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Reforming residential electricity tariff in China: Block tariffs pricing approach

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  • Sun, Chuanwang
  • Lin, Boqiang

Abstract

The Chinese households that make up approximately a quarter of world households are facing a residential power tariff reform in which a rising block tariff structure will be implemented, and this tariff mechanism is widely used around the world. The basic principle of the structure is to assign a higher price for higher income consumers with low price elasticity of power demand. To capture the non-linear effects of price and income on elasticities, we set up a translog demand model. The empirical findings indicate that the higher income consumers are less sensitive than those with lower income to price changes. We further put forward three proposals of Chinese residential electricity tariffs. Compared to a flat tariff, the reasonable block tariff structure generates more efficient allocation of cross-subsidies, better incentives for raising the efficiency of electricity usage and reducing emissions from power generation, which also supports the living standards of low income households.

Suggested Citation

  • Sun, Chuanwang & Lin, Boqiang, 2013. "Reforming residential electricity tariff in China: Block tariffs pricing approach," Energy Policy, Elsevier, vol. 60(C), pages 741-752.
  • Handle: RePEc:eee:enepol:v:60:y:2013:i:c:p:741-752
    DOI: 10.1016/j.enpol.2013.05.023
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    2. He, Xiaoping & Reiner, David, 2016. "Electricity demand and basic needs: Empirical evidence from China's households," Energy Policy, Elsevier, vol. 90(C), pages 212-221.
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    4. repec:eee:enepol:v:114:y:2018:i:c:p:591-597 is not listed on IDEAS
    5. Sun, Chuanwang, 2015. "An empirical case study about the reform of tiered pricing for household electricity in China," Applied Energy, Elsevier, vol. 160(C), pages 383-389.
    6. Zha, Donglan & Kavuri, Anil Savio & Si, Songjian, 2017. "Energy biased technology change: Focused on Chinese energy-intensive industries," Applied Energy, Elsevier, vol. 190(C), pages 1081-1089.
    7. Haider, Haider Tarish & See, Ong Hang & Elmenreich, Wilfried, 2016. "Residential demand response scheme based on adaptive consumption level pricing," Energy, Elsevier, vol. 113(C), pages 301-308.
    8. Hussain Ali Bekhet & Lee Lian Ivy-Yap, 2014. "Highlighting Energy Policies and Strategies for the Residential Sector in Malaysia," International Journal of Energy Economics and Policy, Econjournals, vol. 4(3), pages 448-456.
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    10. Du, Gang & Lin, Wei & Sun, Chuanwang & Zhang, Dingzhong, 2015. "Residential electricity consumption after the reform of tiered pricing for household electricity in China," Applied Energy, Elsevier, vol. 157(C), pages 276-283.
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    14. Sun, Chuanwang & Zhang, Yifan & Peng, Shuijun & Zhang, Wencheng, 2015. "The inequalities of public utility products in China: From the perspective of the Atkinson index," Renewable and Sustainable Energy Reviews, Elsevier, vol. 51(C), pages 751-760.
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    21. Yao, Lixia & Chang, Youngho, 2015. "Shaping China's energy security: The impact of domestic reforms," Energy Policy, Elsevier, vol. 77(C), pages 131-139.
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    24. Yang, Fang & Zhang, Dingzhong & Sun, Chuanwang, 2016. "China׳s regional balanced development based on the investment in power grid infrastructure," Renewable and Sustainable Energy Reviews, Elsevier, vol. 53(C), pages 1549-1557.

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