Electricity regulation and electricity market reforms in China

The electricity industry of China has been in a process of reforms since the 1980s. This paper gives a review on the three main stages of reforms in China so as to trace out key features of various reform measures including those for power investment financing, the separation between government and power enterprises, and the division between power generation firms and power grids. The findings suggest that further regulatory change in China's electricity market reform is necessary when integration of the electricity markets and increased competition are paving the way ahead for a market-oriented structure. Prospective electricity regulation in the form of a strong legal system and effective institutions that protect market competition and promote appropriate incentives for efficiency are suggested in the paper.     

Growing Chinese coal use: Dramatic resource and environmental implications

Chinese coal consumption continues to rise as the country's economy and industry expand. Coal is particularly critical for China's fast-growing power sector, generating about 80% of electricity output. Notwithstanding the importance of coal and electricity, many international forecasts today underestimate their rising use in China. This paper acknowledges the current world financial crisis and assumes that Chinese GDP growth to 2025 will not again approach double-digit levels. Using the scenario analysis, this paper demonstrates that even with conservative assumptions about Chinese GDP growth and income elasticity of electric demand to 2025, the country will likely experience much higher coal demand and emit much greater volumes of carbon dioxide than forecast by various international energy agencies. The paper also analyzes how China's domestic coal reserves may be threatened within two decades, possibly affecting long-term economic growth in China, as well as world coal prices.     

Factors influencing CO2 emissions in China's power industry: Co-integration analysis

More than 40% of China's total CO₂ emissions originate from the power industry. The realization of energy saving and emission reduction within China's power industry is therefore crucial in order to achieve CO₂ emissions reduction in this country. This paper applies the autoregressive-distributed lag (ARDL) co-integration model to study the major factors which have influenced CO₂ emissions within China's power industry from 1980 to 2010. Results have shown that CO₂ emissions from China's power industry have been increasing rapidly. From 1980 to 2010, the average annual growth rate was 8.5%, and the average growth rate since 2002 has amounted to 10.5%. Secondly, the equipment utilization hour (as an indicator of the power demand) has the greatest influence on CO₂ emissions within China's power industry. In addition, the impact of the industrial added value of the power sector on CO₂ emissions is also positive from a short-term perspective. Thirdly, the Granger causality results imply that one of the important motivators behind China's technological progress, within the power industry, originates from the pressures created by a desire for CO₂ emissions reduction. Finally, this paper provides policy recommendations for energy saving and emission reduction for China's power industry.     

On-grid electricity tariffs in China: Development,reform and prospects

With the introduction of market-oriented measures in China's power sector in the mid-1980s, electricity sale prices to the grid companies—on-grid electricity tariffs—became the focus of the energy industry, thus affecting all related stakeholders, including fuel suppliers, power generators and end-use consumers. A number of changes have gradually been undertaken in terms of electricity tariff settings and their implementation to address specific requirements of the expansion of the power industry at each stage of its development. On-grid electricity tariffs had been used as a key lever to attract investment in power generation at an early stage of reform and then to encourage competition in the power industry. In response to the rising concerns about environmental protection and the promotion of clean energy utilisation, tariffs have progressively been developed for renewable electricity generation, which has contributed to massive expansion of the renewable power industry in China. This paper reviews key milestones of the development of on-grid electricity tariffs in China, examines the tariff-setting mechanisms of coal-fired power plants and renewable power generation, analyses the factors associated with the adjustments of the tariff levels and discusses the options for further reform and more effective electricity pricing.     

Electricity distribution industry restructuring in South Africa: A case study

For 20 years there has been vigorous debate about restructuring the large, developed electricity industry in South Africa, but the plans have not been implemented. The justification of the proposed restructuring illustrates the different expectations of the participants in the electricity industry. The case study reviews what has occurred against a background of some theories about organisations, and identifies six key issues. Some lessons include the need to adopt an industry structure compatible with the objectives of electricity distribution in developing countries, the unsuitability of orthodox approaches to organisations, that no industry structure appears to be significantly better than others, industry restructuring of public sector utilities has a significant political dimension, restructuring can fail even if there is support from a high level of government, and indecision and uncertainty have serious negative consequences. The experience should be helpful for other developing countries considering structural change of their electricity industry.     

