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China Focus: New power system reform to activate trillion-yuan market

2015-03-24 GMT+8:00

BEIJING, Mar. 23 (Xinhua) - China will soon release the guidelines on deepening power system reform which aims to further open up the power sector for market competition.

The expected open-up of electricity sales business after the new power reform means trillion-yuan scale market which would benefit power companies with cost advantages and abundant financing, experts say.

Meanwhile, the power system reform could also work to resolve bottleneck of distributed energy development and also benefit downstream industry development with the lower electricity cost, they say.

-- New power system reform guidelines to be unveiled soon

The guidelines on the new power reform include the opening up of new added power distribution and sales market, the opening-up of electricity price, the opening-up of power generation planning as well as the independence of trading institutions, according to earlier reports.

The power system reform would focus on restoring power's commodity attribute for which price would be decided by the market, according to a release on the website of the NEA.

Secondly, the reform would include construction of a power market system to better allocate power resources in larger scope.

Thirdly, China would advance the development of clean energy to improve energy structure.

Fourthly, the country would gradually break monopoly and open the market for competition to attract social and private investment into the power sector.

Fifthly, the reform would transform governmental functions in the power sector which would play better role in planning, according to the release.

Power price reform is likely to be of major importance and the expected open-up of electricity sales business could activate trillion-yuan scale market, industry observers say.

-- New investment opportunities emerge

The power system reform has driven the most attention to the opening-up of electricity sales sector which would break current monopoly by grid operators.

Power reform scheme would feature more diversified and market-oriented power generation and electricity sales entities, experts say.

Earlier in this January, the National Development and Reform Commission (NDRC) approved southern city of Shenzhen as the first to launch new electricity distribution pricing system.

For every 1,000 kwh of electricity, the new electricity distribution price stands at 143.5 yuan (23.5 U.S. dollars) in 2015, lower than the 155.8 yuan in 2014. For 2016 and 2017, the new prices will be 143.3 and 142.8 yuan, respectively, according to the new pricing system.

The new pricing system aims to benefit power users, set up the cost-saving mechanism for power grid enterprises and promote the marketization of electricity, said the NDRC.

The NDRC has also approved the new distribution pricing system to be piloted in Inner Mongolia before expanding it to more areas in the country.

Electricity price would be decided by the market after the reform as the competition among power companies would be the key of the reform, according to a market analyst with Minsheng Securities.

The power reform opens up trillion-yuan scale market and would benefit regions that could pilot the reform such as Inner Mongolia Autonomous Region, Sichuan and Yunnan. Meanwhile, large-scale power companies as well as private power group with abundant capital could also take a share, experts note.

Investment opportunities would emerge for power companies with cost advantages, large scale and qualification for power sales license, according to research institutions.

Also, the reform could lower cost of power use which could improve profitability of downstream sectors such as raw material and manufacturing industries.

In the meantime, the expected birth of a bunch of electricity sales companies in the future would activate the development of distributed power generation industry by solving the problem of grid-connection of distributed power sources, according to industry observers.

In addition, opportunities also come for power grid automation related companies, energy internet related power equipment makers, as well as companies that could integrate power data information and financial services, according to research institutions. (Edited by Niu Huizhe,