China reformed its power sector in 2002, breaking up the State Power Company's monopoly and dividing control over generation and transmission among a handful of state-owned enterprises (SOEs). These reforms significantly improved power transmission by creating relatively consolidated regional power blocks, though even with that upgrade the transmission networks are still insufficient. Today, five companies manage around 80 percent of China's power generation, while grid transmission falls under the auspices of two companies: the State Grid Corporation of China (SGCC) and the Southern Power Grid Company (SPGC). Structural problems persist, in part because the five major power companies rely heavily on burning coal but are unable to set electricity prices as coal prices rise. This inability to create a thriving energy market exacerbates the SOEs' resistance to reform and compounds existing disparities in electricity connectivity between poorer inland areas and the wealthy coast. This in turn poses a problem for the Party's effort to rebalance the economy by developing the vast and populous interior. Inertia, inefficiency and lack of coordination between regions mean that in the last decade the power grid system has not improved as quickly or as comprehensively as needed to accommodate the growing energy production and demand. Power is being produced, but without more effective transmission networks, it often has nowhere to go. The major problem with China's current power grid is weak and inefficient inter-regional coordination. Although the SGCC controls five regional blocks (North, Northeast, Northwest, Central and East), these blocks are not well connected. This means that energy produced in Tibet does not flow easily to Sichuan, much less Hunan, Shanghai or Beijing. Likewise, different management systems for the SPGC and SGCC grids prevent direct power transmission to the coastal manufacturing hubs that need it most. China's problem, then, is not a lack of energy, but rather the inability to fully utilize the power it generates. As the Party moves to develop central China, a more comprehensive and efficient power grid will be necessary and will require investment and further reform of the relationship between the state and the power sector.
