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The key themes and trends identified throughout our Asia Power Risk/Reward (R/R) ratings can be summarised as follows: ■ Economic activity continues to soften across Asia. Scores out of 100. while the last revision was brought on by the completion of a major power project. while the last revision was brought on by the completion of a major power project. Stratified Ratings. Source: BMI Japan: Down On A Deteriorating Economic Outlook We had moderated our R/R ratings for Japan in the previous quarter due to heightened political risks and potential downside to economic growth. UK Tel: +44 (0)20 7246 5126 Fax: +44 (0)20 7248 0467 www.and the political environment. June 30). with minor revisions to the scores of just four countries. and the military coup in Thailand. We now expect electricity consumption in Japan to grow at an average of just 0. Scores Out Of 100 *Higher score = lower risks. ■ China maintains its top place ranking in the regional ratings. such as the lower house elections in India. We expect industrial production and electricity consumption in these countries and their major trade partners to remain weak. Editorial Office: 85 Queen Victoria Street. Three of the four revisions were prompted by changes in the economic or political landscape. London EC4V 4AB. owing to its unrivalled market size (in terms of capacity. This quarter. Ratings Relatively Stable This Quarter The majority of our power R/R ratings for the Asian states remain unchanged this quarter. These developments affected India positively and Thailand negatively. we have once again revised the ratings down as the country's economic outlook deteriorates further. Three of the four revisions were prompted by changes in the economic or political landscape. particularly in Japan and China. China Remains On Top Asia Power Risk/Reward Ratings.July 2014 Issue 7 Asia Pacific Power & Renewables BMI's monthly market intelligence.5% per annum between 2014 and 2023 (down from 0. ■ There were several major political developments in the region. leading us to revise down the market rewards scores for Japan.such as investment spending and industrial production . trend analysis and forecasts for the power & renewables industry across Asia Pacific ISSN: 2054-1430 ASIA Power Ratings Stable Amidst Modest Revisions BMI View: Our power Risk/Rewards (R/R) ratings for the majority of Asian states remain unchanged this quarter.and long-term forecasts for the Japanese economy in April 2014.businessmonitor. We highlight that the Country R/R scores are an important metric in our overall R/R ratings as electricity generation and capacity investments are highly linked to the economic activity .9% previously). and culminated in similar moderations on our power forecasts (see 'Power Landscape Evolving For Asian Giants'. with minor revisions to the scores of just four countries. Growing evidence of an 'Abenomics' hangover prompted our Country Risk team to downgrade both their short.com . generation and consumption) and its substantial growth prospects.

....... 5 Table: Fact Box: Statistics Provided By President Xi in June 2014 ............................... 3 Power Landscape Evolving For Asian Giants ........................................................... 1 Table: ASIA POWER RISK/REWARD RATINGS ................................................................................................. 4 China ...........................................................................................................................................................com .... 5 Carbon Cap Would Supercharge Power Sector Diversification .............................................. 3 Table: FACT BOX: KEY STRATEGIES OF FOURTH BASIC ENERGY PLAN ......................................................................................Asia Pacific Power & Renewables CONTENTS Asia ................ 1 Power Ratings Stable Amidst Modest Revisions ......................................................... 8 New Tariffs Address Loophole................................................................................................. But With Widespread Ramifications ...........................................................................................................................................................................................................................businessmonitor........................................................ 5 Power Views In Play ............................................ 10 www....................................................................................................................................................................................................................

