadian is a wholly state-owned enterprise formed through the integration of enterprises and

institutions that were formerly owned by State Power Corporation of China. State-owned enterprises

accounted for 80% of China‟s GDP (gross domestic product) in 1978, and this contribution has now

dropped by more than 17%. The performance of the state-owned enterprises is relatively poor in the

economy. Furthermore, the government ownership means more regulation regarding prices, imports,

exports, major decisions, management and other areas compared to other public companies. The

company may have to compromise its profits in the interest of the country and social welfare, unlike global

majors which are publicly listed and have profit and growth as their sole motive. This lack of autonomy

may adversely affect the operations of the company and may prove detrimental in competing in the global

arena.

9.5.3.4 China Huadian Corporation Opportunities

New Expansion Plans

China Huadian‟s expansion plans in domestic and international markets through strategic alliances and

overseas projects offer significant potential to expand rapidly and ensure cash flows. In 2011, the

company made a collaboration agreement with General Electric Company for DECHP projects in China.

This agreement will strengthen the company‟s position in the market, as the Chinese government has

decided to promote the national DECHP market‟s development. The company has also launched a

hydropower station in Indonesia. The plant is the second largest of its kind in Indonesia, with an installed

capacity of 180 MW. This was the company‟s first overseas project. The company also got its plan

approved from the National Development and Reform Commission (NDRC) to build a coal-fired power

plant in Indonesia. The company also signed plant operation deals worth $200m with Indonesia and

Malaysia and has investment in a turbine construction project in Russia. These expansion plans offers

significant potential for the company‟s future plans and could further strengthen the company‟s position in

the market.

Growing Hydropower Market

China Huadian could benefit from the growing market for hydropower. According to in-house research,

global hydropower potential is estimated to be around 16,400 Terawatt hours (TWh) per year. The key

drivers for this growth include climate change and the negative impact of power production using fossil

fuels coupled with energy security concerns. Countries with the highest potential include China, the US,

Russia, Brazil and Canada. These countries, cumulatively, produce 8,360 TWh per year. Other prominent

countries, with a combined potential of 2,500 TWh per year, include the Democratic Republic of Congo,

India, Indonesia, Peru, and Tajikistan. The top 10 countries account for about two-thirds of the global

potential. Currently, only 19% of the total global potential has been developed.

Hydro is an established source of electricity, and is the largest renewable energy source, with vast water

resources available. Hydropower plants built 50-100 years ago are still operational. Upgrades and

refurbishment can extend the lifetime of the plants, contributing to lower costs of electricity. Hydropower is

expected see its share in global electricity production increase from 16.3% in 2008 to 17.3% in 2030,

according to in-house estimates. It is projected to be 5,800 TWh by 2050

Growing Wind Energy Market in China

Increasing demand for electricity and stricter safety regulations in mines have resulted in higher prices for

domestic coal in China. Coal accounts for around 70% of the country‟s total energy needs and with an

increase in local coal prices, power plants are sourcing coal from Australia. Furthermore, China burns a

third of the world‟s total coal, resulting in the country being the biggest emitter of greenhouse gases

worldwide. The issue of climate change has led to the commitment of the government in supporting

renewable energy sources, including wind power. This increased investments in sustainable energy in

China, of which wind has emerged as the fastest growing renewable energy source.

China‟s wind power installed capacity grew a CAGR of 61% during the time period 2000-2009. According

to the Chinese Renewable Energy Act of 2006, the country requires electric utilities with 5 GW capacities

or more to meet minimum requirements of renewable sources in their energy mix. Furthermore, by 2020

China aims to increase the contribution of renewable energy for its power requirements from the current




7% to 15%, including 30,000 MW of wind power. In addition, the gap between the demand and supply of

power in China will result in strong demand for electricity from renewable sources such as wind. As the

company has ventured into the wind energy market, it is expected to benefit from the growing demand for

wind energy.

9.5.3.5 China Huadian Corporation Threats

Intense Competition

China Huadian operates in a highly competitive environment. Its key competitors include Yuxian Jinli Gas

Co. Ltd., Wu Ling Power Corporation, Z.K.C Environmental Group Co., Ltd., China Datang Corporation

and Jiangxi Fujiang After-Sales Service Co., Ltd. amongst others. It also competes with many

independent power producers in the power market. The competition is mainly driven by the increasing

demand for energy needs from commercial, government and residential customers. The demand depends

on population growth, economic activity and electricity prices. The administrative approvals are found to

be not sufficient to meet this increasing demand in spite of the country facing an overall shortage in

supply. Such an intense competition could limit the promotional activities of the company.

