Core Viewpoint - The coal power sector in China is undergoing a transformation with the implementation of a capacity price mechanism, which aims to stabilize revenues and support the transition to a dual-function role of providing basic energy security and system regulation [1][2]. Group 1: Capacity Price Mechanism - The capacity price mechanism will officially start in 2024, allowing coal power plants to earn a total of 95 billion yuan in capacity fees, with a capacity price of 2.07 cents per kilowatt-hour [1]. - This mechanism alleviates operational pressures on coal power companies by enabling them to recover fixed costs even when not generating electricity, thus providing a stable income source [1][2]. - The two-part pricing system includes a capacity price (fixed income) and an energy price (variable income based on output), which incentivizes coal power plants to enhance their operational flexibility [1][2]. Group 2: Impact on Coal Power Companies - The capacity price mechanism encourages coal power companies to upgrade existing units for flexibility, improving their ability to compensate for the intermittency of renewable energy sources like wind and solar [2]. - It stabilizes revenue expectations for coal power companies, reducing the impact of market fluctuations on their earnings and easing operational pressures [2]. - The implementation of the capacity price has led to improved collaboration among coal power companies and related departments, optimizing maintenance schedules to enhance peak generation capabilities [2]. Group 3: Future Optimization and Upgrades - There is potential for further optimization of the capacity price mechanism, particularly in regions with declining coal power utilization hours [3]. - The lifespan extension and upgrading of older coal power units are crucial for maximizing resource utilization and achieving economic efficiency [3][4]. - Current coal power units in China have an average operational lifespan of about 17 years, with a significant portion of units being relatively new compared to international standards [3]. Group 4: Challenges and Recommendations - Older units face challenges related to equipment, energy efficiency, and regulatory compliance, necessitating flexible upgrades to meet current energy demands [4][5]. - Recommendations include improving policies to support the lifespan extension of older units, ensuring reasonable investment recovery periods, and establishing technical standards for upgrades [5].