Deregulation & Restructuring

of Power Industry in China

Presented By: Anuj Banshwar

08M-204 (2nd SEM)
M.Tech (P.S)
Outline:
 Forces behind Deregulation?
 Generation & Installed Capacity Of China.
 Increase of Electricity Consumption.
 Distribution of Power Network.
 Management System of Electric Power Industry.
 State Power Corporation (SPC) & Its functions.
 Power Industry Restructuring in China.
 China Power Industry Structure & Its Policies.
contd..
 Obstacles in establishing the Power Market in
China.
 Final Words: Conclusions.
 References.
 Questions & Open Discussion.
Forces behind Deregulation?

 Before deregulation, when generation and transmission were jointly controlled,

generation was decreased at one site and increased at another to load alternate
transmission paths. This relieved the congestion.
Total Electric Generation & Installed
Capacity
Increase of Electricity Consumption
Installed Capacity & Electric
Generation.
Management System of Electric Power
Industry.
 The development & reformation of the industry is according to the policy of ---

 Separating administration from enterprise.

 Making the provincial power companies into real entities.
 Developing United Networks & Unified dispatching.
 Raising Funds from various channels, including from abroad, for power
development.

 The State Power Corporation:

The State Power Corporation (SP), invested
and established by the State council, is the main body for investment &
managing the state owned assets authorized by the State Council.
 It plays a very important role in the future development of China’s power
industry whether running and managing its assets well or not.
 Thus, the SP has made a strategic decision-making plan in 4 steps for the future
development of China’s electric power industry:
Contd.

 The 1st step, from January 1997 to March 1998.

Establishing the SP &
the Ministry of Electric Power, constructing a new decision making
system framework in compliance with a socialist market economy.

 The 2nd step, from 1998 to 2000.

Insisting on the policy of separating
the govt. functions from the enterprise’s function & taking the
provinces, developing the generation market and completing the
restructuring in the SP system.

 The 3rd step, from 2001 to 2010.

Fully realizing the separation of generation
from transmission & distribution.
Contd.
 The 4th step, after 2010.
Gradually and fully opening the distribution and
sale sectors and realizing competition in the generation market.

 Upon the establishment of the SP, the functions of running the state
owned asset and enterprise management formerly undertaken by the
Ministry of Electric Power were transferred to the SP.
It has a special listing in the state plan and its financial budget is
allocated directly from national financial plan.
Functions of SP.

 The restructuring within the SP, separating generation from

transmission & distribution, promoting the nationwide following
factors:

 To normalise the relationship among companies of diff. levels in the SP

system.
 To promote separation of generation from transmission & distribution,
introduce the competition mechanism and build a normalised power
market.
 To promote the implementation of the nationwide power network
interconnection.
 To speed up rural power management institutional reform.
Power Industry Restructuring
 In february 2002, the China
State Department issued the 
Power Industry Structure
Reformation Program.
The program includes 3 main
points:
1. Restructure state-owned
generation assets and establish
several independent generation
companies;
2. Restructure transmission assets
and establish two grid
companies;
3. Establish a State Electricity
Regulatory Commission (SERC)
to monitor and regulate the
electricity markets.
Installed Capacity of 5-Gencos. in China

 After restructuring of the

generation assets, the State
Grid and South China Grid
companies owned 24.5GW
generation capacity, of
which, 15.9GW capacity is
used for frequency
regulation and load
following to ensure reliable
system operation.
Contd..
 The installed capacities owned directly by the two grid companies & all
regional grid companies in 2004 are given in Table (ii). Total
generation of all grid companies in February 2005 is given in Table
(iii).
Electricity Price Policy

 Electricity price policy plays an important role in reforming the China

power industry.
In May 2005, the National Development and Reformation
Commission (NDRC) issued three regulations about electricity prices:

i. Generation Price Regulation,

ii. Transmission and Distribution Price Regulation, and
iii. Customer Electricity Price Regulation.
 Electricity Price Interlink with Coal Price: Most areas of China
experienced a high increase in electricity consumption in 2003, and
one third of the provinces are suffering power shortages. Around 74%
of installed capacities in China is fossil-fuel thermal plants. The high
coal price limits profits of the power plants by a significant extent.
Renewable Energy Policy
 The Act indicates that the government encourages renewable energy
generation. In February 2005, the Renewable Energy Act was issued
by NDRC but came into force in January 2006.

 Renewable energy generation currently used in China are mainly solar

energy and wind energy.
 Solar energy generation production reached 230MW in 2005. In
Shenzhen, a photovoltaic power station of 860kW has been connected
to the transmission grid. It is estimated that total solar generation
production could reach 500MWin 2010.
 The wind turbine capacity is going up at an annual rate of 40%. Total
installed capacity of wind power in 2005 was 500MW. The capacity is
expected to reach 100GW in 2020, which will be around 10% of the
total installed capacity of that year.
Investment & Planning
 Total electricity consumption in China in 2004 was 2170 TWh, which is
a 15% increase over 2003. In 2005, consumption increased by another
10% and reached 2400 TWh.
On the generation supply side, 50GW of new generation capacity
was installed in 2004, and 70GW of new generation capacity was
installed in 2005.

 Investment:
After power industry restructuring, both transmission and
distribution are to be regulated by the government. The generation
side is deregulated, and independent power companies are able to
participate in generation markets. Each generation investment project
will be examined and discussed by the government before it is
approved.
Contd.

 Generation investors in China are mainly in five categories:

i. The former state-owned five generation companies
ii. Some other state-owned companies;
iii. Local government owned Generation companies that own around
55GW capacities in total;
iv. Overseas investors that own 37GW in total; and
v. Other private investors.

 Power System Planning:

After restructuring of the power industry, the
integrated power system has been separated into some generation
companies and some grid companies. Who will perform power system
planning is still not clear.
The customer side is still regulated by the government.
Obstacles in establishing the Power Market
in China.

 There are some issues that need to be emphasized in development of

the China power industry after system restructuring:

1. The structure of the generation sources is not yet fully optimized. The
proportion of fossil-fired generation sources is much higher compared
to other clean renewable energy generation sources.
2. The high proportion of generation relying on coal makes electricity
prices to be significantly affected by price of coal.
3. Transmission network expansion and planning are lagging generation
expansion. How to perform generation planning and transmission
planning after unbundling generation and transmission is an emerging
issue
Final Words: Conclusion.
 The challenges to the industry and government in the restructured
power system come from several sides.

 From the investment side, efficient policies would facilitate investment

in renewable energy sources and optimizing generation source
structure.
 From the planning side, generation planning and transmission planning
coordination is a big challenge for the unbundled system.
 From the development side, the current single-buyer regional
electricity market is still in a transient stage towards the competitive
electricity market.

“To find the best electricity market model for the China power
system will be one of the goals for the future China power
industry.”
References:

[1]State Power website, http://www.sp.com.cn

[2]State Power Information website, http://www.sgcc.com.cn/
[3]China Electric Power News, October 19, 2005.
[4]China Power News website, http://www.cpnn.com.cn
[5]China Electricity Markets and Electricity Price
[6]China Electric Power News, August 19, 2005.
[7]China Energy website, http://www.china5e.com.cn
[8]China Power System Information website, http://www.chinarein.com
[9] Zhao Xizheng, "Optimize the power source structure and upgrade the
power industry" China Industry News, October 26 2005.
[10] Power Market Restructuring In ASIA: RUSSIA, CHINA, INDIA AND
JAPAN
[11] Power system Restructuring & Deregulation Edited by LOI LEI LAI
Any Related Query??....

Thanks For Attention…