The Zhitong Finance App learned that Orient Securities released a research report saying that recently, Changzhou Green Power Environmental Thermal Power Co., Ltd. issued a total of 70,248 green power certificates on the trading platform, making it the first batch of green electricity certificates for waste incineration power generation listed and traded on this platform. The bank believes that the establishment of a green certificate for waste incineration power generation on the green certificate trading platform means that the full green license coverage policy and the renewable energy power generation subsidy reform policy are officially implemented in the field of waste incineration. It has opened up a green license trading market space for waste incineration power generation. After the stock project exceeds the central financial subsidy limit (8,2,500 hours or 15 years), green certificate revenue can still provide additional income.

Incident: According to information from China's green power certificate trading platform, recently, Changzhou Green Power Environmental Thermal Power Co., Ltd. issued a total of 70,248 green power certificates on the trading platform, making it the first batch of green electricity certificates for waste incineration power generation to be listed and traded on this platform

Orient Securities's views are as follows:

The full green license coverage policy has been implemented, opening up green license trading space for waste incineration power generation.

In October 2020, the Ministry of Finance and three other ministries and commissions jointly issued a supplementary notice on matters relating to “Certain Opinions on Promoting the Healthy Development of Non-Water Renewable Energy Power Generation”. Among them, it is clear that the amount of electricity subsidized for the entire life cycle of waste incineration power generation projects = installed capacity x rational use hours (8,2,500 hours). If the amount of electricity exceeds the subsidy amount or has been in operation for more than 15 years, they will not receive the central financial subsidy funds; instead, a green license will be issued to allow participation in green certificate transactions. However, the green certificate transaction policy implemented at the time (Development and Reform Energy [2017] No. 132) only involved the issuance of green certificates for onshore wind power and photovoltaic power generation, so it was legally impossible to participate in green certificate transactions for waste incineration power generation. Until August 2023, the National Development and Reform Commission and three other ministries and commissions jointly issued the “Notice on Accomplishing the Full Coverage of Renewable Energy Green Power Certificates to Promote Renewable Energy Electricity Consumption”, making it clear that biomass power generation issues a green certificate that can be traded, and that green certificate transactions for waste incineration power generation are possible.

The first batch of green certificates for waste incineration power generation was on the shelves, and the listing price was not advantageous.

According to information from China's green power certificate trading platform, recently, Changzhou Green Power Environmental Thermal Power Co., Ltd. (Green Power) issued a total of 70,248 green power certificates (corresponding to 72 million kilowatt-hours of electricity) on the trading platform, becoming the first batch of green power certificates for waste incineration power generation listed on the platform. The listing price is 30 yuan/piece of green certificates (0.03 yuan/kilowatt-hour). Afterwards, some companies quickly followed suit. Huzhou South Taihu Environmental Energy Co., Ltd. (Wangneng Environmental) listed a green power certificate to test the waters. The listing price was 40 yuan/green certificate. The grid-connected power generation period for both projects was 2008, and the electricity generation period corresponding to the listed green certificate was 2023, which means that the maximum subsidy limit for more than 15 years of operation was reached. In terms of price, the unit prices of 30 yuan and 40 yuan do not have an advantage on the trading platform. The average transaction price on the platform in January 2024 was 18 yuan/unit, while the lowest unit prices for wind power, photovoltaics, and biomass green certificates sold were 0.5 yuan, 1.5 yuan, and 5 yuan, respectively.

The green license transaction has started, and the profit expectations of the existing waste incineration power generation project have stabilized, and cash flow is expected to improve.

Judging from the current electricity price structure for waste incineration power generation, the standard Internet price of 0.65 yuan/kilowatt-hour stipulated in the policy consists of three parts: the local coal-fired benchmark electricity price, a fixed provincial subsidy, and a central financial subsidy. Among them, the provincial fixed subsidy is 0.1 yuan/kilowatt-hour, and the standard coal-fired electricity price varies from place to place, resulting in differences in the intensity of the central financial subsidy for various projects. Take the Changzhou project, which was listed for the Green License Deal this time. According to Jiangsu Province's 2020 coal-burning benchmark electricity price of 0.391 yuan/kilowatt-hour, the project's original central financial subsidy intensity was 0.159 yuan/kilowatt-hour. However, its green certificate listing transaction price is only 30 yuan/piece, or 0.03 yuan/kilowatt-hour, which is more than 80% less than the previous national supplement intensity. However, it is worth noting that the green certificate trading market is currently not active. With the gradual improvement of the future price mechanism and the connection and coordination with the carbon market, the green certificate transaction price is expected to increase and form stable expectations. On the other hand, the previous settlement period for central financial subsidies for waste incineration power generation was long and uncertain, resulting in a large number of accounts receivable, while new green certificate transactions were listed or negotiated on trading platforms, which is expected to improve the cash flow of waste incineration companies.

Investment advice:

The launch of a green certificate for waste incineration power generation on the green certificate trading platform means that the full green license coverage policy and the renewable energy power generation subsidy reform policy are officially implemented in the field of waste incineration. It has opened up a green license trading market space for waste incineration power generation. After the stock project exceeds the central financial subsidy limit (8,2,500 hours or 15 years), green certificate revenue can still provide additional income. It is recommended to focus on the waste incineration operators Green Power (601330.SH) and Wangneng Environment (002034.SZ), which have listed green certificates; it is recommended to focus on the existing waste incineration projects, Weiming Environmental Protection (603568.SH), Brilliant Blue Environment (600323.SH), Pioneer Environmental Protection (), Shanghai Environment (USD), and Zhongke Environmental Protection (301175.SZ), which have many waste incineration projects in stock and may benefit from green certificate transactions in the future. 600008.SH 601200.SH

Risk warning: risk of price fluctuations in green license transactions; risk of inactivity in the green license trading market;