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Electricity Transmission Project on Energy Poverty Xiaotian Chen Clemson University, [email protected]

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Electricity Transmission Project on Energy Poverty Xiaotian Chen Clemson University, Xiaotia@G.Clemson.Edu Clemson University TigerPrints All Theses Theses 12-2015 The mpI act of China's "West to East" Electricity Transmission Project on Energy Poverty Xiaotian Chen Clemson University, [email protected] Follow this and additional works at: https://tigerprints.clemson.edu/all_theses Part of the Economics Commons Recommended Citation Chen, Xiaotian, "The mpI act of China's "West to East" Electricity Transmission Project on Energy Poverty" (2015). All Theses. 2286. https://tigerprints.clemson.edu/all_theses/2286 This Thesis is brought to you for free and open access by the Theses at TigerPrints. It has been accepted for inclusion in All Theses by an authorized administrator of TigerPrints. For more information, please contact [email protected]. The Impact of China’s “West to East” Electricity Transmission Project on Energy Poverty A Thesis Presented to the Graduate School of Clemson University In Partial Fulfillment of the Requirements for the Degree Master of Arts Professional Economics by Xiaotian Chen December 2015 Accepted by: Dr. Matthew Lewis, Committee Chair Dr. Jaqueline Oliviera Dr. Peter Blair ABSTRACT Energy poverty, which means that people can’t get enough energy for daily life, is one of the big problems in rural place of Northwest region of China. The government wants to solve the problem with a large-scale electricity transmission project named “West to East”. The aim of this thesis is to evaluate the impact of “West to East” project on the reduction of energy poverty in Shaanxi province in China through the analysis of 119 counties between the years 2003 to 2015. Since residential electricity price are set by the government at artificially low levels, an alternative measure is constructed to evaluate energy poverty in the presence of price controls. The results indicate a significant reduction of energy poverty and increase in social welfare because of the completion of “West to East” project. Key Words: “West to East” project, Energy Poverty, Social Benefit, Shaanxi ii TABLE OF CONTENTS Page TITLE PAGE ................................................................................................................................................i ABSTRACT ................................................................................................................................................ ii 1. INTRODUCTION .................................................................................................................................... 1 2. LITERATURE REVIEW ............................................................................................................................ 6 2.1 STANDARD OF 10% OF INCOME............................................................................................................ 6 2.2 ENERGY POVERTY UNDER PRICE CONTROL .......................................................................................... 8 2.3 PROJECTS ALLEVIATE ENERGY POVERTY ............................................................................................... 9 2.4 ENERGY POVERTY AFFECT SOCIETY .................................................................................................... 10 3. DESCRIPTION OF ENERGY POVERTY UNDER PRICE CONTROL ............................................................. 12 3.1 HIDDEN ELEMENTS ............................................................................................................................. 14 3.2 OTHER FACTORS ................................................................................................................................. 21 CONCLUSION FOR SECTION...................................................................................................................... 28 4. IMPACT OF “WEST TO EAST” PROJECT ................................................................................................ 30 4.1 REAL PRICE CHANGES ......................................................................................................................... 34 4.2 REDUCTION OF ENERGY POVERTY ...................................................................................................... 41 4.3 POWER BLACKOUTS AND RESTRICTIONS ............................................................................................ 48 CONCLUSION FOR SECTION...................................................................................................................... 49 5. ENERGY POVERTY AND SOCIETY ......................................................................................................... 50 5.1 THE NUMBER OF MARRIAGES—HAPPINESS....................................................................................... 50 iii Table of Contents (Continued) Page 5.2 GDP CREATED BY INCREASED FIXED ASSETS—PROSPERITY ................................................................ 54 5.3 THE RETAIL SALES OF SOCIAL CONSUMER GOODS—MERCHANDISE FLOWS ...................................... 56 6. CONCLUSION ...................................................................................................................................... 58 REFERENCES ........................................................................................................................................... 61 iv 1. INTRODUCTION This paper studies the impact of China's West-to-East Project on “energy poverty”, selecting China's Shaanxi Province (with its 119 cities) as an example. It also discusses the social impacts after the alleviation of “energy poverty". As China develops, most people no longer need to struggle with hunger and disease. By late 2002, most of China's provinces and municipalities had largely overcome the problem of hunger. Consequently, the UN food agency stopped food aid to China in 2005.Also, by 1997, most Chinese farmers had access to basic health care. The number of doctors per million people in China has also significantly increased in the late 20th century. Government and the people began to focus on higher levels of living security, such as "energy right". Even though most Chinese people, including those in rural regions, have access to power supply, the power consumption still remains low. Sociologists and government advisers refer to this situation as "energy poverty". To solve this problem, the government began an ambitious transmission line project. Rural electricity transmission system reform, as a part of “west to east” national project, became the focus of national transmission line strategy. "West to east" project was mostly complete by the end of 2010.The main subject of this paper, therefore, is how this project addresses the "energy poverty" issue and what kinds of impacts the alleviation of “energy poverty” has upon the society. 1 “Price control” is a very old measure to make electricity supply available to the people at cheap price. It began in the 1970s, when most people were living under poverty. During that period, the government reduced the electricity price hoping to increase the public access to electricity. Although such control has led to many problems and does not necessarily solve the "energy poverty" issue, it does, however, enable most people to meet their basic power needs. However, because the residential price is set below the true cost of the electricity, additional revenue must be collected through local taxes and increased commercial electricity prices, which ultimately lead to higher price on other household goods. Common methods of calculating “energy poverty” would not correctly attribute these additional burdens to higher electricity costs. "West to East" project is a very large scale transmission line project, and receives the largest investment in the Chinese national strategy of pursuing the "Western Development." Its main purpose is to transport electricity from the West, which has surplus energy, to the East, which is a densely populated region. It also includes a large area of power grid renovation and infrastructure construction. Construction of power facilities in rural areas is the focus of "along the route project"(as a part of “West to East” project), which aims to increase rural energy consumption level. It began in 1996, and was mostly complete by late 2010. It affects 17 provinces and about 800 million people. "West to east" project comprises three main trunks, North, middle and South. Shaanxi Province, which is the example discussed in this paper, is influenced by the North and middle line. 2 “Energy poverty” is lack of access to modern energy services. It refers to the situation of large number of people in developing countries who need to spend significant time collecting fuel to meet basic needs, which negatively affects their well-being. It is estimated that one-third of the world’s population, amounting to about 2 billion people around the world, has no access to electric energy. Electricity is one of the pillars on which education and health lean. As such, the universalization of the access to electric energy in the world is of fundamental importance for the eradication of poverty and reduction of social inequality. In China's vast rural areas, especially in the poorer western region, people have low level of energy consumption. The official newspaper People's Daily says that the solution of "energy poverty" has become the focus of the Chinese government’s rural policy. It further says that China still has two million rural people under a high level of energy poverty and concludes that energy poverty is a pressing problem. It also mentions that the
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