Under the epidemic, how can China stabilize the energy industry chain?


Under the epidemic, how can China stabilize the energy industry chain?

The current international oil price has fallen to US $ 20 per barrel. With the spread of the epidemic in the world, the short-term problems of China's international energy cooperation have become prominent, and long-term risks continue to accumulate. At present, the main international concerns are focused on the timeliness of resumption of energy engineering projects, the stability of the energy industry chain and the sustainability of energy investment. How to look at these three challenges facing the energy field objectively and comprehensively?

First of all, after the outbreak of the epidemic, more than 50 countries have grounded flights, and more than 130 countries and regions have adopted immigration control measures. This involves some Chinese energy cooperation projects. Problems such as workers' inability to rework on time after the holiday, interruption of material supply, and the stagnation of the Wuhan hub have caused key energy projects in Pakistan, Bangladesh and other countries to stop. Especially for projects with a short construction period such as photovoltaics, project delays lead to increased risks such as breach of contract.

At present, various Chinese-funded enterprises have coordinated domestic and foreign materials, deployed overseas personnel from sibling units, and started local recruitment. The countries where the project is located have successively announced delayed delivery deadlines. In addition to the long construction cycle of coal power projects and large fault tolerance space, the sudden crisis has temporarily obtained ease. Large-scale projects such as the Lahore Orange Line in Pakistan and Cambodia ’s dual-fuel power plant are progressing in an orderly manner, and some companies have also expanded into new markets during the epidemic. Therefore, overall, these energy engineering cooperation projects are still within the controllable range in the short term. However, the spread of the epidemic in the world is severe. Once the outbreak countries take stricter control measures, which will lead to longer and more extensive shutdowns, it will bring new problems and uncertainties. The relevant Chinese companies should make preparation in advance.

Secondly, although the risks of energy supply still exist, the dominant position of the energy equipment industry chain remains stable. In the early stage of the epidemic, the price of energy equipment represented by solar cell modules fluctuated and gradually affected upstream manufacturers, downstream installers and operators. Since February 10, domestic energy equipment suppliers, component manufacturers, and energy equipment exporters have resumed production operations. As of now, WHO has not issued a warning for goods from China, and there is no country among the partners that prohibits the import and export of Chinese energy commodities. The impact of the epidemic on the supply of energy equipment is relatively limited. The media predicts that the impact of the epidemic on the production of photovoltaic modules throughout the year will not exceed 5%, but it is still necessary to guard against the risk of inventory backlog caused by the decline in demand for energy equipment.

Affected by the epidemic, the international community has proposed the establishment of a flexible and diversified industrial model, and the voice of "distributed multinational supply chains to replace a single Chinese supply chain" has gradually emerged. Companies such as Mitsubishi and Toshiba of Japan have begun to develop India and Thailand as new centers to reduce their dependence on China. For multinational energy companies, the cost of replacing the energy equipment supply chain is high, involving tariffs, logistics, supporting services, infrastructure, market maturity and other fields. In 2019, China's polysilicon production capacity accounted for about 70% of the world's total. Wind power equipment accounts for nearly 50%, so it is not realistic to get rid of dependence on China on a large scale.

Third, global energy demand is expected to narrow, impacting energy investment flows. Under the impact of the epidemic, the energy varieties represented by oil and gas suffered the greatest impact since the 2008 financial crisis, and the global securities market continued to slump. Judging from the data from 2017 to 2019, the energy import and export in the first quarter is lower than in the other three quarters. The energy investment and trade cooperation between Chinese companies is basically stable, but the new normal and new trends in energy investment require focus.

A slowdown in energy investment will trigger a chain reaction. At present, international investment institutions are generally optimistic about the future economic trend. JPMorgan ’s latest report believes that due to the epidemic, the growth of the global economy and investment will slow in the first quarter of this year, and will gradually pick up in the second and third quarters. The US Energy Secretary declared that the marginal impact of the virus has not affected the global energy market for the time being. However, with the spread of the epidemic in more and more countries around the world, the downward trend in energy investment will cause energy companies, especially small and medium-sized enterprises, to shrink their investment budgets, increase the difficulty of lending by banks, and reduce investment returns.

Clean energy investment is expected to become a new focus, and promote energy investment "reverse growth." After the 2008 financial crisis, the United States and European countries increased investment in low-carbon, energy-saving, and efficient clean energy. Increasing investment in clean energy infrastructure during the economic downturn will not only ensure energy security and deal with climate change in the short term, but also effectively respond to the decline in energy investment and stimulate the recovery of the energy economy.

Facing the complex and diversified energy situation, how can the energy cooperation of Chinese-funded enterprises lift the fog?

First, properly adjust the layout of the energy industry chain to meet the new situation. Aiming at soft factors such as enterprise type, energy variety, technical characteristics, capital scale and business model, we launched a differentiated and stepped energy industry strategy. And further optimize the layout of the international cooperative energy market, and implement one country, one policy for relevant energy key markets. In addition, the energy industry chain must move towards intelligentization, unmannedness, and non-contact, make full use of information technology to provide high-quality energy services, and widen the gap with other countries to ensure China's advantage in the global energy industry chain status.

The second is to stimulate international energy investment and consumption, looking for new sources of energy growth. Promote the energy + financial cooperation model, promote the depth of the financial industry's participation in international energy projects, help energy companies overcome difficulties, ease the pressure on the capital chain, and release vitality. To give full play to the flexibility advantages of small and medium-sized energy enterprises, it is necessary not only to drive small and medium-sized energy enterprises to "go global", but also to help them "take root" in new overseas markets.

The third is to make full use of existing energy international cooperation platforms, land large energy projects, and expand positive factors. In 2019, China proposed and established the “Belt and Road” energy cooperation partnership. This is the first energy international cooperation mechanism established by China. At present, 30 countries have joined and are committed to solving the energy development problems of member countries. On the one hand, the potential of the platform can be fully tapped, supported by the energy authorities of member countries, to expand and land large-scale energy projects between countries, and realize the transnational flow of production factors. On the other hand, with the advantages of the platform, we can respond to concerns of various countries in a timely manner, alleviate doubts, formulate long-term plans for development along the route, and build confidence.

You can buy our products at ease, we provide many products, such as: pv junction box, solar junction box, solar pv junction box, etc. If you want to buy our products, please contact us as soon as possable.



Name is required!

Mail address required!

Mail address must be valid!

Click it

Message field is empty!

Back to Top