Past and future of the renewable energy industry and financial markets
The internet
2018-12-20 08:53:34
The "Renewable Energy Law", which was implemented on January 1, 2006, has opened up a rapid development of renewable energy in China for nearly 12 years. Wind power and photovoltaics have created new peaks.
Every investment company is indispensable, but without the support of financial institutions, it is impossible to achieve such results. As the blood of modern business, finance can almost determine the scale of development of an industry. Renewable energy is more sensitive to financial factors than fossil energy because of its own characteristics.
The particularity of the renewable energy industry determines the difference between business models and financing models and fossil energy.
In the past hundred years, fossil energy groups have to manage the cost of fuel terminals, such as the cost of oil or coal, and manage the income of the sales terminal, such as gasoline or thermal power sold, only to develop into a large company. With bilateral price management capabilities, survive in market volatility. However, the characteristics of renewable energy completely rewrote the business model and created a new market structure.
The first feature is also the core advantage, that is, there is no need to hedge fuel costs.
Wind and light are completely free, and the operation and maintenance cost of the entire equipment is constant, so the life cycle cost can be locked almost at the time of production. Small and medium-sized companies can also hold renewable energy assets based on project conditions and their own affordability without worrying about fluctuations in fuel prices.
The second feature is heavy assets, but the construction cycle is short.
In the general sense of heavy assets, in terms of hydropower, oil, and highways, the characteristics of long construction period are widespread. However, the construction period of wind power is about six months, and photovoltaics can be controlled for three months, which greatly shortens the pressure on the construction of capital, improves the turnover rate of capital, and can incite more projects under the same capital conditions.
The third characteristic, which corresponds to the fixed cost of the whole life cycle, is that the income of the whole life cycle is also fixed.
Up to now, except for a small number of distributed photovoltaic self-sufficiency projects that directly sell electricity to electricity customers, 95% of renewable energy generation is sold to grid companies at fixed electricity prices, and cash flow is divided into thermal power desulphurization and out-of-stock parts. And the subsidy part, keeping the electricity price for 20 years unchanged.
Therefore, in this case, the benefits of the full life cycle are completely fixed and protected by the Renewable Energy Law. Therefore, the structure of renewable energy assets is single and clear. For investors, the risk of project fluctuations is mainly controlled by technical means such as project quality. In addition, the risks of fuel fluctuations and fluctuations in electricity prices are completely isolated.
The financing model that matches the renewable energy assets is also characterized by the industry under the stimulus of the new business model.
Equity investment and bond investment According to their own risk control requirements, they choose the upstream and downstream positions of the industry. Some institutions have earned a lot of money, and some institutions have lost very badly. The decade has been a decade of growth for industry and financial institutions.
In the past 10 years, renewable energy-related financing has been divided into two parts, financing for manufacturing financing and power generation projects. In the early days, financial institutions often confused the two. In fact, the former is not much different from the traditional manufacturing industry, and ultimately relies on technological advantages to occupy the market. Due to the rapid development of China's renewable energy installed market, the upstream manufacturing industry is changing much faster than other manufacturing industries, including technological upgrading and changes in leading enterprises. During the entire process of shuffling, some financial institutions suffered heavy losses. “A snake was bitten in the first place, and ten years were afraid of the well rope.” In the later period, the lending to the manufacturing industry was greatly reduced.
In contrast to the downstream market, the installed capacity of new renewable energy has been relatively strong. After the rapid development of wind power, photovoltaics immediately stood on the top, and financial institutions' financing support played a key role. The core logic of financing has two points. "Protecting electricity prices and guaranteeing sales" is achieved by relying on government credit and grid credit two-wheel drive.
First, the main role of government credit is to maintain electricity prices and determine the cash flow for the next two decades through fixed electricity prices.
Including thermal power and hydropower, it is difficult to ensure that the electricity price will remain unchanged in the next 20 years, but wind power and photovoltaics have been supplemented by subsidies for 20 years. In some areas, due to factors such as power curtailment, we will strive for more power generation by reducing the thermal power desulfurization and out-of-sale parts. However, in the case of unlimited electricity, the price of renewable energy projects is very secure.
