IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v8y2016i7p687-d74396.html
   My bibliography  Save this article

Economic Impacts of Power Shortage

Author

Listed:
  • Peng Ou

    (Electric Power Research Institute of China Southern Power Grid, Guangzhou 510060, China)

  • Ruting Huang

    (China Center for Energy Economics Research, School of Economics, Xiamen University, Xiamen 361005, China)

  • Xin Yao

    (China Center for Energy Economics Research, School of Economics, Xiamen University, Xiamen 361005, China
    Collaborative Innovation Center for Energy Economics and Energy Policy, Xiamen University, Xiamen 361005, China)

Abstract

The electricity industry is a basic industry of the national economy. It has experienced several large-scale power shortages, hard power shortage and soft power shortage, which have brought a great threat to China’s sustainable economic development. To solve this problem better, it is necessary to make a quantitative assessment of the economic impacts of power shortage. The CGE model is commonly used for simulating economic shocks and policy effects. It describes supply, demand and equilibrium in different markets by simulating the economic mechanism through a set of equations. Once changed, the exogenous variables will affect a certain part of the system and then the whole system, leading to changes in quantities and prices. The equilibrium state will also change from one to another. A static CGE model is built in this paper, and the Social Accounting Matrix (SAM) of eight sectors of China in 2007 is compiled, in order to simulate the economic impacts of hard power shortage and soft power shortage. Simulation results show that the negative effects of power shortage on economic development are very significant, and the effects vary in different sectors. Especially, under the background of hard power shortage, the industrial sector suffers most. The economic cost of power shortage is considerable, and the main reason for it is the specific administrative pricing system in China. The low electricity price in the long term will lead to insufficient construction and hard power shortage; moreover, that in the short run would result in soft power shortage. In order to solve the problem of power shortage completely, power system reform is inevitable.

