An Analysis Of The Impeding Effects Of The State Grid Monopoly On The Development Of Wind Power In China

This study researches the negative implications posed on wind power development in China caused by the monopoly power of the State Grid. It then seeks to provide ways to overcome these impeding factors. The background of the study was a fascination for the impressive growth experienced in the Chinese wind power market since the turn of the millennium, and the growing concern for factors hampering further development. This thesis will contribute to existing literature by revealing a correlation between the grid monopoly and these hampering issues. A theoretical framework is applied in order to narrow down and guide the analysis, and case studies were made for the time frame considered from 2002 until today.The study found that the State Grid is failing to provide sufficient grid connection to wind farms, and that the poor quality of their grid infrastructure is forcing wind developers to temporarily shut down production. These findings are supported by theory as issues of quantity and quality are commonly connected to monopolies. Furthermore, though regulated by the Government, research showed that the present pricing model is inadequate in reimbursing both wind developers and the grid; insufficient funding and delayed payments are posing a major threat to wind power development by contributing to financial instability. Several measures are then proposed in order to combat these issues, all based on the crucial assumption that the grid monopoly needs to remain in order to avoid wasteful grid duplicity. It is suggested that the lack of financial incentives faced by the State Grid to improve their operations should be made up for through financial support, such as tax breaks. Furthermore, I found that there is room to liberalize the electricity market by separating transmission and distribution, as the State Grid today holds a monopoly position at both purchasing and selling ends of the wind power supply chain. Also, splitting distribution into several smaller companies would increase competition and the role of market-based electricity pricing, which is expected to deal with the consequences of the imperfect pricing model witnessed today.