Gov’t policies favourable to new energy sector

On August 2, the State Electricity Regulatory Commission (SERC) issued measures to regulate renewable energy businesses fully purchased by power-grid operators. The policy stipulates that operators of six renewable energy sources (hydro power, wind power, biomass, solar energy, ocean energy, and geothermal power) will enjoy priority scheduling and the benefits of fully-purchased power. Also, renewable energy operators do not need to bid for connection to the grid, except large hydro power firms. Moreover, if power-grid operators do not give scheduling priority to renewable energy or purchase all electricity generated by renewable energies as regulated, and if their act causes damage to renewable energy power operators, they will take on full compensation responsibilities.

The policy not only resolves the ‘grid connection’ issue that has been an obstacle to renewable energy operators, but also ensures their profitability. According to a mid- to long-term development plan for renewable energies released by the National Development and Reform Commission (NDRC), China’s consumption ratio of renewable to one-time energies was 7% in 2005, which should improve to 10% by 2010 and 16% by 2020. Excluding hydro power, the targets imply that other renewable energy power will grow at a CAGR of 29% over the next five years, or a CAGR of 22% over the next 15 years. The benefits dissipate any concerns that the operator might have, and stimulate investment sentiment. We believe related equipment manufacturers will be primary beneficiaries and that the segment will shine within the broader machinery sector.

Wind power generation costs lowered to current 4-5 US cents/KWh (at wind fields with better conditions; 6-9 US cents/KWh at others) from 46 US cents/KWh in 1980. The International Energy Agency forecasts this will be lowered to 5.58 US cents/KWh by 2015, close to other forms of power generation. Taking external costs of traditional forms of power generation into consideration, we expect wind power costs will match traditional power generation costs earlier.

Bolstered by favourable policies, China’s wind power industry took off in 2006, with new installed capacity up 170% to 1,347 MW. As of end-2006, accumulated wind power capacity was 2,604 MW. China has now supplanted Italy as the world’s sixth largest wind power generator.

(Source: KGI report)

呢個政策可以話令到再生能源公司無後顧之憂, 生產到幾多度電, 電網公司都要以優惠價首先買哂佢, 既然revenue方面已有保障, 咁再生能源公司就可以focus係點樣cut 成本方面.

最近協鑫上市, 初步睇市場反應唔錯, 係繼中國高速傳動之後第二隻同再生能源有關既新上市公司, 如果做得好, 可能會掀起下一波再生能源熱炒, 香港建設下年分拆旗下既香港新能源時就會有望賣得更好既價, 作為190股東, 我都希望協鑫做好d.