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China plans regional power markets under sector revamp plan

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China will launch spot electricity trading platforms over which qualified generating companies and bulk end-users can settle tariffs themselves, state media reported, a long-mooted sector deregulation aimed at boosting efficiency and attracting private investment.

[BEIJING] China will launch spot electricity trading platforms over which qualified generating companies and bulk end-users can settle tariffs themselves, state media reported, a long-mooted sector deregulation aimed at boosting efficiency and attracting private investment.

The spot markets will be launched in stages and by region, possibly using the southern city of Shenzhen as a launch, with trade focused on newly installed power plants, China Securities Journal (CSJ) said on Monday, citing a widely circulated government policy document.

And such deregulation will target commercial and industrial power consumers, rather than residential users and public utilities over which Beijing will maintain a price-setting role.

Regulators will grant licences to qualified power suppliers, allow them to trade electricity with big commercial users, who also need to win regulatory approval over performance on energy saving and environmental protection, according the document circulated among state and social media.

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The government also aims to free up its electricity retail market, long controlled by two dominant grid operators, a change that would force the State Grid Corp of China and China Southern Power Grid to segregate their long integrated transmission and distribution business.

The state economic planner, the National Development & Reform Commission (NDRC), has yet to officially announce the revamp.

Beijing also envisages launching power futures and other derivatives at an "appropriate" time, according to the unofficial document circulated.

While freeing up the wholesale prices - tariffs power producers charge grids - and retail markets, the government will set the prices for transmission and distribution.

After Shenzhen, where a pilot trading scheme was launched in January, the planned electricity trading would then spread to Inner Mongolia in the north, Yunnan in the southwest and Zhejiang in the east, before a national roll-out around 2018, the CSJ said, citing a securities analyst.

Power experts have warned that such a liberalisation would take time as deregulation in more mature Europe and North American markets took a decade or more from inception.

The industry's previous overhaul dates back to 2002, when Beijing separated power generation from transmission, creating five top state-controlled generating firms and two grid firms. Reform has since slowed and China has frequently experienced power shortages as economic growth outpaced supply.

REUTERS

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