How to stabilize the energy industry chain under the epidemi

At that time, the world oil price has now dropped to $20 per barrel. With the aggravation of the epidemic situation in the world, the short-term problem of China’s world power cooperation has become prominent, and the long-term danger has been accumulating. At present, the world’s primary concerns will focus on the timeliness of power engineering project resumption, the stability of power industry chain and the sustainability of power investment. How to objectively and comprehensively view these three challenges in the field of motivation?

 

 

 

First of all, after the outbreak of the epidemic in the world, more than 50 countries have grounded flights, more than 130 countries and regions have adopted entry control measures, which involves some power cooperation projects in China. After workers’ day, problems such as unable to rework on time, material supply interruption, and the role of Wuhan hub block have resulted in the suspension of key power projects in Pakistan, Bangladesh and other countries. Especially for projects with short construction cycle, such as photovoltaic, the risk of default increases due to project delay.

 

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At present, the domestic and foreign materials of all Chinese funded enterprises are harmonious, the overseas personnel of their brother units are distributed, and local recruitment is started. The country where the project is located has announced to postpone the delivery period continuously. In addition, the construction period of coal power project is long, and the fault-tolerant space is large, and other factors, the emergency crisis has been temporarily relieved. Large projects such as Lahore orange line in Pakistan and dual fuel power plant in Cambodia were promoted in an orderly manner, and some enterprises also expanded new shopping malls during the epidemic. Therefore, from the perspective of the whole, these power engineering cooperation projects are still controllable in the short term. However, the situation of the epidemic spreading in the world is severe. Once the outbreak countries adopt more strict control measures and trigger a longer-term and broader strike, it will bring new problems and uncertainties. Relevant Chinese enterprises should make plans as early as possible.

 

 

 

Secondly, although the risk of power supply still exists, the advantage position of power equipment industry chain is still stable. In the early stage of the epidemic, the price of power equipment represented by solar cell modules vibrated, and gradually affected upstream manufacturers, downstream device manufacturers and operators. Since February 10, domestic power equipment suppliers, parts manufacturers and power equipment exporters have continued to resume production and operation. Up to now, the World Health Organization has not issued a warning on the goods from China, nor has the country banned the import and export of power products among the partners, and the impact of the epidemic on the supply of power equipment is relatively limited. Bloomberg predicts that the impact of the epidemic on the production of photovoltaic modules throughout the year will not exceed 5%, but we still need to be aware of the risk of overstocking caused by the decline in demand for power equipment.

 

 

 

Under the influence of the epidemic, the voice of the world society to establish a flexible and diversified industrial form and replace a single supply chain of China with a distributed multi-national supply chain gradually emerged. Japan’s Mitsubishi, Toshiba and other companies have started to develop India and Thailand as new centers to reduce dependence on China. For multinational power enterprises, the cost of replacement power supply chain is high, which involves tariff, logistics, supporting services, infrastructure, shopping mall maturity and other areas. In 2019, China’s polysilicon production capacity accounts for about 70% of the world’s total, and wind power equipment accounts for nearly 50%. Therefore, large-scale disconnection does not depend on China.Thirdly, the global power demand is expected to narrow, impacting the power investment activities. Under the impact of the epidemic, the types of power represented by oil and gas suffered the biggest impact since the financial crisis in 2008, and the global stock market continued to be in a downturn. From the data of 2017-2019, the power import and export in the first quarter was lower than that in the other three quarters. The power investment and transaction of cooperation between Chinese enterprises basically kept stable at that time, but the new normal and new trend of power investment need to be focused.

 

 

 

The slowdown in power investment will trigger a chain reaction. At that time, the world’s investment institutions generally looked forward to the future economic trend. The latest report of JPMorgan Chase believed that, affected by the epidemic, the growth rate of global economy and investment will slow down in the first quarter of this year, and will gradually rise in the second and third quarters. The U.S. power secretary said the marginal impact of the virus has not affected global power stores for the time being. However, with the spread of the epidemic in more and more countries around the world, the declining trend of power investment will lead to a series of problems, such as the reduction of investment budget of power enterprises, especially small and medium-sized enterprises, the difficulty of bank’s progressive loan, and the reduction of investment income.

 

 

 

Clean power investment is expected to become a new focus and promote the “reverse increase” of power investment. After the 2008 financial crisis, the United States and European countries increased their investment in low-carbon, energy-saving and efficient clean power. In the economic downturn, increasing investment in clean power infrastructure can not only ensure power safety and cope with climate change, but also effectively cope with the lack of power investment and affect the economic recovery.

 

 

 

In the face of the chaotic and diversified power situation, how can the power cooperation of Chinese enterprises get rid of the fog?

 

 

 

First, properly adjust the layout of power industrial chain to meet the new situation. According to the soft factors such as enterprise type, power type, skill characteristics, capital scale and transaction form, the paper puts forward the differentiated and echelon power industry strategy. And further optimize the layout of world collaborative power stores, and implement one country one policy for key power stores. In addition, the power industry chain should be intelligent, unmanned and non-contact, make full use of the power of information technology, provide high-quality power services, and swing away from other countries, so as to ensure China’s advantage position in the global power industry chain.

 

 

 

The second is to influence the world’s power investment and consumption, looking for new power points. Promote the form of power + financial cooperation, promote the participation depth of the financial industry in the world’s power projects, help power enterprises overcome difficulties, relieve the pressure of the capital chain and release vitality. Give full play to the flexibility advantages of small and medium-sized power enterprises, not only drive them to “go out”, but also help them “take root” in new overseas shopping malls.

 

 

 

Third, make full use of the existing power world cooperation channels, land large power projects and expand positive factors. In 2019, one belt, one road power cooperation partnership was put forward and established in China. This is the first dynamic cooperation mechanism in China. Now 30 countries join in the effort to solve the problem of the dynamic development of Member States. On the one hand, it can fully tap the potential of this channel, expand and land large-scale power projects among countries with the support of the competent power departments of member countries, and realize transnational activities of production factors. On the other hand, by virtue of the advantages of this channel, we should respond to the concerns of all countries in a timely manner, relieve doubts, draw up a long-term plan along the line and build up determination.

 

 

 

The authors are Xu Yue, project officer of China Liaison Office of world power agency and Wang Shunchao, deputy director of world cooperation office of General Electric Power Planning Institute