China is considering letting go of regulated electricity prices for large consumers to prevent power outages. With coal becoming more expensive, many Chinese coal-fired power stations are loss-making due to the prevailing price caps, making them hesitant to supply more power.
This has already contributed to the electricity shortages facing the Asian economic powerhouse.
Currently, most of China’s electricity is still sold at regulated prices. However, provinces may increase or decrease it by 10 percent. Insiders tell Bloomberg news agency that an increase in fixed rates is a possibility. In addition, prices may be linked to the price development of coal. There is also talk of higher household rates if the price increase for industrial customers does not work.
The idea is that higher prices will stimulate power stations also to meet the sharply increased demand for electricity. The current shortages threaten to slow economic growth and put even more pressure on international supply chains as factories cannot run at full capacity.
China also announced this week that it would significantly increase coal imports, “regardless of price, to guarantee heating and power production in winter”. Fuel for power stations is one of the most polluting, but now that gas prices have risen to record highs, coal is once again more attractive from a business perspective. As a result, China plans to burn significantly more coal again, making the upcoming UN climate negotiations in Glasgow more complicated.
Globally, the pressure on the coal stock is increasing due to the recovery from the corona crisis. In addition, coal mines in Colombia and Indonesia are also experiencing problems due to heavy rain. In Europe, too, more coal is at risk of being burned by the high gas prices. According to traders, importers in Eastern Europe even get the raw material all the way from Australia, something that almost never happens.