Wind Power Policy

This section contains information on the most important players in the realm of Chinese energy policy making as well as major policies and regulations affecting the Chinese wind power sector. See below for an introduction to the players in energy policy making, click the links on the left for a detailed description of individual policies and regulations.

Players in Energy Policy Making

The Chinese power sector has undergone a gradual reform process since the mid-1980s. In 2002, an important move has been made with the reform of the structure and ownership of China’s power markets. The State Power Corporation was disintegrated and its assets distributed among two grid companies and five power generation companies. The separation of power generation from the grid (transmission & distribution) aims at improving operational efficiency and lowering prices, taking advantage of market forces to profit from more efficient allocation of resources. As a result of this reform, five big state-owned power generation companies are dominating the power sector to this day. As powerful, relatively autonomous players with full or vice-ministerial rank, they are able to influence government energy policy directly. As the influence of market forces on China’s electricity sector remains limited, supply and demand imbalances persist with power shortages and overcapacity alternating in boom and bust cycles.

As the power sector was restructured, China’s energy policymaking apparatus has also been subject to frequent discussion and reorganization. In January 2010, the National People’s Congress resolved upon the latest institutional reform of energy governance. In future, energy policy will be guided by the National Energy Commission (NEC), a high-level strategy and coordination board headed by Premier Wen Jiabao, with members including the head of NDRC and various ministers. The formation of the NEC indicates that China’s leadership is realizing the great importance of energy policy-making and the lack of power and authority of previous energy-policymaking institutions. In addition to the NEC, which is scheduled to meet twice a year, there is the National Energy Administration (NEA), a vice-ministerial body under the National Development and Reform Commission (NDRC).

The NEA, the successor to the Energy Bureau, will deal with the drafting of plans and policies, as well as their implementation, supervision and administration. In addition, the NEA has a mandate to negotiate with international energy agencies and approve foreign energy investments. Specific regulations in support of energy policy are issued by a host of respective ministries. The provincial level authorities are responsible for the execution, administration and monitoring of national policies on provincial level, with autonomous regulatory power over certain projects.

Although the establishment of the NEA is a step towards integration of the fragmented energy policy making apparatus, the NEA lacks the autonomy, authority and resources (especially manpower) necessary to tackle the challenges China faces in the energy sector. Most importantly, the NEA can make recommendations, but has no authority over energy pricing. Since the setting of energy prices is one of the major instruments of macroeconomic control, it is not surprising that NDRC and ultimately the State Council retain that power. Opposition to a more powerful “Ministry of Energy” was strong, from both NDRC, fighting to keep control over power pricing, and the big power generation companies, who do not want to relinquish their current influence on the government and fear stricter regulation. As a consequence, energy policy making will continue to be limited by a series of factors: “conflicts of interest will impede decision-making; the energy companies will remain important drivers of projects and policies; state-set energy prices will continue to contribute to periodic domestic energy supply shortfalls; and the NEA, with no authority to adjust energy prices, probably will resort to “second best” administrative measures to try to eradicate those shortages”. In absence of market price signals, NDRC attempts to accurately forecast demand, approve new generation capacity accordingly and adjust prices to keep profits within a reasonable range. Unfortunately, this approach has resulted in a volatile power sector, swinging between power shortages and supply surpluses.

Set up in January 2010, the National Energy Commission's main task is to address energy-related issues, which are beyond the ability of one department to solve and require coordination from several departments.The high-level intra-ministerial commission, whose members include the head of NDRC and various ministers, is in charge of drafting energy development strategy, reviewing energy security as well as coordinating international cooperation.