Brunel advises China on cutting cost of electricity bill

Despite lower production costs and state regulation, the average Chinese household faces a higher electricity bill than most in Europe - researchers from Brunel University London, with Université de la Méditerranée in France and Swiss Electricity Ltd, set out to find out why.

China is the largest electricity producer in the world. Over the last 30 years, the country’s electricity industry has increased its capacity to supply power more than 12 times.

This has largely fuelled the country’s massive economic growth based on changes to a more free market system. China’s economic growth has drawn the world’s attention but we didn’t know enough about the energy sector to fully understand how this has happened.

Professor Guy Liu, who led the Brunel research, has provided the missing link. Over four years, the team analysed more than 300 electricity firms and investigated the relationship between them and the government.

Prof Liu found that the state retains control over pricing and output which gives electricity producers an advantage to hike up unit costs when negotiating prices with Government, they call this a soft price constraint.  Lui found that reforming how prices are set is important for the continued growth of Chinese economy, the electricity sector needed to become more market-orientated in line with economic reforms. Liu’s research provided strong scientific evidence to speed this up.

Thanks to the research, the Chinese government is looking at alternative ways to set prices which would bring down costs for the consumer and provide incentives for the energy companies to put money into environmentally friendly technology without hiking up prices.