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New coal-power price linkage mechanism implemented

Jan 6, 2016 (China Knowledge) - A new coal-power price linkage mechanism has been implemented starting on the first day of 2016. The revamped scheme is more operational and will urge downstream industries to undertake the cost as well, thus benefiting power users and reducing business cost; meanwhile, the response from power companies remained relatively subdued.

Under the mechanism, the average coal power price in 2014 will be used as the benchmark coal price, while the corresponding feed-in tariff in 2014 will be the benchmark electricity price each time the linkage initiates. In the future, the coal power price and the feed-in tariff will be calculated respectively according to the benchmark coal price and electricity price. Within the period, the mechanism is launched when the fluctuation between the power coal and benchmark coal prices ranges between RMB 30 and RMB 150 per ton.

Earlier policies of such mechanism was never really able to be realized due to the problem of coal price transparency and sensitivity of electricity price adjustment, as macroeconomic environment and all walks of life are concerned. Currently they sufficient coal and electricity supply is conducive to improving the coal-power price linkage mechanism, thermal coal analyst Liu Jie held.

Coal industry analyst Deng Shun says that new mechanism has included the adjustment of industrial and commercial power use, which will help the enterprises concerned lower their costs. The new program also specifies items such as coal price adjustment basis, linkage period and feed-in tariff. And market expectation being steady will enables the producers to make operation plans in advance.

As for the coal enterprises, they appeared to be well aware of the change and the pressure. Comparatively they are more concerned about impact from the new electric change plan, as in some areas, the feed-in tariff has been beaten down because of bidding. Major power enterprises will face more management pressure if the cost pressure is going to be passed downstream.

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