In order to balance inflation and the pressure of loss in power generation companies in some regions, it has been reported recently that people from the Development and Reform Commission have said that the NDRC intends to carry out a “structural price adjustment†on the Internet and sales tariffs in areas where coal and electricity contradictions are prominent.
Since March, there have been repeated market rumours that the National Development and Reform Commission will increase the price of electricity and promulgate coal-fired linkage policies, but none has been achieved. As the peak of summer electricity approaches, if the power plant continues to be allowed to generate electricity at a loss, the power plant may respond to power cuts or even power outages. This will also cause social panic and economic losses. It should be said that the “differential price adjustment†in areas where the contradictions between coal and electricity are outstanding, and the efforts to reduce inflationary pressures in the country, are also compelling choices, but the follow-up response may be even worse.
In order to ease inflationary pressure, the NDRC has suppressed the demand for the increase in electricity prices of power generation companies. However, the conflict between the market coal price and electricity price control imposes huge cost pressures on the power generation companies. This not only causes losses to the entire industry, but also easily leads to the problem of power shortage, that is, the impact of electricity supply. After all, power generation companies will not and can not tolerate losses for a long time. They will often “manufacture†tight coal stocks by reducing high-priced coal purchases in the market and provide a rationale for reducing their power generation. This will lead to market power shortages and pressure on electricity. "Transfer" to the coal industry, and strive for the government to maximize its subsidies for power generation losses.
In fact, since the NDRC cancelled the coal-electricity linkage that actually existed in name only in the second half of 2006, the price conflict between market coal and planned electricity emerged in the form of power shortages. For example, from 2006 to 2010, the total installed capacity of electricity in the country increased from less than 600 million kilowatts to 962 million kilowatts, of which thermal power installed capacity reached 707 million yuan. However, at the same time as the total installed capacity of electric power is developing rapidly, the number of hours of power generation equipment has continued to decline in recent years. Last year, for example, the hours of thermal power equipment was approximately 5,200 hours (usually between 5,000 and 6,500 hours), which was at a relatively low level.
It can be seen that the tariff regulation only changes inflation from a price pattern to a non-price pattern such as electricity shortages and loss of power generation companies. Therefore, we believe that whether the power generation companies suffered losses or power shortages due to electricity price controls or the oil shortages that have emerged in various places in recent years, all reflect the fact that the use of price controls and Other means to curb inflation has not only achieved half the results but also only changed inflation. Instead of easing inflationary pressures, formally achieved.
Current losses in power generation companies are also related to the excessive expansion of power system investment in recent years. Taking only 90 million kilowatts of new power generation investment this year as an example, the required amount of funds will reach 400 billion yuan. Such a huge amount of debt will make it unbearable for power generation companies that continue to suffer losses. In addition, the power system reform initiated in 2002 has been in a semi-stagnatic state for a long time. In particular, the long-term stagnation of the separation of distribution and distribution on the power sale side has also placed power generation companies in a weak position.
This means that simply relieving the loss in the power generation industry and the power shortage issue on coal price linkages is not only a temporary solution, but also unrealistic. After all, it is difficult to effectively promote the market-oriented reform of electricity prices without speeding up the separation of power transmission and distribution, especially the separation reform of the power distribution system, and the distribution reform. The coal price linkage has simply become a signal of rising electricity prices, and it cannot effectively guide electricity. The resource allocation of the market means that as long as the price of thermal coal rises, the power system will use the corresponding increase in the price of electricity to transfer the cost of rising raw materials.
From this it can be seen that the current coal power dilemma with vivid examples of transmission price controls ultimately provides the market with a rich set of inflation options: inflation in terms of prices, inflation payments with industry losses and fiscal subsidies, and Electricity shortages and oil shortages provide shocks to inflation. This reveals that current inflation has caused price control policy failure, and effectively eliminate the risk of policy failures need to gradually abandon price control measures, and accelerate the market-oriented reform of the price of electricity and other factors. At present, price adjustments in some areas are not worth promoting because it will encourage power plants in other regions to seek fair treatment through the power shortage.
