Electricity reform starts to break the monopoly

Recently, the policy of the electric power industry has been blowing frequently. Last week, the policy of value-added tax reform for large-scale hydropower enterprises had just been laid. The rumors of the new reform plan that was led by the National Energy Administration and reported to the State Council this week made the market turmoil. Although the news was denied by the relevant departments, many industry sources told the Financial Investment Reporter that the curtain of power reform has been opened is an indisputable fact. In the new round of reforms, the two sides of the power-selling side competition and large-user direct purchase are the key points. Whether the new power reform can shake the hard-bones of grid monopoly has become the focus of attention of all walks of life.

Grid company receives the difference

According to the above-mentioned industry sources, at present, the pricing power of the power generation-side power generation price, the on-grid electricity price, and the terminal sales power price are all controlled by the government and are highly monopolized by the government.

Regarding the power sales model, the power generation of all power companies, including the five major power generation groups, can only be sold to the State Grid, China Southern Power Grid and other local power grid companies. These government-defining power grid companies have become the only purchasing channels for end users.

This model creates a sharp contrast between the two sides: the strong party is the grid company, and the grid company can receive a fixed price difference between the on-grid tariff and the terminal tariff, even if the grid is still a single seller of power generation companies and a single buyer of power users. Do not bear the risk; while the power generation companies are in the weaker side, the fixed on-grid price allows power generation companies to rely on the weather to eat, hydropower rely on flood season, thermal power on coal prices, cyclical cost changes can not be timely conveyed to the user side.

Earlier there was a State Grid official pointed out that the current price of electricity is priced by the state administration, and selling electricity basically does not make money. If the reform of the power sale side is really implemented, the next step may be that the price of electricity will be superimposed on many links from the cost of the power plant, the on-grid price, and the distribution cost. The model of the end-user electricity price was initially pushed backwards. In other words, once the initial plan for electric reform is implemented, it will accelerate the marketization of the power sales link, and the pace of marketization of electric power prices will follow.

An electric power industry expert who did not wish to be named told reporters that although the slogan of the electric reform has been repeated in recent years, it has not been able to shake the monopoly position of the power grid. In addition, the fixed price difference between the on-grid price and the terminal price also makes power grid enterprises lack the driving force for reform.

Since the establishment of the SERC in 2003, it has attempted to implement separation of the political prisoners. The electricity pricing reform plan was introduced in the same year. By the end of 2011, China Power Construction Group and China Energy Construction Group were established. Dongguan Rao Zhi, an analyst in the securities industry, pointed out that the reform of the power system in the past decade Not going well, the process is slow.

Reform mode:

Build more buy and sell electricity market

In particular, the new plan for electric power reform is to first phase out the sale of electricity in the power grid, and secondly, to select an independent grid finance or dispatch. In addition, the marketization of electricity prices is to establish a buy-and-sell electricity market, and to release on-grid tariffs and sales prices through large-scale direct-purchase pilots.

According to the new reform model, there is still a government decision on the transmission and distribution prices. For the sale of electricity, the on-grid tariff is divided into two parts: The electricity price is determined by the auction price, and the capacity electricity price is still determined by the government. This means that the channel fee model under reasonable return will become the major profit model of the future grid, and transforming the distribution network will become a top priority for power grid companies.

According to statistics, in the loss of power grid, the loss of 10KV distribution network accounted for more than 70%. Among them, 80% loss in 10KV distribution network comes from transformer loss, 20% comes from line loss. To improve operational efficiency, it is necessary to speed up the transformation of distribution networks, in particular to speed up the replacement of high-energy-consuming transformers and increase the deployment of intelligent and automated equipment.

In terms of sales, it is the direction of reforms to promote direct purchases by large users, to establish an electricity market that buys more and sell more, to allow electricity companies and power generation companies to bypass the power grid, and to have independent choice. This will also open the window of opportunity for private capital to enter the power construction and operation field. With the smooth progress of the reform and the formation of power generation side bidding and online electricity purchase, the on-grid tariffs will be liberalized and power generation companies will benefit. Rao Zhi pointed out that the ultimate profit model of power generation companies will be the cost + income approach, maintain a stable level of profitability, coal and electricity linkage policy can withdraw from the stage of history.

The impact of this reform model will also be significantly different: For power generation companies, the competition in the power sales side can promote enterprises to improve operational efficiency, and the release of pricing power is conducive to price adjustment of power generation companies to deal with industry cycles; for power grid companies, the Internet is used. The marketization of electricity prices will cause the grid to face cyclical risks, and open public funding will obviously trigger the grid monopoly cake.

Investment Opportunities:

Star Power and other Chuan shares benefit

Industry insiders expect that the gradual divestment of the power grid power sales business in the future will create a certain degree of competition in the field of power sales, improve service efficiency, and large-scale power sales companies may also be gradually formed. Future investment opportunities will be mainly distributed in the two areas of supply and demand of power distribution equipment and marketization of power sales.

In terms of demand for distribution equipment, Zhongyuan Huadian and Treid, the leading enterprises of transmission and distribution equipment, will directly benefit. Among them, Zhongyuan Huadian has been engaged in power equipment business for many years and has established a relatively complete system of design, manufacture, installation and after-sales service. The company's products are used in key projects such as the Three Gorges Project of the Yangtze River, the 2008 Beijing Olympics Project and the 2010 Shanghai World Expo Project.

On the market side of power sales, star power and Guangan Aizhong (a market and an inquiry) with the advantages of factory and network will directly benefit. Among them, Star Power is Sichuan Electric Power Co., Ltd.'s sole power market platform in Suining. With the further in-depth development of electric power reform, the company will welcome more substantive benefits on the power sale side; Guangan Aizhong owns complete power generation and power supply. And the distribution network is a unique local power company that integrates factory and network.

Industry insiders expect that in view of the complexity of the interests of the power industry, reform or take the local pilot path, while Sichuan, a major power province, is facing a rare opportunity. According to information released by the Sichuan Provincial Energy Bureau, in 2014, the province's new hydropower capacity is expected to reach 10 million kilowatt-hours, and last year the grid plan for on-grid electricity growth will increase by 3.2%. The province’s power grid and thermal power investment will continue to grow, striving to complete 32 billion yuan. According to industry insiders, if this round of electricity reform can be implemented, it will be a good thing for related companies in Sichuan, a major power province, but it will also be a rare development opportunity for private capital.