Vertical relationships in China’s electricity industry: The quest for competition?

In this paper we revisit the debate on the role of vertical integration in the energy sectors: whether vertical integration between coal and electricity sectors is a path to create a competitive electricity market in China. We discuss coal-power conflict and potential anti-competitive concerns related to vertical integration, such as raise rival’s cost and collusion, and suggest that regulators and policy makers should pay more attention to the behavior of integrated companies. In particular, they should balance the tradeoff of vertical integration between coal and electricity companies and ensure that efficiency gains should offset anti-competitive effects.

► We study the vertical integration between China’s coal and electricity sectors.
► We discuss coal-power conflict and potential anti-competitive concerns.
► Regulators should pay more attention to the behavior of intergraded companies.
► They should balance the tradeoff of vertical integration.
► They should ensure that efficiency gains should offset anti-competitive effects.