Second, the high credit of the grid is the guarantee for the sale of electricity from renewable energy projects.
In any other industry, there are few cases of stable sales by a single customer for 20 years, because the product replacement and market demand will affect the sales of the product. Electricity is a very special standardized product, and the acquirer is a power grid company with a very high market credit accumulated over decades. Therefore, renewable energy generation, sales in the next two decades are considered by the market to be convinced, financial institutions can relax the credit requirements of investment entities to a certain extent, and more to examine the project itself to provide credit support.
Market changes lead to future financing changes
With the reform of China's electricity market and the decline in the installed cost of renewable energy and the increase in total volume, some new changes have taken place in the market structure. In the 40 years of reform and opening up, China has been in a state of power shortage for about 35 years, that is, in the past five years, the power supply has gradually loosened and there has been excess in some areas.
In a market with no electricity, neither reform nor sales difficulties exist. However, in the future, the power market will gradually restore the commodity attributes of electricity, so all power generation equipment must face the competition and test of the market.
At the same time, renewable energy is gradually subsidizing, and new projects after 2020 are basically not subsidized. Then investment companies and financial institutions can say that they will face the sale of electricity prices and how to sell as much as possible. Problems after marketization.
The opening of the market means returning the initiative to the customer. The customer can bid on the power trading center and choose the type of power he wants.
How to ensure the consumption or sales of renewable energy is a problem faced by policy makers. In order to adapt to change, the country's support policy has also changed from supporting power generation to creating demand, and guiding the investment at the project side through the demand side. Specifically, from the subsidy for each renewable energy power to the future, the renewable energy quota system is the main constraint on the consumption side.
For power investment companies, it is the key to find a more stable and stable customer. For large-scale ground power plants, it is possible to bid by reducing the cost by scale, but those distributed renewable energy power plants will mainly rely on the mode of “spontaneous use, surplus power online” to develop the market. The situation of individual projects will be more diverse, and financial institutions will also need to support corresponding financing solutions.
In 2018, distributed photovoltaics connected to the grid in the third quarter had about 5 million kilowatts, all of which were not subsidized, mainly relying on self-investment by enterprises and a small amount of lease financing. This model of relying solely on the company's own funds is difficult to support future distributed development. Up to now, banks still rarely involve the development of distributed projects, but distribution is an important part of the future power market. How to connect these projects requires cooperation between the government, power grid enterprises, financial enterprises and development enterprises.
Among them, the stability of the purchase and sale of electricity contracts is the first need to be guaranteed. It is impossible to supply power to a single electricity customer as stable as selling electricity to the grid. Once this customer has difficulties in operating and fluctuations in electricity consumption, whether he can quickly find another customer, that is, selling electricity by partition wall is the key to financing the project. If the sale of the wall is not open, then this part of the renewable energy power generation bidding will seriously affect the income. If the project is financed according to the previous cash flow, I am afraid that there will be difficulties in repayment.
Another need to protect is the collection of electricity charges. If you only sell electricity to the grid, you only need to settle with the grid, which is simple and reliable. However, if you sell electricity to multiple users, it is costly and difficult to collect your own money. Therefore, solving the problem of collecting electricity charges as soon as possible is also the key to whether the project can be financed. Whether it is settled through the power trading center or through the sale of the electricity company, the problem must be solved.
On the whole, not only the power market is surging, but the financial market is also undergoing adjustments such as “lower leverage and promote development”.
The past decade has been a decade of ongoing energy reform represented by China's new energy. At present, renewable energy technology is still making rapid progress, and costs are continuously decreasing. It will enter a new development cycle and bring opportunities to related industries. The generalization and miniaturization of renewable energy projects make investment space huge. Both enterprises and individuals can invest in them to share the benefits of renewable energy, which is unimaginable in the field of fossil energy.
If you want to do more with less, you must rely not only on strong industry governance measures, but also a series of fiscal, financial, and other means to change the incentive mechanism for resource allocation, so that the economic structure, energy structure, and transportation structure become cleaner and greener. In the allocation of resources, the incentive mechanism for fund allocation will certainly play its key role.
