Chinese Coal-fired Electricity Conflict Mechanism And Solution

China has witnessed a persistent conflict between the coal industry and electricity industry,mainly in the form of price fighting,ever since 1993 when the coal industry established a marketing reform.Scholars have made much research into this problem with many policy options given.However,most of them used Game Theory to study this problem,In the paper,the author studied coal-electricity conflict from the perspective of System Dynamics,and was focused on the oscillations and long cycle in the coal market,which was a good supplement to the former research.It was found in the paper that there were several causes for the oscillations of coal market:both endogenous and exogenous.The long delay existing in the coal supply system,mainly construction time of coal capacity,was found to be one of the endogenous causes for the oscillations.Another endogenous cause could be the town-owned coal mines,which accounted for more than 30%of the total coal production,and which was very sensitive to coal price.The exogenous causes for the oscillations fell into two categories:first,the oscillations in the coal demand,and the uncertainty rising from governmental policies.Also looked into was the cycle of coal market,which was found to be 7 years.This replicated the historical data,and was also why it was so difficult for the government to balance coal supply and demand in order to solve coal-electricity conflict since it was really a big cycle.Several policy options were recommended to the government in order to relieve or remove coal-electricity conflict.First,it was suggested that the government reduce the lead time of coal production.Second,effect can be made to control the percentage that town-owned mines account for of the total coal production.Third,attention can be paid to smoothing electricity demand for a smooth coal demand.Forth,it was recommended that the government steer those town-owned coal mines in a reasonable way so as to reduce and control the large swing of coal supply by them.Fifth, government can work to promote the development of coal import and export.Finally, it was recommended that coal enterprise and electricity enterprise sign long-term contract to smooth the oscillations in the coal price.