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China takes first big step in market-oriented hydropower reforms
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CHINA will reform hydropower prices to encourage investment in the industry as the country struggles to meet environmental targets.
For all newly commissioned hydropower projects, on-grid prices — the rates paid by grid operators to generators — will be based on the average price grid companies pay for electricity from all sources in each province.
The reform was announced in a statement by the National Development and Reform Commission on Wednesday.
Prices must also factor in project development costs, the top planning agency said.
Currently, hydropower prices are set by local governments on a project basis, typically lower than those for power generated from coal-fired plants. Hydro is China’s second-largest source for electricity after coal.
The move will “reasonably reflect hydropower’s market rates” and allow “the market to play a more decisive role in the allocation of resources,” the NDRC statement said.
CITIC Securities analysts said in a report the move marked the first major step in China introducing market-oriented reform in the hydropower sector.
“Still, the new mechanism only mainly covers newly commissioned projects, but doesn’t talk much about hydropower generated from existing projects,” they said.
China has introduced similar benchmark on-grid prices for coal-fired, wind, nuclear and solar power on regional basis. But a similar system could be difficult for hydro because development costs vary a lot among projects due to different geological and hydrological conditions.
The NDRC said it will seek to simplify the pricing system for existing projects but didn’t give details.
The hydro price reform comes as China is struggling with its clean-energy and emission-control targets. China aims to have 11.4 percent of its primary energy use from non-fossil fuels by the end of 2015. The number had risen only to 9.4 percent in 2012.
The country also lags behind official targets in energy consumption per GDP, carbon output per GDP and nitrogen oxides emissions.
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