The new coal-power price linkage scheme in China has been initiated upon the thermal power price cut since January 1, 2016. Market believes that the new scheme would streamline transfer of power generation cost from upstream to downstream and prevent unbalanced positive or negative impact on coal and power companies.
China's National Development and Reform Commission (NDRC) has announced to lower nationwide on-grid price for coal-fired electricity and the electricity price for general industrial and commercial purposes, by 0.03 yuan per kWh, effective from January 1, 2016.
To better monitor power coal price, the NDRC launched a coal price index in September, which reflects the prices of coal with a fuel value of 5,000 kilocalories per kilogram. The index, seen by many as preparation for the new coal-power link mechanism, will enable the market to see the direction of future power price adjustments, according to Lin Xiaotao, a coal industry analyst with market research firm ICIS.
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