Should the benchmark price of electricity and coal cooperation be lowered?

From January 1 next year, the linkage mechanism of coal and electricity prices will be cancelled, and the current benchmark feed in tariff mechanism will be changed into a market-oriented mechanism of "benchmark price + fluctuation". The benchmark price shall be determined according to the current benchmark feed in tariff of coal-fired power generation in each region, and the floating range shall be no more than 10% for upward floating and no more than 15% for downward floating in principle. Premier Li Keqiang presided over the executive meeting of the State Council on September 26, and decided to improve the formation mechanism of the feed in tariff of coal-fired power generation, promote the market-oriented trading of electricity, and reduce the power cost of enterprises. This means that the reform of electricity price formation mechanism discussed by all circles before will be officially implemented in the near future. The meeting made it clear that from January 1 next year, the linkage mechanism of coal and electricity price will be cancelled, and the current benchmark on grid electricity price mechanism will be changed to the market mechanism of "benchmark price + fluctuation". The mechanism after the reform will be more perfect than the original "coal power linkage" mechanism, and its main advantage is to take into account the upstream and downstream fluctuations.

The "feed in tariff" mentioned in this meeting refers to the price at which grid enterprises purchase electricity from power generation enterprises. Before that, China had implemented "coal power linkage" at the policy level for a long time. The notice on improving the linkage mechanism of coal and electricity prices, which was implemented at the beginning of 2016, made it clear that the basis of electricity price adjustment is China's electricity and coal price index, and the linkage mechanism takes one year as the cycle. The price of coal and electricity shall be linked in intervals. The starting point is 30 yuan per ton of fluctuation of electricity and coal price compared with the benchmark coal price in the cycle, and the fusing point is 150 yuan per ton. When the fluctuation of coal price does not exceed 30 yuan per ton, the cost change will be absorbed by the power generation enterprises themselves, and the linkage mechanism will not be started; the part of coal price fluctuation exceeding 150 yuan per ton will not be linked. For the part of the fluctuation of coal price between 30 yuan and 150 yuan per ton, the linkage of grading and regressing is implemented, that is, the larger the fluctuation of coal price is, the smaller the proportion coefficient of linkage is.

According to the above notice, the average coal price in 2014 is the benchmark coal price, and in principle, the feed in price corresponding to the coal price in 2014 is the benchmark price. In the future, each time coal and electricity price linkage is implemented, electricity and coal price and feed in electricity price are calculated by comparison with benchmark coal price and benchmark electricity price respectively. After the implementation of the policy in 2016, although the coal price rose rapidly in the second half of that year, at the beginning of 2017, the relevant head of the national development and Reform Commission had said that the national coal electricity benchmark feed in tariff would not be adjusted on January 1, 2017. The person in charge pointed out that "the non adjustment of the benchmark feed in tariff of coal power is conducive to stabilizing the market expectation, stabilizing the energy cost of the real economy and promoting the supply side structural reform of the coal power industry." The previous coal electricity linkage policy paid more attention to the upstream coal price and less attention to the downstream demand side.

The executive meeting of the State Council made it clear that in order to implement the plan of the CPC Central Committee and the State Council to deepen the reform of the electric power system and accelerate the establishment of a market-oriented electricity price formation mechanism by means of reform, the meeting decided to seize the opportunity when the current market-oriented trading electricity of coal-fired power generation has accounted for about 50% and the electricity price is significantly lower than the benchmark on grid electricity price, and the market-oriented trading coal-fired power generation has not yet been realized. From January 1 next year, the linkage mechanism of coal and electricity prices will be cancelled, and the current benchmark feed in tariff mechanism will be changed into a market-oriented mechanism of "benchmark price + fluctuation". The benchmark price shall be determined according to the current benchmark feed in tariff of coal-fired power generation in each region, and the floating range shall be no more than 10% for upward floating and no more than 15% for downward floating in principle.