China revives coal-power price indexation

A key area of China's power pricing reforms is addressing the mismatch between the liberalised coal market and regulated power prices. China introduced a coal-power price indexation mechanism as early as 2004, but in practice it remains largely inactive. The flawed design and weak implementation of the indexation has consequently hurt both power generators and coal miners. A new arrangement was therefore badly needed, especially in 2016, the year of reform in China. In this Insight we examine the latest revision of the indexation, explore its implications and forecast the trend of coal-fired on-grid tariff changes.