Essay on Benefits Of A New Energy Power Plants

707 Words Dec 8th, 2015 3 Pages
Another policy that aims to increase production is to invest and subsidize new energy power plants, which is what Chinese government is doing now. In the plan, investment on new energy production and technology is set to be high, while subsidy of new energy power plants will be gradually decreased and eventually cancelled subsidy in 2020. Both investment and subsidy will decrease the cost of producing new energy. Investment can increase the number of producers of new energy industries, and it can potentially decrease marginal cost by investing on the new energy technologies. For subsidy, it can decrease marginal cost too. Chinese energy power plants are connected by the grid, and three national-owned companies will buy electricity from power plants and sell it to consumers. These national-owned companies are the only buyers in the market, and their purchasing price is set by the government. The marginal cost of different energy industries are different. It costs coal industries about 44 dollars to produce 1000 kw/h electricity. The cost of wind industries and solar energy industries are 77 and 109 dollars respectively. The average price of electricity given by the three companies is 71 dollars. If the price of electricity is set to be a single price of 71 dollars, then the market equilibrium quantity of wind and solar energy would be zero. That’s why subsidy is needed. The government gives subsidy to new energy plants by increasing the buying price, since the three…

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