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Coal-fired Electricity Linkage Mechanism Not Work in 2017 and Price Rise Expectation Unfulfilled

Date time:2017-01-05点击量:592Origin:

    Original Article Link: http://www.cnenergy.org/mt/201701/t20170105_410993.html


    On January 4, according to National Development and Reform Commission (NDRC), coal-fired electricity benchmark of on-grid price increases on average RMB 0.0018 per kilowatt in 2017 based on coal-fired electricity price linkage calculation formula. As required by linkage mechanism, price adjustment will not take place in the year when price fluctuation is less than RMB 0.0020 per kilowatt and the adjustment will be calculated into the next period. Therefore, coal-fired electricity benchmark of on-grid price will not change on January 1, 2017. It means that industrial and commercial retail price will stay unchanged.


    Much-expected electricity price rise comes to nothing, which is not a piece of good news for coal-fired electricity enterprises. Nur Bekri (Nuer Baikeli), Deputy Director of NDRC and Director General of National Energy Administration, admitted at National Energy Work Conference 2017 that price rise of coal-fired electricity has been increasingly squeezed so the whole industry needs to face the risk of financial loss in 2017.


    For current coal-fired power plants, the shutdown of over half of power generation units is nothing new, which is a result of exacerbated excessive capacity of coal-fired electricity. It is learned that the expected install capacity of coal-fired electricity will reach 950 million kilowatts in 2016. Some projects have been kicked off, while some, especially livelihood projects, have been approved. These projects will be constructed and put into place gradually.


    However, the reality is that the growth rate of electricity consumption in the society continues to decline over the past two years. The growth rate in 2015 was only 0.5%, and the year-on-year growth from January to November of 2016 was 5.0%. The growth rate increased 4.2 percentage points compared with the previous year. Against this background, the average utilization hours of thermal power equipment in China has been declining. In 2015, utilization hours totaled 4,468, while, from January to November of 2016, the total utilization hours amounted to 3,756, down by 204 hours compared with last year, reaching a record low since 2005. It was estimated that the total utilization hours stood around 4,300.


    The price of coal-fired electricity increased continuously since June 2016 along with the elimination of overcapacity of coal, which has made the situation worse. According to Yuan Jiahai, professor of North China Electric Power University, due to price rise of coal, production cost of coal-fired electricity enterprises went up from RMB 0.04 to RMB 0.06 per kilowatt in the second half of 2016. According to Zhang Lin, Deputy Director of Planning Department of China Electricity Council, coal sectors of five major power generation groups turned positive profits into negative. Compared with 2015, they profited RMB 6.4 billion, registering profit loss of RMB 300 million. In October, the profit loss of coal sectors of five major power generation groups expanded to RMB 2.6 billion. Reporters of Economic Information Daily found that among 30 listed coal-fired electricity companies of A-share market, the proportion of negative profit growth during the first three quarters in 2016 registered 70% and only 30% remained the same or realized positive growth.


    On January 4, the first phase of Bohai-Rim Steam-Coal Price Index in 2017 closed at RMB 593 per ton, which remained the same compared previous month and increased 59% year-on-year. As noted by Nur Bekri, utilization hours of coal-fired electricity in next year will be lower, declining to 4,100 hours or so. “As coal price is rising and the installed capacity is increasing, coal-fired electricity sector will face more difficulties if utilization hours continue to fall.”


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