The Role of Institutions and Politics in China's Electricity Reform

Abstract

This dissertation studies the institutions and politics in China’s electricity reform. It consists of three free-standing papers, each of which investigates an important subject matter and contributes meaningfully to the current literature. The first paper studies China’s electricity market design and regulatory landscape, and it focuses on the political economy aspect. The second paper studies China’s wind energy integration and curtailment, and it focuses on the roles of institutions. The third paper studies the mechanisms of China’s wholesale generation competition, and it focuses on how institutions and politics affect economic outcomes.

Meanwhile, the three papers are built on the same premise: institutions and politics play a much bigger role in China’s electricity reform than commonly depicted by the literature. The first paper interprets China’s electricity reform as the party-state’s bidding to deliver better economic, social, and environmental outcomes while managing threats to its own power and legitimacy. It is an excellent showcase of why the popular rhetoric “economic efficiency is constrained by politics” is correct but also incomplete. The second paper uses complex chains of causality to explain why the same technical problem can have very different root causes in two institutionally distinct countries. It demonstrates that even for a highly technical problem like wind power curtailment, a sufficient understanding of its institutional background is valuable for developing the right policy response. The third paper explicitly incorporates institutional and political factors into the empirical analysis of economic outcomes. It shows that not only do these factors carry explanation power, but they also speak to the inevitable tradeoffs between economic and political objectives in China’s electricity reform.

Moreover, the three papers arrive at the same conclusion: the “paradoxes” in China’s electricity industry result from the Chinese leaders’ unwavering commitment and persistent efforts to continuously improve the welfare of its citizens while maintaining the party’s monopoly over state power. Ultimately, this dissertation uses China’s electricity reform as a case study to elaborate the dynamic relationship between economic progress and authoritarian politics. The two will, this dissertation argues, continue to generate both synergies and conflicts for China in the foreseeable future.