The National Energy Administration (NEA) convened the national energy work conference on Dec. 27. According to the Economic Information Daily and the 21st Century Business Herald, eight tasks are set on the meeting. It is proposed that in 2017, national energy production will total around 3.67 billion tons of standard coal. The output of coal, crude and natural gas will record around 3.65 billion tons, 200 million tons and 170 billion cubic meters, respectively. The newly installed capacity of hydropower and nuclear power will reach 20 million kilowatts and 10 million kilowatts, respectively, while the installed capacity of wind power and photovoltaic power that is newly connected to the power grid will reach 20 million kilowatts and 18 million kilowatts, respectively.
Of note, de-capacity is put in the first place among the eight tasks set for energy development in 2017. Besides coal, great efforts must be made in removing the excess capacity of coal power. It is disclosed that the capacity of coal power installed in 2016 and projects that have obtained approval reaches 1.13 billion kilowatts, higher than the limit of 1.1 billion kilowatts set during the 13th five-year plan period. Nur Bekri, director of the NEA, stated frankly on the meeting that the room left for the expansion of coal power is smaller and smaller, and the whole industry is exposed to the risk of loss in 2017. Industry insiders claim that adjustment in oil and gas reform, clean energy and coal power structure attract the most attention of the market.
>> Oil and gas reform
Meeting content: Nur Bekri disclosed that reform of the power, oil and gas systems will be deepened in 2017. The establishment of a power market, where mid- and long-term trading is proposed to avoid risks and pricing is decided by spot transactions, will be advanced. The establishment and operation of power transaction institutions as well as the development of pilot reform in incremental power distribution business will be standardized. The construction of regional power market will be pushed forward, and the operation rules for auxiliary service market will be improved.
Nur Bekri disclosed that the opinions on advancing the utilization of natural gas will be worked out and formulated in 2017 to facilitate scale utilization in key areas like urban gas, gas-based power generation, industrial fuel and transport fuel.
Relevant companies: PetroChina Company Limited (601857.SH; 00857.HK); China Petroleum & Chemical Corporation (600028.SH; 00386.HK); China Oilfield Services Limited (601808.SH; 02883.HK)
>> Clean energy
Meeting content: “China will further enhance the quality of energy supply. The annual task set for removing excess coal capacity in 2016 is over-fulfilled, and unqualified coal power projects with capacity of 12.40 million kilowatts are cancelled. Green and clean development and utilization of coal are advanced steadily. The improvement scale of energy saving and ultra-low emission exceeds 200 million kilowatts and 100 million kilowatts, respectively.” Nur Bekri proposed to move faster in developing non-fossil energy, and actively facilitate the replacement of clean energy. China is the largest country in the world now in terms of installed capacity of hydropower, wind power and solar power. In the meantime, as evidenced by that power transmission capacity of over 20 million kilowatts was newly added and both the annual power transformation/distribution and the circuit length grow by 8 percent from a year earlier, China’s ability in sustainable energy development further strengthens.
Relevant companies: Xinjiang Goldwind Science & technology Co., Ltd. (002202.SZ;02208.HK); Sungrow Power Supply Co., Ltd. (300274.SZ)
>> Coal power structure
Meeting content: Nur Bekri indicated on Dec. 27 that China will move faster in the optimization, upgrading and transformation of coal power, and the installed capacity of coal power will be controlled within 1.1 billion kilowatts by 2020. “The construction and production orders of coal mines will be standardized, and efforts made in tackling illegal behaviors like construction before approval and production beyond capability should be intensified; great attention should be paid to the excess capacity of coal power, and regulations should be tightened, especially for the projects with high energy consumption, high pollution and no legal approval. Any projects with incomplete procedures for construction must all be stopped.” Nur Bekri also proposed on the meeting to continue the efforts made in de-capacity of coal and strive to prevent excess capacity of coal power.
Nur Bekri claimed that energy supply structure will be optimized in 2017. Continuous efforts will be made in the prevention of overcapacity; coal mines with resource exhaustion, outdated technology and equipment or those are unqualified for safe production and not in accordance with policies for coal industry should be obsoleted; focus should be laid on obsoleting outdated capacity below 300,000 tons; newly-added capacity should be strictly controlled; abuilding coal mines with incomplete procedures and coal mines suspected of violating regulations should be disposed according to laws and regulations, and advanced capacity should be developed in an orderly way.
Translated by Jennifer Lu
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