Shell suggests revamp for China's power tariff system

PUBLISHED : Friday, 21 March, 2003, 12:00am
UPDATED : Friday, 21 March, 2003, 12:00am

British-Dutch global oil major Royal Dutch/Shell has lobbied China to revamp its power tariff system to help the growth of the country's natural gas industry.

Shell has suggested officials change the existing system where users are charged an average tariff to one where charges are linked to time and cost.

The move has been driven by the lack of cost competitiveness of gas compared with coal, which is abundant, cheap and accounts for about 70 per cent of China's energy consumption.

This compares with the just more than 2 per cent share attributed to gas.

Francis Lung, Shell (China) general manager of power development, yesterday said mainland officials had agreed to consider the company's proposal. He said a more flexible and cost-reflective system would allow gas to become more competitive.

The proposal would promote a more evenly distributed use of power during the day and would cut costs and tariffs, as fewer power plants would be needed to satisfy the same demand.

Unlike some countries where power producers charge customers higher tariffs during peak hours - during the day - than at night, Chinese tariffs are uniform, based on the power plants' average costs.

Gas-fired plants were more efficient in meeting peak-load demand than coal-fired plants, according to Shell. If producers were allowed to charge higher tariffs during peak periods, gas-fired plants would be more economically viable, it said.

China is encouraging gas-fired power plants to reduce pollution and diversify its energy sources.

Mr Lung said Shell was seeking to invest in the downstream operations of China's west-to-east gas pipeline project, including gas distribution and gas-fired power plant projects.

Shell, ExxonMobil and OAO Gazprom agreed last July to invest in the PetroChina-led project.