Suggested Citation

  • Peng Ou & Ruting Huang & Xin Yao, 2016. "Economic Impacts of Power Shortage," Sustainability, MDPI, vol. 8(7), pages 1-21, July.
    • Handle: RePEc:gam:jsusta:v:8:y:2016:i:7:p:687-:d:74396
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/8/7/687/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/8/7/687/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. He, Y.X. & Zhang, S.L. & Yang, L.Y. & Wang, Y.J. & Wang, J., 2010. "Economic analysis of coal price-electricity price adjustment in China based on the CGE model," Energy Policy, Elsevier, vol. 38(11), pages 6629-6637, November.
    2. Shiu, Alice & Lam, Pun-Lee, 2004. "Electricity consumption and economic growth in China," Energy Policy, Elsevier, vol. 32(1), pages 47-54, January.
    3. He, Y.X. & Yang, L.F. & He, H.Y. & Luo, T. & Wang, Y.J., 2011. "Electricity demand price elasticity in China based on computable general equilibrium model analysis," Energy, Elsevier, vol. 36(2), pages 1115-1123.
    4. Scaramucci, Jose A. & Perin, Clovis & Pulino, Petronio & Bordoni, Orlando F.J.G. & da Cunha, Marcelo P. & Cortez, Luis A.B., 2006. "Energy from sugarcane bagasse under electricity rationing in Brazil: a computable general equilibrium model," Energy Policy, Elsevier, vol. 34(9), pages 986-992, June.
    5. Lin, Boqiang & Liu, Chang, 2016. "Why is electricity consumption inconsistent with economic growth in China?," Energy Policy, Elsevier, vol. 88(C), pages 310-316.
    6. J. Cansino & M. Cardenete & J. Gonzalez & M. P. Pablo-Romero, 2013. "Economic impacts of solar thermal electricity technology deployment on Andalusian productive activities: a CGE approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(1), pages 25-47, February.
    7. Jiahai Yuan & Qi Lei & Minpeng Xiong & Jingsheng Guo & Changhong Zhao, 2014. "Scenario-Based Analysis on Water Resources Implication of Coal Power in Western China," Sustainability, MDPI, vol. 6(10), pages 1-26, October.
    8. Li, Hong-Zhou & Tian, Xian-Liang & Zou, Tao, 2015. "Impact analysis of coal-electricity pricing linkage scheme in China based on stochastic frontier cost function," Applied Energy, Elsevier, vol. 151(C), pages 296-305.
    9. Woo, Chi-Keung & Pupp, Roger L., 1992. "Costs of service disruptions to electricity consumers," Energy, Elsevier, vol. 17(2), pages 109-126.
    10. Dorothée Boccanfuso & Luc Savard & Antonio Estache, 2013. "The Distributional Impact of Developed Countries’ Climate Change Policies on Senegal: A Macro-Micro CGE Application," Sustainability, MDPI, vol. 5(6), pages 1-24, June.
    11. Na Li & Xiaojun Wang & Minjun Shi & Hong Yang, 2015. "Economic Impacts of Total Water Use Control in the Heihe River Basin in Northwestern China—An Integrated CGE-BEM Modeling Approach," Sustainability, MDPI, vol. 7(3), pages 1-19, March.
    12. Cherni, Judith A. & Kentish, Joanna, 2007. "Renewable energy policy and electricity market reforms in China," Energy Policy, Elsevier, vol. 35(7), pages 3616-3629, July.
    13. Fisher-Vanden, Karen & Mansur, Erin T. & Wang, Qiong (Juliana), 2015. "Electricity shortages and firm productivity: Evidence from China's industrial firms," Journal of Development Economics, Elsevier, vol. 114(C), pages 172-188.
    14. Yanlin Yang & Yin-E Chen & Zhizhong Liu, 2007. "Energy Constraints and China's Economic Development," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 10(4), pages 343-354.
    15. Akkemik, K. Ali & Oğuz, Fuat, 2011. "Regulation, efficiency and equilibrium: A general equilibrium analysis of liberalization in the Turkish electricity market," Energy, Elsevier, vol. 36(5), pages 3282-3292.
    16. Lin, Boqiang & Jiang, Zhujun, 2011. "Estimates of energy subsidies in China and impact of energy subsidy reform," Energy Economics, Elsevier, vol. 33(2), pages 273-283, March.
