"Fourteen Five"! Where will the biomass power generation industry go?

On January 18, 2017, the three departments of the National Development and Reform Commission, the Ministry of Finance and the National Energy Administration jointly issued the "Notice on the Trial issuance of renewable energy green Power Certificate and Voluntary Subscription trading System" (Development and Reform Energy [2017] No. 132), marking the start of the green power certificate (hereinafter referred to as green certificate) trading system. However, the document makes it clear that the green certificate is a voluntary subscription without any mandatory rules, and because it is just starting, the document also makes it clear that the green certificate cannot be sold again after the subscription. As of November 25, 2020, there is a huge difference in the number of green certificates issued, listed and trading volume (see Table 1), and the income brought by green certificate transactions is not enough to make up for the gap after the cancellation of subsidies.

No. 4 civilization confirmed that "since January 1, 2021, the implementation of green power certificate trading under the quota system, while studying the priority power generation rights of coal-fired power generation enterprises, priority protection of enterprise coal imports and other links with green certificates, continue to expand the scale of green certificate market transactions, and promote green certificate transactions through a variety of market-oriented ways."

This paragraph released a lot of information, summed up in three: first, the green certificate will be expanded from the current only onshore wind power and photovoltaic power generation (excluding distributed photovoltaic) to the entire field of non-water renewable energy power generation, biomass power generation will be included; Second, the green certificate will become the coal power generation enterprises must buy products, which to a large extent will make the green certificate transaction income as an alternative source of electricity price subsidy income, for biomass power generation projects, this is the most substantial positive; Third, green certificates may gradually become securities, which can be traded in a variety of ways. If the country can introduce substantive policies as soon as possible, or will save the biomass power generation industry in water and fire.

We can also expect substantial policies for agricultural and forestry biomass power generation and biogas power generation, such as relevant policy requirements for fuel supply and supply prices.

Industry level

Before the introduction of substantive supporting policies, it is believed that there will be some biomass power generation enterprises "can not carry", which will bring a series of changes in the industry.

The first change is that "untenable" enterprises, especially private enterprises, want to exit. IRR4.9% will make private enterprises more aware that investing in the biomass power generation industry is no longer the best choice, so the sale of biomass power generation assets will become more and more "popular", many of which are high-quality assets. I recently heard that some large and medium-sized enterprises want to sell such assets as a whole.

The second change that follows is that the industry will become more concentrated. Whether it is investment, construction, or operation, the attributes of economies of scale in this industry are relatively strong, so if leading enterprises want to further reduce costs and increase efficiency, the acquisition of relatively high-quality assets at a reasonable price will become a choice.

The third change is that the industry's leading enterprises will become more and more united, and reverse the promotion of the total investment of the upstream and downstream participants in biomass power generation, construction standards, garbage disposal fees, agricultural and forestry waste acquisition prices, and so on, gradually return to rationality.

As we all know, due to the extremely fierce market competition, the major participating enterprises in the biomass power generation industry have not been very "united", which gives the owners continue to increase the total investment, construction standards and other requirements at the same time constantly reduce the cost of garbage disposal opportunities, but also gives the fuel supply side to hoard the opportunity to increase fuel prices. Although this situation has eased in the past two years, the author believes that the introduction of the New Deal will accelerate the return of all participants in the industry to rationality, form a positive interaction, and promote the more standardized and healthy development of the industry.

Enterprise level

No matter how the industry changes, for enterprises with strong subjective initiative, there will be effective means to cope with change. The author expects that the means to deal with this New Deal mainly have the following four aspects.

First, standardize operation. On the one hand, enterprises will spare no effort to reduce costs, reduce all unnecessary expenses, reduce redundancies; On the other hand, the enterprises will be more careful to balance the relationship between the amount of waste disposal, power generation and equipment loss, blindly pursuing super burning, blindly emphasizing the number of continuous operation hours will become a history, and according to the equipment performance requirements of the shutdown and maintenance, strengthen equipment maintenance will be more and more attention by enterprises.