Market Power and Electricity Market Reform in Northeast China - PowerPoint PPT Presentation

MIT Energy and Environmental Policy Workshop, May 1, 2008 Market Power and Electricity Market Reform in Northeast China Zhang Xiaochun and John Parsons

Timeline � 1985 -- end of the central govt monopoly in generation – provincial and local governments – state owned enterprises – private investors, including foreign investors

Electricity System after Early Reforms

Timeline (cont.) � 1997 – corporatization – transmission and generation assets moved from the Ministry of Electric Power to a State Power Corporation of China – parallel reforms at provincial and local levels

Timeline (cont.) � 2002 -- break-up of SPC – 2 main grid companies, with regional and provincial subsidiaries – 5 main generation companies – assorted engineering and other companies – creation of a regulator, SERC or State Electricity Regulatory Commission, but continued involvement of NDRC in economic & industrial strategy

Regional Grid Cos The State Grid Corp. of China (SGCC) operates the majority of the territory, including… Northwest, North, Northeast, Central & East. The South China Grid Corp. operates the South Grid. This is a joint venture owned by the central government and provincial governments of Guangdong and Hainan.

Generation Cos � 5 Gencos…majority owned by the central government – Datang – GuoDian – HuaDian – Huaneng – China Power Investment Corp. � Assured that no company had more than 20% of the generating assets in any region. � State Grid also has generation. � Other 54% of generation continues…provincial, local, IPPs � Ownership structure is inadequately reported.

Timeline (cont.) � 2004 -- Regional grids, uniform management & dispatch, increased geographic exchanges of power � 2004 -- Development of market for wholesale power – experiments had occurred in 2000-2001 in 5 provinces & 1 city; primarily simulation and generally of little consequence; many problems. – Northeast region started in January 2004; simulation first, trial operation for limited capacity; unsatisfactory results and no settlement; suspended pending decisions about how to move forward. – East region started in 2005 with simulation, a pair of auctions in 2006 with settlement. – South region started in 2006. – Others announced. – Single buyer system: generators sell to the grid, and the grid sells to consumers; parallel to long-term contracts. – Integration with reform of electricity tariff system is unclear. � Next ???

Our Analysis -- the Northeast Region Liaoning, Jilin, Heilongjiang and the eastern portion of the Inner Mongolia Autonomous Region, encompassing the Hulunbeier League,Xingan League,Tongliao City and Chifeng City

Northeast Region -- Overview Territory Population GDP Electricity Generation Electricity Consumption per capita per capita (thousand km sq) (million) (billion Yuan) (Yuan) (Terawatt hours) (Terawatt hours) (kwh) [a] [b] [c] [d] [e] [f] [g] [h] [I] [j] [k] [l] NE 1,249 120 2,109 17,600 238 236 1,961 L 146 12% 43 36% 926 44% 21,700 101 42% 123 52% 2,876 187 15% 27 23% 425 20% 15,600 46 19% 41 18% 1,515 J 454 36% 38 32% 622 29% 16,300 65 27% 60 25% 1,562 H 462 37% 12 10% 136 6% 11,400 27 11% 12 5% 986 IM

Figure 2 Generation Capacity by Province E. I nner Mongolia 10% Installed capacity: 48 GW Liaoning: 18 GW, 39% of the total Liaoning Jilin: 11 GW, 23% 39% Heilongjiang: 13 GW, 28% E. Inner Mongol: 5 GW, 10% Heilongjiang 28% Jilin 23%

Figure 3 Generation Capacity by Installation Size Liaoning Jilin 100 MW > > 100 15% 1,000 100 > MW > MW MW > 1,000 13% 15% 17% MW > 36% 500- 500- 1,000- 100 1,000 500 100 MW MW MW MW 32% 1,000- 40% 32% 500 31% MW 15% 500- 100 e. I nner Mongolia Heilongjiang MW 28% 100 MW > > 100 7% 1,000 MW > MW 18% 500- > 28% 100 500- 1,000 MW 100 MW 26% MW 51% 18% 1,000- 1,000- 500 1,000- 500 500 MW MW MW 36% 16% 26%

Figure 4 Generation Capacity by Fuel Type Wind Liaoning Jilin Wind 2% Hydro Wind 2% 8% 1% Hydro Hydro 35% 13% Therm Therm al al 63% 91% Heilongjiang e. I nner Mongolia Hydro Hydro Wind Wind 6% 6% 1% 6% Thermal 85% Therm Therm al al 88% 93%

Figure 5 Generation Capacity by Outlet Liaoning Jilin Self- Gen Self- 7% Self- Gen Gen 15% 14% Sold Sold 85% 93% Heilongjiang e. I nner Mongolia Sold Self- Self- Gen 86% Gen 9% 20% Sold Sold 91% 80%

Figure 6 Generation Capacity by Ownership Liaoning Jilin other GuoDia Dat ang 14% n 9% HuaDia 6% Datan n GuoDian g 7% 9% 21% Huanen g ot her 15% GuoDi 32% other State an 52% Grid 20% 31% CPIC 17% CPIC Huane 12% ng HuaDian State 2% 14% Grid 3% Heilongjiang e. I nner Mongolia Datang other 3% 13% GuoDia Datang n 12% Huanen 7% other Huaneng g 28% 11% 20% St at e Grid 13% State Grid CPIC State 30% 12% Grid HuaDia CPIC 5% n 34% 39% Huanen g 9%

Market Power in Trial Operation 2005 Company Capacity in MW Market Share [a] [b] [c] Datang 1,406 7% [1] � Huadian and Guodian 2,420 11% [2] Huaneng 48% Huadian 5,420 25% [3] Huneng 4,940 23% [4] � CR4 = 70% CPIC 2,200 10% [5] Jinzhou 1,200 6% [6] Suizhong 1,600 7% [7] � HHI = 1,582 Hunjiang 400 2% [8] Yuanbaoshan 1,500 7% [9] Nenggang 400 2% [10] Total 21,486 100%

Market Power in Trial Operation 2005 Datang 7% others Guodian 24% 11% � Huadian and Huaneng 48% CPIC Huadian � CR4 = 70% 10% 25% � HHI = 1,582 Huneng 23%

Market Power in Trial Operation 2006 Company Capacity in MW Market Share [a] [b] [c] Datang 1,405 7% [1] � Huadian and Guodian 2,430 12% [2] Huaneng 50% Huadian 5,420 27% [3] Huneng 4,700 23% [4] � CR4 = 76% CPIC 2,805 14% [5] Suizhong 1,600 8% [6] Nenggang 400 2% [7] � HHI = 1,759 Yuanbaoshan 1,500 7% [8] Total 20,260 100%

Market Power in Trial Operation 2006 Datang � In Liaoning, Huaneng has others 7% 35% of the competitive Guodian 17% capacity. 12% � In Jilin, Guodian has 50% of the competitive capacity . CPIC � In Heilongjiang, Huadian 14% has 62% of the competitive capacity . Huadian � When there are 27% transmission constraints and power shortages, there Huneng might be significant 23% concentrations of market power in these provinces.

Prospects for an Expanded Regional Market Excluding All Facilities Self-Generation CR4 HHI CR4 HHI [a] [b] [c] [d] [1] Northeast Region 50% 770 58% 1,035 [2] Liaoning 44% 580 51% 803 [3] Jilin 83% 1,925 89% 2,202 [4] Heilongjiang 67% 1,837 84% 2,850 [5] E. Inner Mongolia 87% 2,427 96% 2,952 [6] Trial Regional Market 76% 1,759

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