Beijing plans gas-fired future to solve problem

According to estimates provided by Du and his colleagues, Beijing's municipal government will have to provide the plant with subsidies of 700 to 800 million yuan per year just to keep it running once it switches to gas-fired power generation units.

"Beginning last year, we paid just 68 percent of the cost of natural gas to Beijing Gas Group. Otherwise, our plant would have closed," he said.

Last winter, the plant sold heat produced by coal-fired units to the local thermal power group for 33 yuan per gigajoule, while heat produced using gas sold for 79 yuan. When the plant jettisons its coal-fired power generating units in 2016, the price it charges for on-grid electricity will rise to 0.63 yuan per kWh from 0.49 yuan. In the end, the prices of electricity and heating for residential users will rise for sure, he said.

"Reform of the price of natural gas is not a one-step process. On the contrary, it should move forward in small, quick steps to avoid damaging sustainable consumption," said energy scientist Chen Weidong.

In the long run, as the pipeline network is expanded to cover more regions, steep rises in the cost of natural gas will cease, according to Zhou of the China Energy Research Society.

"It's just that for now, the cost must rise to allow industry to develop, but it will reach a balanced stage later on. Then we will be able to discuss the possibility of lowering the cost," he said.

Zhao Xu contributed to this story.