The effectiveness of the unbundling reform in China’s power system from a dynamic efficiency perspective

Abstract

To promote the development of the electricity trading market, China launched a new round of power system reform in 2015. Considering environmental and service factors, this study adopts a dynamic data envelopment analysis model with a network structure based on a slacks-based measure approach to evaluate the performance of the power system and its divisions in the 30 provincial-level administrative regions from 2011 to 2016. To better reflect the practical situation of the power system, we develop an improved network model which includes both free link and fixed link variables at the same time. This study further employs scenario analysis to investigate the effect of the unbundling reform on the power system and its divisions. It reaches the following conclusions: First, inter-regional transmission and environmental factors should be taken into account in evaluating the productive efficiency of the power system. Second, the separation of distribution from transmission has a positive impact on productive efficiency, and the effects of the unbundling reform on the power system differ significantly among divisions. Third, the introduction of an incomplete electricity trading market has a negative impact on the dynamic productive efficiency of the power system compared with the scenario without market reform, while complete market-oriented reform can improve dynamic productive efficiency and narrow the gap between regions. Nevertheless, a complete market reform has less influence on the efficiency than the changing power supply and demand situation caused by economic development.