    17. Grant Dansie & Marc Lanteigne & Indra Overland, 2010. "Reducing Energy Subsidies in China, India and Russia: Dilemmas for Decision Makers," Sustainability, MDPI, vol. 2(2), pages 1-19, February.
    18. Apergis, Nicholas & Payne, James E., 2011. "A dynamic panel study of economic development and the electricity consumption-growth nexus," Energy Economics, Elsevier, vol. 33(5), pages 770-781, September.
    19. Rattso, Jorn, 1982. "Different macroclosures of the original Johansen model and their impact on policy evaluation," Journal of Policy Modeling, Elsevier, vol. 4(1), pages 85-97, March.
    20. Hwang, Won-Sik & Lee, Jeong-Dong, 2015. "A CGE analysis for quantitative evaluation of electricity market changes," Energy Policy, Elsevier, vol. 83(C), pages 69-81.
    21. Liu, Ming-Hua & Margaritis, Dimitris & Zhang, Yang, 2013. "Market-driven coal prices and state-administered electricity prices in China," Energy Economics, Elsevier, vol. 40(C), pages 167-175.
    22. Wang, Yanxiang & Ali Almazrooei, Shaikha & Kapsalyamova, Zhanna & Diabat, Ali & Tsai, I-Tsung, 2016. "Utility subsidy reform in Abu Dhabi: A review and a Computable General Equilibrium analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 55(C), pages 1352-1362.
    23. Ngan, H.W., 2010. "Electricity regulation and electricity market reforms in China," Energy Policy, Elsevier, vol. 38(5), pages 2142-2148, May.
    24. Cheng, Y.S. & Wong, W.K. & Woo, C.K., 2013. "How much have electricity shortages hampered China's GDP growth?," Energy Policy, Elsevier, vol. 55(C), pages 369-373.
    25. Li Jiang & Feng Wu & Yu Liu & Xiangzheng Deng, 2014. "Modeling the Impacts of Urbanization and Industrial Transformation on Water Resources in China: An Integrated Hydro-Economic CGE Analysis," Sustainability, MDPI, vol. 6(11), pages 1-15, October.
    26. Sherman Robinson & Andrea Cattaneo & Moataz El-Said, 2001. "Updating and Estimating a Social Accounting Matrix Using Cross Entropy Methods," Economic Systems Research, Taylor & Francis Journals, vol. 13(1), pages 47-64.
    27. Rodrigues, Renato & Linares, Pedro, 2015. "Electricity load level detail in computational general equilibrium – part II – welfare impacts of a demand response program," Energy Economics, Elsevier, vol. 47(C), pages 52-67.
    28. Cansino, J.M. & Cardenete, M.A. & González-Limón, J.M. & Román, R., 2014. "The economic influence of photovoltaic technology on electricity generation: A CGE (computable general equilibrium) approach for the Andalusian case," Energy, Elsevier, vol. 73(C), pages 70-79.
    29. Welsch, Heinz & Ochsen, Carsten, 2001. "Dismantling of nuclear power in Germany: sectoral and macroeconomic effects," Energy Policy, Elsevier, vol. 29(4), pages 279-289, March.
    30. Hosoe, Nobuhiro, 2006. "The deregulation of Japan's electricity industry," Japan and the World Economy, Elsevier, vol. 18(2), pages 230-246, March.
    31. Zhang, Liang & Ruan, Jian & Ding, Jianhua, 2014. "The institutional power shortage in China: Capacity shortage or capacity under-utilisation?," Applied Energy, Elsevier, vol. 136(C), pages 480-494.
    32. Yuanying Chi & Zhengquan Guo & Yuhua Zheng & Xingping Zhang, 2014. "Scenarios Analysis of the Energies’ Consumption and Carbon Emissions in China Based on a Dynamic CGE Model," Sustainability, MDPI, vol. 6(2), pages 1-26, January.
    33. Cai, Yiyong & Arora, Vipin, 2015. "Disaggregating electricity generation technologies in CGE models: A revised technology bundle approach with an application to the U.S. Clean Power Plan," Applied Energy, Elsevier, vol. 154(C), pages 543-555.