and see this risk coming to the fore. and have revised up our ratings accordingly. May 21). Modi is keen on addressing the country's chronic shortage of electricity due to its detrimental impacts on economic growth. On May 21. The head of the military junta General Prayuth Chan-ocha has refused to give a timeline for the eventual handover of power. with real GDP growth contracting by 2. Ministry of Internal Affairs and Communications We highlight that the level of political risk faced by the power sector has also increased over the last quarter. May 23). 2 www. and such a move seems unlikely to happen within the next 12 months. % chg y-o-y Source: BMI. India: Optimistic On Modi Victory We believe the victory of Narendra Modi and the Bharatiya Janata Party (BJP) in India's lower house elections in May 2014 will have a positive impact on the business environment for the power sector. improve the fuel availability for thermal projects. This is because the ruling by the Fukui District Court creates a legal precedent for local communities across Japan to try to prevent or at least delay reactor restarts (see 'Reactor Restarts Threatened By New Legal Precedent'. we note that the military appears to be in no rush to hand over power.And Federal-Policies Increasingly Conducive'. Thailand: Heightened Political And Economic Risks We have revised down the R/R scores for Thailand due to the political turmoil that has gripped the country since November 2013.businessmonitor. May 22). This will act as a clear drag on electricity consumption. Thailand's economy is clearly reeling from the strain of the political unrest. BoT While we continue to expect an eventual return to civilian government. and this poses a risk to our Long-Term Political Risk Rating.1% quarter-on-quarter in Q114. and we have moderated our forecasts and ratings for the Thai power sector as we see no end in sight to the crisis. % chg y-o-y Source: BMI. the more likely it is that a fully functioning democracy will not be formulated anytime soon. and his administration has already taken a number of direct and indirect steps to boost growth in the renewables sector (see 'Solar: State.1%year-on-year (y-o-y) and 12.4% y-o-y respectively (see 'Economic Resilience Fading Fast'. and possibly privatise certain parts of the sector to improve competitiveness and access to capital (see 'Power Sector To Be Modi-Fied'. Construction Sector Acting As A Major Drag Thailand . in line with our expectations. The manufacturing and construction sectors have been hit particularly hard. contracting by 3. The BJP will also look to reduce red tape for power projects. the District Court of the Fukui Prefecture ruled in favour of a lawsuit by 189 plaintiffs to block the restart of two reactors at the Ohi nuclear power plant. June 25). June 24). and its increasing impact on the economy.Real Household Income.Asia Pacific ASIA Power & Renewables Real Wages In Relentless Decline Japan . Such a scenario would negatively affect policy continuity and clarity over the long-term (see 'Risks Rise That Military Could Outstay Its Welcome'.Real GDP Growth.com . We previously highlighted the risk local communities and governments pose to reactor restarts. We note that the longer the junta remains in power.

with growing evidence of an 'Abenomics' hangover prompting our Country Risk team to downgrade both their short.6 83. with piped gas from Malaysia and Indonesia accounting for more than 90% of the electricity generated in Singapore.2 68.2 56.6 52. and said that this could lead to a slowdown in electricity consumption and generation growth.5 27.2 58.2 38.0 67.8 47.9 31.0 52.3 38. 3 www.5 62.0 40. April 24).6 4 Malaysia 53.5 62.6 65.8 11 Philippines 40.0 1 Australia 52. We now expect the Japanese economy to grow at a real rate of 0.1 56.1 54. The near-term economic outlook for Japan and China continues to deteriorate. Japan: Further Signs Of Weakening Growth'.3 8 Singapore 36. May 6).2 60. Japan: Economic Risks At The Fore We had highlighted signs of an economic slowdown in Japan in our previous analysis of the sector.9 65.2 53.6 76.2 10 Thailand 57.Asia Pacific ASIA Power & Renewables Singapore: Greater Energy Security We have slightly revised up our R/R scores for Singapore following the completion of the country's first LNG-fired power plant. This heavy reliance on Malaysia and Indonesia for gas is not ideal as it exposes Singapore to supply shocks and geopolitical risks.2 61.0 78.0 58.4 49.4 80.3 60.9 71.8 77.7 56.8 39. April 1).4 60.8 6 Indonesia 63. we have moderated our forecasts for Japan due to a worse-than-expected deterioration in its economy (see 'China. Table: ASIA POWER RISK/REWARD RATINGS Industry Rewards Country Rewards Industry Risks* Rewards Power R/R Ratings Country Risks* Risks* Rank China 88. The LNG-fired plant helps to reduce these risks as LNG can be sourced internationally.3 58.5 57.3 50.4 75. while our long-term outlook for the broader Asian power sector remains unchanged and positive.0 13 Cambodia 44.3 66.3 50.1 49.4 62.6 58.2 51.9 3 India 72.9 79.5 58.1 46.1 69.1 56.0 31.8 51.2 15 Pakistan 40.7 63.2 41.3 56.6 64. We also tapered our long-term growth expectations for Japan on the back of negative developments in the business environment and the increasing likelihood for authorities to redouble stimulus efforts to the detriment of wealth creation and financial stability.0 53. Power Landscape Evolving For Asian Giants BMI View: We have slightly revised down our 2014 forecasts for electricity generation in Asia this quarter due to deterioration in the economic outlook for several countries in the region.3 9 Taiwan 58.8 43.0 51.1 43.3 54.5 62. While we have maintained our forecasts for China this quarter.4 45.0 53. Source: BMI. This risk has materialised.6 47.3 