Economics at your fingertips  

Why do electricity utilities cooperate with coal suppliers? A theoretical and empirical analysis from China

Xiaoli Zhao (), Thomas Lyon (), Feng Wang and Cui Song

Energy Policy, 2012, vol. 46, issue C, 520-529

Abstract: The asymmetry of Chinese coal and electricity pricing reforms leads to serious conflict between coal suppliers and electricity utilities. Electricity utilities experience significant losses as a result of conflict: severe coal price fluctuations, and uncertainty in the quantity and quality of coal supplies. This paper explores whether establishing cooperative relationships between coal suppliers and electricity utilities can resolve conflicts. We begin with a discussion of the history of coal and electricity pricing reforms, and then conduct a theoretical analysis of relational contracting to provide a new perspective on the drivers behind the establishment of cooperative relationships between the two parties. Finally, we empirically investigate the role of cooperative relationships and the establishment of mine-mouth power plants on the performance of electricity utilities. The results show that relational contracting between electricity utilities and coal suppliers improves the market performance of electricity utilities; meanwhile, the transportation cost savings derived from mine-mouth power plants are of importance in improving the performance of electricity utilities.

Keywords: Electricity and coal firms; Cooperation; Coal and electricity price (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.enpol.2012.04.020

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-12-28
Handle: RePEc:eee:enepol:v:46:y:2012:i:c:p:520-529