The attracting news this week should be the resumption of smelters in Yunnan, sourcing from related office of Yunnan on 17th March, finally guaranteed deliver 800,000Kw power to smelters, but didn’t disclose more details. theoretically, it could get 500kt /y capacity to resume in final, roughly over 40% of all shutdowns in November last year.
Since 2022, power shortages in southwest (Yunnan, Sichuan and Guizhou) frequently became a hot topic around the industry. Tight supply once pushed the price of aluminium to over 20,000 yuan, setting a record for the best profit year for all enterprises. Bad thing is low operating rate throughout the year has caused dissatisfaction among smelters. Looking back at the reasons for the initial move to Yunnan:1. Preferential electricity prices. 2. Green energy. Especially the second point is the fundamental goal pursued by enterprises in the next few years. While, But at present, the price of doing so is that it cannot meet the requirement of stable production at full horsepower. Heavy industry requires a stable power supply, not like agriculture.
However, the power supply situation is slowly changing this year.
According to data released by the Yunnan Energy Bureau, from January to February 2024, Yunnan Province’s total power generation was 52.05 billion kilowatt-hours, a year-on-year increase of 5.7%; of which, thermal power generation was 10.61 billion kilowatt-hours, a year-on-year increase of 15.3%; hydropower generation was 297.8 100 million kilowatt-hours, a year-on-year increase of -10.8%; wind power generation was 8.89 billion kilowatt-hours, a year-on-year increase of 56.7%; solar power generation was 2.76625 billion kilowatt-hours, a year-on-year increase of 184.8%. The combined power generation even excessed thermal.
End to 2023, the total installed capacity of new energy in Yunnan Province reaches 34.89 million kilowatts, of which wind power installed capacity is 15.30 million kilowatts and centralized photovoltaic installed capacity is 19.59 million kilowatts. It continues to consolidate the position of new energy as the second largest installed power supply capacity in the province. According to the release, the installed capacity of wind power in January 2023 were mere 9.38 million kilowatts, and solar power were 6Kw, with an increase of 63% y/y and over 200% y/y.
This explained the resumption could be earlier in 2024.
Table1: The difference from January to February in recent two years, please note that different unit for capacity and generation, details in context.
| Installed Capacity | Power Generation | |||
| Wind | Solar | Wind | Solar | |
| 2023 | 9.38 | 6.1 | ||
| 2024 | 15.3 | 19.59 | 8.89 | 2.8 |
| Y/Y | 63% | 221% | 56.70% | 184.80% |
Further important reason to support the development of new energy is policy. In December of 2023, Yunnan offices announced policy changes on the price of wind and solar power price.
Table 2: The difference of price policy from 2023 to 2024
| Proportion of new energy settled based on thermal-power benchmark price | ||
| Date | Wind | Solar |
| January-July in 2023 | None | 100% |
| August-December 2023 | None | 80% |
| January-June 2024 | 50% | 65% |
| July-December 2024 | 45% | 55% |
Ensure to maximally absorb new energy and integrate to grid, 50% of grided wind power could calculate based on thermal-power price rather than clean energy benchmark price. In February, provincial direct transaction price of clean energy is 0.29028yuan/kwh, thermal power price (brown coal) direct transaction price is 0.35509yuan/kwh. This policy would support and encourage the healthy and sustainable development of wind power stations, the interaction is ensuring the development of heavy industry, not only for aluminum. Though smelters have to pay more on direct cost to produce per tone metal.
Generally speaking, we seem to continue to have hope for the development of aluminum in Yunnan.