27.9 38.5 44.1 54. Our forecasts for Japan experienced the most significant revisions due primarily to a slowing economy and a new energy plan. with recent weakness in purchasing managers index readings.1 48.1 36. June 4).5 40.8 57.6 44.0 53.4 35.com .6 53.and long-term forecasts for the Japanese economy in April. Singapore currently has to import nearly all its fuel as it has no known domestic hydrocarbon reserves.0 53.businessmonitor. prompting us to revise up our ratings for Singapore's power sector (see 'New LNG-Fired Plant Furthers Hub Ambitions'.3 14 Hong Kong 30.8 51.0 49.8 7 Japan 56. We also see growing upside risks to our power forecasts for India.4 74.9 16 *Higher score = Lower risks.4 56.9% in 2014 (down from 1.5 56.3% previously).0 44.1 71.9 53.6 42.4 57.5 47. and the ongoing widening of the trade deficit all contributing to the revision (see 'Downgrading Growth As Abenomics Hangover Kicks In'.5 49.3 49.4 12 Sri Lanka 41.4 2 South Korea 67.8 64. still-negative real wage growth.0 56.3 72.8 33.4 65.4 66. which is a trend we had highlighted and incorporated in our previous analysis of the Asian power sector (see 'Slowdown In Major Asian Economies Hurts Regional Power Outlook'.3 44.4 5 Vietnam 71. The plant allows the country to diversify its energy sources and reduce its reliance on piped gas from Malaysia and Indonesia.

Ministry of Health. Source: Ministry of Economy. The previous target was for renewable energy to account for 13.1% per annum between 2014 and 2023.com . Gas. the District Court of the Fukui Prefecture ruled in favour of a lawsuit by 189 plaintiffs to block the restart of two reactors at the Ohi nuclear power plant. May 22). but did not set any specific targets. and see this risk coming to the fore. and reversed a plan to phase out nuclear energy (see 'Nuclear Proves Critical. March 18). and we now expect electricity consumption in Japan to grow at an average of just 0. improve the fuel availability for thermal projects. we have refrained from revising our forecasts for the Indian power sector this quarter as we are waiting for the administration to make progress in passing legislation on the sector. We previously highlighted the risk local communities and governments pose to reactor restarts. highlighted coal as an important baseload source. The BJP will also look to reduce red tape for power projects. approved by the Cabinet on April 11. India: Upside Materialising We had said in our previous analysis that the outcome of India's lower house elections in May 2014 posed an upside risk to our forecasts.5% per annum between 2014 and 2023 (down from 0. That said.Asia Pacific ASIA Power & Renewables Disappointing Wage Growth Japan . We believe that Modi will try to implement regulations and reforms that are conducive for growth across all parts of the power sector. On May 21.0% in 2030. and defines nuclear energy as an 'important baseload power source' without specifying the share of nuclear in the nation's energy mix. May 23). Trade and Industry We note that Japan's nuclear sector continues to present significant risks to both our outlook for the country's broader power sector. We expect the election of Narendra Modi and the Bharatiya Janata Party (BJP) to have an impact on the power sector as Modi is keen on addressing the country's chronic shortage of electricity due to its detrimental impacts on economic growth. with coal and nuclear energy generation receiving less aggressive revisions.and oil-fired generation experienced the most aggressive moderation. which are widely credited for helping the state avoid persistent power shortages. Modi himself had introduced several reforms during his time as Chief Minister of Gujarat (2001-2014).businessmonitor. The Modi administration has already taken a number of direct and indirect steps to boost growth in the renewables sector (see 'Solar: State. Coal Remains In The Mix'. This is notably higher than the global growth average. which we attribute to several reasons: 4 www. We also moderated our forecasts for the various components of generation. Beyond 2014: Outlook Stable And Sanguine Our outlook beyond 2014 remains relatively stable and we are forecasting electricity generation in the region to grow at an average rate of 5. April 15). Welfare and Labour These revisions have also translated into similar moderations in our power forecasts. with coal set to play a major role in the policy over the long-term.5% of total power generation in 2020 and around 20. Energy Mix Minister for METI Toshimitsu Motegi told reporters after the cabinet meeting that the government might decide on an ideal energy mix within two or three years. and this poses an upside risk to our forecasts (see 'Core View In Play: Nuclear In The Mix'. There is also a risk for a greater-than-expected number of reactors to be restarted. The plan. % chg y-o-y 6mma Source: BMI. Table: FACT BOX: KEY STRATEGIES OF FOURTH BASIC ENERGY PLAN Generation type Policy Change Nuclear This new policy reverses the previous administrations' plans to gradually phase out nuclear energy.And Federal-Policies Increasingly Conducive'. and this has materialised. Conventional Coal and hydropower were highlighted as important baseload sources. June 24). Renewables The new policy said that Japan would aim to surpass renewable energy targets in past plans. and possibly privatise certain parts of the sector to improve competitiveness and access to capital (see 'Power Sector To Be Modi-Fied'. This is in line with the country's fourth Basic Energy Plan. This is a major risk to reactor restarts in Japan as the local authorities must give their approval for reactors in their jurisdiction to be restarted (see 'Reactor Restarts Threatened By New Legal Precedent'.9% previously).Real Wage Growth.

