The development of China’s economy is increasingly faced with pressure from energy conservation and emission reduction.Power industry is a key area in energy conservation and emission reduction in China.And the development of power industry which is efficient and low carbon is mostly based on the marketization of electric power system.But the existing industry management system and operation mechanism of power industry is obviously unfit for the requirement of energy conservation and emission reduction，which hinders the effectively implementation of China’s energy conservation and emission reduction.

The reform of electric energy system is the key area for reform in the process of China’s transition from planned economy to market economy，which is also a basic field of the whole reform strategy.It is not an accidental event in some areas，what it refects is that political and economic issues have the value of “Universality”.And the electricity reform is beginning with the diversification of investors.In order to solve the problem of power－supply shortage，the government has adopted the policy of financing from society and the state to build power plants.However，the relationship between government and market and the conflict between planned economy and market economy have been important issues，which will block the development of industry and the further reform.While our country has established a market－oriented electricity reform program，which is put forward in the Reform of Electricity System of 2002，and electricity industry has obtained remarkable successes in market competition and power source construction，there is a big gap between what has implemented and the goal of market－oriented reform.Thus the mechanism of industry development has not been fundamentally changed; the completion of short－term task is not very perfect; the progress of reform is sluggish，stagnant and even backward in some areas.So in policy aspect，the route of reform can be the following suggestions.It is essential to stick to market－oriented reform and start with the reform of transmission and distribution system and the establishment of competitive retail market.Then a thorough reform can be carried out by improving industry restructuring，the market－oriented operation and modern regulation mechanism.

The process and performance of the power system reform is largely affected by the political and economic system of a country.Since different institutional environments between transition country and those with mature market economy，there are significant differences in their tasks，goals，contents.In transition country，if you want to continue the power system reform，it is necessary to make a firm commitment to establish a marked－oriented power industry and to enhance the ability of system.Since 1978，it is actually a problem－oriented reform path of China.But it can’t be dominant mode of the reform.Because comparative advantages of the mode gradually disappear，for the growing complexity and urgency of the deep－seated problems in the process of reform.Therefore，it is necessary to promote the power reform by top－level designing and reforming systematically，to adopt project－oriented mode and legalize implementation system.

Reconstruction of power industry is a premise to form a competitive power market.The electric power reform has finished the separation of plant and network since 2002.After that，the reconstruction has almost become blocked.And it has become a contorted structure that consists of many competitive power generation plants and monopoly of transmission and distribution.The blocked reconstruction has wasted the performance of the power generation plants reform and even hindered the formation of electricity market seriously.There are two targets of China’s power industry restructure.In the near future，we should transform the single buy－side model based on unilateral trade into competitive wholesale mode based on bilateral trade as soon as possible.And in the long term，the goal is to establish effective competition trade mode of retail along with the mature of market mechanism.And in brief，the goal of the reform is to separate transmission and distribution business and make power retail independent. According to this，the reconstruction of power industry should focus on transmission and distribution system as well as the competitive retail market that starts with the direct purchase of electricity by large users.Finally，it can establish a bilateral competition system which connects both supply and demand sides，and form a competing electricity market.

China’s power industry has long existed multiple price distortion，and there are structural distortions in coal price and power price，grid price and retail price，prices between different consumers .According to calculations on different price distortions，government regulation on electricity power has caused great economic cost，which is inefficient and unfair.The main reason of price distortion is that the regulation mechanism of electricity price lags severely behind the reforming and development of the power industry.The grave mismatch between the market－oriented reforming and the reform of the government’s price regulation system is an important manifestation of the displacement of government functions.China has long been taking electricity as a quasi－public product and an important policy tool for the government to sustain economic growth and obtain political support.So the government has to use the method of distorting tariff structure and level of electricity price to get low electricity price，which in turn would cause great economic loss.To Scientifically position the government，to establish a market－oriented price mechanism，to deregulate grid－price and retail price，to implement incentive regulation on prices of transmitting and distributing electricity are of critical importance to China’s electricity price reforming.

Effective power supply needs to be provided by reasonable investment in electricity industry.The moderate coordinating between power industry investment and economic growth is an important goal of the reforming and development of the power industry.Since 1978，China’s power supply and demand balancing mechanism，which holds investment mechanism as its core，has gone through two changes，which refers to the transition from market－promoting mechanism to market－suppressing mechanism.The government has re－emphasized the power supply and demand balancing mechanism which focuses on investment approval and the domination of the state－owned enterprise.This inhibitive market supply and demand mechanism makes up for the supply gap which is caused by the retreat of non－state capital through strengthening government intervention and dominating state－owned enterprises.But while achieving equilibrium of the power industry，the mechanism’s sustainability deteriorates due to the endogenous“repellent systems”.Therefore，the investment system of power industry in China needs major institutional transformation－from the administration－oriented system to the market－oriented system.

