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MPhil in Engineering for Sustainable Development

global challenges, engineering solutions

Studying at Cambridge

 

Xinxiao Li

Willingness to pay for renewable electricity in the Beijing-Tianjin-Hebei Region, China

In the light of its commitment to decarbonisation in the Paris Agreement and nationwide Beautiful China Initiative the energy sector in China is facing tremendous pressure on supply-side reform. Renewable Electricity (RE) has been prioritised in the government’s plan of further electrification. The Beijing-Tianjin-Hebei Region (BTHR) is directly relevant to the topic of RE development because of a) its high population density, b) its notorious air pollution c) its special geospatial character and d) its unique political position in the country. Government intervention has contributed to a rapid expansion in RE; however, can people afford it? Undoubtedly, supply-side reform should also be driven by the demand-side. Willingness to Pay (WTP) for RE is an indicator of RE market demand and social benefit, including externalities such as air pollution and climate change. Yet there are scarcely any data on WTP in the BTHR and its policy implications.

This dissertation aims a) to estimate WTP in the BTHR for RE in household electricity portfolios and identify explanatory factors underlying heterogeneity in the WTP among the population, b) in light of WTP, to determine both short and long-term implications and inform the policymakers and generators of these.

To achieve the research objectives, firstly a two-stage questionnaire survey is designed with the support of a pilot study. Stage One is based on online questionnaires, Stage Two on face-to-face questionnaires focusing on a targeted group. The survey data are then analysed, a semi-linear model is employed, with all the explanatory factors being variables. Generalised Least Squares Regression is used in the analytical approach. Following this, Cost-Benefit Analysis is used further to examine the WTP results. Monte Carlo Simulation is also used to include uncertainties.

More than six hundred questionnaires are collected in the survey, and 487 responses are valid. Individuals’ WTP for RE in the BTHR function is determined, and fifteen explanatory factors are identified. Based on the WTP function, the aggregated WTP for RE in the BTHR is calculated. By Cost-Benefit-Analysis and Monte Carlo Simulation the implications for short and long-term RE development are identified. For short-term 22% of Ratio of RE (RRE) is the threshold of policy-makers and electricity generation investors who are willing to risk less. In a competitive and direct purchase market, generators should increase their investment in RE if RRE is lower than 22% and vice versa. The demand side is strong enough to support any RE development target with RRE lower than 22%, directly or indirectivity. If REE is aimed at over 22%, there must be further intervention which would be disruptive to the whole economic system. For policymakers and generators willing to risk more, the threshold is 28%. Additionally, one way to ease the RE subsidy dilemma is to put a levy on household electricity use. To achieve a satisfaction rate higher than 60% the levied tariff should not exceed 0.686 CNY/kWh. It is highly likely to achieve the ambitious China Pathways to 2050 if WTP can be fully exploited in the long term (2030-2050). In the medium term (2020-2030) challenges of RE development are projected to be twofold: relatively low affordable possibility and an imperfect market fully to exploit this WTP. Referring to experience from international reform and other sectors, this study creates an action list along with its timelines for policymakers, the power industry, generators and joint effort of these three parties, as supplements to China Pathways 2050.