BMI View : New data released by the China Electricity Council (CEC) corroborate BMI 's view that China's electricity consumption growth will slow in 2012 as a result of a China hard landing. As the downtrend in GDP growth intensifies in 2012, we expect that the growth rate of power consumption will slow from an estimated 11.1% in 2011 to 7.6% (below the 8.5% to 10.5% rate indicated by the Chinese authorities). We also note utilities see new downside risks arising from hikes in gasoline and diesel prices, authorised in response to rising prices in international markets.
Despite these developments affecting our short-term outlook, we highlight that our main view on the market remains unchanged. China's overall electricity generation and consumption will remain considerable and in a league of its own. Yet, we anticipate that growth rate of consumption and generation of electricity in the country will moderate in the coming years. The country's 12th Five-Year Plan (March 2011), the government outlined a course for the economy, gearing it on more high-valueadded industries, scaling back reliance on manufacturing and heavy industry. As such, we now forecast that annual average growth of total electricity generation will be 6.29% between 2012 and 2016, with total installed capacity reaching 1,610GW by the same year.
In terms of fuel mix, conventional thermal sources are expected to continue dominate electricity generation in the coming years, as many projects under construction or planned will use coal or gas. Yet, policy developments in H211 and Q112 confirmed our previous analysis, and prompted us to assume an even more bullish posture with regard to renewables, especially wind and solar.
Considering these key themes, major trend and changes for China's power sector include:
- As predicted by BMI, in December 2011, the Chinese government increased electricity prices for the first time in six months and promised to cap the cost of power-station coal in an attempt to reduce outages in coming months.
- The government has revised its solar policy and set a target for installed solar power generating capacity to reach 15 GW by 2015, 50% up compared to its previous plan.
- In January 2012, the Chinese government announced its plan to build a 300MW offshore wind farm in Leting County in Hebei province. The plant, which will be China's largest offshore wind farm, will feature 100 units of 3MW offshore turbines and involve an investment of CNY5.76bn (US$914mn).