Electric energy regime is not only an important part of the reforming of power industry mechanism，but also a significant factor influencing it and the high efficiency and low carbon development of the power industry.At present，China’s energy management system is seriously lagging behind the industry marketization process and the requirements of the industry development.The reforming of electrical energy management is to establish modern regulatory system which is compatible with the market economic system，to regulate in accordance with the law，to manage by centralization，to decentralize reasonably，to supervise professionally and effectively.

Electric power supply，which features“province entity”，and patterns of the local economic development have become new important institutional factors in China’s power consumption as well as energy conservation and emission reduction for a long time.It exists obvious regional imbalances and great interprovincial differences in the consumption and supply of electricity.Besides，there is an interactive co－integration relationship between provincial consumption of electricity and economic growth，and they are strongly influenced by regional factors.From electricity consumption，we can see that economic scale has a strong positive effect on the consumption of power，yet it is not true with structural changes－which reflect the tendency of high power consumption.Judging from power efficiency，though it increases weakly，the industry energy efficiency of eastern districts has always been at the forefront.Relatively speaking，the energy efficiency of Midwest districts is lower，however，there is a great potential to improve.On the whole，the gap between them is narrowing.Results from econometric studies show that optimization of industry structures，opening and reforming，and technological progress can improve the efficiency of national indus-trial power consumption rather than that the degree of marketization inhibits the efficiency of national industrial power consumption.Market－based electricitysaving mechanism is the basis that the power consumption efficiency is increasing.It is especially important to change the economic development and power supply mechanism which features“province entity”，to eliminate institutional barriers in inter－provincial electricity trade，to improve inter－provincial electricity trade，and to establish institution and mechanisms concerning endogenous energy conservation and emission reduction of the local government.

At present，China is in an important period of rapid deepening industrialization and there still need to consume a lot of energy to sustain industrial growth.but due to the limited domestic supply capacity，maintaining industrial growth means we will facing growing pressure of energy supply.So we need to establish a new concept of energy security and program the strategy of national energy security systematically to ensure the security of energy supply.In China’s energy consumption structure，the energy consumption of the industrial sector accounted for the proportion of total energy consumption has been remaining at around 70 ％，so the trend of changes in energy consumption in the industrial sector determines the trend of changes in total energy consumption.Overall，the energy efficiency of China’s industrial sector is relatively low，some industries have significant energy－saving potential，while the energy－saving，which is brought by the structural optimization，has not effectively released.Therefore，improving energy efficiency is critical，industrial energy saving policy should be focused on structural and technical energy saving，besides，it is necessary to establish an industrial structural energy－saving－oriented system，which is based on micro subjects’incentive.China has long adhered to the trade policy which pursuit the growth in export quantity，and the domestic energy price system is distorting，these become fundamental obstacles in the way that the trade texture of the export of China’s industrial goods transform in the direction of energy saving and low consumption.So as to slove this problem，it is necessary to change the development pattern of the export trade that excessively pursuit the growth of export trade volume to the pattern which is energy saving and low consumption.Therefore，for the purpose of energy conservation and emission reduction，we need to change the pattern of traditional economic development as well as optimize the structure of industry and energy.

In order to achieve energy conservation and emission reduction in power industry，china has adopted a variety of policy means，mainly including administrative policy and electrovalence policy of energy saving and emission reduction.Currently，the system of implement energy saving and emission reduction policy in power industry has executive－led characteristics，administrative measures are the main way the policy implemented，local government has direct responsibility for policy implementation.The executive－led system has shortages of high cost，low efficiency and lack of incentives，it is rooted in the unique political and economic system of the economy in transition.It can alter the Marketbased policy instruments by strong executive power and has the capacity of maintaining inferior policy and expanding field of application.Good policies of energy saving and emission reduction should meet the basic requirements of lowcost，incentive and equity.The effectiveness of policy implementation depends largely on the realization of incentive compatibility of related subjects and whether the market mechanism has played its basic role，the building of institutional infrastructure for the implementation of Market－oriented policy.

Promoting the development of renewable energy vigorously is important content in optimizing energy structure and realizing energy saving and emission reduction.Every country should design her policies and make choices according to the reality of the country so as to ensure the effectiveness of the policy.China has issued a series of policies to promote the development of renewable energy and they are effective.At present，China faces arduous task of the development of renewable energy，and to develop renewable energy we face technical，institutional，and many other obstacles.So we need to deepen the reform of power system，make full use of market mechanism，optimize the design and combination of policies and realize the combination of government and market.