Assessing the roles of efficient market versus regulatory capture in China’s power market reform

Abstract China began implementing market-based economic dispatch through power sector reform in 2015, but the has encountered some political and challenges. Here we identify reform’s efficiency changes explore influences of market-driven politically driven mechanisms behind them. We do this a cost-minimizing model integrating high-frequency data southern China. find that transition improves overall efficiency, regulatory capture provincial markets limits its full potential. The preference for local enterprises over central state-owned (SOEs) by governments, form allocated generation quotas, demonstrates challenge market reform. quota protects small coal-fired natural gas generators owned SOEs, lessening their motivation to improve even after As result, nearly half potential carbon dioxide emissions reduction social welfare gains is not realized.