China's Guangdong province raises on-grid tariffs for gas-fired power plants

China's Guangdong province has raised electricity tariffs by Yuan 0.05/kilowatt-hour for natural gas-fired power plants, excluding those running on Australian LNG, effective Oct. 1 2021, according to a notice posted on the provincial Development and Reform Commission's official website Oct. 20.

The tariff was raised mainly due to a sharp increase in natural gas prices this year, GDRC said.

The move is aimed at helping local gas-fired power plants address the cost challenges of higher natural gas prices, in a bid to encourage their power generation in the coming winter peak demand season, market sources said.

The rise has enabled many gas-fired power plants in Guangdong to enjoy on-grid electricity tariffs of around Yuan 0.655-Yuan 0.69/kWh, compared with the previous levels of Yuan 0.605-Yuan 0.64/kWh, S&P Global Platts calculations showed.

Meanwhile, the on-grid electricity tariffs for gas-fired power plants running on Australian LNG will stay unchanged at Yuan 0.616/kWh. There are five gas-fired power plants, namely Huizhou, Qianwan, Zhujiang, Meishi and Dongbu, that use Australian LNG as feedstocks, according to local media. These power plants were the first batch end-users of Shenzhen Dapeng LNG terminal, which signed China's first LNG supply contract with Australia effective 2006.

The increase this time is equivalent to a growth of around 8% in electricity tariffs, which is far from enough to cover the rise in cost burdens of gas-fired utilities, especially since natural gas prices have surged more than 50% in the last three months, market sources noted.

Trucked LNG prices in the Pearl River Delta rose to an average of Yuan 6,267/mt, up 50.4% from Yuan 4,167/mt seen in June, data from domestic energy information provider Haoqi net showed.

Prior to that, China had expanded the fluctuation range of coal-fired power trading prices for non-residential users, allowing it to fluctuate by up to 20% from the benchmark levels. The coal-fired power trading prices can even be raised by more than 20% for energy-intensive industries, Platts reported earlier.

China encountered power supply shortage in many provinces including Guangdong in late September, which have promoted the central and local governments to take measures to encourage the power generation, market sources said.

Guangdong province in the south has one of the highest concentrations of gas-fired power generation capacity in China. The installed capacity of gas-fired power plants in Guangdong was about 28.38 GW at the end of 2020, according to local government data, which accounts for around 29% of the country's total natural gas installed capacity of 98.02 GW, Platts calculations based on data from CNPC Economics and Technology Research Institute showed.