IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v63y2013icp97-100.html
   My bibliography  Save this article

The value of holding scarce wind resource—A cause of overinvestment in wind power capacity in China

Author

Listed:
  • Liu, Xuemei

Abstract

China's wind power capacity has increased dramatically in recent years, but about 30% of the installed capacity sits idle, so overinvestment in wind power capacity seems to be a serious problem. This paper explores reasons for the overinvestment. The economic analysis shows that, given uncertain future policy on wind power, it is optimal for power companies to invest more than the amount in a certain world. A part of the “overinvestment” has a real value, which can be interpreted as the value of holding scarce wind resource. This value exists because the wind-rich sites with convenient locations to connect to the grids are scarce resource, and also because the specific government policies that are essential for promoting wind power are uncertain in the future. This value should be taken into account in the investment decision, but it results in the phenomenon of “overinvestment”. The concept of the value of holding scarce resource can be generally applied to the resources that are scarce and for which the future policy is uncertain.

Suggested Citation

  • Liu, Xuemei, 2013. "The value of holding scarce wind resource—A cause of overinvestment in wind power capacity in China," Energy Policy, Elsevier, vol. 63(C), pages 97-100.
    • Handle: RePEc:eee:enepol:v:63:y:2013:i:c:p:97-100
    DOI: 10.1016/j.enpol.2013.08.044
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421513008483
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2013.08.044?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Liu, Yingqi & Kokko, Ari, 2010. "Wind power in China: Policy and development challenges," Energy Policy, Elsevier, vol. 38(10), pages 5520-5529, October.
    2. Fang, Yong & Li, Jing & Wang, Mingming, 2012. "Development policy for non-grid-connected wind power in China: An analysis based on institutional change," Energy Policy, Elsevier, vol. 45(C), pages 350-358.
    3. Yu, James & Ji, Fuxing & Zhang, Ling & Chen, Yushou, 2009. "An over painted oriental arts: Evaluation of the development of the Chinese renewable energy market using the wind power market as a model," Energy Policy, Elsevier, vol. 37(12), pages 5221-5225, December.
    4. Han, Jingyi & Mol, Arthur P.J. & Lu, Yonglong & Zhang, Lei, 2009. "Onshore wind power development in China: Challenges behind a successful story," Energy Policy, Elsevier, vol. 37(8), pages 2941-2951, August.
    5. Wang, Feng & Yin, Haitao & Li, Shoude, 2010. "China's renewable energy policy: Commitments and challenges," Energy Policy, Elsevier, vol. 38(4), pages 1872-1878, April.
    6. Wu, Yunna & Li, Yang & Ba, Xi & Wang, Heping, 2013. "Post-evaluation indicator framework for wind farm planning in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 17(C), pages 26-34.
    7. Lema, Adrian & Ruby, Kristian, 2007. "Between fragmented authoritarianism and policy coordination: Creating a Chinese market for wind energy," Energy Policy, Elsevier, vol. 35(7), pages 3879-3890, July.
    8. Yu, Xiao & Qu, Hang, 2010. "Wind power in China--Opportunity goes with challenge," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(8), pages 2232-2237, October.
    9. Xiliang Zhang & Shiyan Chang & Molin Huo & Ruoshui Wang, 2009. "China's wind industry: policy lessons for domestic government interventions and international support," Climate Policy, Taylor & Francis Journals, vol. 9(5), pages 553-564, September.
    10. Yang, Ming & Nguyen, François & De T'Serclaes, Philippine & Buchner, Barbara, 2010. "Wind farm investment risks under uncertain CDM benefit in China," Energy Policy, Elsevier, vol. 38(3), pages 1436-1447, March.
