Electricity coal price cuts free space for new energy generation
The National Development and Reform Commission recently announced a new policy aimed at adjusting electricity pricing mechanisms. The decision involves utilizing the price space created by the decline in coal and electricity prices to increase the cost of renewable energy, denitrification, and dust removal measures, while keeping overall electricity prices stable. This move is designed to support the growth of renewable energy sources and encourage coal-fired power plants to adopt cleaner technologies, ultimately improving air quality and environmental sustainability.
According to reports, China's electricity sales pricing system has evolved over time from a planned economy model. It is currently divided into seven main categories: residential, agricultural production, large industries, commercial, non-industrial and general industries, non-residential lighting, and others. Each category includes subcategories, such as irrigation in poor counties under the agricultural production group, or specific industrial uses like electrolytic aluminum and fertilizer production under the large industry category. To reflect different usage patterns, pricing methods like two-part tariffs and time-of-use pricing have been introduced for major sectors, particularly in large-scale industries.
A senior official from the National Development and Reform Commission stated that the government plans to gradually restructure the sales price classification system over the next five years. The goal is to shift from the current seven categories based on industry and usage to a more simplified structure focused on load characteristics, aiming for a clear, reasonable, and flexible pricing framework. The official emphasized that this reform must be implemented carefully, taking into account users' ability to adapt, especially protecting the interests of residential and agricultural consumers. Lessons from international practices will also be considered during the transition.
In many countries, electricity pricing is classified based on either the cost of supply or the nature of the user. For example, France uses a system that divides electricity costs based on capacity, peak and off-peak times, and seasonal variations. In the UK, large consumers are charged real-time rates that fluctuate hourly or even every 15 minutes depending on market conditions. South Korea, on the other hand, categorizes users into six groups—residential, education, general use, industry, agriculture, and street lighting—but still applies cost-based pricing within each category, including load rate and time-of-use adjustments.
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