and the top four small power generation groups
(State Development & Investment Corporation,
SDIC; Guohua Electric Power; CR Power; and
China General Nuclear Power Group, CGN). The
installed capacity of these companies accounts for
60% of the country’s total. There are also some
power generation enterprises that are wholly
owned or controlled by local government. At the
same time, power transmission, distribution and
sales have not yet been deregulated, and power
supplies in all provinces come mainly from local
monopoly power grid enterprises. Electricity
sales from central grid enterprises account for
more than 80% of the country’s total electricity
demand. Independent market-oriented trading has
not yet been established in China’s electricity
market—competition has been introduced in
power generation, but monopolies remain in
transmission, distribution and sales. Grid companies with power transmission and distribution
networks have a monopoly in both wholesale and
retail. Finally, power generation plans are developed in coordination with government at all
levels and with power plants and grids. This has
created an administrative system influenced by
multiple factors, such as regulation policies,
energy conservation and emissions reduction, and
the requirements of administrators.
The new electricity market reform plan has
been released in the Opinions on Further Deepening the Reform of the Electric Power System.
The goal of “establishing and improving the
market mechanism in the power sector that features ‘legal basis, separation of government and
enterprises, compliant market participants, fair
trading, reasonable prices and effective supervision” stated in the Opinions echoes actual
requirements. The priorities and pathway of
electricity market reform can be summarised as
“deregulating a new power distribution and sales
market, deregulating electricity prices other than
transmission and distribution tariffs, and deregulating power generation other than that for safe
and efficient power operation and supply reliability, and others. The reform framework is
defined as “deregulating power generation, sales
and end use, and control of power transmission
and distribution”, which is basically what would
be expected. Generally, this round of electricity
market reform has been carried out with a
common-sense approach and has taken both the
requirements of reform and the principle of
practicality into consideration. Compared with
“Document No. 5”, released in 2002, the Opinions is of more practical significance.
(3) Coal sector market reforms are complete,
though the long-term contract price for
thermal coal needs to be tested in the
market
The coal sector has ended its dual-track price
system and completed its market-oriented
reform. Apart from thermal coal, China’s coal
market was already market-based. In 2013, the
cancellation of priority contracts and the ending
of the dual-track price system for thermal coal
completed the market reform of the coal sector.
Although the contradiction between marketoriented coal and planned electricity appears to
have been resolved, the long-term contract price
for thermal coal, reached through difficult negotiations and compromise between all parties
involved, has yet to be tested in the market.
3.3.2 Analysis of Existing Problems
China’s energy circulation system is largely
monopolistic. Administrative monopoly is
prominent in investment access and resource
acquisition in upstream primary energy. The fact
that there is only a limited number of market
participants in the oil and gas sector (especially
in upstream and midstream) affects the overall
efficiency of the sector.
(1) The upstream and downstream oil and gas
monopoly affects the overall efficiency of
the value chain
The monopoly in upstream oil and gas persists.
Despite mutual penetration of each other’s
dominant market areas by CNPC, Sinopec and
CNOOC, the “separation of upstream and
downstream, separate administration of domestic
and overseas trading, and separation of offshore
and onshore oil and gas” in the oil and gas sector,
436
S. Yaodong and A. Gillespie
(State Development & Investment Corporation,
SDIC; Guohua Electric Power; CR Power; and
China General Nuclear Power Group, CGN). The
installed capacity of these companies accounts for
60% of the country’s total. There are also some
power generation enterprises that are wholly
owned or controlled by local government. At the
same time, power transmission, distribution and
sales have not yet been deregulated, and power
supplies in all provinces come mainly from local
monopoly power grid enterprises. Electricity
sales from central grid enterprises account for
more than 80% of the country’s total electricity
demand. Independent market-oriented trading has
not yet been established in China’s electricity
market—competition has been introduced in
power generation, but monopolies remain in
transmission, distribution and sales. Grid companies with power transmission and distribution
networks have a monopoly in both wholesale and
retail. Finally, power generation plans are developed in coordination with government at all
levels and with power plants and grids. This has
created an administrative system influenced by
multiple factors, such as regulation policies,
energy conservation and emissions reduction, and
the requirements of administrators.
The new electricity market reform plan has
been released in the Opinions on Further Deepening the Reform of the Electric Power System.
The goal of “establishing and improving the
market mechanism in the power sector that features ‘legal basis, separation of government and
enterprises, compliant market participants, fair
trading, reasonable prices and effective supervision” stated in the Opinions echoes actual
requirements. The priorities and pathway of
electricity market reform can be summarised as
“deregulating a new power distribution and sales
market, deregulating electricity prices other than
transmission and distribution tariffs, and deregulating power generation other than that for safe
and efficient power operation and supply reliability, and others. The reform framework is
defined as “deregulating power generation, sales
and end use, and control of power transmission
and distribution”, which is basically what would
be expected. Generally, this round of electricity
market reform has been carried out with a
common-sense approach and has taken both the
requirements of reform and the principle of
practicality into consideration. Compared with
“Document No. 5”, released in 2002, the Opinions is of more practical significance.
(3) Coal sector market reforms are complete,
though the long-term contract price for
thermal coal needs to be tested in the
market
The coal sector has ended its dual-track price
system and completed its market-oriented
reform. Apart from thermal coal, China’s coal
market was already market-based. In 2013, the
cancellation of priority contracts and the ending
of the dual-track price system for thermal coal
completed the market reform of the coal sector.
Although the contradiction between marketoriented coal and planned electricity appears to
have been resolved, the long-term contract price
for thermal coal, reached through difficult negotiations and compromise between all parties
involved, has yet to be tested in the market.
3.3.2 Analysis of Existing Problems
China’s energy circulation system is largely
monopolistic. Administrative monopoly is
prominent in investment access and resource
acquisition in upstream primary energy. The fact
that there is only a limited number of market
participants in the oil and gas sector (especially
in upstream and midstream) affects the overall
efficiency of the sector.
(1) The upstream and downstream oil and gas
monopoly affects the overall efficiency of
the value chain
The monopoly in upstream oil and gas persists.
Despite mutual penetration of each other’s
dominant market areas by CNPC, Sinopec and
CNOOC, the “separation of upstream and
downstream, separate administration of domestic
and overseas trading, and separation of offshore
and onshore oil and gas” in the oil and gas sector,
436
S. Yaodong and A. Gillespie