Socio-environmental Impact

Failure to consider the environmental impact of its hydropower projects could lead the company to

litigation. Decisions about the development of hydropower projects are impacted by controversies over

their environmental and social effects. Analysis of both the benefits and impact of projects is challenging

and time-consuming, potentially draining the company‟s resources. The range of issues involved include

the enhancement of economic conditions of citizens, protection of lives and property from floods and

droughts, securing citizens‟ rights with regard to expropriation of land to be inundated, and the protection

of environment with regard to air, land, water, and biodiversity.

Changes in Regulations and Policies

The company‟s operations require permits from various federal and state government authorities. The

operations are subject to various laws governing land use, protection of the environment, production,

exports, taxes, labor standards, occupational health, waste disposal, toxic substances, mine safety and

other matters. Construction and operation of hydropower projects is subject to various regulations. The

company requires certain approvals and licenses for operating its business. These compliances also

include planning regulations and approvals for the commencement of a power project, and clearance from

environmental regulators. Any new government regulations or utility policies or changes in existing

regulations related to the company‟s operations may result in significant additional expenses. This, in turn,

would affect the company‟s business and overall growth.




9.6 Key Companies in the Chinese Power Market, China Power Investment Corporation

9.6.1 China Power Investment Corporation, Company Overview

China Power Investment Corporation (CPI) is a state-owned investment holding corporation engaged in

the development, investment, construction, operation and management of power source, and organizing

the production and marketing of electric power. It has 213 member companies/institutions and 15

participating companies. The company owns assets in 28 provinces, municipalities and autonomous

regions in China, and also in Hong Kong, Macao and other regions.

9.6.2 China Power Investment Corporation, Business Description


CPI is an investment holding corporation. The company is engaged in the development, investment,

construction, operation and management of power sources, and organizes the production and marketing

of electric power (thermal power). It manages all of the state-owned assets owned by the state and by

CPI and CPI‟s associated enterprises. In addition, the company is involved in the complete equipment

supply of power equipment, engineering construction and supervision, tendering and bidding, materials

distribution, equipment maintenance, scientific development, real estate development, property

management and intermediary services, as well as other power related businesses. The company also

deals with investment and financing business. Furthermore, it develops foreign trade business,

international cooperation, international engineering contract and international labour service cooperation

based on government approval. Furthermore, it also undertakes other businesses as approved or allowed

by the State.

The company owns assets in 28 provinces, municipalities and autonomous regions in China, and also in

Hong Kong, Macao and other regions. The six A-share listed companies of CPI include Shanghai Electric

Power Co. Ltd, Shanxi Zhangze Electric Power Co. Ltd, Chongqing Jiulong Electric Power Co. Ltd, Jilin

Electric Power Co. Ltd, Huolinhe Open Coal Mining and Shijiazhuang Oriental Co-generation Co. Ltd.

The other companies owned by CPI include China Power International Holding Ltd., China Power

Development Ltd., China-Hong Kong Power Development Ltd., Upstream Huanghe Hydropower

Development Co., Ltd and Wuling Electric Power Development Corporation, China Power Complete

Equipment Company Ltd. and Mengdong Group Co. Ltd. In addition, the company also owns 19 operating

power plants, has an ongoing stake in the Shandong Haiyang nuclear power project is an equally joint

holding Liaoning Hongyanhe nuclear power project which is in its phase I. This holds minority shares in

five nuclear power plants in operation and three under construction.

CPI operated the first phase of the Wusu thermal power plant in July 2010, Xinhua Infolink reported. The

first phase of construction began in May 2009. The company invested CNY2.7 billion on the first phase.

Presently, China Power is welding the generating surfaces of the boilers in generator number one. Later,

the company will perform welding of the boilers.

In January 2011, the company collaborated with Alcoa Inc. on a broad range of aluminum and energy

projects, representing more than $7.5 billion of potential investment over the coming years, under a MoU

signed by the companies.




9.6.3 China Power Investment Corporation, SWOT Analysis

9.6.3.1 Overview

CPI is a government-owned organization. It was established from part of the constituent businesses of the

former State Power Corporation of China. CPI, with a registered capital of CNY12 billion, is one of the

pilot state-authorized investment entities and state-owned holding corporations approved by the State

Council. The company gets significant financial and technical support from the government. The over-

dependence of the company on thermal fuel sources and its geographic concentration are key areas of

concern for the company. Nevertheless, the company can explore growth opportunities through new

investment and expansion. However, the global economic recession and stringent regulatory obligations

are major challenges for the company.

