State-owned carbon aggregator enters China’s emerging power market

Published 10:36 on March 10, 2016  /  Last updated at 20:43 on March 10, 2016  /  Bavardage, China, China's National ETS, China's Pilot Markets  /  No Comments

The carbon trading arm of Huaneng, China’s biggest power generator, has bought a 20% stake in a new wholesale power company set up to participate in the nation’s emerging power market, which aims to wrestle control of electricity supply away from the nation’s big grid operators.

The carbon trading arm of Huaneng, China’s biggest power generator, has bought a 20% stake in a new wholesale power company set up to participate in the nation’s emerging power market, which aims to wrestle control of electricity supply away from the nation’s big grid operators.

Huaneng Carbon Asset Management Corp., one of the major players in China’s seven pilot emissions trading markets, on Thursday announced that it had become the second biggest shareholder in the new firm Beijing Ronghe Shengyuan Power Sales Company.

The new company has been set up as part of China’s mixed-ownership reform, seeking to attract a greater share of private investors.  However, the main shareholder with a 30% stake, China Power Investment Corp., is also among the country’s five big state-owned power firms.

The carbon trader’s involvement indicates that it sees the CO2 emission reduction potential in the ongoing power market reforms in China, although climate change is not among the top reasons the government has initiated the changes.

Power supply in China is mostly dictated by the two main grid operators, the State Grid and China Southern Power Grid Company. This has made it difficult for generators to get clean electricity onto the grid.

In the past year, the central government has taken several steps to liberalise the power market.

Beijing and Guangzhou last week opened power trading exchanges over which suppliers and buyers can negotiate contracts directly without the involvement of the grid companies, which actually own the exchanges.

Ronghe Shengyuan is one of around 300 new companies that have been set up to participate in this market.

The Beijing power exchange has announced a first deal for 900 GWh of electricity from China’s western regions to eastern Shandong province under a government-backed, cross-regional trading programme called Yindong.

The NDRC on Thursday said it would allow 10,000-12,000 GWh of electricity from Yindong to trade on the Beijing exchange this year – more than a third of the total volume from the programme. Some 30% of that also must come from renewable sources.

Observers say the two new power exchanges will have limited immediate impact on the local carbon markets in Beijing and Guangdong province, but in the longer term the power market reforms are expected to make it easier for the national ETS to send an effective carbon price signal to the electricity market.

By Stian Reklev – stian@carbon-pulse.com

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