Rationalising China's power market: proposals, actions and outlook Report

Insight 24 March 2017

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Report summary

The 13th five-year plan for the power industry aims to set the stage for a cleaner, more efficient and sustained power sector. Key objectives are to rationalise coal-fired overbuild, add more peaking plants to enhance system flexibility, and boost renewables penetration and cut curtailments. Despite the ambitious proposals, we believe the plan could be challenging to implement and some targets won’t be met. Coal power will slow its capacity build, but generators will face growing financial hardship. Gas power will play a bigger role and claim more generation share, as government encouragement and cheap LNG open up more opportunities. The pace of new builds in conventional hydro power will slow while pumped storage will be a bright spot to serve greater peak-shaving demand. Renewables will continue to lead capacity growth, but generation is likely to fall short of targets.

Executive summary
China power report card
- The big picture: slowing demand, cleaner supply and falling utilisation
- Government puts gas back on the agenda
- Hydro capacity build slows – but pumped storage is a bright spot
- Renewable curtailments to remain in the near term
- Nuclear looks less promising
- Conclusions