The determinants of aggregated electricity intensity in ChinaWord文件下载.docx

The determinants of aggregated electricity intensity in ChinaWord文件下载.docx

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ABSTRACTThisstudyprovidestechnologicalchange,factordemandandinter-factorsubstitutabilitymeasuresforchinaelectricityindustry.Weuseindividualfuelpricedataandtranslogfactorcostfunctionapproachtoestimatetotalfactorcostfunctionsandfuelshareequations.TheimpliedpriceandMorishimasubstitutionelasticitiesforinter-factorareobtained.Byestimatingthesubstitutionbetweenfactors,ourpurposeistoexplorethedrivingforcestoaggregateelectricityintensity.Theresultssuggestthatenergyissubstitutableforcapitalandcomplementaryforlaborregardingcross-priceelasticity.CapitalisMorishimasubstitutiontoenergyandlaboriscomplementtoforenergy.Factorsubstitution,budgetandtechnologyeffectscontributetotheyear-to-yearvolatilityofelectricityintensityintheproportion48%:

41.99%:

9.89%.

Keywords:

China,Electricityintensity,Factorsubstitution

1.Introduction

Withprominentdecreaseof69percentofChinaenergyintensityin1985-2002andareversalsince2003,avastmajorityofstudiesattempttoexplainthisphenomenon.Thedebateofthedrivingforcestothepersistentdeclineofenergyintensityhasbeenrevolvingaroundstructuralshiftsandefficiencyimprovements.JustasCromptonandWu（2005）pointedoutthatChina'

sdecliningenergyintensityisoftenexplainedintermsoftechnologicalandstructuralfactors.

Atthebeginningof1990s,researchersarguedthatthestructuralshiftsawayfrommoreenergy-intensiveindustrialsub-sectorsplayedthemostimportantroleinChina（e.g.,Smile,1990;

Kambara,1992）.Sincethen,theliteraturesusuallyacceptedtheviewthatthecontinuousdeclineinenergyintensitywasmainlyattributedtotheenhancedefficiencyofenergyuseofindustrysectors,whilethestructuralshiftswithinthemanufacturingsub-sectorsorfromprimarytosecondaryortertiaryindustryplayonlyanominalrolefrom1980totheearly1990s（SitonandLevine1994;

Zhang,2003）.Garbaccioetal.（1999）evenfoundthatstructuralchangeactuallyincreasedenergyintensitybetween1987and1992.Sincethemid-1990s,efficiencyimprovementshavebeenparticularlymarkedinenergy-intensiveindustriessuchasmetallurgy,cement,paper,textiles,oilandcoalprocessing,andelectricalpowergeneration（Philip,2009）.Contrarytotheabovementionedstudiesfocusingonthedeclineofenergyintensity,thereareliteraturesspecializingontheunusualphenomenonofenergyintensityincreasingsince2003.MaandStern（2008）indicatedthattheincreaseinenergyintensitysince2000couldbeexplainedbynegativetechnologicalprogress.Zhaoetal.（2010）foundthatthemostimportantdriverbehindChina’senergyintensityincreaseduring1998-2006wastherapiddevelopmentinenergy-intensiveindustries.

Thecommonfeaturethepreviousstudieshaveisthattheyusuallyapplytheindexdecompositionmethodwhichisusedtotracktheenergyintensity/efficiencytrendandassessthefulfillmentofenergyefficiencytargets.Ashortcomingofpurelydescriptivedecompositionstudiesisthatitcannotexplainwhatisbehindenergyefficiencyimprovementsandenergy-savingstructuralchange（WelschandOchsen,2005）.Toourunderstanding,notonlytheenergyefficiencyimprovementscouldbecausedbytechnologyadvancementandfactorssubstitution,butalsobepossiblebytheenergypricechanging.Thisviewissupportedbyotherresearchers.Employingasetofpaneldataforapproximately2500ofChina’smostenergyintensivelargeandmedium-sizedindustrialenterprisesduring1997-1999,Fisher-Vanden（2004）obtainedthatrisingrelativeenergypricesaccountfor54.4%ofthedeclineinmeasuredaggregateenergyintensity.ByreviewingofthederegulationofenergypricesinChinabetween1985and2004,HangandTu（2007）impliedthatanincreaseofrelativepricesofdifferentenergytypesleadstoadecreaseincoalintensity,oilintensity,andaggregateenergyintensity.ShiandPolenske（2005）foundanegativeown-priceelasticityofenergyintensity,aprice-inducementeffectonenergyefficiencyimprovement,andagreatersensitivityoftheindustrysector,comparedtotheoveralleconomy.Zhaoetal.（2010）arguedthatlowenergypriceshavedirectlycontributedtohighindustrialenergyconsumptionandindirectlytotheheavyindustrialstructurealthoughtheydidn’tempiricallygetwhethertheenergypriceshaveeffectonenergyintensity.

