Center

Coal pricing system could become more market-oriented

By Wan Zhihong (China Daily)
Updated: 2006-12-26 08:55

"The nation's coal prices are now being linked more to the market, compared with electricity prices," he said.

Coal-fired power plants account for about 70 per cent of China's electricity output. Electricity prices are still controlled by the central government. Different pricing mechanisms have led to disputes between coal suppliers and power firms.

Because of the increasing cost of coal, the government decided in 2004 to approve a mechanism linking coal and power prices, allowing electricity prices to move in line with coal price increases.

Under the mechanism, electricity prices could be adjusted if the price of coal rises by more than 5 per cent in a six-month period.

Under the mechanism, 70 per cent of coal price increases are transferred to end-users, while power generation firms bear the remaining 30 per cent.

However, electricity prices have yet to be fully linked to the market. The government will do more work on the electricity pricing system in order to link it closer to movements in raw material prices, according to the NDRC.

The nation's power industry has seen double-digit growth over the past four years. The installed capacity reached 508 gigawatts in 2005, an increase of 14.9 per cent from 2004.

The installed capacity to be put into production is expected to exceed 70 gigawatts this year.

The nation is trying to adjust its power mix, hoping that cleaner energy will make up at least 35 per cent of the entire supply in 2010.