(2) Outdated approach to administration and
overcomplicated approval processes
Due to the typically large scale of investment
required in the upstream and midstream sectors
of the energy industry, and the need for productivity allocation and cross-provincial coordination, the requirement that the administrative
function be vertically hierarchical and horizontally decentralised creates an overcomplicated
approval process. Moreover, there are some
specific requirements that make it difficult to
access non-state-owned capital. Central enterprises entering this field also need to handle their
relationship with local government, for whom the
conflict between administration and interests is
difficult to manage.
There is also a lack of public services in the
energy sector, which can be clearly seen in the
provisions for information disclosure. First, there
is insufficient disclosure of government information, including missing or inadequate updates
regarding administrative licencing and laws and
regulations, as well as too little disclosure of
documents and notices that have a direct impact
on the development of the energy industry.
Second, the mandatory information disclosure
system for natural monopolies like oil and gas
pipelines has not been established, and information disclosure platforms are absent. Third, there
is no administrative system for making data
public, especially in basic research. As a case in
point, the system for collecting and submitting
data on oil and gas resources was introduced in
China several years ago, but due to slack
enforcement the relevant administration has had
difficulty obtaining and managing these data. The
delay in building databases and disclosing
information has severely affected the integration
of mining rights administration processes.
(3) Poor and uncoordinated energy plans
make it difficult to balance supply and
demand
The coordination between energy plans at different levels and in different sectors is poor.
Some energy plans are conditional on each other.
Other energy plans (especially local plans) do not
take energy supply and demand sufficiently into
account. The energy plans for some sectors have
not been effectively implemented or even completed for some time. Coordination between
central and local energy plans is poor. Typically,
energy plans are more often completed on the
supply side and poorly implemented on the
demand side. The evaluation of energy plans and
their implementation is far behind schedule.
Planning for supply and demand balancing
tends to consider volume ahead of how price
affects energy demand. Although changes in the
scale and structure of energy demand are assessed
within the context of socioeconomic development, the current (government-led) pricing
mechanisms for oil, gas and electricity make it
hard for price changes to reflect market supply and
demand. When energy plans are implemented,
price tends to severely restrict the market’s role.
Moreover, the administration of energy volume
and price are separate responsibilities of the NEA
and NDRC respectively, which also contributes to
the tension between volume and price when
energy supply and demand are considered.
The lack of coordination between plans for
power consumption and generation has become
increasingly acute, which can be clearly seen in
generating equipment availability. In 2014, the
average availability of several types of generating
equipment in China hit a record low. In addition
to weak power demand due to the sluggish
economy, the distribution of power generating
units also caused problems. For example, the
start-up of Unit 2 of the Hongyan River nuclear
power plant was postponed even though it was
ready, because the power supply capacity of the
north-eastern power grid had not been properly
considered at the planning stage. The lead time
for nuclear power plant construction increases the
likelihood of mismatches between installed
power capacity and power demand.
(4) Energy strategies lack national support
and an implementation mechanism
China lacks national medium- and long-term
energy strategies. Despite the introduction of the
Special Report 4: China’s Energy System Revolution
433
overcomplicated approval processes
Due to the typically large scale of investment
required in the upstream and midstream sectors
of the energy industry, and the need for productivity allocation and cross-provincial coordination, the requirement that the administrative
function be vertically hierarchical and horizontally decentralised creates an overcomplicated
approval process. Moreover, there are some
specific requirements that make it difficult to
access non-state-owned capital. Central enterprises entering this field also need to handle their
relationship with local government, for whom the
conflict between administration and interests is
difficult to manage.
There is also a lack of public services in the
energy sector, which can be clearly seen in the
provisions for information disclosure. First, there
is insufficient disclosure of government information, including missing or inadequate updates
regarding administrative licencing and laws and
regulations, as well as too little disclosure of
documents and notices that have a direct impact
on the development of the energy industry.
Second, the mandatory information disclosure
system for natural monopolies like oil and gas
pipelines has not been established, and information disclosure platforms are absent. Third, there
is no administrative system for making data
public, especially in basic research. As a case in
point, the system for collecting and submitting
data on oil and gas resources was introduced in
China several years ago, but due to slack
enforcement the relevant administration has had
difficulty obtaining and managing these data. The
delay in building databases and disclosing
information has severely affected the integration
of mining rights administration processes.
(3) Poor and uncoordinated energy plans
make it difficult to balance supply and
demand
The coordination between energy plans at different levels and in different sectors is poor.
Some energy plans are conditional on each other.
Other energy plans (especially local plans) do not
take energy supply and demand sufficiently into
account. The energy plans for some sectors have
not been effectively implemented or even completed for some time. Coordination between
central and local energy plans is poor. Typically,
energy plans are more often completed on the
supply side and poorly implemented on the
demand side. The evaluation of energy plans and
their implementation is far behind schedule.
Planning for supply and demand balancing
tends to consider volume ahead of how price
affects energy demand. Although changes in the
scale and structure of energy demand are assessed
within the context of socioeconomic development, the current (government-led) pricing
mechanisms for oil, gas and electricity make it
hard for price changes to reflect market supply and
demand. When energy plans are implemented,
price tends to severely restrict the market’s role.
Moreover, the administration of energy volume
and price are separate responsibilities of the NEA
and NDRC respectively, which also contributes to
the tension between volume and price when
energy supply and demand are considered.
The lack of coordination between plans for
power consumption and generation has become
increasingly acute, which can be clearly seen in
generating equipment availability. In 2014, the
average availability of several types of generating
equipment in China hit a record low. In addition
to weak power demand due to the sluggish
economy, the distribution of power generating
units also caused problems. For example, the
start-up of Unit 2 of the Hongyan River nuclear
power plant was postponed even though it was
ready, because the power supply capacity of the
north-eastern power grid had not been properly
considered at the planning stage. The lead time
for nuclear power plant construction increases the
likelihood of mismatches between installed
power capacity and power demand.
(4) Energy strategies lack national support
and an implementation mechanism
China lacks national medium- and long-term
energy strategies. Despite the introduction of the
Special Report 4: China’s Energy System Revolution
433