The increase in labour costs in China in recent years has been well documented. But a new report reveals energy prices too are on an upward swing in China. The report, produced by site selection and incentives advisory firm Biggins Lacy Shapiro & Co along with consultancy Tractus Asia, details how US electricity prices directly compare with China’s for large industrial users, such as manufacturing operations and data centres.
China’s electricity prices rose much faster than those in the US over the past 10 years; in fact, rates in China have risen 17.5% over the decade, compared with 11.9% in the U.S. Median electricity prices for industrial loads in the US tend to be between 34% and 49% lower than Chinese prices, with point-to-point comparisons varying between a 15% and 70% saving in the US.
Counting the cost
This gap is not expected to diminish in the short term, because China is still recovering the cost of having invested so heavily and quickly in infrastructure investment in recent years.
“The gap between US and Chinese electric prices is expected to remain more or less consistent over the next few years,” the report concludes. “The longer term is harder to project. We expect to see the central government under President Xi Jinping continue pushing forward reforms to China’s electricity market to include more market-based pricing and demand signalling. As China does this, generation costs will become more closely linked to the global price of coal, its primary fuel source, which appears to be on a long cyclical downward trend, as cleaner, renewable sources gain favour. At the same time, however, China has also been tightening controls on emissions, which could have an upward impact on the price of coal-generated electricity.”