1% Gas Consumption Growth Coal Consumption Growth In 2012 15. As we have said previously. He emphasised the importance of a diverse energy mix. Xi also said that the nation would have to 'rein in irrational energy use and control energy consumption by fully implementing energy-saving policies'. A number of countries have already allowed electricity prices to increase. while contending with factors such as fuel availability. the government faces a tremendous challenge in finding ways to grow energy supply at the same rate as demand. President Xi Jinping presented some key growth statistics on the country's energy sector. with nuclear and renewable energy set to gain the largest shares from coal over the coming decade. and this is set to drive electricity consumption growth over the long-term. with Myanmar's first 500kV line being a key example (see 'Myanmar Transmission Project Desperately Needed'. March 6).0% 1. the cost of generation. and how the clean and efficient use of coal and development of other energy sources were crucial to continued development. particularly through an emphasis on nuclear and renewable energy. % Source: IEA ■ Positive regulatory developments: The majority of governments in Asia are pushing for greater competition. ■ Low electrification rates: Electrification rates in Asia are relatively low. 5 www. and environmental impacts.com .Asia Pacific CHINA Power & Renewables ■ Economic and demographic growth: We believe that emerging Asia is set to outperform the global economy over the medium. Several countries in the region have already initiated programmes to improve electrification rates. transparency and sustainability in their power sectors through various reforms.businessmonitor. and are set to increase alongside economic and technological development in the region. January 10).5% Source: Chinese Media The statements and statistics announced by President Xi on June 14 reaffirm our outlook for the Chinese power sector. Electrification Rates Still Low South East Asia . and we see room for price increases and reforms in the future (see '2014: Upward Pressure On Electricity Tariffs In Asia'. CHINA Power Views In Play BMI View: The shift towards energy efficiency and lower emissions. and said that the country 'should lose no time in constructing nuclear power projects in eastern coastal regions'.4% Wind Generation Growth 35% Nuclear 2. Table: Fact Box: Statistics Provided By President Xi in June 2014 Energy Mix (End-2013) Generation and fuel consumption growth in 2013 Solar Generation Growth 122% Thermal 80. During a meeting of top-level Chinese government officials on June 14.4% Hydropower 15. This has led the government to focus on the development of cleaner energies. has been reaffirmed by the top echelons of the Chinese government. particularly with regards to the need to diversify the energy mix and improve energy efficiency.Electricity Access In 2009. This validates our forecasts for the evolution of the Chinese energy mix.9% Renewables 2.to longterm due to positive demographic and structural factors.

