Archive for 7 Electric Power

China Electric Power Law

The Electric Power Law of the People’s Republic of China, adopted at the 17th Meeting of the Standing Committee of the Eighth National People’s Congress on December 28, 1995, is promulgated now, and shall enter into force as of April 1, 1996.

7 Electric Power, 7.1 Government Policy

Transforming China’s Electricity Sector: Institutional Change and Regulation in the Reform Era

Aiming to reduce the politicization and direct administration of electricity generation, transmission and distribution, the central planners launched three major episodes of institutional changes in the reform era culminating in the creation of an independent ministry-level agency – the State Electricity Regulatory Commission (SERC) – to oversee an oligopoly of restructured power companies in 2002. However, a new regulator operating in face of powerful state-owned firms and an hierarchical and competitive bureaucratic landscape is bound to open a new chapter in contentious politics. We argue that the influential role of the National Development Reform Commission (NDRC) has undercut the institutional role and autonomy of the SERC, resulting in growing discrepancy between the SERC’s legal mandate and its efficacy in establishing clarity in rules of competition. Hampered in their growth potential, independent power providers and grid operators have focused their business strategic efforts on crowding out the private sector and foreign investors, and playing off ministerial supervisors for particularistic gains. The resulting regulatory outcome provides neither effective governmental management of oligopolistic dynamics and price fluctuations in the power sector, nor sustained momentum for privatization.

7 Electric Power, 7.2 Recent Structural Reforms in the Sector

People’s Republic of China Electricity Sector Challenges and Future Policy Directions

The electricity sector in the People’s Republic of China (PRC) includes the technically most complex infrastructure that produces and delivers electricity just-in-time to almost the entire population across the country through wires. It has come a long way from an estimated less than 2 gigawatt (GW) of installed capacity in 1949 to more than 900 GW by 2010. After initial sluggish start, the sector has grown rapidly, particularly in the past two decades. During the 2001–2010 period alone, it has almost tripled its capacity. But even with the rapid growth, the electricity sector has been in adjusting to the surging electricity demand. The summer peak demand and the winter peak, combined with transport difficulty for coal, stress the fragile demand-supply balance, which has often resulted in seasonal shortages. The under and overcapacity cycles—electricity shortages in 2003–2004 and 2010–2011, and surplus capacity in 2008–2009 are causing ripple effects throughout the economy. The PRC’s electricity sector has generally kept pace with the technological advancement and sophistication needed to plan, construct, operate, and manage such a complex infrastructure. While it had its share of stresses, it has performed remarkably well and managed to avoid catastrophic failures as experienced elsewhere on similar networks with comparable coverage and complexity. Although significant achievements have been made in the electricity sector development through the previous and ongoing reforms, it has to confront new issues and challenges such as optimization of resources, environmental constraints, and climate change and low-carbon imperatives. These issues have become or will become key drivers for change and put pressure for further reforms and innovations. This policy note looks into major challenges and constraints in the electricity sector aiming at providing suitable policy recommendations to restore the sector’s health as well as ensuring its long-term sustainability.

7 Electric Power, 7.2 Recent Structural Reforms in the Sector

China’s Power Sector Reforms: Where to Next?

The Chinese government has initiated electricity sector reforms to overhaul an antiquated system and attain new energy security and environmental objectives. How China proceeds with these reforms will have lasting consequences, both locally and globally. Assessing the current state of electricity regulation in China, this report draws on experience elsewhere to explore how better to develop and communicate strategy, how to moderate growth in demand through increased efficiency, how to integrate environmental goals into planning and operation, how to ensure sufficient supply when and where it is needed, and how to handle institutional and governance challenges. In this respect, electricity sector reform in other countries offers valuable lessons as to how China might proceed. As it describes perspectives and challenges for the Chinese power sector, Chinas Power Sector Reforms: Where to next? is a useful tool for policy makers and business leaders.

7 Electric Power, 7.2 Recent Structural Reforms in the Sector

China’s Electric Power Market: The Rise and Fall of IPPs

This paper starts off with a brief history of China’s power market starting from the late 1980s when the power generation sector was first opened to private investment. The second section explains the role of foreign IPPs in the market, in particular, addressing why their significance has waxed and waned over the last decade. The third section discusses certain factors and developments in the investment climate of China’spower market which has affected the investment strategies and operations of gencos across the board. This provides the context for an analysis of how these factors have affected foreign IPPs differently from other gencos as well as of how different foreign IPPs have structured the projects in ways leading to variations in investment outcomes. The final section will outline our selection of five case studies for in-depth treatment.

