China Fully Liberalizes Electricity Prices for Coal-Fired Power Generation

[Image source=Yonhap News]

[Asia Economy Reporter Cho Hyun-ui] Amid an extreme power shortage in China, coal prices have surged to an all-time high, prompting the Chinese government to announce a policy for the complete liberalization of electricity prices from coal-fired power generation.

According to major foreign media on the 12th, the National Development and Reform Commission (NDRC) of China stated that, without specifying the exact implementation date, electricity generated from coal power will be supplied 100% through market transactions going forward. This measure is part of the energy crisis response, aimed at easing operational difficulties for power plants and increasing power generation.

Currently, China applies market prices to only 70% of electricity generated from coal-fired power. Among industrial and commercial electricity users in China, only 44% use electricity at market prices, while the rest receive electricity at fixed prices.

Local experts predict that industrial electricity consumption in the fourth quarter will decrease by about 12% due to reduced coal supply. Earlier, on the 8th, the State Council of China decided at a meeting chaired by Premier Li Keqiang to raise the upper limit of the electricity price increase for coal power from the current 10-15% to 20% above the baseline.

Meanwhile, Bloomberg reported that coal futures prices surged for two consecutive days due to flood damage in major coal-producing regions of China. At the Zhengzhou Commodity Exchange, coal futures prices rose 12% the previous day and surged again by as much as 7.1% on the day, trading at an all-time high of 1,507.8 yuan per ton, maintaining a strong trend.

Market participants stated that due to heavy rains in Shanxi Province, a major coal-producing area, 60 out of 682 coal mines were closed, and two coal mines in the neighboring Shaanxi Province were also damaged by heavy rains, with concerns over supply instability dominating the market. China, which produces and consumes more than half of the world's coal supply, relies on coal power for 64% of its total electricity generation.

This content was produced with the assistance of AI translation services.