EIA. We note that the political and operating environment for renewable energy developers and operators remains conducive (see 'Mega Solar Project Highlights Continued Sector Attractiveness' January 7). CGN ■ 6 Bullish renewable energy: We have also been extremely optimistic on the growth prospects for the renewable energy sector. Ambitious Nuclear Plans China .Nuclear Capacity Data And Forecasts (GW) Source: f = BMI/Government forecast. and find President Xi's statements in line with our expectations.businessmonitor. November 4 2013). and said that the country was on track to exceed its 2020 target of 58GW capacity (see 'Nuclear Sector On The Path To Criticality'. Our outlook is based on the scalability. 1990-2040 (billion metric tons) Source: EIA Some of our major views on the sector include: ■ Bullish nuclear: We have been bullish towards the growth prospects for China's nuclear generation industry since the country resumed its new build programme in 2012 (see 'Third Generation Reactors Usher In A New Atomic Age'.com .Asia Pacific CHINA Power & Renewables with the country's 12th Five-Year Plan (2011-2015) outlining plans to boost the share of non-fossil fuels in primary energy consumption and installed generating capacity to 11% and 30% respectively by 2015. www.1% of the country's generation mix at the end of 2013.Increases In Energy-Related C02 emissions by fuel type (non-OECD). May 7). and environmentally friendly nature of nuclear energy. and highlight that our 2013 growth estimate for solar generation (of 120%) was accurate (122%). which makes it an extremely viable source of energy for China. We note that nuclear energy accounted for only 2. August 29 2013). and we see tremendous upside for the sector if private capital were to be brought in (see 'Nuclear IPO: Economic And Environmental Motivations'. efficacy. March 13). CNNP. and are forecasting strong and sustained growth in 2014 and beyond. A Growing Pollution Problem Global . We correctly predicted there would be several regulatory changes in the sector in 2013 (see 'Renewables Outlook Stable Despite Major Developments'. Source: BMI. World Nuclear Association.

forecasting generation to grow at an average annual rate of 16. and this could help improve energy efficiency and reduce the rate of electricity consumption growth in the country (see 'Smart Grid: New Highs. According to President Xi. June 6).2% between 2014 and 2023 . Source: BMI. at the start of June. China aims to reduce energy consumption per unit of GDP by 16% from the 2010 level by 2015.Non-Hydropower Renewable Capacity By Type. UN Data ■ Conventional to grow as well: We had said in May 2013 that coal-fired generation will remain integral to the Chinese power sector.and the growth of demand for natural gas in the past two years (15. China Already At The Top Global .3% between 2002 and 2011) provided by President Xi.4% in 2012 and 13. EIA.com . We had also predicted that gas-fired generation would grow aggressively .9% in 2013) reaffirms our expectations.businessmonitor. This is in line with statements and statistics (coal consumption grew only 1. accounting for only 54% of the overall target. Source: BMI. May 16 2013). But Early Adoption Woes'. compared to an annualised growth rate of 8. made mention of plans to introduce a cap on carbon emissions (possibly an incremental cap). While we are unsure about the efficacy and enforcement of emissions reduction targets in China. GW e/f = BMI estimate/forecast. and that the sector would have to find ways to reduce emissions intensiveness (see 'Pollution In China: Clean Coal The Key'. WCA ■ Energy efficiency: We highlighted the increasing momentum behind smart grid and meter development in China in February. 7 www. we believe that even the discussion of such targets highlights the growing political pressure on Beijing to address the issue of pollution.CHINA Asia Pacific Power & Renewables Wind And Solar Still Growing Aggressively China . and thus the need to further diversify its energy mix. We note that Chinese officials had.9% in 2012. February 20). but this had only dropped 9% between 2011 and 2013.Thermal Coal Exports (LHS) & Imports (RHS) By Geography (2012e) e = World Coal Association (WCA) estimate. We believe that the rate of development is likely to accelerate as China is behind its energy efficiency targets based on President Xi's statements. and that this has the possibility to create huge opportunities for investment (see 'Carbon Cap Would Supercharge Power Sector Diversification'.