The prospective of coal power in China: Will it reach a plateau in the coming decade?

Coal power holds the king position in China's generation mix and has resulted in ever-increasing ecological and environmental issues; hence, the development of the electric power sector is confronted with a series of new challenges. China has recently adopted a new economic principle of the “new economic normal,” which has a large effect on the projection electricity demand and power generation planning through 2020. This paper measures electricity demand based upon China's social and economic structure. The 2020 roadmap presents China's developing targets for allocating energy resources to meet new demands, and the 2030 roadmap is compiled based upon an ambitious expansion of clean energy sources. Results show that electricity demand is expected to reach 7500 TWh in 2020 and 9730 TWh in 2030. Coal power is expected to reach its peak in 2020 at around 970 GW, and will then enter a plateau, even with a pathway of active electricity substitution in place.     

An imbalanced development of coal and electricity industries in China

China's coal and electricity industries have a strong reliance on each other, however, because of excessive invasion of government, it is difficult for these two industries to form a stable, reasonable, and transaction cost-saving relationships, but long-run disputes and quarrels. This paper discusses the pricing policies and transaction relationship between these two industries from the historical perspective. It begins with the discussion of coal. Coal market has become competitive since 1980 due to the system of dual track approach, but coal sold to electricity was still tightly controlled by government-guided pricing. Then the paper examines electricity investment and tariff reform. Unlike coal, entry to electricity generation sector was gradually relaxed but generation and retailing tariffs are still strictly regulated. As energy demand and prices soared after 2002, coal and electricity enterprises are all unsatisfied with the rule of price setting of coal sold to electricity industry. This paper concludes that the deliberate low coal price policy does protect electricity industry from fuel cost fluctuation but harm coal industry. Allocative and productive efficiency are difficult to achieve in the long run.     

Evaluation of potential co-benefits of air pollution control and climate mitigation policies for China's electricity sector

Since the rapid industrialisation, local air pollution has become one of China's most important environmental issues. In consequence, increasingly stringent air pollution control policies have been established by the Chinese government. These policies will inevitably affect China's future electric power investment given the key contribution of this sector to air pollution. This sector is also a key contributor to China’s greenhouse gas emissions and hence climate policy efforts. We present a study exploring what impacts of potential interactions and combinations of different policy efforts for local air pollutant control and carbon mitigation have on China's future electricity generation mix. The study utilises a novel generation portfolio model that explicitly incorporates key uncertainties in future technology costs and different policy approaches including carbon pricing and air emissions control. The findings highlight that China can achieve significant reductions for both greenhouse gas and local air pollutant emissions through a combination of climate change and air pollution control policies. Furthermore, there are potentially significant co-benefits from the perspectives of both air pollutant control and carbon mitigation and, notably, that the co-benefit from a sufficient carbon pricing policy to air pollution emission reductions is much stronger than that from stringent air pollutant control policies to carbon mitigation. Specifically, in order to achieve substantial local air pollution and greenhouse gas mitigation from China's electricity sector, it is necessary to close coal-fired power plants rather than merely seeking to clean their air pollution emissions up.     

Analysis of the market penetration of clean coal technologies and its impacts in China's electricity sector

This paper discusses policy instruments for promoting the market penetration of clean coal technologies (CCTs) into China's electricity sector and the evaluation of corresponding effects. Based on the reality that coal will remain the predominant fuel to generate electricity and conventional pulverized coal boiler power plants have serious impacts on environment degradation, development of clean coal technologies could be one alternative to meet China's fast growing demand of electricity as well as protect the already fragile environment. A multi-period market equilibrium model is applied and an electricity model of China is established to forecast changes in the electricity system up to 2030s. Three policy instruments: SO₂ emission charge, CO₂ emission charge and implementing subsidies are considered in this research. The results show that all instruments cause a significant shift in China's electricity structure, promote CCTs’ competitiveness and lead China to gain great benefit in both resource saving and environment improvement. Since resource security and environment degradation are becoming primary concerns in China, policies that could help to gain generations’ market share of advanced coal-based technologies such as CCTs’ is suitable for the current situation of China's electricity sector.     

