Experts highlight reforms and pricing mechanism in achieving 2030, '60 goals

The nation's latest top-design working guideline toward goals of having carbon dioxide emissions peak by 2030 and achieve carbon neutrality by 2060 will boost pricing reforms in electricity markets, as it sets high-standard requirements regarding energy utilization efficiency and the proportion of non-fossil energy in total energy consumption, industry experts said.

They said further measures are expected to raise the cost for large power consumers, leveraging market mechanism more in forming energy prices so as to achieve better allocation.

The guideline said China will raise the proportion of non-fossil energy in its energy consumption to about 25 percent by 2030 and more than 80 percent by 2060, and increase its combined installed capacity of wind and solar power to more than 1,200 gigawatts by 2030, which is twice the current level.

Moreover, China will raise energy efficiency in key energy-consuming industries to advanced international levels by 2030. The whole nation's energy efficiency will reach advanced international levels by 2060.

"To achieve such goals, the nation should step up reforms and improvements in energy and electricity pricing mechanism, including that for electricity transmission and distribution, to promote development of renewable energy and accelerate the transition toward a green and low-carbon energy mix," said Yang Juan, researcher of the market and price research institute under the National Development and Reform Commission.

China currently adopts a complicated power pricing system under which the formation of on-grid electricity prices depends on factors such as the types of power generation and the approval dates and locations of renewable power projects, while electricity prices for end-users also vary among regions and according to types and amounts of usage, including differentiation among residential and industrial users, industries, and voltages.

Yang said high-level proportions of renewable electricity will be included in the power grid and distributed to final consumers by improving the on-grid pricing of wind, solar and other new energy-based electricity, deepening reforms in hydropower pricing, establishing and enhancing the pricing mechanism for power storage used to balance the grid, and reforming the electricity transmission and distribution pricing mechanism.

As for electricity prices on the consumer side, industry experts said enhancements to the current differential and tiered pricing system are expected to improve energy efficiency.

Yang said tiered-pricing for electricity consumption in the sector of electrolytic aluminum, and higher power pricing rates for key energy-intensive industries, which include ferroalloy and steel, will be seriously implemented. Preferential electricity price treatments in high energy-consuming and high-emission sectors will also be strictly prohibited.

As residential usage accounts for an increasingly higher share in China's energy consumption, tiered-pricing for households needs to be improved to gradually reduce electricity price cross-subsidization and better reflect the cost of power supply, Yang said. Cross subsidization is the practice of charging higher prices to one type of consumers to artificially lower prices for another group.

Lin Boqiang, head of the China Institute for Studies in Energy Policy at Xiamen University in Fujian province, said China's reforms in electricity pricing mechanism have already been speeding up this year, especially spurred by recent nationwide power outages.

All coal-fired power, which is more than 65 percent of the total, is supposed to be priced in response to changing conditions of supply and demand, he said, adding power supplied to energy-intensive industrial users－about 45 percent of the nation's total power consumption－should be charged at market-driven prices.

However, electricity pricing reforms for residential users will be relatively more difficult, as they are influenced by factors such as difference in affordability and pursuit of equality, although there is no doubt such reforms will press on despite challenges at this time, Lin said.