Table 32: China Power Investment Corporation, SWOT Analysis, 2010

Strengths Weakness

Government Support

Strong Operational Performance

High Production Safety Standards

Comprehensive Range of Services


Geographic Concentration


Focus on Renewable Energy Generation

New Projects

New Technologies

Volatility in Price Level

Legal and Political Framework

Global Economic Slowdown

Source: GlobalData

9.6.3.2 China Power Investment Corporation Strengths

Government Support

CPI is a government owned organization. It was established from part of the constituent businesses of the

former State Power Corporation of China. CPI, with a registered capital of RMB12 billion is one of the pilot

state-authorized investment entities and state-owned holding corporations as approved by the State

Council. The company gets a significant financial and technical support from the government. This

enables the company to carry out its operations uninterruptedly. The government backing thus, enables

CPI to have a significant competitive edge over its private counterparts.

Strong Operational Performance

The company reported strong operational performance in the fiscal year ended 2007. CPI earned an

annual profit of RMB 4.507 billion in the fiscal year ended 2007, an increase of 15.4% over the fiscal year

ended 2006. It generated the sales revenue of RMB 58.6 billion in the fiscal year ended 2007, a 21.2%

year-on-year increase. Further, the company in the fiscal year ended 2007, achieved 10.8% increase in

electricity generation, 31.9% increase in coal production and 102.5% increase in aluminum production, as

compared to the previous year. CPI's net profit and ROE in the fiscal year ended 2007 has been ranked

among the top places in the power generation companies. The strong operational performance provides

the company with a strong prospect of growth and expansion.

High Production Safety Standards

CPI has continuously fulfilled the responsibilities of production safety and has established and improved

safety guarantee system and supervision system. The company since its establishment, has witnessed no

accidents of security targets in its entire system. The incidence of equipment failure decreased by 52%

and the un-planned shutdown also reduced by 26% in the fiscal year ended 2007, as compared to the

previous year. The high focus of the company on the production safety enables it to carry out its

operations efficiently and uninterruptedly.




Comprehensive Range of Services

The company manages all of the state-owned assets invested by the State and owned by CPI in CPI and

CPI‟s associated enterprises. It is engaged in the development, investment, construction, operation and

management of power source, and organizes production and marketing of electric power (thermal power).

In addition, the company is involved in the complete equipment supply of power equipment, engineering

construction and supervision, tendering and bidding, materials distribution, equipment maintenance,

scientific development, real estate development, property management and intermediary service as well

as other power related businesses. The company also deals with investment and financing business. It

also develops foreign trade business, international cooperation, international engineering contract and

international labor service cooperation based on the government approval. Further, it also undertakes

other businesses as approved or allowed by the State. This enables the company to maintain the strong

market position.

9.6.3.3 China Power Investment Corporation Weaknesses


79.1% of the company‟s installed capacity comes from thermal units. Thermal fuel sources are costlier

when compared to non conventional sources of energy such as nuclear, wind, solar and hydro. Any

inability to procure the required amount of coal and gas at right price could severely impact the net

generation of the company. High dependency on coal increases the cost of production and affects the

profit margins of the company. The company should focus on clean fuel sources for power generation so

that dependency on coal can be minimized and the generation capacity of CPI increases.

Geographic Concentration

CPI operates in 28 provinces and municipalities autonomous regions in China, and also in Hong Kong

and Macao. High dependence on these markets exposes the company to the risks associated with market

concentration. As a result, the company‟s business is more susceptible to regional factors, which include

changes in the economy, weather conditions, demographics and population, as compared to the more

geographically diversified competitors. Thus, CPI's over dependence on a single market could adversely

affect its revenue and profit margins.

9.6.3.4 China Power Investment Corporation Opportunities

Focus on Renewable Energy Generation

The favorable macro-economic trends have drawn attention of several governments across the globe

towards renewable energy sources. Many countries have provided fiscal incentives and schemes to

encourage the increasing usage of renewable energy sources. These incentives and schemes range from

preferential tariffs or tax credits for renewable energy projects, and framing taxing schemes for those who

contribute to emission of carbon dioxide. CPI is making swift progress towards renewable generation. The

hydro units comprise of 20.3% of the equity installed capacity of CPI and wind units comprises of 0.6% of

the equity installed capacity of CPI. The company's first wind power project built, synchronized and

operated in east Inner Mongolia was synchronized for generation on 31 July 2009. This is a 49.5MW wind

power units of Chifeng Yihegongfeng Wind Farm Phase I, CPI Northeast New Energy Development Co.,

Ltd. In addition, the company would be adding more renewable sources into its generation portfolio. This

will secure its supply, climate protection and economic efficiency.




