People's Republic of China Electricity Sector Challenges and Future Policy Directions
The electricity sector in the People's Republic of China (PRC) includes the technically most complex infrastructure that produces and delivers electricity just-in-time to almost the entire population across the country through wires. It has come a long way from an estimated less than 2 gigawatt (GW) of installed capacity in 1949 to more than 900 GW by 2010. After initial sluggish start, the sector has grown rapidly, particularly in the past two decades. During the 2001-2010 period alone, it has almost tripled its capacity.
But even with the rapid growth, the electricity sector has been in adjusting to the surging electricity demand. The summer peak demand and the winter peak, combined with transport difficulty for coal, stress the fragile demand-supply balance, which has often resulted in seasonal shortages. The under and overcapacity cycles - electricity shortages in 2003-2004 and 2010-2011, and surplus capacity in 2008-2009 are causing ripple effects throughout the economy.
The PRC's electricity sector has generally kept pace with the technological advancement and sophistication needed to plan, construct, operate, and manage such a complex infrastructure. While it had its share of stresses, it has performed remarkably well and managed to avoid catastrophic failures as experienced elsewhere on similar networks with comparable coverage and complexity.
Although significant achievements have been made in the electricity sector development through the previous and ongoing reforms, it has to confront new issues and challenges such as optimization of resources, environmental constraints, and climate change and low-carbon imperatives. These issues have become or will become key drivers for change and put pressure for further reforms and innovations. This policy note looks into major challenges and constraints in the electricity sector aiming at providing suitable policy recommendations to restore the sector's health as well as ensuring its long-term sustainability.
- Challenges and Constraints
- Policy Recommendations