A round of tariff cuts for coal-fired power plants has sent a clear message to the electricity industry: go green.
So far, 13 power firms have been notified by the National Development and Reform Commission about tariff cuts of varying degrees backdated to late September, according to the China Securities Journal. The cuts will erode the sector’s revenue by about 5 percent and reduce overall net profit by 18 percent, the daily said, quoting analysts’ estimates.
Along with cutting on-grid tariffs, Beijing also raised subsidies for renewable energy from 0.8 fen per kilowatt hour to 1.5 fen.
The moves came after crumbling coal prices generated a general earnings surge for coal-fired power plants in the first half.
The special adjustment is a warning to traditional, highly polluting power plants that whenever they make any windfall profit, the government will redirect those gains to subsidize the expansion of renewable energy, be it wind power or solar.
For the power giants, the obvious choice is to gradually build up their renewables exposure, as the clean-energy business will probably benefit more from policy breaks and better tariffs.
At the same time, overcapacity in equipment manufacturing has been driving down the costs of wind turbines and solar modules, making investment in solar farms and wind operations more alluring.
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