Special Issue on Restructuring and Sustainable Development for China’s Electric Power Industry

China has been achieving fast economic growth in the previous decades. Following the economic growth, the electricity demand of China has also been growing at an unprecedented rate. This poses substantial challenges for the Chinese government to maintain adequate and reliable supply of electricity to feed its economy. Since 2002, China’s power industry has been undergoing various structural reforms to introduce competition, including separating the generation sector from electricity grid. The outcome now includes a record level of newly installed capacity and expansion of electricity grid. By the end of 2009, China’s installed capacity has reached 870 GW and is the second largest in the world’s electricity industry behind the United States. There are also thousands of miles of ultrahigh-voltage (UHV) transmission lines being constructed. This makes the power grid around the nation to be more intensively connected.

Although coal-fired output still accounts for about 80% of the energy generated, China has been aggressive in renewable energy development. In 2010, China has surpassed the United States to have the largest installed capacity of wind power in the world. There have also been efforts to conserve energy and reduce carbon emissions, including the development of generating units of high efficiency, distributed renewables and cogeneration, and the implementation of differentiated pricing on energy-intensive sectors. Given the slow recovery of the world economy with risks and uncertainties ahead, and the elevated concerns about climate change, the effectiveness of these efforts and their long-term effect to the sustainable development of China’s electric power industry and the economy is unknown. The four papers in this special issue address some of these issues.

The first paper in this special issue by Tan, Li, Wang, and Chen addresses how the differentiated pricing scheme on the energy-intensive industries could affect the other sectors or the Chinese economy. The energy-intensive industries in China consume 50% of the total energy generated, but are responsible for 70% of the total national emissions. However, they only account for 30% of China’s gross domestic product (GDP). Imposing a higher electricity price to these industries has a potential for reducing both national energy consumption and pollutions. This, however, may lead to lower production levels in these industries such that the shortage of supplies of the products from these industries could create an upward pressure on their products’ prices and increase the production costs for other sectors that rely on their products as inputs. In this paper, the authors apply an input-output (IO) model, which composes 42 sectors calibrated with data in 2002, to examine these ripple effects.

As previously mentioned, China is now the largest wind energy provider in the world. Although the newly installed capacity is impressive, wind power still accounts for a small portion of China’s total power generation. Wind resources are often characterized by poor locations with respect to the transmission network, limiting its economic feasibility. Therefore, wind power is often more costly than conventional resources. The cost and benefit analysis is an important issue in the investment decisions of wind power. The paper by Wang, Wen, Yang, and Huang tackles this important issue. They authors argue that a stable investment for wind power relies on both scale economy of the wind power and effective pricing policies that motivate the growth of the wind industry. Two pricing schemes currently implemented in China are examined in this paper. The authors also discuss the competition from local wind turbine manufacturers; with that, the authors illustrate the prospect of wind power development in China.

Because of increasing concerns about climate change and air quality, nuclear has been considered as an alternative to coal power in China. Nuclear power has also been undergoing rapid expansion in China. The paper by Hou, Tan, Wang, and Xie gives an overview of nuclear power developments in China. The authors also discuss current government policies, potential changes to the policies, and the barriers to nuclear power development in China. The authors conclude that China has the potential to accomplish its planned, large-scale nuclear power development. Recently, massive earthquake struck Japan’s northeastern coast, followed by a devastating tsunami that resulted in significant damages to its nuclear facilities and radioactive leakages. This sends the world a new lesson to be learned. After the earthquake, the Chinese government has reaffirmed that it will not change its plan for developing nuclear power projects but will learn the lessons from Japan.

The final paper of this special issue, by Yu, Zhou, Chan, and Lu, discusses an important technical issue of Automatic Generation Control (AGC) under the new Control Performance Standards (CPS) issued by the North American Electric Reliability Council (NERC). This CPS has been adopted by utilities worldwide including the East China Power Grid and the China Southern Power Grid. Under this CPS, the authors exploit the $Q$-learning method to better maneuver generating outputs to achieve significant saving in fuel costs without compromising the reliability requirement.

In this special issue, the selected papers only address a small subset of the issues and challenges facing China’s growing power industry. It is hoped that this special issue will foster much needed further research work in the future. I would like to thank all the contributing authors for their efforts and Dr. Hilary Inyang, editor in chief of the Journal, for the opportunity to produce this special issue.