The gap in renewable energy subsidies

- Sep 11, 2019-

Policy makers of renewable-energy subsidies had no idea that the policy he signed to boost the new energy industry had left such a big hole.

Due to the rapid growth of new energy installations represented by wind power and photovoltaic, the gap of renewable energy subsidies has been widening year by year.Authorities estimate that, up to now, the national finance owes the subsidy amount to each operating enterprise as high as 200 billion yuan, and the receivables of many new energy development enterprises exceed 10 billion yuan.

For an industry that has not fully matured and still needs policy support to some extent, this huge funding gap has undoubtedly affected the normal operation of the whole new energy industry.

In the new energy industry chain, there are several participants: downstream power station operators, midstream project contractors and upstream equipment production or parts suppliers.Among power station operators, there is a clear difference between wind power and photovoltaic: the former is mainly state-owned enterprises, while the latter is mostly private enterprises.Under the background of substantial arrears of subsidy funds, different companies in the industrial chain have different forms of survival, and it can be said that all beings are different.

* private power plant operators fell.For private power station operators, electricity generation was once regarded as an important way for them to obtain cash flow. However, under the condition that subsidies are not enough, it is natural that they cannot maintain long-term heavy asset operation by only a small amount of electricity price income.In particular, amid uncertainty about future subsidies, some plant owners are selling assets to save themselves.

Compared with private enterprises, state-owned enterprises in particular have a background state power station operators, and with his back leaning against a big tree bear ability better natural capital, in this round of private enterprises in the process of selling assets, became the flange, so that be seen as project transfer "beneficiary", but in fact, most state-owned enterprises but also for the day.

Among state-owned new energy operators, a large part of them are listed on the Hong Kong capital market. According to the current stock prices, most of them are at low historical prices. With a p/e ratio of about 5 times, these enterprises basically lose the financing function of the secondary market, and it is difficult to maintain the follow-up resource development.In the words of one business operator, "international investors have shed the make-up of new energy companies" because of the subsidy defaults.

Compared with operating enterprises, upstream suppliers may be affected more severely by subsidies. Due to the failure of operating enterprises to timely and fully pay, fund arrears become the norm, and the upward transmission of pressure becomes the industry rule. In this process, those who are embarrassed and burdened by capital chain will eventually be eliminated.

Of course, the default will also have another negative impact, that is, in the case of financial constraints, it is inevitable that the upstream companies will cut corners, thus affecting the quality of products, of course, in this way * the end victim is naturally the downstream power station operators.The "mutual harm pattern" formed by the triangle debt is thus produced.

Sources familiar with the matter say there have been several battles between the ministry of finance and the NDRC over subsidies, with the former in charge of the purse strings and the latter in charge of project approvals, when the pace of the two sides fails to coordinate and the funding gap arises.

The size of the subsidy gap, and the resulting vicious cycle between industrial chains, seems to have no solution.

Fortunately, the era of new energy parity has arrived.After more than a decade of cultivation and growth, the new energy industry will enter the weaning period in the next few years, and when it has truly completed its own adult ceremony, the future, this industry still can be expected.