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Demand-Side Management in China's Demand-Side Management in China’s Restructured Power Industry: Public Disclosure Authorized How Regulation and Policy Can Deliver Demand-Side Management Benefits to a Growing Economy and a Changing Power System Public Disclosure Authorized Public Disclosure Authorized Report 314/05 Public Disclosure Authorized December ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP) PURPOSE The Energy Sector Management Assistance Program (ESMAP) is a global technical assistance partnership administered by the World Bank and sponsored by bi-lateral official donors, since 1983. ESMAP’s mission is to promote the role of energy in poverty reduction and economic growth in an environmentally responsible manner. Its work applies to low-income, emerging, and transition economies and contributes to the achievement of internationally agreed development goals. ESMAP interventions are knowledge products including free technical assistance, specific studies, advisory services, pilot projects, knowledge generation and dissemination, trainings, workshops and seminars, conferences and roundtables, and publications. ESMAP work is focused on four key thematic programs: energy security, renewable energy, energy-poverty and market efficiency and governance. GOVERNANCE AND OPERATIONS ESMAP is governed by a Consultative Group (the ESMAP CG) composed of representatives of the World Bank, other donors, and development experts from regions which benefit from ESMAP’s assistance. The ESMAP CG is chaired by a World Bank Vice President, and advised by a Technical Advisory Group (TAG) of independent energy experts that reviews the Programme’s strategic agenda, its work plan, and its achievements. ESMAP relies on a cadre of engineers, energy planners, and economists from the World Bank, and from the energy and development community at large, to conduct its activities. FUNDING ESMAP is a knowledge partnership supported by the World Bank and official donors from Belgium, Canada, Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden, Switzerland, and the United Kingdom. ESMAP has also enjoyed the support of private donors as well as in-kind support from a number of partners in the energy and development community. FURTHER INFORMATION For further information on a copy of the ESMAP Annual Report or copies of project reports, please visit the ESMAP website: www.esmap.org. ESMAP can also be reached by email at [email protected] or by mail at: ESMAP c/o Energy and Water Department The World Bank Group 1818 H Street, NW Washington, D.C. 20433, U.S.A. Tel.: 202.458.2321 Fax: 202.522.3018 Demand-Side Management in China’s Restructured Power Industry How Regulation and Policy Can Deliver Demand-Side Management Benefits to a Growing Economy and a Changing Power System December 2005 Zhaoguang Hu David Moskovitz Jianping Zhao Energy Sector Management Assistance Program (ESMAP) Copyright © 2005 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing December 2005 ESMAP Reports are published to communicate the results of ESMAP’s work to the development community with the least possible delay. The typescript of the paper therefore has not been prepared in accordance with the procedures appropriate to formal documents. Some sources cited in this paper may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, or its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The Boundaries, colors, denominations, other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to the ESMAP Manager at the address shown in the copyright notice above. ESMAP encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Table of Contents Foreword ....................................................................................................................................... vii Acknowledgments.......................................................................................................................... ix Abbreviations and Acronyms......................................................................................................... xi Executive Summary ........................................................................................................................ 1 China's Energy Use and Power Markets .............................................................................1 China's DSM Experience ....................................................................................................3 DSM Potential in China ......................................................................................................5 Barriers to DSM in China....................................................................................................6 Impacts of Power Sector Reform on DSM..........................................................................7 International DSM Experience............................................................................................8 Policy Recommendations....................................................................................................9 China’s Energy Use and Power Market ........................................................................................ 15 Energy Resources in China ...............................................................................................15 Present Status of China’s Electricity Sector......................................................................18 Historical Review and Present Situation of China’s Power Sector Reform and its Relationship to DSM ............................................................................... 20 Primary DSM-Related Problems in the Electricity Sector................................................22 China’s DSM Experience.............................................................................................................. 27 An Overview .....................................................................................................................27 Load Management Experience..........................................................................................28 Experience with Energy Efficiency...................................................................................36 The Potential for Demand-Side Management ............................................................................... 39 Load Management Potential..............................................................................................39 Savings Potential of End-Use Electrical Equipment in China ..........................................41 Cumulative Energy Saving and Environmental Benefits..................................................45 Major Barriers to Demand-Side Management............................................................................... 49 Legal Obstacles .................................................................................................................49 DSM Funding....................................................................................................................50 Unclear DSM Responsibility.............................................................................................50 Power Pricing ....................................................................................................................51 Tariff-Setting Methods......................................................................................................51 Energy-Saving Technologies and Methods.......................................................................51 Energy-Saving Product Quality.........................................................................................52 Lack of Education and Awareness of DSM’s Potential and Benefits ...............................52 Shortage of Talented DSM Professionals .........................................................................53 The Impacts of Power Sector Reform on DSM............................................................................. 55 Conclusions .......................................................................................................................58 International DSM Experience...................................................................................................... 61 International Experience Using DSM to Address Power Shortages .................................62 DSM Lessons Learned from International Experience with Power Shortages .................75 Policy Recommendations .............................................................................................................. 81 Short-Term Regulatory and Policy Options to Promote DSM in China ...........................82 Longer-Term
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