    34. Ming, Zeng & Song, Xue & Lingyun, Li & Yuejin, Wang & Yang, Wei & Ying, Li, 2013. "China's large-scale power shortages of 2004 and 2011 after the electricity market reforms of 2002: Explanations and differences," Energy Policy, Elsevier, vol. 61(C), pages 610-618.
    35. Nguyen, Khanh Q., 2008. "Impacts of a rise in electricity tariff on prices of other products in Vietnam," Energy Policy, Elsevier, vol. 36(8), pages 3135-3139, August.
    36. Li, Ji Feng & Wang, Xin & Zhang, Ya Xiong & Kou, Qin, 2014. "The economic impact of carbon pricing with regulated electricity prices in China—An application of a computable general equilibrium approach," Energy Policy, Elsevier, vol. 75(C), pages 46-56.
    37. Yanlin Yang & Yin‐E Chen & Zhizhong Liu, 2007. "Energy Constraints and China’s Economic Development," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 10(4), pages 343-354.
    38. Erling Holmøy, 2005. "The Anatomy of Electricity Demand: A CGE Decomposition for Norway," Discussion Papers 426, Statistics Norway, Research Department.
    39. Ma, Hengyun & Oxley, Les & Gibson, John, 2009. "China's energy situation in the new millennium," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(8), pages 1781-1799, October.
    40. Pyatt, Graham, 1988. "A SAM approach to modeling," Journal of Policy Modeling, Elsevier, vol. 10(3), pages 327-352.
    41. Sun, Tianqing & Wang, Xiaohua & Ma, Xianguo, 2009. "Relationship between the economic cost and the reliability of the electric power supply system in city: A case in Shanghai of China," Applied Energy, Elsevier, vol. 86(10), pages 2262-2267, October.
    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. Gallaher, Adam & Graziano, Marcello & Fiaschetti, Maurizio, 2021. "Legacy and shockwaves: A spatial analysis of strengthening resilience of the power grid in Connecticut," Energy Policy, Elsevier, vol. 159(C).
    2. Ning Zhang & Bing Wang, 2016. "Toward a Sustainable Low-Carbon China: A Review of the Special Issue of “Energy Economics and Management”," Sustainability, MDPI, vol. 8(8), pages 1-8, August.
    3. Wu, Kuei-Yen & Huang, Yun-Hsun & Wu, Jung-Hua, 2018. "Impact of electricity shortages during energy transitions in Taiwan," Energy, Elsevier, vol. 151(C), pages 622-632.
    4. Feng, Zhong-kai & Niu, Wen-jing & Wang, Sen & Cheng, Chun-tian & Jiang, Zhi-qiang & Qin, Hui & Liu, Yi, 2018. "Developing a successive linear programming model for head-sensitive hydropower system operation considering power shortage aspect," Energy, Elsevier, vol. 155(C), pages 252-261.
    5. Ojo, Ademola Eyitope, 2020. "Determinants of Market Power in Electric Power Market of Rural Areas in Nigeria," Asian Development Policy Review, Asian Economic and Social Society, vol. 8(3), pages 156-170, September.
    6. Botelho, Vinícius, 2019. "Estimating the economic impacts of power supply interruptions," Energy Economics, Elsevier, vol. 80(C), pages 983-994.
    7. Bo Wang & Limao Wang & Shuai Zhong & Ning Xiang & Qiushi Qu, 2022. "Low-Carbon Transformation of Electric System against Power Shortage in China: Policy Optimization," Energies, MDPI, vol. 15(4), pages 1-18, February.
    8. Fromm, Hansjörg & Ewald, Lukas & Frankenhauser, Dominik & Ensslen, Axel & Jochem, Patrick, 2019. "A study on free-floating carsharing in Europe: Impacts of car2go and DriveNow on modal shift, vehicle ownership, vehicle kilometers traveled, and CO2 emissions in 11 European cities," Working Paper Series in Production and Energy 36, Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP).
    9. Niu, Wen-jing & Feng, Zhong-kai & Cheng, Chun-tian, 2018. "Optimization of variable-head hydropower system operation considering power shortage aspect with quadratic programming and successive approximation," Energy, Elsevier, vol. 143(C), pages 1020-1028.

