Coal-fired linkage restart is not the core of power reform

Thermal power losses, coal prices plummeted, coal-fired linkage needs to restart?

In the context of rising electricity prices, falling coal prices, falling interest rates, and a decrease in electricity volume of “one to three,” the thermal power industry’s operating conditions are improving.

Taking Shanxi, a province with severe power losses, as an example, from January to May, Shanxi Electric Power realized a profit of 1.10 billion yuan, an increase of 2.536 billion yuan over the same period of last year. The five major power groups represented CLP. In the first half of the year, the thermal power sector reduced losses by 578 million yuan year-on-year.

Based on this, people in the coal industry began to utter the words: “The price of coal has dropped and why the price of electricity has not been reduced accordingly. The reason is simple. When the price of coal is high, the power companies will have the highest voice. The low price of coal should be lowered accordingly.”

More supportive people believe that the current economic downturn and declining power demand are a good opportunity for coal-electricity linkage. "If the rainy season is over, the thermal power will re-emerge. By then, the coal and electricity supply may become tight again, and the coal-electricity linkage window will be lost."

Coal-fired linkage policy in China began at the end of 2004. At that time, the state stipulated that for a period of coal price linkage of not less than six months, if the average coal price in the cycle exceeds 5% in the previous cycle, the on-grid tariff will be adjusted accordingly. At the same time, power generation companies must absorb 30% of the coal price increase factor.

Power generation companies raise their hands against this. The main reasons are as follows: First, thermal power companies have not been compensated for the historical losses caused by rising coal prices; second, coal-fired power generation linkages have not been carried out according to regulations; power generation companies still insist on sending “political power.” Third, compared with coal and oil and gas, Electricity prices are still low and should be raised rather than lowered.

Some energy experts hold the same opinion as the power generation companies. They believe that in the past adjustment of the electricity price, the linkage of coal price was not in place and the price adjustment rate was controlled. In the process of electricity price reform, there is a rise in electricity prices. In the situation where the demand for electricity is decreasing, it is obviously not appropriate to increase the price of electricity.

Coal and electricity companies, out of their own interests, have different judgments on coal-fired linkage policies. However, from the perspective of price regulation, the mode of administrative regulation of electricity prices has made coal-fired electricity linkages difficult.

From the longitudinal analysis of the electric reform process, coal-electricity linkage is the transition plan for the electric power system reform. The intention is to coordinate the interests of coal and electricity through administrative regulations. However, it was greatly reduced in the implementation process. In the context of soaring coal prices, decision-making departments suspended linkages due to inflation and other concerns.

The direct impact of this measure is that coal and electricity contradictions have worsened, thermal power companies have suffered losses year after year, and the asset-liability ratio has been high. In 2011, the power generation business of the five major power generation groups suffered a loss of 15.117 billion yuan, a negative growth of 348.32% year-on-year, and the debt ratio exceeded the SASAC's limit of 85%.

The more important effect is that the decision-making department missed the opportunity to guide electricity consumption through electricity prices and promote power reform. As a result, in the first half of this year, in the process of residents' ladder price reforms, they opposed audio frequency.

From this point of view, the key to reforming the electricity pricing administration model is to restart coal-fired electricity linkages, which is not the core of electric reform. Judging from the basic laws of the market, the price should be given to the market. In the process of negotiations between the supply and demand sides, games, and fine-tuning of the market, prices arise.

In terms of electricity, we should establish a competitive, open electricity market and create a market pattern of buying more and selling more. Of course, electricity products are the lifeblood of the national economy. The government needs to make choices in the provision of public goods and commodities to prepare for positioning. Is it management price or regulatory market?