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China’s Electricity Market Reform and Power Plants Efficiency

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  • Ma, Chunbo
  • Zhao, Xiaoli
  • Ma, Qian
  • Zhao, Yue

Abstract

In the past three decades, Chinese electricity industry has experienced a series of regulatory reforms serving different purposes at different stages. In 2002, the former vertically integrated electricity utility - the State Power Corporation (SPC) – was divested and the generation sector was separated from the transmission and distribution networks in an effort to improve production efficiency. In this paper we study the impact of the reform on efficiency of fossil-fired power plants using plant-level data during 2000-2008. Our results from the data envelopment analysis (DEA) and panel regressions show that: 1) the total factor productivity (TFP) growth mainly comes from technological change; 2) the technical efficiency of previously SPC-managed power plants is converging to that of better-performing independent power producers (IPPs); 3) capacity utilization and unit size are significant factors affecting changes in technical efficiency and the pattern of converging technical efficiency between the two kinds of power plants; 4) most plants operate at increasing returns to scale indicating further cost savings could be achieved through increasing output.

Suggested Citation

  • Ma, Chunbo & Zhao, Xiaoli & Ma, Qian & Zhao, Yue, 2011. "China’s Electricity Market Reform and Power Plants Efficiency," Working Papers 117811, University of Western Australia, School of Agricultural and Resource Economics.
    • Handle: RePEc:ags:uwauwp:117811
    DOI: 10.22004/ag.econ.117811
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    More about this item

    Keywords

    Industrial Organization; Productivity Analysis; Resource /Energy Economics and Policy;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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