Planning for economically and environmentally sound electricity in Shandong Province, China

Abstract

This thesis specifies, simulates and examines a number of electricity service expansion scenarios for Shandong Province, China. In this exercise it communicates how a selected assortment of generation and end-use efficiency strategies will perform over alternative 25-year futures with respect to cost and emissions goals identified by the provincial utility and project's primary client, Shandong Electric Power Group Corporation (SEPCO). For context it chronicles the expansion of electricity service in Shandong during China's post-Mao era of market reforms, and juxtaposes China's imperative for continued economic growth with Shandong's struggle to address the severe health and environmental impacts of its historical reliance on coal combustion for electricity generation. Using SEPCO's existing practices and articulated strategy as two reference cases, it then investigates the firm's options for modifying planning practices in light of four likely phenomena that will influence its operating environment over the course of the study period. To represent the hypothesized influence of these factors on SEPCO, it specifies and generates a set of scenarios crafted to model the particular impacts on the utility of China's 1) pending accession to the World Trade Organization, 2) ongoing financial market reforms, 3) introduction of electric sector restructuring and 4) implementation of stricter pollutant emissions enforcement. It finds SEPCO should be able to maintain or slightly reduce long-term unit costs over a growing rate base by virtue of efficiency gains derived from replacing its generating stock. However, aggressive end-use efficiency, risk management and organizational change at the firm level, as well as continued institutional and policy reform at the national level will be essential if these events are to have a positive impact on Shandong's and China's endemic environmental issues.