Have market-oriented reforms improved the electricity generation efficiency of China's thermal power industry? An empirical analysis

Abstract

In 2003, China implemented market-oriented reforms to its electric power industry, aimed at improving the generation efficiency of its thermal power plants. In this paper, we use the polynomial functions, PLS (partial least squares) algorithm, and generation efficiency data from 1993 to 2012 to evaluate the effect of these reforms. Empirical analysis shows that the reforms caused a sudden down shift of 0.142 kW h per kg SCE (standard coal equivalent) to the “natural” generation efficiency curve of the thermal power industry, resulting in 555.8 million tons of SCE of wasted fossil energy during 2003–2012. This was mainly due to the non-implementation of electricity price bidding. To improve the generation efficiency of the thermal power plants, market competition should be further introduced into China's electric power industry as a matter of urgency. The major policy adjustment directions include: a) Electricity price bidding should be promoted by sub-region according to the unified trading rules designed by the central government; b) Over-the-counter transaction should be permitted; as well as c) Dynamic incentive mechanisms for renewable energy development should be established.