    11. Yu, Dayang & Zhang, Bo & Liang, Jun & Han, Xueshan, 2011. "The influence of generation mix on the wind integrating capability of North China power grids: A modeling interpretation and potential solutions," Energy Policy, Elsevier, vol. 39(11), pages 7455-7463.
    12. Liao, Cuiping & Jochem, Eberhard & Zhang, Yi & Farid, Nida R., 2010. "Wind power development and policies in China," Renewable Energy, Elsevier, vol. 35(9), pages 1879-1886.
    13. Li, Jun, 2010. "Decarbonising power generation in China--Is the answer blowing in the wind?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(4), pages 1154-1171, May.
    14. Zhao, Xiaoli & Wang, Feng & Wang, Mei, 2012. "Large-scale utilization of wind power in China: Obstacles of conflict between market and planning," Energy Policy, Elsevier, vol. 48(C), pages 222-232.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xia, Fang & Song, Feng, 2017. "The uneven development of wind power in China: Determinants and the role of supporting policies," Energy Economics, Elsevier, vol. 67(C), pages 278-286.
    2. Liu, Liyun & Zhao, Zhenzhi & Zhang, Mingming & Zhou, Dequn, 2022. "Green investment efficiency in the Chinese energy sector: Overinvestment or underinvestment?," Energy Policy, Elsevier, vol. 160(C).
    3. Zhang, Dayong & Cao, Hong & Zou, Peijiang, 2016. "Exuberance in China's renewable energy investment: Rationality, capital structure and implications with firm level evidence," Energy Policy, Elsevier, vol. 95(C), pages 468-478.
    4. Irawan, Denny & Okimoto, Tatsuyoshi, 2021. "Overinvestment and macroeconomic uncertainty: Evidence from renewable and non-renewable resource firms," Journal of Economic Dynamics and Control, Elsevier, vol. 126(C).
    5. Singh, Amanjot, 2022. "Oil Price uncertainty and labor investment efficiency," Energy Economics, Elsevier, vol. 116(C).
    6. Dabo Guan & David M. Reiner & Zhu Liu, 2014. "China’s road to a global scientific powerhouse," Cambridge Working Papers in Economics 1447, Faculty of Economics, University of Cambridge.
    7. Yu, Xiaojun & Yao, Yao & Zheng, Huanhuan & Zhang, Lin, 2020. "The role of political connection on overinvestment of Chinese energy firms," Energy Economics, Elsevier, vol. 85(C).
    8. Liu, Tingting & Chen, Zhe & Xu, Jiuping, 2022. "Empirical evidence based effectiveness assessment of policy regimes for wind power development in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 164(C).
    9. Mogues, Tewodaj & Billings, Lucy, 2015. "The making of public investments: Champions, coordination, and characteristics of nutrition interventions:," IFPRI discussion papers 1479, International Food Policy Research Institute (IFPRI).
    10. Xiaogang Zhang & Dong Wang & Yuanhao Liu & Hongtao Yi, 2016. "Wind Power Development in China: An Assessment of Provincial Policies," Sustainability, MDPI, vol. 8(8), pages 1-12, July.
    11. Pan, Lingying & Liu, Pei & Li, Zheng, 2017. "A system dynamic analysis of China’s oil supply chain: Over-capacity and energy security issues," Applied Energy, Elsevier, vol. 188(C), pages 508-520.
    12. Kejia Yang & Ralitsa Hiteva & Johan Schot, 2020. "Niche Acceleration driven by Expectation Dynamics among Niche and Regime Actors: China’s Wind and Solar Power Development," SPRU Working Paper Series 2020-03, SPRU - Science Policy Research Unit, University of Sussex Business School.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xuemei Liu, 2016. "Why Has Wind Power Capacity Been Overinvested Under Uncertainty in China?," Review of Economics & Finance, Better Advances Press, Canada, vol. 6, pages 1-12, February.
    2. Lam, J.C.K. & Woo, C.K. & Kahrl, F. & Yu, W.K., 2013. "What moves wind energy development in China? Show me the money!," Applied Energy, Elsevier, vol. 105(C), pages 423-429.
