Hydropower prices to be reformed
Print Edition
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 for electricity that grid companies pay in each province, according to a statement by the National Development and Reform Commission. Prices must also factor in project development costs, the country’s top economic planning agency added.
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 statement said.
Hydropower prices are now set by local governments on a project basis, and they are typically lower than those for power generated from coal-fired plants. Hydro is China’s second-largest source for electricity after coal.
CITIC Securities analysts said in a report that the NDRC’s move marked the first major step for China to introduce 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.
The NDRC said it will seek to simplify the pricing system for existing projects.
The hydropower price reform comes as China is struggling with its clean-energy and emission-control targets. Under a five-year plan, China aims to have 11.4 percent of its primary energy use from non-fossil fuels by the end of 2015 from about 8 percent, but that rose to just 9.4 percent in 2012.
China also lags behind official targets in energy intensity, carbon intensity and nitrogen oxide emissions.
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