China will replace benchmark price with new “base price + 10% floating” mechanism for coal-fired plants

China will replace benchmark price with new “base price + 10% floating” mechanism for coal-fired plants

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In order to deepen the deployment of the power system reform, and accelerate the reform in a way that promotes the establishment of a market-oriented electricity price determination mechanism, the old mechanism which relied on a fixed regional coal benchmark price, will be abolished.

The system will be replaced by a “base price + floating (up or down)” mechanism, in which “base price” will be determined by the current coal-fired power generation benchmark feed-in tariff, and the floating range can either go 10% above or 15% below the base price.

Coal-fired power generation is increasingly market-oriented with over 50% of electricity traded in the power market last year. All coal-fired generated power that is not traded in the power market is required to follow the new mechanism.

Future prices will be determined by power generation companies, power brokers and power users through consultation or bidding processes. However for next year, prices are not allowed to go above the "base price", in a temporary measure to ensure that C&I consumer electricity prices will not go up. (GOV)