1990-2040 (billion metric tons) Source: EIA When looking at diversification of the Chinese energy mix. While we emphasise that coal will retain its primacy in the energy mix even if a cap is implemented. Burning Through The Black Stuff Increases In Energy-Related C02 emissions by fuel type (non-OECD). While details are scarce. we believe that efforts at energy mix diversification are already gaining added impetus and the scale of expansion of non-coal capacity will create numerous opportunities for investors. While there would inevitably be questions about the efficacy and enforcement of emissions reduction targets in China. the implementation of a cap would supercharge our forecasts for power sector expansion in non-coal sectors. Under our current forecasts we expect coal-fired generation to grow at an annual average rate of 5. Coal To Remain King In China Planned Coal-Fired Power Plant Capacity Additions (MW) Source: World Resources Institute Nevertheless. While we adopt a cautious approach to reports China will introduce a target and concede that it may be part of an effort by Beijing to project its soft power ahead of climate change negotiations (we also highlight that Reuters attributes the quotes to a government adviser). As such.Asia Pacific CHINA Power & Renewables Carbon Cap Would Supercharge Power Sector Diversification BMI View: The introduction of a cap on carbon emissions in China would not only advance global efforts to tackle climate change exponentially. May 30 2014).will have a limited impact on the overall generation mix. certain 8 www. but would supercharge our already-strong forecasts for growth in gas-fired. even the discussion of such targets highlights the growing political pressure on Beijing to address the issue of pollution .2% between 2014 and 2023.com .businessmonitor. we note that the timing of the Chinese announcement is relevant from a geopolitical perspective . if the aforementioned cap on emissions is ultimately implemented. China is clearly under pressure to tackle emissions. pollution in China is dominating the political discourse and government efforts to address the issue will create huge opportunities for investment.the day after the US Environmental Protection Agency (EPA) announced it would cut emissions from domestic coal-fired power plants by 30% by 2030 (see 'EPA Regulations: Winners And Losers'.which is at crisis levels in urban areas. While we greet reports that China will follow the US and announce a cap on carbon emissions in 2016 with caution. we emphasise that. nuclear and renewables generation. coal capacity will continue to expand at a rapid pace. Attempts at diversification although staggering in terms of the volumes of gas needed and the number of nuclear facilities in the project pipeline . although we forecast that the rate of coal capacity expansion may decelerate (in part due to slowing growth in electricity demand).

creating opportunities for growth in midstream and liquefied natural gas (LNG) infrastructure expansion. Nuclear: China has the biggest nuclear expansion plans globally and has 31 nuclear reactors under construction and more than 100 under early consideration. CGN Renewables: We currently forecast average annual growth in renewables capacity of 11. this is clearly underscored by the recent deal with Russia .particularly in the solar sector. 9 www. CNNP.under which China will receive 38 billion cubic metres (bcm) of Russian gas for 30 years (see 'Geopolitics Takes Centre Stage In Sino-Russian Gas Deal'. Ambitious Nuclear Plans China Nuclear Capacity Data And Forecasts (GW) Source: f = BMI/Government forecast. A cap on emissions would accelerate growth across the gas sector.by extension support our long-term bullish view on uranium (see 'Long-Term Bullish On Uranium As Pockets Of Growth Drive Demand'.com .Power Generation Mix. Huge Opportunities In Diversification China . May 22 2013). The scalability and efficacy of low-emissions nuclear creates major upside to our forecasts and we have recently highlighted that we believe sentiment in the nuclear industry is improving as concerns about safety begin to dissipate four years on from the Fukushima disaster in Japan. and we believe an emissions cap could lead to aggressive revisions to solar installation targets. Despite infrastructure. Source: BMI. We forecast that gas-fired generation will grow at an annual average rate of 16. May 30 2014). an emissions target would generate added momentum behind China's pilot carbon markets (see 'Carbon Trading Pilot Schemes Gaining Momentum'. Continued government support for renewables companies and the sheer scale of installed capacity already make China an outperformer in the renewables space. Beijing is ramping up its efforts to utilise greater volumes. We believe that placing a cap on carbon emissions would boost the credibility of such schemes. support their wider rollout across China and ramp-up the pressure on state-owned companies to take part in cap-and-trade schemes. A carbon cap would boost already-robust sentiment in the world's biggest nuclear market and . pricing and supply constraints. World Nuclear Association.3% per annum and a carbon emissions cap would boost our robust outlook exponentially . 2023 Source: BMI Forecasts In addition to power generation segments noted above. November 29 2013).5% of China's electricity generation mix in 2014. as well as China's nascent shale gas industry.businessmonitor. We have highlighted in our previous analysis that China is rolling out seven separate pilot carbon markets with a view to integrating them in 2015. Areas we highlight as critical to diversification include: Gas: Although gas only accounts for 1. EIA.2% between 2014 and 2023 . This would boost our forecasts for non-coal-fired generation considerably.Asia Pacific CHINA Power & Renewables segments of the power sector would receive much greater attention.

