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September 22, 2009

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Home » Business » Energy

Producers of hydro electricity win with price hikes

SHARES in Chinese hydroelectric power producers rose yesterday after media reports said the government may raise hydropower rates.

China Yangtze Power Co, operator of the world's largest hydropower project, the Three Gorges Dam, rose 3.5 percent to 13.91 yuan (US$2.04).

China will implement a pilot project equalizing hydropower prices with those of coal-fired electricity producers, the Websites of China Securities Journal and Caijing magazine reported, citing National Energy Administration head Zhang Guobao, who spoke at an energy forum on Saturday.

The trial program will be launched in the near future though many hurdles remain before it can be implemented on a wide scale, according to Zhang.

The price hike would be used to compensate the cost of relocating people for the construction of dams.

Hydro cheaper

Among other stocks in the sector, Chongqing Three Gorges Water Conservancy and Electric Power Co each soared to the 10 percent market daily limit, and Sichuan Minjiang Hydropower Co jumped 6.69 percent. The Shanghai Composite Index was up 0.15 percent.

At present, the on-grid tariff - or price charged by power producers to grids for hydropower electricity - is about 0.2-0.3 yuan per kilowatt-hour in China. That compares with 0.4-0.5 yuan for coal-fired power.

The prices are set based on operational costs of producing the power.

Hydropower projects require bigger investment than coal-fired generators but run at lower costs upon completion.

"Such pricing has made hydropower electricity projects less attractive to investors, who can rake in profits from coal-fired projects more quickly," said Wang Xiaoyan, an analyst at China Minzu Securities.

The goal in the nation's energy reform program, Wang said, is to equalize prices between hydro- and coal-fired power, which are more reliable than solar and wind generators.

China's hydroelectric plants generated 563.3 billion kilowatt-hours of electricity last year, accounting for 16.4 percent of the nation's total power output and second only to coal-fired generation.


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