| Small power firms face lights out with on-grid price cuts |
| Last Updated(Beijing Time):2007-04-06 12:59 |
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China will cut the on-grid prices for electricity produced by small-scale power generators to accelerate phasing out inefficient capacity, the nation's top planning body said.
Coal-fired units with capacity of less than 100 megawatts and other types, like those running on fuel oil, whose capacities are less than 200MW, will be affected, the National Development and Reform Commission said yesterday.
Small coal-fired generators will be subject to their regional benchmark on-grid prices, which are 0.05 yuan to 0.1 yuan lower per kilowatt-hour than the original prices, it said. The regional benchmarks are based on local average coal-fired generation costs.
This compares with China's current average on-grid price of between 0.35 yuan and 0.5 yuan (6 US cents) per kwh, according to CCID Consulting.
The rate adjustments will take place gradually over four years, depending on the age and the original on-grid prices for respective generating units, the NDRC said. This also allows time for power producers to upgrade facilities.
The NDRC said the extra income made by grid operators from the price cuts will be used to subsidize power producers' increasing fuel costs such as those of coal. Implementation details will be announced later.
China is on track to boost industrial efficiency. This year, the government plans to close small generation capacity of 10 gigawatts, or 1.6 percent of the nation's total installed capacity of 622GW at the end of last year.
Last year, the NDRC also announced an extra power tariff increase for inefficient industrial users to discourage overinvestment and cut pollution.
However, China's five-year plan to cut energy use per unit of gross domestic product by a fifth by 2010 has been challenged after missing last year's target.
Calvin Xu, a program manager for energy efficiency finance under the World Bank, said China is in a "tough stage" regarding energy efficiency improvement.
"Financing could be a problem for small Chinese companies which want to upgrade their facilities," Xu said. "They usually can't secure loans from domestic state-owned commercial banks for such a project regarding improving energy efficiency. We need more participation from the private sector in this issue."
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