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China Considers New Fees To Compensate Utilities For Building Coal Plants

China is mulling over imposing capacity fees on industrial and commercial users from 2024 to compensate local utilities for the coal-fired power capacity they have built in recent years, Bloomberg reported on Tuesday, quoting a draft of the plan it had seen.

Industrial and commercial power users would be charged an additional capacity fee on top of their electricity bills if the plan is adopted.

The Chinese National Development and Reform Commission (NDRC) has been circulating the proposal to electricity providers for feedback, according to Bloomberg. 

Coal capacity in China continues to increase, but some of it would be idle as it would serve as backup to intermittent solar and wind power generation—at a cost to the utilities. Revenues and profit margins at electricity generators are also squeezed by government-imposed price caps on the rates they can charge to consumers. 

China is the global leader in renewable energy spending, but it’s also one of just a few major economies still approving and building coal-fired capacity. Energy security and the need for stable power generation during peak demand to back the growing economy and supply stability precede concerns about emissions. 

China has already reached its goal to have more non-fossil fuel installed electricity capacity than fossil fuels earlier than planned, with 50.9% of its power capacity now coming from non-fossil fuel sources. Back in 2021, the Chinese authorities said they would target renewables to outpace fossil fuel-installed capacity by 2025.

China is globally unmatched in renewable energy spending, investing in raising its solar and wind power capacity.

So far this year, renewables have helped to partially offset the crippled supply from hydropower generation due to droughts, but coal has saved the day

During the first half of 2023 alone, China approved more than 50 GW of new coal power, Greenpeace said in a report last month. That’s more than it did in all of 2021, the environmental campaign group added. 

By Tsvetana Paraskova for Oilprice.com

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