Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065 GAME ANALYSIS OF INTEREST GROUPS IN POLICY-PROCESSING OF POWER GRID CONSTRUCTION AND RESEARCH ON COMPENSATION MECHANISMS Liang YAN Huzhou Electric Power Bureau of State Grid – China

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065  Introduction  On the description of problem  How to solve the problem?  Compensation mechanism  Simulation analysis  Research conclusion CONTENT

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065 Recent years have witnessed an increase on the conflict existing in construction agents and legal affairs. The policy-processing of grid construction refers to the attainment of agreement between the planner of grid construction and interest groups of external environment. 1. INTRODUCTION

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – ON DESCRIBING THE PROBLEM  Coordinate the economic development of the local life with its social equivalent, improve the related infrastructure and performance of government officials. Local government Local residents Grid company  High standard of compensation for grid- construction land expropriation and environmental pursuit.  Fulfill its social responsibility and lower construction cost. MAIN INTEREST GROUPS

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065 Negotiation Coordinated by government Litigate Upgrade Residents: Compensation, Environmental pursuit Government: Economic development, Agency fee Grid Company: Lower construction cost CONFLICTING PATH Conflict 2. ON DESCRIBING THE PROBLEM

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065 MAIN REASON: Local residents of power inputting areas will get the benefit from clean energy while local residents of passing-through areas could not get it but environment pollution and land expropriation. 2. ON DESCRIBING THE PROBLEM

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065  Compensation mechanism based on the stakeholder theory Reduce negotiation space of local government and residents in power inputting areas and expand negotiation space of those in areas which transmission line passed through. 3. HOW TO SOLVE THE PROBLEM?

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065  Simulation analysis of the compensation mechanism Check the availability of the compensation mechanism 3. HOW TO SOLVE THE PROBLEM?

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065  Simulation analysis of the compensation mechanism Four interest groups:  One grid company  Two local governments which grid construction passed through  One local governments which electric power is input into 3. HOW TO SOLVE THE PROBLEM?

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065  The decision-making model of local residents in passing through areas 3. HOW TO SOLVE THE PROBLEM?

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065  The decision-making model of local residents in inputting areas 3. HOW TO SOLVE THE PROBLEM?

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065  Simulation analysis of the compensation mechanism 3. HOW TO SOLVE THE PROBLEM? Related data of grid company, local government and local residents kbetato P betato V costacostbcostccostdcostecostf Grid company Gov Gov Gov Resident

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065  Local residents’ profit and cost simulation analysis 3. HOW TO SOLVE THE PROBLEM? Profit curve of local residents without considering stakeholders Profit curve of local residents considering stakeholders

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065  Local residents’ profit and cost simulation analysis 3. HOW TO SOLVE THE PROBLEM? Effort cost curve of local residents without considering stakeholders Effort cost curve of local residents considering stakeholders

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065 Firstly, each interest group would like to make an agreement as soon as possible in the process of negotiation.  Local residents  Grid companies  Local governments 4. CONCLUSION

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065 Secondly, the compensation mechanism based on the stakeholder theory would be likely to reduce the compensation degree of inputting areas and increase that of passing-through areas to balance their profit. 4. CONCLUSION

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065 Thirdly, compensation mechanism based on the stakeholder theory can effectively reduce the appearance of deadlock during negotiation. 4. CONCLUSION

Frankfurt (Germany), 6-9 June 2011 Liang YAN – China – RIF Session 5 – 0065 THANK YOU