On June 6, according to the Shanghai Securities News, multiple sources confirmed that the Department of Human Rights Reform under the National Development and Reform Commission organized a symposium with power generation companies and leading experts on Wednesday and next week. The event aimed to gather insights and suggestions for the upcoming power system reform, also known as the electricity reform. This development signals that the long-anticipated electricity reform is likely to move forward in the near future.
According to insiders involved in the process, the current draft proposals have not seen significant changes from previously disclosed content. The pace of implementation will largely depend on whether the market can play a central role in shaping the new structure. Experts suggest that while the reform has been discussed for years, real progress hinges on balancing market forces with regulatory oversight.
The electricity reform is essentially based on two main approaches: vertical and horizontal restructuring. The vertical model focuses on splitting the power grid into separate transmission and distribution networks, with clear pricing and reduced grid monopoly. However, this approach may lead to higher transaction costs and potential risks to grid stability. On the other hand, the horizontal model involves dividing the existing regional grids, which faces less resistance but fails to address the deeper structural issues within China’s power system.
Given these challenges, a gradual approach is expected. The reform is likely to retain the State Grid and Southern Grid while introducing measures such as direct power purchasing and fostering competition in areas like power generation and retail sales. These steps aim to improve efficiency, enhance customer service, and create a more transparent and competitive electricity market. As the reform progresses, it will be crucial to maintain a balance between innovation and stability to ensure a smooth transition for all stakeholders.
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