Coal policy revolution – Improving the linkage mechanism of China’s coal price, coal power
price and end-use electricity price

In 2021, China’s power industry has witnessed many challenges such as tight supply, short-term power rationing, and loss in the coal power industry. In particular, more than 20 provinces have adopted measures for orderly consumption of electricity from September to October, and some areas have experienced short-term power supply restrictions (for cause analysis, please refer to the October 2021 newsletter). In the context of the 30-60 carbon peaking and carbon neutrality targets, these events once again show us the role of coal power in ensuring power supply in China and also put forward practical problems such as soaring coal prices and imperfect cost transmission mechanisms that lead to the loss of coal power enterprises. To this end, the National Development and Reform Commission (NDRC) issued Document No. 1439 and Document No. 303 in October 2021 and February 2022 respectively. These two policy documents aim to make coal power enterprises assume social responsibilities and complete supply guarantees while solving the problem of cost transmission to alleviate operational pressure.