UK government controls and the electricity supply industry since 1980

This article considers the main non-statutory controls applied by the UK government to the electricity supply industry since 1980, namely financial targets and external financing limits (EFLs). The effects of these controls are examined and it is argued that, in general, energt policy objective embodied in the industry's financial targets have been overridden by macroeconomic policy objectives incorporated in the industry's EFLs. Future prospects for achieving energy policy objectives in the electricity sector are reviewed.     

Analysis of China's energy utilization for 2007

China is the world's second-largest energy producer and consumer, so that it is very necessary to analyze China's energy situation for saving energy consumption and reducing GHG emission. Energy flow chart is taken as a useful tool for sorting out and displaying energy statistics data. Energy statistics data is the premise and foundation for analyzing energy situation. However, there exit many differences between China and foreign energy balance. Based on the international criterion of energy balance and some advices given by related experts, the author properly adjusts China's energy balance. And the purpose of this paper is to draft China's energy flow chart for 2007, which is used to study the characteristics of energy production and consumption in China. We find that: (1) coal is the main energy in China, which accounted for 73.2% of total energy supply in 2007; (2) thermal power accounted for 83.2% of the total electricity supply, and 78.43% thermal power was based on coal; (3) in 2007, the secondary industrial sector consumed about 69.93% of energy; (4) China's energy utilization efficiency was about 33.23% in 2007.     

Residential electricity consumption in industrialized countries: Changes since 1973

We consider the evolution of residential electricity use since the early 1970s in 11 OECD countries. Average growth in demand has been higher in Europe and Japan than in the U.S. This result is mainly attributable to the difference in saturation of appliances and electricity heating, which was higher in the U.S. than elsewhere at the beginning of the period. Growth in appliance ownership was responsible for high growth rates from 1960 through around 1973, when electric heating began to become popular in many countries. By the early 1980s, more efficient appliances and tighter new homes dampened growth in demand in most countries. Average growth in electricity demand per household between 1978 and 1983 was generally less than 2% per yr, and was negative in some countries.     

Restructuring of Turkey’s electricity market and the share of hydropower energy: The case of the Eastern Black Sea Basin

This paper presents the historical development of Turkey’s electricity power sector, the efforts for introducing competition in the power industry in Turkey, and the concerns regarding restructuring in Turkey. The contribution of the hydropower energy potential in Turkey to the reconstruction of the electricity structure in Turkey is also investigated. Then, among the 25 hydrological basins in Turkey, the Eastern Black Sea Basin located in the northeast of Turkey, which has great advantages from the view point of small hydropower potential or hydropower potential without storage, is chosen as the case study to carry out some investigations concerning its potential and to analyze the contribution of the private sector (the corporate body) in regard to the development of hydro potential in this basin within the scope of the 4628 Electricity Market Law. With this law, concerning the restructuring of the electricity market, private sector investments in this segment have increased. In total, 1524 hydroelectric power projects with 22 360 MW installed capacity has been implemented until January 22nd, 2009 and this figure is continuously rising.     

China's electricity market restructuring and technology mandates: Plant-level evidence for changing operational efficiency

China's electricity sector has experienced substantial efficiency improvement during the last one and a half decades. The recent literature has mostly attributed the efficiency improvement to the 2002 unbundling reform with little attention paid to the large scale retrofitting process introduced by technology mandates. Using a unique panel dataset for hundreds of power plants from 1997 to 2010, we are able to examine the contributions from technology mandates and market restructuring. We confirm the significant contributions from the unbundling reform but more importantly, technology mandates have contributed at least half of the observed efficiency improvement during this period. The results have significant implications for efficiency and demand forecast in the future.     

