The List of "One Belt, One Road" Energy Projects Published

China, together with the other countries involved in the "one belt, one road" initiative, is planning on six economic corridors to better interconnect China’s economy with the rest of Asia, Africa, the Middle East and Europe. It is reported that planning for the China-Mongolia-Russia corridor has been completed. And energy cooperation is undoubtedly a main focus.

Meanwhile, the State Council has instructed China’s 34 provinces to produce their own "one belt, one road" implementation plans by October. Guangdong recently released "one belt, one road" implementation plan, including a list of priority projects to support the Central Government’s strategy. Teaming up with Hong Kong, Macao, Taiwan and the surrounding provinces, Guangdong’s plan aims to promote cooperation with countries along the historic Silk Road by improving transport, trade, financial and other links with them. Guangdong has announced 68 priority projects involving a total investment of $ 55.4 billion, covering six areas of infrastructure, energy and resources, manufacturing, services and other areas.

 The scope of the “one belt, one road” initiative is enormous. A report published by Chinese Academy of Sciences states that, "one belt, one road" involves more than 60 countries for two-thirds of the global population and one-third of global GDP. To meet the demand of these countries for economic growth and infrastructure development up to $ 6 trillion of investment will need to be mobilised. Supplying the necessary funding and designing rational programmes for investing are most important initiative parts for the "one belt, one road".  

Decentralization of Approval Power on Energy Project and the Industry looking forward to Negative List

Recently China’s National Energy Council released its Proposals on further Advancing the Decentralization of Regulatory Approvals (hereinafter referred to as the Proposals), which recommended eliminating some existing requirements for investment and regulatory approvals , and further reducing the number of energy projects requiring approval at the national level. It also proposed to accelerate the establishment of "three lists" to define more clearly for the powers and responsibilities of government, the market, business enterprises and society in regulating the energy sector, including a negative list, a list of powers and a list of responsibilities. These proposals are intended to reduce excessive red tape and make regulators more responsive to the needs of businesses and consumers.

Since May 29, 2013, according to the Decision of the State Council on Issues Concerning Removing or Adjusting a Batch of Administrative Approval Items, the National Energy Administration eliminated a total of 14 administrative approvals, a devolved 2 provincial or regional energy regulators, 11 administrative approval items compromising 8 administrative licensing approvals and 3 policy approvals.

It is said that the proposed negative list will prevent the energy sector from being fully open to competition, but the proposal reforms will also open a door for foreign investors and individual companies to enter the market outside of the forbidden area on the negative list. To truly open the market, it will be necessary to pay equal attention to stream-lining the procedures for obtaining investment approvals, the regulatory process and public finance.

PPP Could Address the Problem of Making Environmental Protection Profitable.

In the wake of the new Environmental Protection Law taking effect and the State Council’s Action Plan for Preventing and Treating Water Pollution, environmental protection has become a particular focus of the media. However, businesses specializing in environmental protection still find it difficult to find ways of making money. Some environmental companies are even still loss-making. How to make environmental protection profitable is a major concern.

At present, many countries have used the PPP project financing model to attract social capital into the infrastructure development. The State Environmental Protection Department suggest that China should now look to the PPP mode as a way of encouraging investment in environmental protection. The PPP model could become a lifeline for the environmental protection industry.

The main challenge for China's environmental protection industry is to overcome the difficulty in achieving the required economies of scale to make investing in these projects worthwhile. Given China’s limited experience of using the PPP model; the uncertain return on investment, weaknesses in the regulatory and commercial framework for these projects and the lack of an effective risk prevention mechanism etc., it is hard to find a suitable project to invest in.

One of the solutions to these problems is that the government offer innovative financial instruments to these projects according to officials from the State Environmental Protection Department. Let the government take the lead in setting up a special fund to inject capital lower than a bank would charge to attract environmental protection businesses which are in urgent need of funds. Such a fund could also play a role in jump starting the flow of capital into the environmental protection industry.

Layout of Plans on Energy Internet for Chinese Energy Enterprises

As the Energy Internet Action Plan and its related projects take shape, the Premier Chinese "Internet +" initiative, which aims to facilitate the integration of traditional industries with the Internet has attracted the interest of many state owned energy enterprises. It is reported that several state-owned energy companies, among them CNPC, Sinopec, State Grid Corporation of China have expressed considerable interest in joining hands with Tencent and Alibaba to explore how traditional industries can benefit from the internet revolution.

The Energy Internet involves the integrated use of advanced power system technologies, information technology and intelligent management technology to manage a large number of distributed sources of energy, energy storage devices, and a variety of load management device to create a new type of network for the distribution of oil, electricity, and natural gas to deliver energy efficiently, reliably and mutually to meet the demand for energy wherever it arises. Its main aim is to maximize the use of renewable energy, especially large-scale use and sharing of distributed renewable energy resources. China's Energy Internet has huge potential and is expected to become one of the main focuses of investment.

Distributed and user-side of energy storage and the smart energy devices (smart meters and intelligent inverters) will be the mainly focus of the Energy Internet development over the next 5 years. The electricity trading market mechanism has already been established, and will focus on the development of demand side management. From there, the Energy Internet will look into develop smart power distribution that is open to widely distributed sources for renewable power generation. It is also reported that China has recently formally established the Energy Internet Alliance hoping to jointly promote the development of Energy Internet system engineering by working with the government, industry organizations, energy and Internet companies, financial institutions and the media.