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A regional analysis of excess capacity in China’s power systems

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  • Lin, Jiang
  • Kahrl, Fredrich
  • Liu, Xu

Abstract

China's economy has entered a “new normal,” characterized by slower economic growth and widespread overcapacity in its industrial sectors. Nevertheless, construction of power plants, especially coal-fired plants, continues at a rapid pace. Our analysis examines the extent of overcapacity in China's regional electricity grids. We show that already in 2014, the average reserve margin across China's regional grids was roughly 28%, almost twice as high as a standard planning reserve margin in the U.S. In addition, we find large variations in reserve margins across regional power grids in China, with the highest reserve margin (64%) in the Northeastern grid. This paper examines future reserve margins across regions in China under three growth scenarios. The results suggest that the majority of China will not need new baseload coal power (at least for reliability purposes) before 2020, and potentially not until 2025, under the low- and mid-growth scenarios. Under the high-growth scenario, China's central and eastern regions will need to import more power or built new capacity by 2020. As China's energy sector enters this new normal, our results highlight the growing importance of establishing mechanisms — planning processes and markets — that coordinate generation and transmission investments across grid regions, and that align the country's energy sector investments with its longer-term air quality and climate goals.

Suggested Citation

  • Lin, Jiang & Kahrl, Fredrich & Liu, Xu, 2018. "A regional analysis of excess capacity in China’s power systems," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt44j2w0d0, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt44j2w0d0
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    References listed on IDEAS

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    1. Ming, Zeng & Ping, Zhang & Shunkun, Yu & Hui, Liu, 2017. "Overall review of the overcapacity situation of China’s thermal power industry: Status quo, policy analysis and suggestions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 76(C), pages 768-774.
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    Cited by:

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    2. Yuan, Jiahai & Guo, Xiaoxuan & Zhang, Weirong & Chen, Sisi & Ai, Yu & Zhao, Changhong, 2019. "Deregulation of power generation planning and elimination of coal power subsidy in China," Utilities Policy, Elsevier, vol. 57(C), pages 1-15.
    3. Yang, Lin & Xu, Mao & Fan, Jingli & Liang, Xi & Zhang, Xian & Lv, Haodong & Wang, Dong, 2021. "Financing coal-fired power plant to demonstrate CCS (carbon capture and storage) through an innovative policy incentive in China," Energy Policy, Elsevier, vol. 158(C).
    4. Liu, Shiyu & Bie, Zhaohong & Lin, Jiang & Wang, Xifan, 2018. "Curtailment of renewable energy in Northwest China and market-based solutions," Energy Policy, Elsevier, vol. 123(C), pages 494-502.
    5. Delu Wang & Xun Xue & Yadong Wang, 2021. "Overcapacity Risk of China’s Coal Power Industry: A Comprehensive Assessment and Driving Factors," Sustainability, MDPI, vol. 13(3), pages 1-21, January.
    6. Liu, HuiHui & Zhang, ZhongXiang & Chen, Zhan-Ming & Dou, DeSheng, 2019. "The impact of China's electricity price deregulation on coal and power industries: Two-stage game modeling," Energy Policy, Elsevier, vol. 134(C).
    7. Xu Wang & Pallav Purohit, 2022. "Transitioning to low-GWP alternatives with enhanced energy efficiency in cooling non-residential buildings of China," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 27(7), pages 1-28, October.
    8. Li, Gao & Ruonan, Li & Yingdan, Mei & Xiaoli, Zhao, 2022. "Improve technical efficiency of China's coal-fired power enterprises: Taking a coal-fired-withdrawl context," Energy, Elsevier, vol. 252(C).
    9. Qian Zhang & Christopher Kennedy & Tao Wang & Wendong Wei & Jiashuo Li & Lei Shi, 2020. "Transforming the coal and steel nexus for China's eco‐civilization: Interplay between rail and energy infrastructure," Journal of Industrial Ecology, Yale University, vol. 24(6), pages 1352-1363, December.
    10. Li, Ke & Yuan, Weihong, 2021. "The nexus between industrial growth and electricity consumption in China – New evidence from a quantile-on-quantile approach," Energy, Elsevier, vol. 231(C).
    11. Penghao, Chu & Pingkuo, Liu & Hua, Pan, 2019. "Prospects of hydropower industry in the Yangtze River Basin: China's green energy choice," Renewable Energy, Elsevier, vol. 131(C), pages 1168-1185.
    12. Yu, Miao & Zhao, Xintong & Gao, Yuning, 2019. "Factor decomposition of China’s industrial electricity consumption using structural decomposition analysis," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 67-76.
    13. Fangtian Sun & Yonghua Xie & Svend Svendsen & Lin Fu, 2020. "New Low-Temperature Central Heating System Integrated with Industrial Exhausted Heat Using Distributed Electric Compression Heat Pumps for Higher Energy Efficiency," Energies, MDPI, vol. 13(24), pages 1-17, December.
    14. Wang, Yongpei & Yan, Weilong & Zhuang, Shangwen & Zhang, Qian, 2019. "Competition or complementarity ? The hydropower and thermal power nexus in China," Renewable Energy, Elsevier, vol. 138(C), pages 531-541.
    15. Lin, Jiang & Xu Liu, & Gang He,, 2020. "Regional electricity demand and economic transition in China," Utilities Policy, Elsevier, vol. 64(C).
    16. Wang, Yongpei & Yan, Weilong & Komonpipat, Supak, 2019. "How does the capacity utilization of thermal power generation affect pollutant emissions? Evidence from the panel data of China's provinces," Energy Policy, Elsevier, vol. 132(C), pages 440-451.

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