Every investment company is indispensable, but without the support of financial institutions, it is impossible to achieve such results. As the blood of modern business, finance can almost determine the scale of development of an industry. Renewable energy is more sensitive to financial factors than fossil energy because of its own characteristics.
Particularity of renewable energy assets
The particularity of the renewable energy industry determines the difference between business models and financing models and fossil energy.
In the past hundred years, fossil energy groups have to manage the cost of fuel terminals, such as the cost of oil or coal, and manage the income of the sales terminal, such as gasoline or thermal power sold, only to develop into a large company. With bilateral price management capabilities, survive in market volatility. However, the characteristics of renewable energy completely rewrote the business model and created a new market structure.
The first feature is also the core advantage, that is, there is no need to hedge fuel costs.
Wind and light are completely free, and the operation and maintenance cost of the entire equipment is constant, so the life cycle cost can be locked almost at the time of production. Small and medium-sized companies can also hold renewable energy assets based on project conditions and their own affordability without worrying about fluctuations in fuel prices.
The second feature is heavy assets, but the construction cycle is short.
In the general sense of heavy assets, in terms of hydropower, oil, and highways, the characteristics of long construction period are widespread. However, the construction period of wind power is about six months, and photovoltaics can be controlled for three months, which greatly shortens the pressure on the construction of capital, improves the turnover rate of capital, and can incite more projects under the same capital conditions.
The third characteristic, which corresponds to the fixed cost of the whole life cycle, is that the income of the whole life cycle is also fixed.
Up to now, except for a small number of distributed photovoltaic self-sufficiency projects that directly sell electricity to electricity customers, 95% of renewable energy generation is sold to grid companies at fixed electricity prices, and cash flow is divided into thermal power desulphurization and out-of-stock parts. And the subsidy part, keeping the electricity price for 20 years unchanged.
Therefore, in this case, the benefits of the full life cycle are completely fixed and protected by the Renewable Energy Law. Therefore, the structure of renewable energy assets is single and clear. For investors, the risk of project fluctuations is mainly controlled by technical means such as project quality. In addition, the risks of fuel fluctuations and fluctuations in electricity prices are completely isolated.
The core logic of industrial financing in the past
The financing model that matches the renewable energy assets is also characterized by the industry under the stimulus of the new business model.
Equity investment and bond investment According to their own risk control requirements, they choose the upstream and downstream positions of the industry. Some institutions have earned a lot of money, and some institutions have lost very badly. The decade has been a decade of growth for industry and financial institutions.
In the past 10 years, renewable energy-related financing has been divided into two parts, financing for manufacturing financing and power generation projects. In the early days, financial institutions often confused the two. In fact, the former is not much different from the traditional manufacturing industry, and ultimately relies on technological advantages to occupy the market. Due to the rapid development of China's renewable energy installed market, the upstream manufacturing industry is changing much faster than other manufacturing industries, including technological upgrading and changes in leading enterprises. During the entire process of shuffling, some financial institutions suffered heavy losses. “A snake was bitten in the first place, and ten years were afraid of the well rope.” In the later period, the lending to the manufacturing industry was greatly reduced.
In contrast to the downstream market, the installed capacity of new renewable energy has been relatively strong. After the rapid development of wind power, photovoltaics immediately stood on the top, and financial institutions' financing support played a key role. The core logic of financing has two points. "Protecting electricity prices and guaranteeing sales" is achieved by relying on government credit and grid credit two-wheel drive.
First, the main role of government credit is to maintain electricity prices and determine the cash flow for the next two decades through fixed electricity prices.
Including thermal power and hydropower, it is difficult to ensure that the electricity price will remain unchanged in the next 20 years, but wind power and photovoltaics have been supplemented by subsidies for 20 years. In some areas, due to factors such as power curtailment, we will strive for more power generation by reducing the thermal power desulfurization and out-of-sale parts. However, in the case of unlimited electricity, the price of renewable energy projects is very secure.