New Projects

CPI has been undertaking numerous new projects. On 20 August 2009, 2×600MW expansion project of

Yanshanhu Power Plant was held in Chaoyang City, Liaoning Province. This is the largest energy project

ratified by the National Energy Administration in Liaoning Province this year and also the first „replacing

small units with big ones‟ project of CPI in Liaoning Province. In addition, on 31 August 2009, the

company signed EPC contract and equipment procurement contract of Jiangxi Pengze Nuclear Power

Project Phase I. The Pengze Nuclear Power Project contract will play a significant role for CPI‟s future

nuclear power projects. On 8 September 2009, the “Replace Small Units with Big Ones” Project of Guixi

Power Plant was actively promoted by replacing the 4×125MW units with one efficient 600MW unit. This

project will be equipped with efficient ESP, baghouse collector, FGD and SCR simultaneously so as to

meet environmental standards. Further, on 10 September 2009, the company signed altogether 25 major

projects of business invitation and capital attraction, totaling RMB 236.5 billion. All these projects will help

the company to further increase its operational capacity.

New Technologies

The company should install many new equipments and technologies to further reduce emissions of

nitrogen oxide, sulfur dioxide, and mercury from its generating plants, which will help it to protect the

environment. These new equipment and technologies would enable CPI to meet the various existing

emission laws and standards and also the ones, which are expected to come up in the near future. The

company is continuously involved in the development of new technologies. Its study on and application of

Ultra- Supercritical Technology of Coal Fired Power Generation, won the first prize of the State Science

and technology Achievement Award. The investments and research on the development of new

technologies would also enable the company to smoothly carry on its operations.

9.6.3.5 China Power Investment Corporation Threats

Volatility in Price Level

The company is exposed to market risk due to fluctuations in the wholesale price of electricity, coal,

natural gas, diesel fuel and emission allowances. The prices, the company pays for raw materials like

coal, oil and natural gas, fluctuate a lot depending on supply and demand of these commodities in the

international markets. Any disruption in fuel supply may require the company to find alternative fuel

sources at higher costs, to produce power from higher cost generation facilities or to purchase power from

other sources. The frequent pricing changes and imbalances could adversely affect CPI‟s operations and

profitability.

Legal and Political Framework

CPI‟s businesses are regulated by various national and local environmental laws and regulations

concerning its operations, products and other activities in the various jurisdictions in which it operates.

The growing importance on climate change and to emphasis on reducing carbon emissions is increasing

the role of various renewable sources of energy. The company‟s earnings can be affected by the

regulations concerning emissions, fuel consumption and safety. The non-compliance with these limits

could lead to penalty payments. In addition, the political conditions of the country also affect the

company‟s business. The change in government policies and regulations could have negative effect on

The company's growth and expansion strategies.

Global Economic Slowdown

The recent crisis in the global financial markets and economy and its aftermath pose a serious threat to

CPI. The adverse economic and financial market scenario across the world could severely affect the

company‟s cash flows, levels of indebtedness, credit ratings, liquidity and its financial performance in the

short-term. In addition, the economic slowdown has affected industrial activities in China. As a result, the

company could experience lower demand from its customers. Furthermore, volatility in the market could

pull down the value of investment portfolio of the company resulting into a decline in its asset value. Also,

due to the uncertainties in the credit market, the company could face difficulties in raising the capital

required for its operations.




10 Appendix

10.1 Market Definitions

The geographical coverage of the report includes China. The report covers market segments related to

electricity import and export, installed capacity, generation, consumption, power infrastructure and power

regulations in the country. The report covers the whole of China for a quantitative assessment of the

power market.

10.1.1 Power

The rate of producing, transferring, or using energy, most commonly associated with electricity. Power is

measured in watts and often expressed in Kilowatts (KW) or Megawatts (MW).

10.1.2 Installed Capacity

The maximum rated output of a generator under specific conditions designated by the manufacturer. The

installed capacity is usually indicated in units of Megawatts (MW) on a nameplate physically attached to

the generator.

10.1.3 Active Installed Capacity

The component of electric power that performs work, typically measured in Kilowatts (KW) or Megawatts

(MW).

10.1.4 Electricity Generation

The process of producing electricity by transforming other forms of energy into electrical energy,

measured in Gigawatt-hours (GWh).

10.1.5 Thermal Power

A term used to identify a type of electric generating station, capacity, capability, or output in which the

source of energy for the prime mover is heat like coal, oil or natural gas.

10.1.6 Hydro Power

Electricity produced from generators driven by water turbines that convert the energy in falling or fast-

flowing water to mechanical energy.

