Welcome to Azure International

Azure International is a leading investment and advisory company focused on China's cleantech energy sector. Founded in 2003, we have a team of 20+ local and international professionals based in China with backgrounds in engineering, marketing, manufacturing, consulting, policy, government relations and finance. In addition to deep advisory capabilities in renewable energy, energy efficiency, carbon management, and energy finance, we have proven capability to invest in and accelerate the development of clean energy companies.  Our portfolio and partner companies have achieved both significant commercial success and returns to investors. Azure provides the necessary expertise and execution capabilities in China to lead relationship development with government and strategic partners, project execution, sourcing, sales and technology development – all with deep understanding of Chinese and international requirements.

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Grid – NEA releases 2014 electricity statistics: The National Energy Administration released its annual power statistics on January 16 and many of the numbers fell well below original forecasts. Electricity consumption grew only 3.8%, compared to a 6.5-7.5% forecast. Meanwhile, new generation capacity grew at 8.7%, contributing to 5.2% decline in generation utilization. Total grid-connected wind and solar capacity reached 95.61 GW and 26.52 GW respectively, with implied new grid-connected capacity of 19.52 GW and 10.63 GW respectively. Wind utilization was down 6% to 1905 hours, but not significantly off the five year average. Slower than expected growth in electricity consumption will create problems moving into 2015. Specifically, new generation projects in oversupplied regions will need to be put on hold to allow demand to catch up. Ideally, new thermal plants will be targeted. Beyond generation planning concerns, it is interesting to note the large disparity between GDP and electricity consumption growth statistics. Based on 7.4% GDP growth in 2014, this year’s Elasticity Ratio of Electricity Production fell to .51, the lowest level since the Asian Economic Crisis in 1997-98. (NEA CN)

 

China GDP Electricity Consumption Growth 1990 2014 Azure Cleantech news Jan 20 2015

 

 

Elasticity Ratio of Electricity Production Electricity Growth GDP Growth 1990 2014 Azure Cleantech News Jan 20 2015

 

Policy – NDRC releases transmission and distribution pricing for Shenzhen pilot: On January 15, the National Development and Reform Commission released a pricing list for transmission and distribution services in Shenzhen from 2015-2017. The prices are broken down by voltage level, with electricity consumers at the 10 kV level paying the highest transmission and distribution fees. In 2015, the average price across all customers will be RMB0.1435/kWh and this will gradually be lowered to RMB0.1428/kWh by 2017, signaling that the government is expecting regulated pricing (cost + regulated return on investment) to lower the cost of transmission and distribution service. This pilot is testing a very important reform. By fixing transmission and distribution pricing, the NDRC is opening up opportunities for direct sales between electricity consumers and generators. This lays the foundation for a bid-based wholesale market and multiple retailers of electricity. In Chinese, this is referred to as “setting the middle to open up both ends.” (NDRC CN)

 

Policy – NDRC releases new pricing mechanism for natural gas-fired generation: The NDRC released a notice calling for provincial government to fix natural gas-fired generation prices for large-scale CHP plants, large-scale peaker plants and distributed natural gas-fired generation. The policy calls for provincial pricing authorities to fix prices based on costs of production, societal benefits and utilization. It encourages direct supply contracts between generators and consumers and tries to establish pricing agreements for excess electricity sent into the grid, stating that they should generally be in line with large-scale CHP pricing.  The policy states that a direct linkage between fuel and electricity prices should be established but that the costs of natural gas-fired generation should not exceed local coal-fired tariffs by more than RMB0.35/kWh. The policy became effective on January 1. Establishing pricing for natural gas-fired generation is a major market development. Prior to this policy, natural gas-fired generation received the local coal-fired benchmark price and local governments, like Beijing, were responsible for paying the additional costs. The created a substantial risk for governments as they were exposed to fuel price changes. Under this new policy, it appears that grid operators will pay a premium price for natural gas-fired generation and pass these costs on the end-user via increases in retail electricity prices. This policy should serve to drive investment in badly needed load following generation.  However, it will not be without it perils. Natural gas price inflation will be a major challenge as demand continues to outpace supply and more expensive sources (LNG imports) are utilized. (NDRC CN)

 
Policy – China to continue to prioritize natural gas for residential and transport use:  According to a release by the NDRC on January 19, local governments should continue to prioritize natural gas availability for residential and transport applications. Stemming from limited resources and gas storage, many regions of China is faced with regional natural gas shortages. This announcement follows the NDRC’s establishment of generation pricing for natural gas-fired generation. The flexibility of natural gas-fired generation has and will continue to be limited by its lower priority during gas shortage events. (NDRC CN)
 
Policy – NDRC releases coal consumption reduction targets for key regions: In support of the State Council’s air pollution and low carbon action plans, the NDRC has released 2017 coal use reduction targets for Beijing, Hebei, Tianjin and Shandong of 13, 10, 40 and 20 million ton of standard coal respectively. It calls for Shanghai, Jiangsu, Zhejiang and Guangdong to establish targets by June 2015. In addition to stating targets, the policy defines roles for the MOF, MIIT, MEP, NEA and NBS with regard to providing financial, technical and verification support. Continued measures to reduce pollution from coal consumption are strongly impacting small to medium size manufacturers as well as energy intensive industries (steel, cement, coking, etc.) that cannot meet new regulations. Many of these companies will need to switch to more expensive natural gas or biomass fired boilers, relocate or shut down. (NDRC CN)
 
Grid – China State Grid announces 2014 statistics and 2015 goals: At the China State Grid 2015 Work Meeting, held on January 16, China State Grid announced that its 2014 investment reached RMB 338.5 billion, growing 14.1% over 2013. In 2015, it expects to invest RMB420.4 billion, 24% more than in 2014. This will support the construction of 50 next generation smart substations, 60.6 million smart meters, and further expansion of UHV. According to State Grid statistics, it absorbed 921.8 TWh of clean energy in 2014, equivalent to 300 million tons of standard coal and reducing carbon emissions by 740 million tons. Total new energy grid-connected capacity reached 120 GW, with the PV market growing at 172%, the fastest in the world. State Grid connected 5883 distributed PV projects totaling 1.63 GW. Notably, inter-province and inter-regional power exchanges grew 88% to 136.7 TWh. (BJX CN)
 
Solar – Ministry of Industry and Information Technology releases draft of PV manufacturing standards: On January 12, the MIIT released a series of manufacturing standard suggestions with the stated intent of encouraging manufacturers to upgrade to more efficient manufacturing processes. The suggestions cover investment in new capacity, yearly production and utilization targets, panel efficiency, resource utilization, waste management, quality and safety. In particular, the document suggests minimum production capacity for all segment of the PV supply chain, including inverters. It also calls for production capacity utilization to meet or exceed 50%.  This policy is seemingly trying to force industry consolidation. It is similarly structured to a lithium ion battery industry consolidation policy released by the MIIT on December 12. The combination of scale and manufacturing utilization requirements could force the closure of small manufacturers who cannot meet these standards. (MIIT CN)

Natural gas – China natural gas production increases 10% in 2014, exceeds targets:  According to preliminary data from China Mining News, China produced 133 bcm in 2014, up 10.7% and beyond the 131 bcm target. (Interfax EN)


Wind – Swedish manufacturer SKF receives Euro15.7 million order for wind turbine bearing sets: SKF will supply to bearing to Chongqing Gearbox Co for 1.5 MW and 2 MW units. Chongqing Gearbox Co is a subsidiary of China Shipbuilding Industry Corporation. (renews EN)


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