context: NDRC (National Development and Reform Commission) and NEA (National Energy Administration) jointly issued 'Notice on establishing coal power capacity price mechanism', effective from 1 January 2024. NDRC expects power prices to remain stable in the short term. The new mechanism is a firm step towards a unified national power-market with spot prices at the core.
The introduction of the coal power capacity price mechanism will alleviate the production and operation pressure of coal power enterprises, argues Yang Kun 杨昆 China Electricity Council party secretary and executive vice chairman.
Coal and power companies have recently suffered large losses and their financial conditions have continued to deteriorate, contends Yang, noting
- major domestic power generators incurred losses of C¥120.3 bn in 2021, with 80 percent operating at losses
- the losses in the first half of this year still exceeded C¥100 bn, with 50 percent operating at losses
- 41 percent of power plants have a debt ratio exceeding 75 percent
- the annual power generation hours of coal power units already having dropped from more than 5,000 hours in 2015 to 4,300 hours in 2022; with the rise of new energy, they will further decrease in the future
In the long run, Yang says, the new mechanism will
- encourage coal and power enterprises to make necessary investments and transformations, and improve the ability of the power system to ensure safe supply and flexible adjustment
- play an active role in building a new power system, further promoting the construction of a unified national power market and promoting the adequacy of power system capacity and the safe, sustainable and stable supply of power