FIRST
China scales back on wind subsidies CHINA
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hina’s wind power developers could face lower returns for their projects as the state moves towards grid parity and proceeds with the withdrawal of subsidies with its new 2020 wind power policy. In a report, UOB Kay Hian analysts said that whilst grid parity would be positive to the industry in the long term, there may be transition pains. China’s new wind power policy is encouraging the prioritisation of gridparity wind power projects by having them voluntarily switched from subsidised to non-subsidised. China’s largest wind producer, Longyuan Power, indicated that although some subsidised projects may switch to being non-subsidised, the projects’ internal rate of return (IRR) should also meet the companies’ required IRR. Effect on big developers Big developers should not immediately feel the bite of the policy in 2020, according to Shen. Huaneng Renewables (HNR) and Longyuan now own 6.5GW and 4GW of wind power projects that were approved before end-2018 and should be grid connected by end-2020. “Longyuan said that it did not have many
approved grid-parity and competitive tender projects in 2019 and it is focusing on the construction of subsidised projects. We believe earnings of HNR and Longyuan should be intact in 2020, given enough subsidised projects in their pipelines. In addition, Longyuan said it heard the rumour that the grid connection deadline may be postponed by half a year. If so, wind farm operators can connect more subsidised projects, which will enhance their earnings,” Shen said. Orderly construction schedule The withdrawal of subsidies is not the only highlight of China’s new policy. The policy aims to have an orderly construction of wind power projects by not allowing them to surpass the target under the 13th Five Year Plan (FYP). Provinces that have already exceeded FYP targets for offshore projects are to suspend tenders and new approvals. However, Shen said the cap is not a concern for developers and that there is still sufficient room for capacity additions. The analyst cited a 2017 paper that projects total wind power capacity to reach 258GW by end-2020; however, actual capacity is still at 198GW as of September 2019. “Note that the government was aiming to cap the annual capacity addition as the connection ability of the grid network is limited, according to Longyuan.” Even with concerns of lower returns on the horizon, Shen noted developers should look out for positives, like the higher utilisation hour (UH) that would lower the levelised cost of energy (LCOE), thanks to technological improvement and the government’s efforts to guarantee renewable energy’s consumption; and subsidy withdrawals by wind farm operators.
X PROJECTS PUSHED BACK XXX ASEAN
Negative public sentiment is rising xxx
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INDIA
India’s specialised developers get boost as market for open access PPA doubles India’s specialised project developers have shown a growth in market share as the open access PPA solar market grew 2.5 times to 2.9GW for the past two years. With the growth of the open access market, large-sized IPPs with a national presence, such as ReNew and Avaada, and other specialised project developers, such as CleanMax, Amplus and AMP Solar, have begun to considerably increase their market share. According to a report by the World Business Council for Sustainable Development, these national developers have the competitive advantage of having access to large corporate buyers as well as financing sources with a lower cost of capital. But the market share of regional players has contracted. They have been responsible for structuring most early open access renewable PPA projects, as they had easier access to land and was better placed to deal with local DISCOMs and regulators. India remained the second largest market for corporate PPAs with a global share of 7.4% or 440MW installed, but estimates suggested that the annual corporate PPA renewable addition in India contracted 30-35% for the full year. 10 ASIAN POWER
Installations and project pipeline for key developers under open access and group captive models, as of 31 August 2019
Source: JMK Research
Power supplier segmentation for open access solar markets in India
Source: JMK Research Note: This chart includes only open access PPA solar projects, not captive projects.
