The lockdown of many regions in China to contain Covid-19 outbreaks has dampened power consumption, and cast a shadow over market demand, said Fitch Ratings in its latest China Power Watch report.
According to Fitch Ratings, China’s power demand growth slowed to 5 percent on a year-on-year (YoY) basis in 1Q22, with consumption growth decelerating to 3.5 percent YoY in March. Fitch attributes the slowdown to a high base effect and the economic disruption caused by the Omicron Covid-19 wave, augmented by stringent carbon emission controls and China’s property-sector downturn.
Thermal power output represented almost three quarters of the total in 1Q22, amid higher output from heating power co-generation thermal units and weak renewable energy output in the winter. High coal prices, with imported coal prices substantially higher than those of domestic coal amid tight global supply, are putting pressure on the margins of power generation companies, especially those with large exposure to seaborne coal.
Regulators issued the 14th Five-Year Plan on Modern Energy System Planning in 1Q22, which aims to boost the proportion of non-fossil fuel consumption to around 20% by 2025, from 16% at end-2020.
The plan is also focussed on enhancing energy security and modernising the industry’s structure. Fitch expects this, together with 14th Five-Year Plan on new power storage, and the development of a uniform national power market, will largely support the expansion of renewable energy while ensuring energy security, said the report.