China’s state planner, the National Development and Reform Commission (NDRC), said on Tuesday it will fully liberalise pricing for electricity generated from coal and that industrial and commercial users will all have to buy from the market.
The NDRC said, giving no specific timeframe, that 100% of electricity generated from coal-fired power will be priced via market trading, up from 70% in the country now.
Industrial and commercial users will have to buy directly from the market or via agents over the grid “as soon as possible,” up from 44% of such users who currently buy direct from the market. Other current buyers pay fixed prices.
The reforms are Beijing’s latest effort to deal with an energy crisis gripping the world’s second largest-economy that is expected to last through to the end of the year.
Supply Tipped To Fall Short
Analysts and traders have been forecasting a 12% cut in industrial power consumption in the fourth quarter because coal supply is expected to fall short this winter.
“[The pricing reform] is designed to reflect power demand and consumption, and to some extent to ease operation difficulties of power firms and encourage plants to increase power supply,” said Peng Shaozong, an official with the NDRC, at a press briefing on Tuesday.
China’s State Council said on Friday it would allow coal-fired power prices to fluctuate by up to 20% from base levels, an increase on previous limits, to prevent high energy consumption.
China’s power reforms will have no impact on the consumer price index (CPI) and limited impact on other economic indicators, Peng said.
• Reuters with additional editing by Jim Pollard