Vice Director of the National Development and Reform Commission (NDRC) Zhang Guobao has told a forum on Sustainable Development of Hydropower that China intends to raise the price of hydropower, according to a February 19 report in Caijing magazine. The price adjustment would change a long-standing policy to set the price of hydropower lower than that of thermal power.
"Price has been one of main obstacles to developing China's hydropower industry." Zhang said, "China has adjusted some unreasonably low prices, but for historical reasons, the price of hydropower remains lower than that of thermal power."
Zhang said that at the end of 2008, China had 170 million kilowatts of installed hydropower capacity, accounting for 21.6 percent of the country's total capacity. In 2008 hydropower output was 563 billion KWH, 16.4 percent of total output.
For a long period, the price of hydropower was fixed by NDRC following the rule of cost price plus reasonable profit. But because the hydropower industry requires huge up-front investment whereas subsequent operating costs are relatively low, this pricing strategy has been criticized by insiders.
Zhang said that if the problem is not solved, the development of China's hydropower industry will be affected.
"At present hydropower price is set at 0.2 yuan to 0.3 yuan per KWH compared with a thermal power price of 0.4 yuan to 0.5 yuan per KWH, which means the value of different energy types is not balanced," said ex-general manager of the Three Gorges Project Development Corporation Lu Youmei.
Zhang Guobao added, "Following the principle of 'Same product, same price', the price of hydropower and thermal power should be the same. Increased costs should be reflected in the sale price, which will affect the interests of both power grid corporations and power generating companies. As a result, the adjustment of hydropower prices will be complex and difficult."
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(China.org.cn by Ma Yujia, February 20, 2009)