Factors affecting CO2 intensities of power sector in Asia: A Divisia decomposition analysis

This paper analyses the evolution of CO₂ intensity of the electricity sector in 12 selected Asian countries during the period 1980–1990. The roles of changes in generation mix and fuel intensity in CO₂ intensity changes during the period have been examined using Divisia index decomposition approach. A key finding of this study is that power sector CO₂ intensities of most Asian countries were mainly influenced by changes in fuel intensities during 1980–1990.     

Cost efficiency and electricity market structure: A case study of OECD countries

The OECD electricity sector has witnessed significant institutional restructuring over the past three decades. As a consequence, many power generation utilities now act as unregulated companies that technically compete to sell power on an open market. This paper analyses the performance in term of cost efficiency for electricity generation in OECD power sector while accounting for the impact of electricity market structures. We employ the short-run cost function in which capital stock is treated as a quasi-fixed factor input. Empirical models are developed for the cost function as a translog form and analysed using panel data of 25 countries during the period 1980 to 2009. We show that it is necessary to model latent country-specific heterogeneity in addition to time-varying inefficiency. The estimated economies of scale are adjusted to take account of the importance of the quasi-fixed capital input in determining cost behaviour, and long run constant returns to scale are verified for the OECD generation sector. The research findings suggest there is a significant impact of electricity market regulatory indicators on cost. In particular, public ownership and vertical integration are found to have significant and sizable increasing impacts on cost, thereby indicating policy lessons on the desirable ways to implement structural electricity generation reforms.     

Poland and the EU Electricity Directive

Poland has entered the preaccession phase of the integration process with the European Union (EU). The Polish electric power sector is proving its capability of meeting the challenges posed by the accession and, in the process, may facilitate unavoidable transformation in other areas of the Polish economy. The currently implemented legislation related to the electric power sector in Poland conforms to the IEM 96/9UEC Directive. As a consequence of Polish electric power sector restructuring, separation of generation, transmission and distribution was introduced in 1990. The generation subsector consists of over 30 generation companies, with a total installed capacity amounting to 34000 MW and with gross annual electricity generation amounting to 142 TWh. The transmission subsector is represented by the Polish Power Grid Company as transmission system operator (TSO) and is preparing itself to play the role of the operator in the balancing market. The focus is on a phased opening of the internal electricity market for internal competition, restructuring and privatization of the electric power sector, and fuel supply sectors     

Decomposition for emission baseline setting in China's electricity sector

Decomposition analysis is used to generate carbon dioxide emission baselines in China's electricity sector to the year 2020. This is undertaken from the vantage point of the final consumer of electricity, and therefore considers factors influencing electricity demand, efficiency of generation, sources of energy used for generation purposes, and the effectiveness of transmission and distribution. It is found that since 1980, gains in efficiency of generation have been the most important factor affecting change in the emission intensity of electricity generated. Based upon known energy and economic policy, efficiency gains will continue to contribute to reductions in the emission intensity of electricity generated, however, fuel shifts to natural gas and increases in nuclear generation will further these trends into the future. The analysis confirms other sources in the literature that decomposition is an appropriate technique available for baseline construction, thereby suitable for the emerging carbon market and its related mechanisms.     

Power generation from pulverized coal in China

The growth of power generation in China since the 1980s has been reviewed by analyzing the relationship between demand and supply of power, the increasing in installed capacity, and the variations in power-resource structure. Currently, the power generation from pulverized coal (PC) is dominant in the China's power industry, with relevant PC-power-generation technologies being introduced in the past two decades; such technologies were introduced to tackle various issues such as economy, reliability, and pollutant emissions. Furthermore, some of the problems related to PC-power generation in China have been discussed herein. Accordingly, the prospects of PC-power generation in China are predicted, considering the aspects of emission reduction and improvements in efficiency and reliability.