Power coming from the sky: Economic benefits of inter-regional power transmission in China

Abstract

Broader trading opportunities usually lead to higher economic benefits, and this is also true for cross-regional electricity transmission. However, few studies have rigorously confirmed the economic benefits of cross-regional power transmission for both power-input-region and power-output-region. In this paper, we take the spatial effects as a perspective to demonstrate the economic benefits of inter-regional power transmission (IRPT) at both theoretical and empirical levels. Especially, after the first phase of the West to East electricity transmission project in China, IRPT across regions plays a more critical role in achieving balanced regional development and cross-regional common prosperity. This paper first estimates the economic impacts of electricity transfer to the power-importing and exporting provinces through the fixed-effect and instrumental variable methods. Further, the study relaxes the original assumptions and innovatively constructs spatial weight matrices of electricity transmission, and estimates the spatial direct, indirect, and total effects of cross-regional electricity transfers. Arguing the economic benefits to both local and other regions brought about by power import and export in the IRPT, this paper refutes the view of trade protectionism and reaffirms that IRPT is conducive to widespread economic prosperity.