7 Electric Power, 7.2 Recent Structural Reforms in the Sector

Guangdong Electric Power Market Reform: Options and Impact

The electricity industry of China’s Guangdong Province has been in a process of reforms since the 1980s. The reforms have so far greatly promoted the industry development, advancing the provincial electric power system to the largest in the country (Zeng, et al., 1999; Zhang, et al. 2001). Achievements notwithstanding, the industry is facing numerous difficulties that challenge both reform policy makers and academics. The province needs high speed capacity expansion and power imports in the foreseeable future to meet the continued demand surge. End-users in Guangdong are paying the highest tariffs in the nation. The technological structure of the existing generation capacity is highly undesirable because large number of tiny generating units and oil-fired capacity are adversely affecting economic and energy efficiencies of electric power supply. Power generation is causing increasing environmental damages. However, the most challenging is probably the fact that there lacks an adequate mechanism to solve these problems and promote efficient and sustainable growth of the electric power industry. On one hand, reforms in the past twenty years not only have not fundamentally changed the traditional mode of central government planning of provincial electric power supply and development, but also have contributed to the evolving problems of the industry and showed their limitation. On the other hand, utility de-integration and market competition represents an attractive alternative to policy makers, but little is known of the reform roadmap and the potential impact. This paper examines the utility market reform scenario in Guangdong Province and provides a basic quantitative assessment of the possible impact of the reform policy on electricity tariffs and system development.

7 Electric Power, 7.2 Recent Structural Reforms in the Sector

Reform of the Chinese Electric Power Market: Economics and Institutions

When the People’s Republic was founded in 1949, the Chinese electricity industry, with only 1.85 GW installed capacity, was primitive. It has since grown into the second largest in the world, with installed capacity rising to 353 GW in 2002. The number of people who have no access to electricity has been reduced to less than 2 percent of a population of 1.26 billion. On a per capita basis, installed capacity has edged up to one half of the world’s average. Development has been particularly impressive since the 1980s thanks to increased investment in the sector. According to industry accounts, an estimated RMB 1,107 billion ($US 134 billion) was invested between 1981 and 2001 in new generation and delivery capacity. Additional investment was also made in retrofitting and upgrading the system, reaching over RMB 100 billion ($12 – 15 billion) per annum in the past seven years. Three quarters of this sectoral capital came from domestic sources, with foreign investment making up the rest. This remarkable power sector growth and financing have been achieved through an ongoing, unsystematic process of electricity industry reforms initiated in the mid 1980s. Further system expansion, projected at about 25 GW per year for the next two decades, challenges the Chinese government to continue and deepen this reform process.

7 Electric Power, 7.2 Recent Structural Reforms in the Sector

Demand Side Management in China: Benefits Barriers and Policy Recommendations

One tool that has proven effective in many countries for delivering energy efficiency, but has not yet been widely adopted in China, is demand-side management, or DSM. As China restructures its electric utility industry, it has an important opportunity to develop power market rules and regulatory structures that would make DSM profitable for utilities or independent DSM program administrators, provide adequate funding and permit demand-side resources to compete with new generation in the marketplace. US-based Natural Resources Defense Council and China’s State Power Economic Research Center and Energy Research Institute jointly released a report summarizing the benefits of DSM for China, exploring China’s experience to date in developing DSM policies and programs, analyzing the main structural, financial and regulatory barriers to further implementation, and recommending a number of policies and strategies for overcoming these barriers.

7 Electric Power, 7.2 Recent Structural Reforms in the Sector

Establishment of a State Electricity Regulatory Commission in China: A Suggested “Roadmap”

This paper presents an indicative roadmap for establishment of an effective and functioning State Electricity Regulatory Commission (SERC) for China by the end of 2003. The roadmap has been prepared based on preliminary discussions with the concerned Government agencies in China.

7 Electric Power, 7.2 Recent Structural Reforms in the Sector

Electric Utility Restructuring and Power Sector Reform

The Regulatory Assistance Project (RAP) is a lead international technical advisor in China on electric utility restructuring, power sector reform, renewable resource development, the development of competitive markets, performance based regulation, demand-side management and green pricing. Three papers are:

7 Electric Power, 7.2 Recent Structural Reforms in the Sector