EPRG 0828

Xi Liang, David Reiner and Karsten Neuhoff

Current Legal and Institutional Frameworks for Investing in Lower Carbon Electricity in China

EPRG 0828 Non-Technical Summary | PDF

Abstract: The economic and policy framework for investment decisions in the power generation sector in China are investigated. Our analysis combines a review of the existing legal framework with a survey of stakeholders in industry and government. Based on interviews with over 60 stakeholders, we find a consistent picture emerges of the role of the major institutions and the decision criteria used in investment decisions for conventional thermal power technologies. In contrast, the evolving legal framework for investment in lower-carbon technologies, as reflected primarily in the renewable energy law, produces no clear consensus regarding decision criteria from either government or industry stakeholders. The overall objectives are widely acknowledged, but there is considerable disagreement amongst stakeholders over its implementation. From an investment analysis of risks versus returns, most respondents perceive advanced thermal power investments and small hydro as being more attractive than lower carbon alternatives such as wind power and solar photovoltaic (PV) power.

Keywords: Investment decisions, Institutions, Power sector, Lower-carbon electricity, China

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