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China’s Electricity Market Reform and Power Plants Efficiency


  • Ma, Chunbo
  • Zhao, Xiaoli
  • Ma, Qian
  • Zhao, Yue


In the past three decades, Chinese electricity industry has experienced a series of regulatory reforms serving different purposes at different stages. In 2002, the former vertically integrated electricity utility - the State Power Corporation (SPC) – was divested and the generation sector was separated from the transmission and distribution networks in an effort to improve production efficiency. In this paper we study the impact of the reform on efficiency of fossil-fired power plants using plant-level data during 2000-2008. Our results from the data envelopment analysis (DEA) and panel regressions show that: 1) the total factor productivity (TFP) growth mainly comes from technological change; 2) the technical efficiency of previously SPC-managed power plants is converging to that of better-performing independent power producers (IPPs); 3) capacity utilization and unit size are significant factors affecting changes in technical efficiency and the pattern of converging technical efficiency between the two kinds of power plants; 4) most plants operate at increasing returns to scale indicating further cost savings could be achieved through increasing output.

Suggested Citation

  • Ma, Chunbo & Zhao, Xiaoli & Ma, Qian & Zhao, Yue, 2011. "China’s Electricity Market Reform and Power Plants Efficiency," Working Papers 117811, University of Western Australia, School of Agricultural and Resource Economics.
  • Handle: RePEc:ags:uwauwp:117811

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    Cited by:

    1. Meng, Ming & Mander, Sarah & Zhao, Xiaoli & Niu, Dongxiao, 2016. "Have market-oriented reforms improved the electricity generation efficiency of China's thermal power industry? An empirical analysis," Energy, Elsevier, vol. 114(C), pages 734-741.
    2. Seifert, Stefan, 2015. "Productivity Growth and its Sources - A StoNED Metafrontier Analyis of the German Electricity Generating Sector," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112975, Verein für Socialpolitik / German Economic Association.
    3. Wei, Chu & Löschel, Andreas & Liu, Bing, 2015. "Energy-saving and emission-abatement potential of Chinese coal-fired power enterprise: A non-parametric analysis," Energy Economics, Elsevier, vol. 49(C), pages 33-43.
    4. Dai, Xiaoyong & Cheng, Liwei, 2016. "Market distortions and aggregate productivity: Evidence from Chinese energy enterprises," Energy Policy, Elsevier, vol. 95(C), pages 304-313.
    5. Tooraj Jamasb & Rabindra Nepal & Govinda Timilsina & Michael Toman, 2014. "Energy Sector Reform, Economic Efficiency and Poverty Reduction," Discussion Papers Series 529, School of Economics, University of Queensland, Australia.
    6. Stefan Seifert & Astrid Cullmann & Christian von Hirschhausen, 2014. "Technical Efficiency and CO2 Reduction Potentials: An Analysis of the German Electricity Generating Sector," Discussion Papers of DIW Berlin 1426, DIW Berlin, German Institute for Economic Research.
    7. Seifert, Stefan & Cullmann, Astrid & von Hirschhausen, Christian, 2016. "Technical efficiency and CO2 reduction potentials — An analysis of the German electricity and heat generating sector," Energy Economics, Elsevier, vol. 56(C), pages 9-19.
    8. Du, Limin & Hanley, Aoife & Rehdanz, Katrin, 2014. "China's CO2 emissions from power generating stations: A first exploration," Kiel Working Papers 1934, Kiel Institute for the World Economy (IfW).
    9. Blanco Orozco, Napoleón Vicente & Zuniga Gonzalez, Carlos Alberto, 2013. "Productivity Analysis in Power Generation Plants Connected to the National Grid: A New Case of Bio Economy in Nicaragua," MPRA Paper 49356, University Library of Munich, Germany, revised 25 Feb 2013.
    10. 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.
    11. Bai-Chen Xie & Jie Gao & Shuang Zhang & ZhongXiang Zhang, 2017. "What Factors Affect the Competiveness of Power Generation Sector in China? An Analysis Based on Game Cross-efficiency," Working Papers 2017.12, Fondazione Eni Enrico Mattei.
    12. Du, Limin & Hanley, Aoife & Zhang, Ning, 2016. "Environmental technical efficiency, technology gap and shadow price of coal-fuelled power plants in China: A parametric meta-frontier analysis," Resource and Energy Economics, Elsevier, vol. 43(C), pages 14-32.
    13. Zhong-Hua Tian & Ze-Liang Yang, 2016. "Scenarios of Carbon Emissions from the Power Sector in Guangdong Province," Sustainability, MDPI, Open Access Journal, vol. 8(9), pages 1-14, August.

    More about this item


    Efficiency; DEA; Malmquist Index; China; Electricity; Industrial Organization; Productivity Analysis; Resource /Energy Economics and Policy; D24; L11; L51; L94; L98;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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