Power Rationing econ6313 (Cecilia)Ziyan liu z5382514
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| Proposal
In light of these negative impacts of rolling blackouts, there are three ways to achieve the object. Proposal 1 One pragmatic proposal is to innovate the technology that could increase the utilization efficiency and comprehensive utilization level of power system. Although the demand for power significantly increased in the last decade to improve the industrial production the actual utilization rate of industrial power is very low which caused the waste of electricity. Thus, if the factories improve the technology, even if the time of production decreases, the factories still could improve the production efficiency to increase the profit. Proposal 2 The second proposal is to develop the self-producing power through subsidies. Figure 2: structure of power system in China (National Bureau of statistics 2021) Figure 2 would appear to indicate that most of China’s electricity comes from coal power. Therefore, if the government wants to alleviate the environmental problem, it is necessary to innovate the technology of renewable electricity generation which means that factories and households are motivated by subsidies to invest and build renewable energy power stations. The theoretical foundation is as follows: As Figure 3 illustrates, the subsidy will lower the cost that factories and households generate their own clean energy power, shifting the supply curve 1 to supply curve 2. Then subsidy policy would increase the amount of renewable energy from to . As a result, this policy could not only reduce pollution, but also could alleviate the power shortage problem. Proposal 3 Finally, it is beneficial to develop the new power ration scheme consisting of rolling blackouts, quota system, price signal and price discrimination. To achieve this, the first step is to transmit the price signal in advance. Because the price signal indicates the abundance or scarcity of electricity. Then according to the average usage of electricity and the price signal, consumers calculate and submit their baseline consumption to the State Grid. If their actual power consumption exceeds the baseline, they will be fined. Gradually, due to the learning curve, consumers could more precisely estimate their baseline. Furthermore, the third step is that the State Grid distributes and transmits the electricity based on integrated planning of each consumer’s baseline. Then it will charge the industrial power based on the Second-degree Price Discrimination and charge the residential use based on the Peak-load Pricing. In addition, when there is an urgent crisis such as the significantly increasing price of energy, the government could introduce the rolling blackouts. The reason why this proposal is more efficient than rolling blackouts is based on the second-degree price discrimination theorem and the peak-load pricing theorem. Figure 4: second-degree price discrimination theorem As figure 4 shown, according to the second-degree price discrimination theorem, average and marginal costs fall because of the scale compensation. Besides, as the industrial power has the properties that are large amount, stable load and small load peak and off-peak difference, the more power is generated, the more welfare consumers could have and the more profit the power companies will obtain. Therefore, it is reasonable to exert second-degree price discrimination on industrial power. Figure 5: peak-load pricing theorem As can be seen from Figure 5, as residential power usually has a large difference between load peak and off-peak, the marginal costs are different and the electricity power at different periods is different. That contributes to higher efficiency because the price is closer to the marginal cost, then the sum of producer surplus and consumer surplus is larger. Thus, it is beneficial for consumers to pay for the electricity fee based on the peak-load pricing. Download 374.48 Kb. Share with your friends:
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