With 713 GWe of installed generation capacity in 2007, China has the second largest electricity market in the world - a market that is now open to participation by private, local and foreign entities [10, 11]. The reform process in the Chinese electricity market began in the mid-1980s when non-central governmental entities were allowed to invest in generation. The process of reform was significantly advanced in 2002, when the State Power Corporation (SPC) was split into two transmission and nine-generation companies. Further, private investments by local and foreign players have been increasing under the watchful eye of the State Electricity Regulatory Commission. Central government has been actively seeking the involvement of private and state-owned entities to introduce the elements of market-based incentives to improve system efficiency and obtain needed capital investment to meet the projected growth in power generation sector .
Generation capacity in China is dominated by coal-fired plants, followed by hydropower. The Three Gorges project is the world's largest hydropower project. As such, China is the largest producer of renewable energy in the world, despite the fact that solar and wind power have a relatively small share of the total installed generation capacity. Coal is expected to remain the key source of primary energy for electricity sector in the near future.
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