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In Between the State and the Market: An Empirical Assessment of the Early Achievements of China’s 2015 Electricity Reform

Author

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  • Xuemei Zhenga

    (School of Economics, Southwestern University of Finance and Economics, Chengdu, China)

  • Flavio Menezes

    (School of Economics, University of Queensland, Brisbane, Australia)

  • Rabindra Nepal

    (School of Accounting, Economics and Finance, University of Wollongong, Wollongong, Australia)

Abstract

This is the first study to investigate and quantify the extent to which the 2015 reform has already impacted the economic and technical performance as well as the security of supply of China’s electricity sector. We use provincial data from 2003 to 2018 to estimate the impacts of the reform on on-grid prices, average retail electricity prices (including those for households) and supply reliability. We adopt fixed effect models together with other dynamic panel data models. We find that the 2015 reform has already had a negative impact on on-grid prices of electricity generated from thermal energy and on overall average retail prices, but the impacts on other prices are not statistically significant. Our results also suggest that the 2015 reform has had significantly negative impacts on technical efficiency, as measured by the coal burned per unit of thermal generation, but no impact on the line loss rate of electricity transmission. In addition, our empirical analysis suggests that the 2015 reform has reduced reliability and increased the instances of supply interruptions. These results are robust to different estimators and models. Finally, the effect of the reform is heterogeneous across regions. Our findings suggest that additional steps are needed to further improve the overall economic efficiency of the electricity sector in China, despite significant progress arising from the 2015 reform. The results may also provide useful lessons for other developing economies aiming to reform their power sectors and who are facing similar choices between the roles of the state and the market in ensuring efficient outcomes.

Suggested Citation

  • Xuemei Zhenga & Flavio Menezes & Rabindra Nepal, 2020. "In Between the State and the Market: An Empirical Assessment of the Early Achievements of China’s 2015 Electricity Reform," Discussion Papers Series 633, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uq2004:633
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    Cited by:

    1. Michael Pollitt, 2021. "Measuring the Impact of Electricity Market Reform in a Chinese Context," Working Papers EPRG2111, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. Liu, Yang & Jiang, Zhigao & Guo, Bowei, 2022. "Assessing China’s provincial electricity spot market pilot operations: Lessons from Guangdong province," Energy Policy, Elsevier, vol. 164(C).
    3. Zheng, Xuemei & Wu, Chengkuan & Nepal, Rabindra, 2022. "Did the administrative approval reform in China affect the productivity of energy firms? – A quasi-natural experimental approach," Energy Economics, Elsevier, vol. 105(C).
    4. Liu, Y. & Jiang, Z. & Guo, B., 2021. "Assessing China's Provincial Electricity Spot Market Pilot Operations: Lessons from the Guangdong Province," Cambridge Working Papers in Economics 2165, Faculty of Economics, University of Cambridge.
    5. Hao, Wu & Abbas, Qaiser & Ahmad, Ishtiaq & Alharthi, Majed & Hanif, Imran & Taghizadeh-Hesary, Farhad, 2021. "Institutional efficiency and utility reform performance: An evidence from electricity performance in South & East Asia," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 549-561.
    6. Guannan Wang & Juan Meng & Bin Mo, 2023. "Dynamic Volatility Spillover Effects and Portfolio Strategies among Crude Oil, Gold, and Chinese Electricity Companies," Mathematics, MDPI, vol. 11(4), pages 1-25, February.
    7. Nepal, Rabindra & Phoumin, Han & Musibau, Hammed & Jamasb, Tooraj, 2022. "The socio-economic impacts of energy policy reform through the lens of the power sector – Does cross-sectional dependence matter?," Energy Policy, Elsevier, vol. 167(C).

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    More about this item

    Keywords

    Electricity sector reform; Market mechanism; China;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment

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