Restructuring China´S power sector: The technical, economic and political foundations of unbundling transmission and distribution segments in China´S electricity industry

Starting from 2002 China has been engaging vast amount of resources in restructuring its power industry and has so far achieved the separation of generation and auxiliary from the former vertically integrated entity. What remained unsettled and even grew into a tougher bottleneck is that without obvious efforts in unbundling the transmission and distribution (T&D) segments there was actually a trend of reintegration and recentralization of power grid assets. The State Grid Corporation of China (SGCC), China´s giant national grid operator, currently runs over 70 percent of the country´s business in electricity transmission, distribution and sales, and its monopolistic market power continues to expand through pursuing national goals like rural electric network renovation and strong smart grid construction. Despite SGCC´s great contribution to the overall development of China´s power sector, its operational efficiency has long been questioned and little public openness been challenged. The chaos in recent years in which interest controversies between local electric companies and SGCC evolved into armed conflicts exposed the structural deficiencies in a unified T&D configuration. It is consequently appealed that an approach to dismantle China´s electricity distribution from transmission should be urgently dedicated to. This paper aims at designing an approach to unbundle China´s electricity transmission and distribution segments. Such an approach should be effective in solving present problems and paving ways for further reforms. At the same time, it should avoid affecting the achievement of the nation´s long-term goals. It is therefore suggested that a gradual approach with modest, step-by-step adjustments should be taken. Through deep investigation into China´s electricity transmission and distribution section,