The Development and Reform Commission cut down the price of thermal power on-grid electricity

The National Development and Reform Commission (NDRC) issued a notice yesterday to cut the on-grid tariffs for coal desulfurization benchmarks for coal-fired power generation companies in provinces (autonomous regions and municipalities) while maintaining the same level of sales price. At the same time, increase the on-grid tariffs for coal-fired power generation enterprises that have achieved denitrification, dust removal, and acceptance by environmental protection agencies.

Prior to this, the National Development and Reform Commission (NDRC) had stated that it would use the space for electricity price vacated by the drop in thermal coal prices to support the development of renewable energy, encourage coal-fired power generation enterprises to carry out denitrification, dust removal and reconstruction, and improve air quality.

The sales price of terminal equipment has remained unchanged. Prior to this, the news of the reduction in the on-grid electricity price of thermal power has been disclosed through the announcement issued by the relevant listed company. Yesterday, the website of the National Development and Reform Commission’s official website stated in a notice that it decided to adjust the tariff level appropriately while keeping the level of sales tariff unchanged. The adjustment of the price of electricity was implemented on September 25, 2013.

The notice stated that the reduction in the on-grid tariffs for coal-fired power generation companies in the relevant provinces (autonomous regions and municipalities) and the overall adjustment of the on-grid tariffs for coal-fired power generation enterprises that did not implement the benchmark tariffs have been reduced. Beijing lowered 1.35 points/kWh (including tax), and in each province (region, city), the downward adjustment in Heilongjiang Province was at least 0.6 points/kWh (including tax). Shanghai, Jiangsu and Zhejiang cut the most, with 2.5 points/kWh (including tax).

At the same time, the adjustment of on-grid electricity prices shows that the power generation companies are encouraged to adopt environmental protection measures.

According to the notice, on the basis of the above-mentioned electricity prices, the on-grid tariffs for coal-fired power generation enterprises that meet the standards for denitrification and acceptance by the environmental protection authorities will increase by 1 cent per kilowatt-hour. For new coal-fired power generation enterprises with dust removal and smoke emission concentrations below 30mg/m3 (in key areas below 20mg/m3) and qualified by environmental protection agencies, the on-grid tariff increases 0.2 cents per kilowatt-hour.

It is worth noting that the adjustment of the on-grid tariff does not involve terminal sales price. The National Development and Reform Commission emphasizes that it is not allowed to go beyond the price management authority to lower the on-grid tariff of power generation companies, and it is not allowed to reduce the sales price of electricity users, especially high-energy-consumption enterprises.

The rebound in coal price may be affected by the reduction in the on-grid electricity price of the thermal power plant and the increase in the price of environmental protection on-grid electricity. It is believed that the impact on the thermal power generation enterprises will be relatively limited. At the same time, coal prices that have just eased may face pressure.

Han Xiaoping, Chief Information Officer of China Energy Network, told reporters yesterday that there will be no loss of thermal power plants. In the past two years, the decline in the price of coal has made the thermal power plants earn enough money. The thermal power companies are now almost fully profitable, and thermal power companies are obliged to adopt environmental protection measures.

He suggested that while supporting power companies to protect their environment, reduce emissions, and purchase clean energy, they should also be subsidized to natural gas to adjust their energy structure and promote the use of high-efficiency energy.

Ren Haoning, analyst at China Investment Consulting Group, said that the adjustment of the on-grid electricity price of thermal power will change the pattern of the thermal power industry, that is, the stronger and the weaker will be weaker. Because the input cost of environmental protection equipment is relatively large, the financial pressure on small-scale power generation companies is greater. At the same time, for coal companies, prices that have just started to pick up slowly in July will face pressure. Winter is just a critical moment for coal companies. At this time, the reduction in electricity prices may dampen the momentum of coal prices.