Song Yingying, Chief Analyst, China Merchants Securities co. Ltd.
The implementation of the coal power capacity pricing mechanism marks a crucial step that will further stabilize industry’s anticipation and boost enthusiasm for power generation. With the rapid expansion of renewable energy, there is an urgent need for coal-fired power to play a supportive and regulatory role in order to ensure the security and stability of the electricity supply. Under the current single electricity pricing mechanism, coal power enterprises struggle to fully recoup their costs. Additionally, due to high coal prices in recent years, thermal power companies in general have experienced great losses, resulting in unstable industry expectations and a decline in the incentive to generate electricity. The introduction of the coal power capacity pricing mechanism comes at an opportune moment, offering an opportunity for power generation enterprises to recover a portion or all of their fixed costs, thereby stabilizing coal power profitability. In this way, the value of the thermal power industry is expected to be re-estimated.