Thispaperalsoattemptstoinvestigatethedeterminantsofenergyintensity.However,wefocusonelectricpowerindustry.Toourunderstanding,fewliteratureshavefocusedonpowersectoronthisissue.Therestofthepaperproceedsasfollows.ThefirstpartofthispaperoutlinestheelectricityproductionandconsumptioninChina.Followingthis,themethodologyanddataaredevelopedtocalculatetheinterfactorsubstitutabilityanddecomposeChina’schangingelectricityintensitytoascertainthedrivingforces.Theempiricalfindingsandtheinterpretationoftheresultsarepresentedinthefourthsection.ThelastsectionprovidesconclusionsanddiscussestheimplicationsofourempiricalresultsforincreasingChina’selectricityefficiency.

2.ElectricityproductionandconsumptioninChina

Electricityisoneofthemostimportantandbasicneedsoftodaycommunity.AccordingtoCSY（2008）,netelectricitygenerationinChinain2007totalled3281TWh,83percentofwhichwasthermalpower,followedbyhydropowerwith14.8%.Thethermalpowerwasgeneratedthroughthecombustionoffossilfuels.Coalplaysthelargestroleingeneration,followedbypetroleumandthennaturalgas,witheachrepresenting97.46percent,1.38percent,and1.16percentof2007’stotalnetgeneration,respectively.Itisobviousthatfossilfuelcombustiondominatesingeneratingpower,despiteitsnegativeenvironmentalexternalities.Moreover,coal-firedpowergenerationwillbeinastageofstabledevelopmentuntilatleast2020.

Before2003,theStatePowerCorporation（SPC）dominatedtheproductionandsupplyofelectricpowerinChinaandownedalltransmissionnetworksandalargeproportionofthedistributionfacilities.Attheendof2002,thegeneratingassetsoftheSPCweredivestedtofiveindependentpowerproducerstoincreasethecompetitivenessofthepowerindustryandrevamppricingmechanisms.Despitetheremarkablegrowthofelectricitygenerationexperiencedfrom1985to2007,thecurrentbalancebetweenpowersupplyanddemandinChinaisstillatalowlevel.Since1998,demandforelectricityhasacceleratedbeyondwhatmanyeconomistshadinitiallypredicted.Consequently,anumberofseriouseconomicproblemshavebeguntoemerge.

TheaveragepowernetworkenergylossrateinChinawas6.97%in2007,whichmeanselectricityof229TWhwaslostinpowergridin2007.Lossesintransmissionin2007were206TWh,accountedfor6.72%ofconsumptionbyusage.ItindicatesthatChina’spowertransmissionsystemremainsunder-improvedandtherearemuchpotentialinenhancingtheratesofelectricityutilizationefficiency

Withrespecttoelectricityconsumption,since1980,itincreasedfast.From1985to2007,itgrewatannualaveragingnearly6.87%,versus4.43%perannualforcoaland5.46%perannualforpetroleum.Thereasonsarenumerous,andmainlyledbystronggrowthinindustrialactivityandincreasingpenetrationsofelectricalequipment,spacecoolingandotherelectricappliancesinbothindustrialandresidentialsectors.Fig.1showstheconsumptionstructureofelectricitybysectorsin1985and2007.Industrycontributesmostofthenation’stotalelectricitydemandalthoughitdecreasedfrom79.74%to75.3%.Theresidentialsector'

scontributiontototalnationalelectricitydemandrosefrom5.4%to11.07%duringthesameperiodtimes（23years）（CSY）.Itwaslargelyduetotheincreasingpenetrationofelectricalapparatussuchastelevision,spacecoolingtothefamilywithhigherincome.

Fig1.Electricityconsumptionstructure

3.Methodologyanddata

Thetranslogproductionfunction（TPF）developedbyChristensenetal.（1973）introducesinteractiontermsandcanbeestimatedinasymmetricsystemofderivedfactorshareequationsthatimproveestimationpropertiesrelativetoasingleequation.Ageneralprobleminestimatingaproductionfunctionisthatinputfactorsarelikelyendogenous,therebyviolatingabasicnecessaryconditionforordinaryleastsquarestobeunbiased.Byusingfactorpricesinacostfunctionframeworkthisparticularproblemismostlikelycircumvented,somostempiricalstudiesestimateatranslogcostfunctioninsteadofatranslogproductionfunction（Koetse,2008）.

Ourpointofdepartureistoestimatethefactorsubstitution.Followingthepreviousstudiesonfactorsubstitution,weusethetypicalapproachreflectingfactorsubstitutabilitywithatranslogcostfunction.Theunitcostfunctioncanbestatedas:

（1）

WhereLnindicatesthenaturallogarithm;

Cmeanstheequilibriumtotalcost;

Pit（Pjt）isthepriceofinputfactori（j）attimet;

tisatimevariabletocapturetechnicalchange.

Linearhomogeneityinputprices,aninherentfeatureofanycostfunctionrequiresthefollowingregularityconditions:

and

forj=1,…n.

（2）

ApplyingtheShephard’slemma,wecanderivealinearexpressionoftheshareofoverallcostattributabletoeachfactori:

（3）

Here,

isappointedasdistributionparametersand

assubstitutionparameters（Christensenetal.,1973）.Theformermeasureshowtheco