The elevated project costs will reduce margins for all three groups.Solar Capacity. ■ The Commerce Department is still conducting an investigation on the dumping issue (a separate issue from unfair subsidies). SEIA We note that some of the larger solar developers in the US have taken steps to reduce their exposure to solar trade disputes and price fluctuations. and could decide to increase or introduce new tariffs.2% and 18. International panel manufacturers may also benefit from these tariffs on Chinese manufacturers. Growth Already Set To Slow US .000 75 50 20. June 5). These companies will now have to move production of both solar cells and panels overseas in order to avoid tariffs.such as First Solar. when the US government imposed tariffs of between 18% and 250% on Chinese solar cells (see 'Changing Dynamics Of Renewables Manufacturers'. Chinese producers were able to evade these tariffs by purchasing solar cells or moving their production overseas (with the most common alternative being Taiwan) before shipping these cells back to China for assembly into solar panels. It is estimated that at least half of the solar equipment (and up to 70% of the rooftop solar market) installed in the US in 2013 was sourced from China. and consumers in the US are likely to be negatively affected by elevated project development costs arising from higher panel prices.com . and these deposits will be repaid if the tariffs are not confirmed. and poses a significant downside risk to our solar forecasts (see 'Solar Forecasts Boosted As Market Conditions Strengthen'. investors. and consumers. This ruling will effectively seal a loophole that Chinese solar manufacturers have allegedly used to circumvent tariffs imposed by the US on Chinese solar cells in 2012. Effects Of The Tariff We believe that the imposition of these tariffs will have effects on several parts of the US solar sector: ■ Domestic manufacturers: Solar equipment manufacturers with sizeable production bases in the US . One of the country's largest developers. A decision is due on July 25 2014.businessmonitor. ■ Domestic project developers.will benefit from these tariffs as the prices of panels imported from China will increase. October 18 2012). This is in contrast to the 2012 tariff. On June 3 2014.from China. announced that it would be purchasing solar panel manufacturer Silevo on 10 www. MW (LHS) Solar Capacity. which only affected Chinese solar cells. ■ US Customs have started collecting cash deposits on imports based on the duty rates.Asia Pacific CHINA Power & Renewables New Tariffs Address Loophole. Source: BMI. ■ The duties will be levied on solar photovoltaic (PV) panels and the cells used to make them. The key details of the tariffs are as follows: ■ Preliminary duties of 35.namely solar ingots and wafers . MW (LHS) and %y-o-y (RHS) 40. investors. We believe that US solar manufacturers stand to gain the most from these tariffs. Sunpower and Germany's SolarWorld . asserting that these manufacturers had benefited from unfair subsidies. In many instances. % y-o-y (RHS) e/f = BMI estimate/forecast. the cells manufactured outside of China were derived from components . But With Widespread Ramifications BMI View: The new tariffs proposed by the US government on Chinese solar panel makers will effectively seal a loophole used by these manufacturers to circumvent tariffs imposed on Chinese solar cells in 2012. the US Department of Commerce announced its preliminary decision to impose steep import duties on Chinese solar panel makers. and consumers: Developers. but their gain will be to the detriment of US-based project developers. investors.6% would be imposed on imports of Suntech and Trina Solar respectively. ■ The tariffs will be reviewed by the US International Trade Commission (ITC) in October 2014 before a final decision is made. increasing the length of time needed for solar projects to breakeven. This could negatively affect growth in solar capacity. The new tariffs will mean that Chinese companies will not be able to exploit this loophole any longer. However. while other Chinese solar producers will immediately receive tariffs of 27%. and will have to move production and assembly of both solar cells and panels overseas in order to avoid tariffs. UN Data.000 2023f 2022f 2021f 2020f 2019f 2018f 2017f 2016f 2015f 0 2014f 0 2013e 25 Solar Capacity. SolarCity.

innaccuracies or omissions affecting any part of the content. SolarCity currently obtains its solar panels from China's Yingli and Trina Solar. Analyst: Marina Petroleka Sub-Editor: Nicola Gollan Subscriptions Manager: Lucinda Morek Production: Neil Murphy Publishers: Richard Londesborough/Jonathan Feroze © 2014 Business Monitor International. including forecasts. All content. . and as such no part of this content may be reproduce. All such content is copyrighted in the name of Business Monitor International. analysis. repackaged. copied or redistributed without the express consent of Business Monitor International Ltd. but announced plans to build a massive solar panel factory in New York on the day of the Silevo acquisition. This will give SolarCity a greater control over its supply and protect it from price fluctuation that can vary greatly as a result of trade disputes or market forces governing supply and demand. All information. has been based on information and sources believed to be accurate and reliable at the time of publishing. forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organisations (including those using the service on a trial basis).CHINA Asia Pacific Power & Renewables June 17 2014. All rights reserved. and accepts no liability whatsoever for any loss or damage resulting from opinion. analisys and opinion. Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information provided. errors.