Response of scale and leverage of thermal power enterprises to renewable power enterprises in China

Abstract

Power generation structures in China remain dominated by coal, despite the overwhelmingly favorable response to the poll: To resist or not to resist? Since the renewable power enterprises have to compete with thermal power enterprises in a limited incremental market, the thermal power enterprises have the motivation to develop strategic responses to protect their own interests and meet policy requirements. Previous studies on renewable energy policies may have underrated or ignored the possible responses of rivalry from thermal power enterprises to the positive shock to renewable power enterprises. Considering the adverse effects of this response on the development of renewable power enterprises, it is necessary to reveal the short-term competitive response of thermal power enterprises. This paper conducts generalized impulse response analysis to estimate the scale and leverage of the response of thermal power enterprises to the unexpected positive impact on renewable power enterprises’ scale and leverage using a VAR-based model. The results indicate that thermal power enterprises are more likely to adopt resistant strategies to the positive shock to the scale of renewable power enterprises in the first quarter, whether or not these responses are profitable. Particularly, scale strategy is preferential for thermal power enterprises, which may have negative effect on the development of renewable power enterprises and slowed renewable energy transition. We suggest that the policies should consider the possible scale expansion of thermal power enterprises and mitigate the competition between thermal and renewable energy enterprises.