Document #9 calls for better governance and regulation, especially with respect to regulatory capacity, regulatory methods, and system planning. China’s adoption of revenue-based rate-making for transmission and distribution systems is one important step toward this goal. As the reform effort deepens, however, China’s methods of regulating and its institutional capacity to do so will need to evolve.
This paper reviews the regulatory history and governance practices in the U.S. and identifies the following opportunities for China’s policymakers:
- Creating transparent, predictable, and open processes.
- Identifying clearly the authority and allocation of authority between central and provincial regulators.
- Creating clear processes, roles, and responsibilities for resource planning and procurement with an explicit link among planning, investment decisions, and project approval.
- Addressing overcapacity and potentially unrecovered (“stranded”) costs.
- Addressing resource adequacy in an environment of both competitive and noncompetitive resources.
- Creating system operations to address generator dispatch and compensation, integrate demand response and variable renewable resources, and include flexibility resources and ancillary services.
- Integrating energy and environmental policy and regulation.
This paper is one in a series of papers by RAP and the Natural Resources Defense Council that looks at international experience for potential solutions and perspectives to inform China’s policymakers as they work toward meeting the country’s air quality and greenhouse gas reduction goals. Other papers address renewable energy integration, wholesale markets, and power sector planning.
This paper is also available here in Chinese.