Among several energy policies that have been announced during this reporting period, three are of particular relevance for the Chinese energy system. Firstly, the State Council has announced that China’s coal power prices will shift from fully government-regulated to partially market-based, although they will remain capped. Power generators, electricity retailers and large electricity users will determine the proportion of floating tariffs through negotiation or bidding. Floating tariffs can rise by up to 10% (after 2021) and on the downside may not exceed 15%. To prevent price increases for industrial and commercial customers, tariffs are not allowed to increase before 2021 – thus only downside price adjustment is permitted before that date.
Secondly, the state-owned Assets Supervision and Administration Commission of the State Council (SASAC) has announced trial measures requiring the ‘Big 5’ state-owned power enterprises to close down loss-making coal power plants amounting to a quarter or a third of overall capacity in Gansu, Shanxi, Xinjiang, Qinghai and Ningxia. The reason for these measures is that out of 474 plants collectively owned by the Big 5, 257 were making a loss.
Thirdly, the National Development and Reform Commission (NDRC) has released a request for comment regarding measures which require grid operators to purchase all on-grid electricity generated from renewable energy generators, except renewable energy traded in the electricity market. Under the new rules, grid companies will be responsible for any unjustified economic losses they cause for renewable energy power generation companies and are liable for providing compensation, thus increasing economic incentives for purchasing renewable energy.