Second, the high credit of the grid is the guarantee for the sale of electricity from renewable energy projects.
In any other industry, there are few cases of stable sales by a single customer for 20 years, because the product replacement and market demand will affect the sales of the product. Electricity is a very special standardized product, and the acquirer is a power grid company with a very high market credit accumulated over decades. Therefore, renewable energy generation, sales in the next two decades are considered by the market to be convinced, financial institutions can relax the credit requirements of investment entities to a certain extent, and more to examine the project itself to provide credit support.
Market changes lead to future financing changes
With the reform of China's electricity market and the decline in the installed cost of renewable energy and the increase in total volume, some new changes have taken place in the market structure. In the 40 years of reform and opening up, China has been in a state of power shortage for about 35 years, that is, in the past five years, the power supply has gradually loosened and there has been excess in some areas.
In a market with no electricity, neither reform nor sales difficulties exist. However, in the future, the power market will gradually restore the commodity attributes of electricity, so all power generation equipment must face the competition and test of the market.
At the same time, renewable energy is gradually subsidizing, and new projects after 2020 are basically not subsidized. Then investment companies and financial institutions can say that they will face the sale of electricity prices and how to sell as much as possible. Problems after marketization.
The opening of the market means returning the initiative to the customer. The customer can bid on the power trading center and choose the type of power he wants.
How to ensure the consumption or sales of renewable energy is a problem faced by policy makers. In order to adapt to change, the country's support policy has also changed from supporting power generation to creating demand, and guiding the investment at the project side through the demand side. Specifically, from the subsidy for each renewable energy power to the future, the renewable energy quota system is the main constraint on the consumption side.
For power investment companies, it is the key to find a more stable and stable customer. For large-scale ground power plants, it is possible to bid by reducing the cost by scale, but those distributed renewable energy power plants will mainly rely on the mode of “spontaneous use, surplus power online” to develop the market. The situation of individual projects will be more diverse, and financial institutions will also need to support corresponding financing solutions.
In 2018, distributed photovoltaics connected to the grid in the third quarter had about 5 million kilowatts, all of which were not subsidized, mainly relying on self-investment by enterprises and a small amount of lease financing. This model of relying solely on the company's own funds is difficult to support future distributed development. Up to now, banks still rarely involve the development of distributed projects, but distribution is an important part of the future power market. How to connect these projects requires cooperation between the government, power grid enterprises, financial enterprises and development enterprises.
Among them, the stability of the purchase and sale of electricity contracts is the first need to be guaranteed. It is impossible to supply power to a single electricity customer as stable as selling electricity to the grid. Once this customer has difficulties in operating and fluctuations in electricity consumption, whether he can quickly find another customer, that is, selling electricity by partition wall is the key to financing the project. If the sale of the wall is not open, then this part of the renewable energy power generation bidding will seriously affect the income. If the project is financed according to the previous cash flow, I am afraid that there will be difficulties in repayment.
Another need to protect is the collection of electricity charges. If you only sell electricity to the grid, you only need to settle with the grid, which is simple and reliable. However, if you sell electricity to multiple users, it is costly and difficult to collect your own money. Therefore, solving the problem of collecting electricity charges as soon as possible is also the key to whether the project can be financed. Whether it is settled through the power trading center or through the sale of the electricity company, the problem must be solved.
On the whole, not only the power market is surging, but the financial market is also undergoing adjustments such as “lower leverage and promote development”.
The past decade has been a decade of ongoing energy reform represented by China's new energy. At present, renewable energy technology is still making rapid progress, and costs are continuously decreasing. It will enter a new development cycle and bring opportunities to related industries. The generalization and miniaturization of renewable energy projects make investment space huge. Both enterprises and individuals can invest in them to share the benefits of renewable energy, which is unimaginable in the field of fossil energy.
If you want to do more with less, you must rely not only on strong industry governance measures, but also a series of fiscal, financial, and other means to change the incentive mechanism for resource allocation, so that the economic structure, energy structure, and transportation structure become cleaner and greener. In the allocation of resources, the incentive mechanism for fund allocation will certainly play its key role.
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