Analysis of Global Power Market

Analysis of China's Power Operation Market Power Generation Cost • • • • Levelised Cost of Electricity (LCOE) represents the net present value of the unit cost of electricity, i.e. to generate one KWh electricity, over the total lifecycle of a power generating asset. It allows the comparison among different power generation methods on a consistent basis. In China, coal-fired power and hydropower are the two major power generation sources, with a relatively mature technology and minimum LCOE lower bound. LCOE of power generation using sources such as gas, coal and biomass varies and is affected by fuel cost. In 2018, LCOE of gas-fired power generation is within the range of RMB 0.28 to RMB 1.28 per KWh, and LCOE of coal-fired power generation is within RMB 0.25 to RMB 0.54 per KWh. A slight downward trend is observed for both sources, as price of gas and coal are lower compared with 2017. LCOE of power generation using biomass is higher, with a range of RMB 0.74 to RMB 2.27 per kWh. LCOE of power generation using renewable sources such as hydro, solar and wind are mainly affected by the initial capital investment and natural factors. For instance, LCOE of hydropower is generally low and site-specific (e.g. built on reservoir or the running-of-river), as well as influenced by financial factors (e.g. cost of capital raising) and natural factors (e.g. rainy period and drought period). The LCOE varied within the range of RMB 0.15 to 0.32 per KWh in 2018. Given the rapid development of technology and acceleration of industrialisation, LCOE of power generation using renewable sources are witnessing a downward trend compared with past years. Levelised Cost of Electricity (LCOE) of Major Power Generation Sources, China, 2018 RMB per KWh 2.50 2.00 1.50 1.28 2.27 1.29 1.00 0.70 0.54 0.49 0.50 0.32 0.74 0.76 0.50 0.25 0.00 0.15 0.28 0.34 Hydro Coal Gas Wind Solar Biomass Nuclear FROST Source: World Energy Council, International Renewable Energy Agency, Frost & Sullivan SULLIVAN 52

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