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The Chinese electricity industry: supply capacity and its determinants with reference to OECD countries

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  • Guy Liu
  • Liang Zhang
  • Eric Girardin

Abstract

This paper takes a two-stage estimation approach to investigate the direct and indirect determinants of the capacity of power supply in China, with reference to the Organization for Economic Cooperation and Development countries. In the first stage we investigate the determinants of demand for electric consumption and in the second stage we test the impact of demand for consumption on capacity. Our study shows that the direct impact on capacity growth is mainly of GDP growth, which is a China-specific effect, and load factor, which is a non-China specific effect. Capacity investment is driven by the demand for power relative to the utilization of existing capacity. Furthermore, power prices and the industrial structure of an economy are the indirect determinants of capacity through their impacts on demand. The industrial structure has a strong influence on the power demand in China, since the country has accelerated its industrialization with more investment in heavy industry that further fuels the demand for power and therefore supply capacity.

Suggested Citation

  • Guy Liu & Liang Zhang & Eric Girardin, 2014. "The Chinese electricity industry: supply capacity and its determinants with reference to OECD countries," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 12(4), pages 353-382, November.
    • Handle: RePEc:taf:jocebs:v:12:y:2014:i:4:p:353-382
    DOI: 10.1080/14765284.2014.952515
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    2. Adom, Philip Kofi & Agradi, Mawunyo Prosper & Bekoe, William, 2019. "Electricity supply in Ghana: The implications of climate-induced distortions in the water-energy equilibrium and system losses," Renewable Energy, Elsevier, vol. 134(C), pages 1114-1128.

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