Abstract
This article analyzes resource misallocation in the Chinese wind power industry by examining wind power development in relation to implementation of feed-in tariff (FIT), an electricity price subsidy policy. We construct a plant-level dataset to explore the extent of distortions exacerbating resource misallocation in the wind power industry from 2000 through 2013. Our results show that distortions have been exacerbated since 2009, when the Chinese government implemented FIT, and that the potential production improvement of the wind power industry was relatively high after 2009. FIT provides added incentives for low-productivity plants to enter the industry, especially in regions better endowed with resources. This suggests that the increased distortion in resource allocation of most wind power plants is largely due to government subsidies. In addition, higher FIT rates significantly lower average capital productivity of wind power plants while having no significant effect on average labor productivity. Plants with better production technologies face worse growth rates in the region most richly endowed with relevant resources and there is no significant difference in these productivity impacts between new and already existing power plants. We postulate that similar relationships between subsidies and efficiency are likely to occur in other renewable energy sectors receiving government subsidies.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
