China Energy Outlook 2020 - Flipbook - Page 99
Power Sector Reform
Efforts to develop competitive wholesale and retail electricity markets are proceeding,
reaching a share of 30% of market-traded electricity at the end of 2018, with 8 provincial
spot market pilots launched in 2019.
China launched a new round of power sector reform in 2015 with the issuance of Opinions on
Further Deepening the Reform of Electric Power System (a.k.a. Document No. 9) and supporting
documents (NDRC, 2015b; State Council, 2015b), which provides guidance for making the
transition from a government-controlled to a market-based power system that injects
diversification of supply and market participants, resource efficiency, and competition into a
sector that has long been dominated by the only two state utilities – the State Grid and the
Southern Grid – with administratively determined electricity prices.
Guided by Document No. 9, China’s national government and provinces are developing
competitive wholesale and retail electricity markets. On the wholesale side, the goal is to
establish: 1) provincial power markets for formulating weekly, monthly, and annual power
contracts between generators and large end-users with prices competitively determined; 2)
provincial spot power markets that facilitate intra-day and day-ahead transactions to set prices
in real time (Reuters, 2018); 3) regional power markets that enable cross-province, cross-region
power trading and multi-province dispatch to enable more resource sharing over a much larger
geographic area to reduce costs, renewable curtailment, and emissions. On the retail side, the
goal is to open up the retailing business to non-grid companies and foster retail competition
that offers end-use consumers the opportunity to select their electricity providers and procure
power based on the price of power supplied to them. Over the last 2-3 years, the number of
electricity retailers registered in China’s power exchanges has reached 3500, a 10-fold increase
from 2016 (Yicai, 2018b). By the end of 2018, the share of market-traded electricity in China’s
total electricity consumption reached 30.2% (China Energy News, 2019).
Guangdong Province has taken a leading role in carrying out power market reform, becoming
the first province among the 8 pilots to release its draft spot market implementation plan in
August 2018 (Guangdong Province, 2018). According to the plan, Guangdong will build fullyfunctional power markets step by step that in the near term consist of market settlement of
medium- and long-term contracts equipped with a mechanism of adjustment to cover the
difference between the fixed price and the market price, a spot market with both day-ahead
and intra-day transactions, an ancillary service market initially as a separated market but later
integrated, and an integrated regional power market that trades and dispatches power cross
the entire Southern region. In the longer term, Guangdong will explore establishment of a
capacity market and trading of financial transmission rights among others.
Reducing Renewable Electricity Curtailment
In 2018, China reduced its average curtailment rates for wind and solar to 7% and 3% (from
12% and 6% in 2017), respectively, while generation from wind and solar energy grew by
20% and 50%, respectively, over 2017.
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