    3. Zhao, Xiaoli & Wang, Feng & Wang, Mei, 2012. "Large-scale utilization of wind power in China: Obstacles of conflict between market and planning," Energy Policy, Elsevier, vol. 48(C), pages 222-232.
    4. Zhao, Xiaoli & Zhang, Sufang & Yang, Rui & Wang, Mei, 2012. "Constraints on the effective utilization of wind power in China: An illustration from the northeast China grid," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(7), pages 4508-4514.
    5. Zhao, Xiaoli & Zhang, Sufang & Zou, Yasheng & Yao, Jin, 2013. "To what extent does wind power deployment affect vested interests? A case study of the Northeast China Grid," Energy Policy, Elsevier, vol. 63(C), pages 814-822.
    6. Wu, Zhongqun & Sun, Hongxia & Du, Yihang, 2014. "A large amount of idle capacity under rapid expansion: Policy analysis on the dilemma of wind power utilization in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 32(C), pages 271-277.
    7. Li, X. & Hubacek, K. & Siu, Y.L., 2012. "Wind power in China – Dream or reality?," Energy, Elsevier, vol. 37(1), pages 51-60.
    8. Xiaogang Zhang & Dong Wang & Yuanhao Liu & Hongtao Yi, 2016. "Wind Power Development in China: An Assessment of Provincial Policies," Sustainability, MDPI, vol. 8(8), pages 1-12, July.
    9. Klagge, Britta & Liu, Zhigao & Campos Silva, Pedro, 2012. "Constructing China’s wind energy innovation system," Energy Policy, Elsevier, vol. 50(C), pages 370-382.
    10. Da, Zhang & Xiliang, Zhang & Jiankun, He & Qimin, Chai, 2011. "Offshore wind energy development in China: Current status and future perspective," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4673-4684.
    11. Pei, Wei & Chen, Yanning & Sheng, Kun & Deng, Wei & Du, Yan & Qi, Zhiping & Kong, Li, 2015. "Temporal-spatial analysis and improvement measures of Chinese power system for wind power curtailment problem," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 148-168.
    12. Xia, Fang & Song, Feng, 2017. "The uneven development of wind power in China: Determinants and the role of supporting policies," Energy Economics, Elsevier, vol. 67(C), pages 278-286.
    13. Zhao, Zhen-Yu & Chang, Rui-Dong & Chen, Yu-Long, 2016. "What hinder the further development of wind power in China?—A socio-technical barrier study," Energy Policy, Elsevier, vol. 88(C), pages 465-476.
    14. Yuan, Jiahai & Sun, Shenghui & Shen, Jiakun & Xu, Yan & Zhao, Changhong, 2014. "Wind power supply chain in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 39(C), pages 356-369.
    15. Stua, Michele, 2013. "Evidence of the clean development mechanism impact on the Chinese electric power system's low-carbon transition," Energy Policy, Elsevier, vol. 62(C), pages 1309-1319.
    16. Woo, C.K. & Sreedharan, P. & Hargreaves, J. & Kahrl, F. & Wang, J. & Horowitz, I., 2014. "A review of electricity product differentiation," Applied Energy, Elsevier, vol. 114(C), pages 262-272.
    17. Li, Cun-bin & Li, Peng & Feng, Xia, 2014. "Analysis of wind power generation operation management risk in China," Renewable Energy, Elsevier, vol. 64(C), pages 266-275.
    18. Li, Mingquan & Patiño-Echeverri, Dalia & Zhang, Junfeng (Jim), 2019. "Policies to promote energy efficiency and air emissions reductions in China's electric power generation sector during the 11th and 12th five-year plan periods: Achievements, remaining challenges, and ," Energy Policy, Elsevier, vol. 125(C), pages 429-444.
    19. Gosens, Jorrit & Lu, Yonglong, 2014. "Prospects for global market expansion of China’s wind turbine manufacturing industry," Energy Policy, Elsevier, vol. 67(C), pages 301-318.
    20. Gosens, Jorrit & Lu, Yonglong, 2013. "From lagging to leading? Technological innovation systems in emerging economies and the case of Chinese wind power," Energy Policy, Elsevier, vol. 60(C), pages 234-250.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:63:y:2013:i:c:p:97-100. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.