Implementing China’s national energy conservation policies at state-owned electric power generation plants

Abstract

China’s 11th Five-Year Guideline identified energy conservation as one of the country’s fundamental policies and established a mandatory target: 20% reduction in national average energy intensity by 2010. Despite the various policies, laws, and administrative reforms to support energy conservation, China fell behind schedule for meeting its conservation targets in 2006 and 2007. Using a combination of available literature and an interview-based case study, this paper examines the implementation of energy conservation and investigates impediments to achieving China’s conservation goal in the electric power generation sector. Three key impediments are detailed: (1) municipal governments’ incentives to overlook conservation-related central directives primarily because of budget pressures linked to financial decentralization, (2) procedural obstacles in the form of time required to obtain project approvals for high-efficiency power generation units, and (3) financial obstacles making it difficult for power generation enterprises to raise capital for energy conservation projects. An interview-based case study of a state-owned coal-fired electric power generation company demonstrates the influence of the aforementioned obstacles. While procedural obstacles are notable, they can be managed. However, electricity pricing reforms and/or stronger subsidy programs will be needed to address the financial obstacles facing Chinese power generation companies.