We visited Beijing last week and met with industry experts in environmental and solar areas. We summarize below the key takeaways on a few topics that could be of interest to the investment community.
Solar: 2020 targets; renewable surcharge hike; solar tariff cut; poly/wafer price
• Official 2020 target for solar could be raised to 150GW in the 13th five year plan. However, such capacity target would become less instructive in determining the actual capacity growth, as financing, grid construction and land approvals could hold the key.
• Renewable surcharge is likely to be raised by Rmb0.01/kWh to Rmb0.025/kWh (incl. VAT) along with coal-fired on-grid tariff cut, to relieve the prolonged delay in subsidy payment. It is highly uncertain that the NDRC would approve a higher surcharge hike, although a hike of Rmb0.015/kWh is needed for a more aggressive 2020 target on wind/solar.
• Solar power feed-in tariff cut for new projects in tier-1 and tier-2 regions (with good solar resources) is justified, given lower investment cost. However, such policy may only be announced in or after 2Q16 and become effective a few months later.
• Poly price should stabilize as the ASP is around the marginal cash cost of c.USD15/kg. Wafer price tend to be more stable than poly, partly due to GCL Poly’s dominating market share and therefore market power.
Environmental: WTE potential / competition; soil pollution control; membrane
• Waste to energy (WTE) is likely to account for c.50% of municipal waste treatment volume by 2020, from currently c.30%. However, there are not many large-scale municipal WTE projects left in the market, leading to intense competition for new projects and the waste treatment fees from some recent bidding are unreasonably low.
• Grate furnace will remain the mainstream technology for WTE; while circulating fluidized bed technology generates more fly ash (now considered as hazardous waste) and could face cost surge.
• The Soil Pollution Control Plan, to be released in 2016/17, could focus on hazardous/solid waste treatment, heavy metal and organic substance treatment, contaminated soil retrofitting, etc.
• Membrane can be applied in reclaimed water (both industrial and municipal) and drinking water treatment; while for municipal wastewater treatment, membrane-based projects (ex. underground ones) are still more expensive than conventional projects, with 20-30% higher initial investment cost and 30-40% higher electricity consumption ratio. (Read Report)
Source : Deutsche Bank Markets Research