New moves in China towards power reform and deregulation

20/10/2021 - The deregulation of the Chinese power sector has been an important objective for policymakers, but there weren’t any clear indications of what the next steps would be or a timeline for implementation.

That uncertainty may now have been cleared up with new regulations published by the NRDC, effective 15 October. The timing seems very much related to the ongoing coal supply issues and power supply shortages in most provinces.

These new regulations represent a large step in China’s power sector liberalization journey, with significant potential knock-on effects for its decarbonization goals as well.

Price reform

• Change in retail pricing: Last week, China took a big step in power reform by allowing coal-fired power plants to pass on higher costs to some customers, with an aim to encourage power plants to generate more electricity and ease their profitability pressures. This signals that the government is not confident that it can control coal prices in the near future.
  
• The regulator NRDC said the end game is to deregulate all coal-fired power generation, which means the pricing would be determined mainly by trading in the market.
  
  
• The key policy changes are [...]