Power industry operations face four challenges, how to seek development breakthroughs

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Compared to the cyclical downturn in coal prices, the mainland power sector is facing a long-term structural problem, and it is neither easy nor possible to bring the sector back to a resilient upturn. Low coal prices on the mainland, once brought the mainland power companies earnings soared, but unfortunately the good times are not always good, the market in the past year, but the mainland power stocks as worthless, the share price fell endlessly. Anyone who wants to take advantage of the low prices to buy power stocks for a rebound is likely to be disappointed, as the power industry is facing four challenges in its operations.

Oversupply of electricity
Oversupply exists in almost every industry on the mainland, and the power sector is no exception. The problem is that new installed capacity continues to expand, while demand is insufficient. According to the National Energy Administration (NEA), electricity supply will grow by about 7% per year by 2020, with thermal power generation growing at an average of 5% per year. However, FARB noted in its study that as of the end of 2015, there was about 366 GW of approved and under-construction installed capacity, and thermal power generation supply is projected to increase by an average of 6% per annum over the next five years.

In response to the oversupply of electricity, the NEA has stipulated that thermal power projects approved before 2012 must be canceled if construction has not yet begun; all approved thermal power projects in 15 provinces and regions, including Shandong and Heilongjiang, must be deferred until after 2017 if they have not yet been constructed; and no new thermal power projects will be approved in 13 provinces and regions, including Inner Mongolia and Heilongjiang, before the end of 2017.