China Longyuan Leads Gains on New National Renewables Targets

  • Power producers must tap renewables for at least 9% of output
  • Wind, solar power production may rise 18% annually by 2020

China Longyuan Power Group Corp., the nation’s biggest developer of wind farms, surged in Hong Kong, leading gains in renewable energy stocks after China outlined steps to boost the use of clean energy.

China Longyuan jumped as much as 11 percent, the most since Feb. 15, to HK$4.97 and traded at HK$4.90 as of 2:18 p.m. local time. Huaneng Renewables Corp., an operator of wind farms, surged as much as 9.5 percent to HK$2.07. The benchmark Hang Seng Index gained as much as 1 percent.

The advances came after the National Energy Administration published guidelines on its website on Thursday calling for power producers to tap renewable sources for at least nine percent of their output by 2020. The guidelines, which break down targets for 31 regions, exclude hydroelectric power as a renewable source and don’t cover power producers with a specific focus on non-fossil fuels.

The directive means China will probably boost power harvested from the sun and wind by 18 percent annually in the next five years, according to analysts.

"The new policy should help Longyuan and other clean-energy producers, yet the challenge will be successful implementation by regional governments," Miranda Wang, a Hong Kong-based analyst from Bloomberg Intelligence wrote in a note on Thursday.

Electricity Consumption

The move will more than double renewable energy’s share of total electricity consumption compared with 2015 levels, with wind and solar being the biggest beneficiaries, said Louis Sun, an analyst at BOCOM International Holdings Co. in Shanghai.

Wind and solar power generation will need to rise by at least 18 percent annually to meet the target based on an assumption that China’s total electricity use grows by 2 percent each year, Sun forecasts.

The new rules, unveiled days before a gathering of the national legislature on Saturday, build on efforts by the world’s biggest carbon emitter to boost renewable energy and reduce greenhouse gases. Air pollution is a growing source of friction in China, with increasing calls from the public for the leadership to take tougher action.

The measures will "further squeeze coal-fired power" in China, said Tian Miao, a Beijing-based analyst at North Square Blue Oak Ltd., a research company.

For companies that aren’t able to achieve the targets, the NEA is encouraging the purchase of credits from those that exceed the requirements.

— With assistance by Feifei Shen

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