    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. Cheng, Y.S. & Wong, W.K. & Woo, C.K., 2013. "How much have electricity shortages hampered China's GDP growth?," Energy Policy, Elsevier, vol. 55(C), pages 369-373.
    2. Jieting Yin & Qingyou Yan & Kaijie Lei & Tomas Baležentis & Dalia Streimikiene, 2019. "Economic and Efficiency Analysis of China Electricity Market Reform Using Computable General Equilibrium Model," Sustainability, MDPI, vol. 11(2), pages 1-22, January.
    3. Yuanying Chi & Zhengquan Guo & Yuhua Zheng & Xingping Zhang, 2014. "Scenarios Analysis of the Energies’ Consumption and Carbon Emissions in China Based on a Dynamic CGE Model," Sustainability, MDPI, vol. 6(2), pages 1-26, January.
    4. Wang, Chen & Zhou, Kaile & Yang, Shanlin, 2017. "A review of residential tiered electricity pricing in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 79(C), pages 533-543.
    5. He, Xiaoping & Reiner, David, 2016. "Electricity demand and basic needs: Empirical evidence from China's households," Energy Policy, Elsevier, vol. 90(C), pages 212-221.
    6. Zhang, Chi & Zhou, Kaile & Yang, Shanlin & Shao, Zhen, 2017. "On electricity consumption and economic growth in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 76(C), pages 353-368.
    7. Feng, Zhong-kai & Niu, Wen-jing & Wang, Sen & Cheng, Chun-tian & Jiang, Zhi-qiang & Qin, Hui & Liu, Yi, 2018. "Developing a successive linear programming model for head-sensitive hydropower system operation considering power shortage aspect," Energy, Elsevier, vol. 155(C), pages 252-261.
    8. Zhou, Kaile & Yang, Shanlin, 2015. "Demand side management in China: The context of China’s power industry reform," Renewable and Sustainable Energy Reviews, Elsevier, vol. 47(C), pages 954-965.
    9. Solomon P. Nathaniel & Festus V. Bekun, 2020. "Electricity Consumption, Urbanization and Economic Growth in Nigeria: New Insights from Combined Cointegration amidst Structural Breaks," Research Africa Network Working Papers 20/013, Research Africa Network (RAN).
    10. Woo, C.K. & Ho, T. & Shiu, A. & Cheng, Y.S. & Horowitz, I. & Wang, J., 2014. "Residential outage cost estimation: Hong Kong," Energy Policy, Elsevier, vol. 72(C), pages 204-210.
    11. Guo, Zhengquan & Zhang, Xingping & Zheng, Yuhua & Rao, Rao, 2014. "Exploring the impacts of a carbon tax on the Chinese economy using a CGE model with a detailed disaggregation of energy sectors," Energy Economics, Elsevier, vol. 45(C), pages 455-462.
    12. Niu, Wen-jing & Feng, Zhong-kai & Cheng, Chun-tian, 2018. "Optimization of variable-head hydropower system operation considering power shortage aspect with quadratic programming and successive approximation," Energy, Elsevier, vol. 143(C), pages 1020-1028.
    13. Erisa Dautaj Şenerdem & K. Ali Akkemik, 2020. "Evaluation of the reform in the Turkish electricity sector: a CGE analysis," International Journal of Economic Policy Studies, Springer, vol. 14(2), pages 389-419, August.
    14. Langarita, Raquel & Duarte, Rosa & Hewings, Geoffrey & Sánchez-Chóliz, Julio, 2019. "Testing European goals for the Spanish electricity system using a disaggregated CGE model," Energy, Elsevier, vol. 179(C), pages 1288-1301.
    15. Gregori, Tullio & Tiwari, Aviral Kumar, 2020. "Do urbanization, income, and trade affect electricity consumption across Chinese provinces?," Energy Economics, Elsevier, vol. 89(C).
    16. Wang, Di & Zhang, Zhiyuan & Yang, Xiaodi & Zhang, Yanfang & Li, Yuman & Zhao, Yueying, 2021. "Multi-scenario simulation on the impact of China's electricity bidding policy based on complex networks model," Energy Policy, Elsevier, vol. 158(C).
    17. Wang, Tiantian & Wu, Fei & Dickinson, David & Zhao, Wanli, 2024. "Energy price bubbles and extreme price movements: Evidence from China's coal market," Energy Economics, Elsevier, vol. 129(C).
    18. Arora, Vipin & Cai, Yiyong & Jones, Ayaka, 2016. "The national and international impacts of coal-to-gas switching in the Chinese power sector," Energy Economics, Elsevier, vol. 60(C), pages 416-426.
    19. He, Yongda & Lin, Boqiang, 2017. "The impact of natural gas price control in China: A computable general equilibrium approach," Energy Policy, Elsevier, vol. 107(C), pages 524-531.
    20. Zeng, Ming & Yang, Yongqi & Fan, Qiannan & Liu, Yingxin & Zou, Zhuojun, 2015. "Coordination between clean energy generation and thermal power generation under the policy of “direct power-purchase for large users” in China," Utilities Policy, Elsevier, vol. 33(C), pages 10-22.

    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:gam:jsusta:v:8:y:2016:i:7:p:687-:d:74396. 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.