Energy in China Spotlight

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Source: http2007.  Licensed under  Creative Commons Attribution 2.0 Generic.

Source: http2007. Licensed under Creative Commons Attribution 2.0 Generic.

Introduction

Home to almost 1.4 billion people, China is the world’s most populous nation and a rapidly developing economic powerhouse. It has seen some of the most rapid industrialization of any country on Earth, and electricity development has been a sizable part of this industrialization. The advent of a planned economy under Mao Zedong spurred China’s initial burst of economic growth, but the gradual transition to a market economy has kicked development into high gear. Liberalization began with the policies put into place by Mao’s successor Deng Xiaopin in 1978, and has continued since then. Regulatory policy is still fairly stringent, but China has become open enough to the free market to encourage ample investment in many sectors, particularly the manufacturing and electricity sectors. GDP PPP was an estimated $13.39 trillion in 2013, compared to $16.77 trillion for the United States in the same year. GDP per capita in 2013 was a modest $6,807 USD in 2013, putting it on par with many Eastern European and Latin American countries, but it is growing exponentially.

Thanks to aggressive policy action, China has achieved near universal electrification, with a nationwide electrification rate of 99.7%. In order to meet the challenge of providing nearly a billion and a half people with reliable access to electricity, it has built the largest generation and grid system in the world. In 2013, China had an installed generating capacity of 1247 GW. Although at the moment, 90% of China’s electricity generation comes from coal and hydropower, government policies are causing a considerable shift towards wind and solar. Despite impressive development in the electricity sector, many Chinese still suffer from energy poverty in the form of solid fuel usage. This is a problem that has not been fully addressed by Chinese policymakers, and presents a wonderful opportunity to social entrepreneurs.

China’s rapidly transitioning economy, mature electricity sector, and challenging regulatory environment create a unique and challenging environment for small and medium-sized energy enterprises that are attempting to gain entry into the market. Here, we will explore the current state of energy in China, the structure of China’s electricity generation and distribution system, lingering energy poverty in China, relevant government programs and policies, the state of the energy market, barriers to entry for enterprises, and environmental issues relating to electricity production and consumption.

Contents

China’s Electricity Sector

This section takes a hard look at where China gets its electricity and how it is distributed. Where does China’s electricity come from? How do things vary on a regional basis? How does China’s grid system work? What does China’s energy mix look like?

Energy Poverty in China

This section talks about energy poverty in China. More specifically, what form of energy poverty manifests itself in a country with near-universal electricity access and an average income significantly higher than that of many other energy-poor nations.

Current Policy Framework

Here we explore what the policy and regulatory environment in China looks like. How are businesses regulated in China? What sorts of relationships exist between private enterprise and the Chinese government? What is the Chinese government already doing to combat issues such as lack of grid access and solid fuel usage?

Market Environment and Barriers to Entry

It’s important for businesses to know what sort of challenges they will be facing in the markets they plan to operate in. Energy business in China is no exception; barriers to entry are numerous and often difficult to overcome. What does China’s market environment look like? How does investment in China work? How do these factors create a unique and challenging environment for social business?

Environmental Issues

China’s rapid industrial development has come at a hefty price. This section takes a look at how energy production and consumption has caused widespread environmental degradation and contributed to climate change. What can be done to fix this, and what is already being done to fix this?

Key Recommendations for Social Enterprises

Here we give a few recommendations for social enterprises that are seeking to do business in China.

References