Then we identified economically attractive, environmentally benign energy resources as alternatives to constructing coal-fired power plants in Hainan. An important potential cost-effective source of savings is setting electricity prices that reflect the real costs of producing and distributing power during different hours of the day and days of the week. To varying degrees, many countries use electricity prices as an economic development tool. As a matter of policy, they set prices below costs to foster economic development, rather than at cost-based levels to reduce electricity demand. In the process, national governments subsidize electricity production.
China is no exception.
Changing these prices to reflect costs and, therefore, lowering the demand for electricity is an important alternative to constructing coal-fired power plants in Hainan. These cities are currently experiencing a construction boom that is expected to continue. Therefore, now is a particularly favorable time to implement standards that require insulation, energy-efficient windows, and other conservation measures for new commercial construction. Hainan also appears to have the climate to support a cost-effective residential solar water heating program. A program to increase the penetration of efficient lighting in Hainan is also cost effective, resulting in significant demand-side electricity savings for the Hainan Electric Power Company while lowering energy costs for household customers.