The Competition, Regulation And Structure Conversion In The Electricity Market

At present, it is a very important period for the innovation and development of electricity industry, which affects the development of the national economy and daylife of ordinary people. The actual reform process of the electricity industry is also a process of organizational integration, which also means the vertical or the horizontal integration process between the power generation, the power grids and the enterprise users between. So it requires the government to carry out monitoring and controlling to ensure that the reform of the electricity market will be successfully implemented. In fact, the electricity market reform is the re-integration and re-positioning the relationship between the market competition and the regulation. However, the competition and regulation problems of power market with monopoly network are unable to be effectively solved by the traditional economics theory due to the very complicated and particular physical characteristics of monopoly network. Therefore, by means of the newest outcomes of the game theory of economics, the nonlinear complementarity method and new system economics, the competition, regulation problems and system innovation of power market with the complex monopoly network are completely and systemically investigated in this paper. The balance between the regulation and the competition of electricity market is the core of this paper.We first analyse the corresponding characteristic of electricity market, and analyse the constructs and economic performance, then study the corresponding theory of the competition and regulation about electricity market. The reform of the electricity market in fact is a process between the electricity market competition and the regulation of the electricity market scientific. The electricity market is oligarchy effective competition conditions under the government regulation (rather than perfect competition). The article simulates the dynamic decision-making process of the electricity market participants. Taking into account the dynamic game and presenting the supply function equilibrium model, the article puts forward the embedded optimization difference-dynamic model of the market participants, which is constrained by transmission networks and based on the supply constraints function, and achieves the combination of the dynamic game and the power systems with inherent physical properties. At the same time, the conversion from dynamic model to the difference– algebra form is realized using nonlinear complementary methods in the optimization theory. In this part, this article scientifically analyzes the decision process of electricity market equilibrium, at the same time, it presents the regulation policies in favor of the electricity market equilibrium.According to the economic theory of the new system, the economic system within the industry (arrangement) depends on the "institutional arrangements" (a contractual relationship) among the economy agents. As a result, there are two types of relationship in the electricity network: One is the horizontal structure in which enterprises are combined horizontally, and the other is the vertical structure. Which one is more scientific or rational? According to the relationship among enterprise links in quantity, size and the new enterprises entering difficulty based on the principles from the monopoly of the electricity market and a description of the level of competition in the electricity market, we can define the principles for the conversion of electricity market structure and analyze the reconstruction of electricity market structure under the regulation. As a result, it is obtained that there are multiple ways to convert the electricity market structure (horizontally and vertically), but the specific method is decided by the goal of the conversion.The ultimate goal of the structure conversion of the electricity market, from which to determine a reasonable price mechanism, can be summed up as follows: to achieve optimal distribution of resources; to ensure the balance between demand and supply in the electricity market; to ensure adequate economic benefits and social well-beings as well as to ensure electric power safety. This article analyzes the price formation mechanism from three aspects in the electricity market: the interests balance among the enterprises, the optimal resources allocation, the price flexibility and the external characteristics of the industrial economy. So, we have reached a core conclusion, that is, the integrated value of the electricity is the basis of the price formation. We can negotiate the benefit distribution among enterprises gradually and vertically by introducing the flexibility cost of the power enterprises, the use of the positive and the negative externalities of electric powers, the property rights decomposition of the power resources and the value re-estimation into the mechanism of the price formation. As a result, the price formation foundation is made for the structure conversion of electricity market, and it is the goal of the electricity market reform and is also the key of the reform of the market regulation and the competition.The theoretical research is the service for the practice. The power industry in China has experienced from the monopolized state-owned power enterprises, the highly centralized government management model to the raising funds, more competition, separating from enterprises and introducing competition into the electricity at the core market-oriented reforms. Facing the diversity of the monopolized power industry, the ownership structure consists mainly of the state-owned system, the irrational electricity market structure, and the backward construction of the power grid. But how is the performance of the power market competition in China, regulation and the structure conversion? What is the "degree" between the Competition and the Regulation? The article analyzes China's electricity market competition, regulation and the structure conversion performance after the theoretical analysis based on the data of the years 1978-2007. The results show that after the reform and opening, the specific regulatory framework and the independent regulatory agencies and the sophisticated regulatory system significantly improve the volume and efficiency of the power industry, reducing the level of prices and monopoly profits in the statistical sense, but the quality service does yet not play an effective role. Generally speaking, The power industry regulation in China has yielded tangible results, while the good regulatory design system not only improves the performance of the power industry in theory, but also drives the force to improve the performance in practice of the power industry.