China's market-trade share in power generation could hit 50% in 2019

Major IPPs are developing integrated energy business and expanding to downstream retail.

China’s share of market-trade in total power generation is expected to rise to 40-50% in 2019 for most coal independent power producers after its capacity glut led to price cuts in the electricity-trade market, according to S&P Global Ratings’ 2019 industry top trends report.

Major IPPs are said to be upgrading their generation facilities, as well as developing integrated energy businesses and expanding to downstream retail. The report highlighted that China Resources Power Holdings Co. (CRP) has the most efficient coal power units in China, whilst also making meaningful diversification into the wind power segment which may contribute more than 50% of its operating profit over the next one to two years.

“Effects of CRP’s burgeoning electricity retail and integrated energy business remain to be seen,” Abhishek Dangra, one of the report’s authors, said.

“We expect renewable energy producers to also shift from a subsidy-driven business model to an efficiency/cost-driven one. Technology advancement has substantially lowered investment costs and supports continuing tariff reduction,” he added. “In the run-up to grid parity with coal power, competition has intensified in bidding for subsidised projects and participating in subsidy-free pilot projects.”

According to the report, future new projects are likely to be conferred to developers with strong operating efficiency, healthy balance sheets and funding capability.