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Lurching towards markets for power: China’s electricity policy 1985–2007

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  • Zhao, Xiaoli
  • Lyon, Thomas P.
  • Song, Cui

Abstract

China’s electricity industry has experienced two major stages of development: from 1949 to 1984, the industry was treated as a subordinate sector whose goal was to support the development of other industrial sectors; since 1985, a series of reforms in its governance mechanisms have been carried out. This paper applies transaction-cost analysis to provide a new perspective on the efficiency of these reforms, emphasizing changes in the areas of electricity prices and investment incentives. We argue that the governance reforms successfully ended the significant social welfare losses resulting from the severe power shortages of the previous 30years, introduced real or potential competition, and encouraged technological progress. However, they also led to low operational efficiency and excessive investment in power generation plants. Our empirical analysis, uses panel regression models, shows that by 2003 the reforms led electric capacity to increase tremendously. Meanwhile, the electricity price reform in 1996 promoted power generation corporations more responsive to electricity demand and price signals to some extend. However, it cannot be proved that the electricity price reform in 2003 (and the dismantle reform at the end of 2002) affect electricity generation corporations in the same way.

Suggested Citation

  • Zhao, Xiaoli & Lyon, Thomas P. & Song, Cui, 2012. "Lurching towards markets for power: China’s electricity policy 1985–2007," Applied Energy, Elsevier, vol. 94(C), pages 148-155.
  • Handle: RePEc:eee:appene:v:94:y:2012:i:c:p:148-155
    DOI: 10.1016/j.apenergy.2012.01.035
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    References listed on IDEAS

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    Cited by:

    1. Xiaopeng Guo & Xiaodan Guo & Jiahai Yuan, 2014. "Impact Analysis of Air Pollutant Emission Policies on Thermal Coal Supply Chain Enterprises in China," Sustainability, MDPI, Open Access Journal, vol. 7(1), pages 1-21, December.
    2. Sun, Mei & Li, Juan & Gao, Cuixia & Han, Dun, 2017. "Identifying regime shifts in the US electricity market based on price fluctuations," Applied Energy, Elsevier, vol. 194(C), pages 658-666.
    3. HuiHui Liu & ZhongXiang Zhang & ZhanMing Chen & DeSheng Dou, 2018. "The impact of China’s electricity deregulation on coal and power industries: Two-stage game modeling approach," CCEP Working Papers 1804, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
    4. Zeng, Ming & Yang, Yongqi & Fan, Qiannan & Liu, Yingxin & Zou, Zhuojun, 2015. "Coordination between clean energy generation and thermal power generation under the policy of “direct power-purchase for large users” in China," Utilities Policy, Elsevier, vol. 33(C), pages 10-22.
    5. Zhang, Liang & Ruan, Jian & Ding, Jianhua, 2014. "The institutional power shortage in China: Capacity shortage or capacity under-utilisation?," Applied Energy, Elsevier, vol. 136(C), pages 480-494.
    6. Zeng, Ming & Yang, Yongqi & Wang, Lihua & Sun, Jinghui, 2016. "The power industry reform in China 2015: Policies, evaluations and solutions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 57(C), pages 94-110.
    7. Guo, Xiaopeng & Guo, Xiaodan, 2016. "Nuclear power development in China after the restart of new nuclear construction and approval: A system dynamics analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 57(C), pages 999-1007.
    8. repec:eee:enepol:v:106:y:2017:i:c:p:148-154 is not listed on IDEAS
    9. Xiaoli, Zhao & Rui, Yang & Qian, Ma, 2014. "China's total factor energy efficiency of provincial industrial sectors," Energy, Elsevier, vol. 65(C), pages 52-61.
    10. repec:eee:appene:v:217:y:2018:i:c:p:440-455 is not listed on IDEAS
    11. repec:eee:rensus:v:79:y:2017:i:c:p:533-543 is not listed on IDEAS
    12. Li, Hong-Zhou & Tian, Xian-Liang & Zou, Tao, 2015. "Impact analysis of coal-electricity pricing linkage scheme in China based on stochastic frontier cost function," Applied Energy, Elsevier, vol. 151(C), pages 296-305.
    13. Wang, Yi-Shu & Xie, Bai-Chen & Shang, Li-Feng & Li, Wen-Hua, 2013. "Measures to improve the performance of China’s thermal power industry in view of cost efficiency," Applied Energy, Elsevier, vol. 112(C), pages 1078-1086.
    14. Wei Shang & Guifen Pei & Conor Walsh & Ming Meng & Xiangsong Meng, 2016. "Have Market-oriented Reforms Decoupled China’s CO 2 Emissions from Total Electricity Generation? An Empirical Analysis," Sustainability, MDPI, Open Access Journal, vol. 8(5), pages 1-12, May.
    15. repec:eee:enepol:v:109:y:2017:i:c:p:208-217 is not listed on IDEAS
    16. Du, Limin & He, Yanan & Yan, Jianye, 2013. "The effects of electricity reforms on productivity and efficiency of China's fossil-fired power plants: An empirical analysis," Energy Economics, Elsevier, vol. 40(C), pages 804-812.
    17. Liang Zhang & Jian Ruan & Jianhua Ding, 2013. "The mechanism of the power shortage in China: capacity shortage or capacity underutilisation?," Economics Bulletin, AccessEcon, vol. 33(4), pages 3050-3058.

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