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China’s power sector reform on the way

Date:16/04/2014   View: 943   Tags: China; Power sector reform
China’s National Energy Administration (NEA) has submitted a new plan to the State Council for reform of the country’s power sector, sources reported.

Presently, the country’s grid operators, mainly the State Grid and the China South Grid, purchase electricity from power generating companies at low prices and resell it to end users at prices higher than the purchase cost and transmission cost.

According to the plan, grid operators would gradually withdraw from electricity sales, and large end users will be able to purchase electricity directly from power producers at prices negotiated freely, said by Shi Yubo, deputy director of the NEA on sidelines of the parliamentary sessions earlier this month.

The ultimate objective is to break grid operators’ monopoly in the transaction of electricity, and realize marketization in power generation and sales prices, while power transmission and distribution prices still under the control of the government, analyst said.

Meanwhile, grid operators are required to be independent in finance or electricity dispatching for cost monitoring, according to the new plan.

Industry authorities said it would be more likely for grid operators to realize financial independence, which will facilitate calculation of power transmission and distribution costs and accelerate the process of direct power purchase by large users.

Several provinces, such as Hunan, Sichuan, Shanxi and Gansu, have begun to pilot direct power purchase for large users. And the NEA will publicise the average power transmission and distribution cost by monitoring 10 provincial power grids.

East China’s Shandong province has issued a pilot scheme on the development of direct electricity trade between large consumers and generators, envisaging an annual trading volume of 10 TWh.

Last year, the NEA granted China Power Investment Co. to conduct research on the transaction mode of direct power purchase for large consumers, which is still under way.

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