10.1.7 Nuclear Power

Electricity generated by the use of the thermal energy released from the fission of nuclear fuel in a

reactor.

10.1.8 Renewable Energy Resources

Renewable energy resources are naturally replenishing but flow-limited energy resources. They are

virtually inexhaustible in duration but limited in the amount of energy that is available per unit of time.

Renewable energy resources include: biomass, biogas, solar, and wind.

10.1.9 Generation Company

A regulated or non-regulated entity, that owns or operates electricity generating plants. The company may

own the generation plants or interact with the short-term market on behalf of plant owners.

10.1.10 Electricity Consumption

The total electricity consumed by the different sectors in the country, measured in Gigawatt-hours (GWh).

10.1.11 Transmission Network

High voltage transmission lines that connect power plants to multiple substations near a populated area.

10.1.12 Interconnector

A transmission system that connects the transmission networks of adjacent states.




10.1.13 Transmission and Distribution Loss

Electric energy lost due to the transmission and distribution of electricity.

10.2 Abbreviations

Table 33: Abbreviations,

Abbreviations Full Form

AC Alternating Current

CAGR Compound Annual Growth Rate

CCGT Combined cycle gas turbine

CDM Clean Energy Development Mechanism

CDT China Datang Corporation

CHEC China Huadian Engineering Co., Ltd.

CHNG China HuaNeng Group

Ckm circuit kilometer

CNY Chinese Yuan

COACH COoperation Action within CCS CHina

DC Direct Current

EU European Union

EPC Engineering, Procurement and Construction

FDI Foreign Direct Investment

FGD Fuel Gas Desulfurization

GDP Gross Domestic Product

GWh Gigawatt-hours

HIPDC Huaneng International Power Development Co.

HPI Huaneng Power International, Inc.

kV kilovolt

kWh kilowatt hours

MW Megawatts

NDRC National Development and Reform Commission

NZEC Near Zero Emissions Coal

PV Photovoltaic

ROE Return on Equity

SERC State Electricity Regulatory Commission

SGCC State Grid Corporation of China

SOE State-Owned Enterprises

T&D Transmission and distribution

TWh Terawatt hours

UHV Ultra high voltage

Source: GlobalData




10.2.1 Coverage

The objective of updating GlobalData coverage is to ensure that it represents the most up to date

vision of the industry possible.

Changes in the industry taxonomy are built on the basis of extensive research of company,

association and competitor sources.

Company coverage is based on three key factors: market capitalization, revenues and media

attention/innovation/ market potential.

An exhaustive search of 56 member exchanges is conducted and companies are

prioritized on the basis of their market capitalization.

The estimated revenues of all major companies, including private and governmental, are

gathered and used to prioritize coverage.

Companies which are making the news, or which are of particular interest due to their

innovative approach are prioritized.

GlobalData aims to cover all major news events and deals in the power industry, updated on a daily

basis.

10.2.2 Secondary Research

The research process begins with exhaustive secondary research on internal and external sources

being carried out to source qualitative and quantitative information relating to each market.

The secondary research sources that are typically referred to include, but are not limited to:

Company websites, annual reports, financial reports, broker reports, investor

presentations and SEC filings

Industry trade journals and other literature

Internal and external proprietary databases

National government documents, statistical databases and market reports

News articles, press releases and web-casts specific to the companies operating in the market

10.2.3 Primary Research

GlobalData conducts many of primary interviews a year with industry participants and commentators

in order to validate its data and analysis. A typical research interview fulfills the following functions:

It provides first-hand information on the market size, market trends, growth trends,

competitive landscape, future outlook etc

Helps in validating and strengthening the secondary research findings

Further develops the Analysis Team‟s expertise and market understanding

Primary research involves e-mail correspondence, telephone interviews for each market, category,

segment and sub-segment across geographies.

The participants who typically take part in such a process include, but are not limited to:

Industry participants: CEOs, VPs, business development managers, market intelligence

managers and national sales managers

Outside experts: investment bankers, valuation experts, research analysts and key

opinion leaders specializing in power industry




10.3 Contact Us

If you have any queries about this report or would like further information, please contact

North America: +1 646 395 5460

Europe: +44 207 406 6653

+44 1204 543 523

Asia Pacific: +91 40 6616 6700

Email: [email protected]

10.4 Disclaimer

All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by

any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of

the publisher, GlobalData.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed.

Please note that the findings, conclusions and recommendations that GlobalData delivers will be based

on information gathered in good faith from both primary and secondary sources, whose accuracy we are

not always in a position to guarantee. As such GlobalData can accept no liability whatever for actions

taken based on any information that may subsequently prove to be incorrect.

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