Local governments are often keen promoters of smaller wind farms, which do not
require state-level approval because they bring tax revenue, provide jobs and help
local industry (Zhang et al., 2013, p338). Energy companies, meanwhile, have mixed
interests. Grid and supply firms have to buy wind energy, but to some extent have
been allowed to pass costs through to consumers and in any case have soft budget
constraints as state-owned enterprises. State-owned generation companies have
invested heavily in wind power because of the requirement on them to meet their
portfolio targets, which affects their ability to obtain permission to build more
conventional (coal and nuclear) capacity. Such companies own more than 80
per cent of China’s wind capacity (Zhang et al., 2013, p338).
The costs of wind and other renewables in China are now financed from a fund
set up by a surcharge on consumers’ bills (Yuan and Zuo, 2011a). The surcharge
is still fairly low, but has been increased several times since the mid-2000s. In spite
of this, the renewables fund is still facing shortfalls and, as a result, there have been
delays in payments to wind developers since 2010 (Davidson, 2013). The most
recent increase to the surcharge has involved a doubling for industrial customers
but no change for domestic customers, a reverse of the German policy by which
most industrial users were exempt from such charges. At the same time, feed-in
tariffs have been somewhat scaled back, especially for solar PV. However, the overall
political effects of negative cost feedback are likely to be limited. This is because
the Chinese government sets electricity prices centrally and consumer prices have
been kept low, including for industrial users (Rutkowski, 2013).
In China, then, policy has been kept on track by strong positive feedback via
the development of wind as industrial policy and by more direct control of energy
companies by the state. The potential negative feedback effects of costs falling on
electricity consumers is likely to remain small as long as the state continues to keep
power prices low. In effect, in terms of Figure 6.1 above, the Chinese state is
using its huge fiscal resources to act as a buffer between providers and users.
The role of institutional context
Diversity in social and economic institutional systems
In addition to the nature of policies themselves, we might also expect the wider
discursive, institutional and political context in which policies are made and
implemented to also have an influence (Pierson, 1993, p602; Patashnik and Zelizer,
2009, p3). As discussed above, it is these contexts that determine the exact nature
of the structural relationships between energy providers, users and policy-makers
(see Figure 6.1 above) in different countries.
First, the range of options for policy design which are acceptable in any
particular context will to a great extent be prescribed by what are sometimes called
‘policy paradigms’ – i.e. interpretive frameworks of ideas and standards that are
‘embedded in the very terminology through which policy-makers communicate
about their work . . . influential precisely because so much of it is taken for granted
96 Matthew Lockwood
require state-level approval because they bring tax revenue, provide jobs and help
local industry (Zhang et al., 2013, p338). Energy companies, meanwhile, have mixed
interests. Grid and supply firms have to buy wind energy, but to some extent have
been allowed to pass costs through to consumers and in any case have soft budget
constraints as state-owned enterprises. State-owned generation companies have
invested heavily in wind power because of the requirement on them to meet their
portfolio targets, which affects their ability to obtain permission to build more
conventional (coal and nuclear) capacity. Such companies own more than 80
per cent of China’s wind capacity (Zhang et al., 2013, p338).
The costs of wind and other renewables in China are now financed from a fund
set up by a surcharge on consumers’ bills (Yuan and Zuo, 2011a). The surcharge
is still fairly low, but has been increased several times since the mid-2000s. In spite
of this, the renewables fund is still facing shortfalls and, as a result, there have been
delays in payments to wind developers since 2010 (Davidson, 2013). The most
recent increase to the surcharge has involved a doubling for industrial customers
but no change for domestic customers, a reverse of the German policy by which
most industrial users were exempt from such charges. At the same time, feed-in
tariffs have been somewhat scaled back, especially for solar PV. However, the overall
political effects of negative cost feedback are likely to be limited. This is because
the Chinese government sets electricity prices centrally and consumer prices have
been kept low, including for industrial users (Rutkowski, 2013).
In China, then, policy has been kept on track by strong positive feedback via
the development of wind as industrial policy and by more direct control of energy
companies by the state. The potential negative feedback effects of costs falling on
electricity consumers is likely to remain small as long as the state continues to keep
power prices low. In effect, in terms of Figure 6.1 above, the Chinese state is
using its huge fiscal resources to act as a buffer between providers and users.
The role of institutional context
Diversity in social and economic institutional systems
In addition to the nature of policies themselves, we might also expect the wider
discursive, institutional and political context in which policies are made and
implemented to also have an influence (Pierson, 1993, p602; Patashnik and Zelizer,
2009, p3). As discussed above, it is these contexts that determine the exact nature
of the structural relationships between energy providers, users and policy-makers
(see Figure 6.1 above) in different countries.
First, the range of options for policy design which are acceptable in any
particular context will to a great extent be prescribed by what are sometimes called
‘policy paradigms’ – i.e. interpretive frameworks of ideas and standards that are
‘embedded in the very terminology through which policy-makers communicate
about their work . . . influential precisely because so much of it is taken for granted
96 Matthew Lockwood