Since March, there have been repeated market rumours that the National Development and Reform Commission will increase the price of electricity and promulgate coal-fired linkage policies, but none has been achieved. As the peak of summer electricity approaches, if the power plant continues to be allowed to generate electricity at a loss, the power plant may respond to power cuts or even power outages. This will also cause social panic and economic losses. It should be said that the “differential price adjustment†in areas where the contradictions between coal and electricity are outstanding, and the efforts to reduce inflationary pressures in the country, are also compelling choices, but the follow-up response may be even worse.
In order to ease inflationary pressure, the NDRC has suppressed the demand for the increase in electricity prices of power generation companies. However, the conflict between the market coal price and electricity price control imposes huge cost pressures on the power generation companies. This not only causes losses to the entire industry, but also easily leads to the problem of power shortage, that is, the impact of electricity supply. After all, power generation companies will not and can not tolerate losses for a long time. They will often “manufacture†tight coal stocks by reducing high-priced coal purchases in the market and provide a rationale for reducing their power generation. This will lead to market power shortages and pressure on electricity. "Transfer" to the coal industry, and strive for the government to maximize its subsidies for power generation losses.
In fact, since the NDRC cancelled the coal-electricity linkage that actually existed in name only in the second half of 2006, the price conflict between market coal and planned electricity emerged in the form of power shortages. For example, from 2006 to 2010, the total installed capacity of electricity in the country increased from less than 600 million kilowatts to 962 million kilowatts, of which thermal power installed capacity reached 707 million yuan. However, at the same time as the total installed capacity of electric power is developing rapidly, the number of hours of power generation equipment has continued to decline in recent years. Last year, for example, the hours of thermal power equipment was approximately 5,200 hours (usually between 5,000 and 6,500 hours), which was at a relatively low level.
It can be seen that the tariff regulation only changes inflation from a price pattern to a non-price pattern such as electricity shortages and loss of power generation companies. Therefore, we believe that whether the power generation companies suffered losses or power shortages due to electricity price controls or the oil shortages that have emerged in various places in recent years, all reflect the fact that the use of price controls and Other means to curb inflation has not only achieved half the results but also only changed inflation. Instead of easing inflationary pressures, formally achieved.
Current losses in power generation companies are also related to the excessive expansion of power system investment in recent years. Taking only 90 million kilowatts of new power generation investment this year as an example, the required amount of funds will reach 400 billion yuan. Such a huge amount of debt will make it unbearable for power generation companies that continue to suffer losses. In addition, the power system reform initiated in 2002 has been in a semi-stagnatic state for a long time. In particular, the long-term stagnation of the separation of distribution and distribution on the power sale side has also placed power generation companies in a weak position.
This means that simply relieving the loss in the power generation industry and the power shortage issue on coal price linkages is not only a temporary solution, but also unrealistic. After all, it is difficult to effectively promote the market-oriented reform of electricity prices without speeding up the separation of power transmission and distribution, especially the separation reform of the power distribution system, and the distribution reform. The coal price linkage has simply become a signal of rising electricity prices, and it cannot effectively guide electricity. The resource allocation of the market means that as long as the price of thermal coal rises, the power system will use the corresponding increase in the price of electricity to transfer the cost of rising raw materials.
From this it can be seen that the current coal power dilemma with vivid examples of transmission price controls ultimately provides the market with a rich set of inflation options: inflation in terms of prices, inflation payments with industry losses and fiscal subsidies, and Electricity shortages and oil shortages provide shocks to inflation. This reveals that current inflation has caused price control policy failure, and effectively eliminate the risk of policy failures need to gradually abandon price control measures, and accelerate the market-oriented reform of the price of electricity and other factors. At present, price adjustments in some areas are not worth promoting because it will encourage power plants in other regions to seek fair treatment through the power shortage.
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