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Liang Zhang, Jian Ruan and Jianhua Ding
''The mechanism of the power shortage in China: capacity shortage or capacity underutilisation?''
( 2013, Vol. 33 No.4 )
This paper investigates the mechanism of the power shortage in China by estimating the capacity expansion and capacity utilisation behaviour of the power firms. The theoretical and empirical evidence is presented to show that the state planner deals with the ‘coal-electricity' conflict by internalising the coal price inflation in the power generation sector. This policy may distort the market signal of the capacity utilisation and lead to the power shortage even if the capacity supply is sufficient.
Keywords: electricity price, power shortage, capacity utilisation, capacity expansion, coal-electricity conflict, China
JEL: Q4 - Energy: General
L2 - Firm Objectives, Organization, and Behavior: General
Manuscript Received : Oct 17 2013 Manuscript Accepted : Dec 23 2013

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