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Evaluating the impacts of reforming and integrating China's electricity sector

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  • Chen, Hao
  • Cui, Jian
  • Song, Feng
  • Jiang, Zhigao

Abstract

Addressing the efficiency–equity–environment trade-off is an important part of implementing electricity sector reform. To support China's electricity market reform, this study conducts an ex-ante analysis to quantify the economic, distributional and environmental effects of marketization and integration. Three scenarios are designed based on the current reform progress and possible reform directions, including a planning scenario, a provincial market scenario and a regional market scenario. Using high-frequency data of electricity load, production and trade from five southern Chinese provinces in 2018, we quantify the impacts on electricity generation mix, wholesale prices, carbon emissions and social welfare. The potential welfare improvement achieved from establishing provincial markets is 14.3 billion yuan, which could be further increased to 21.0 billion yuan by integrating the provincial markets into a regional market. The regional average wholesale price could be reduced by 23.5% 22.7% and (regional market) (provincial market), respectively. The carbon emissions could be reduced by about 12.4 million tons (2.4%) in the provincial market scenario and 16.6 million tons (3.2%) in the regional market scenario. Moreover, individual provinces are affected heterogeneously from the marketization and integration, and the potential winners and losers have been identified from market reform. The regional market performs better than the provincial market in terms of overall efficiency gains and environmental outcomes but worse in addressing equity concerns.

Suggested Citation

  • Chen, Hao & Cui, Jian & Song, Feng & Jiang, Zhigao, 2022. "Evaluating the impacts of reforming and integrating China's electricity sector," Energy Economics, Elsevier, vol. 108(C).
    • Handle: RePEc:eee:eneeco:v:108:y:2022:i:c:s0140988322000925
    DOI: 10.1016/j.eneco.2022.105912
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    2. Wang, Chang & Guo, Yue & Yang, Yu & Chen, Shiyi, 2022. "The environmental benefits of electricity industry restructuring in China: Ownership mixing vs. vertical unbundling," Energy Economics, Elsevier, vol. 115(C).
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    More about this item

    Keywords

    Electricity sector reform; Market integration; Carbon emissions; Social welfare; Equity and efficiency;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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