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Reform and renewables in China: The architecture of Yunnan's hydropower dominated electricity market
Abstract
Reforms currently under way in China's electricity markets bear important implications for its decarbonization objectives. The southwestern province of Yunnan is among the provinces piloting the current iteration of power market reforms. As such, lessons from Yunnan will inform future market reform and renewable energy policies in China and potentially elsewhere. The dominance of hydropower in Yunnan's energy portfolio and the particular transmission constraints it faces, offer an interesting case study of the challenges of decarbonization. We report on market architecture reforms and aggregate market data collected from the Yunnan Power Exchange. We review four elements in the reformed market architecture. Market pricing rules, transitional quantity controls, the generation rights market, and inter-provincial trade. The specifics of market reform reflect a compromise between decarbonization, inter-provincial competition, grid security and development objectives and contribute to understanding of how the dual transitions of hydropower decarbonization and market liberalization interact. We conclude on six insights regarding the role of the grid operator, security checks on trade, integration of cascade hydropower, the inclusion of renewables in the generation rights market, price controls, and market participant price uncertainty.
... The scale and complexity of China's hydropower marketization far exceed those of hydropower markets in Brazil, the Nordic region, and North America. The sector faces multiple challenges, including uncertainties in runoff and load demand, imperfections in market rules, and diversity in trading varieties [8]. Additionally, hydropower bidding decisions are constrained by numerous interrelated factors. ...
... P H i,t represents the power output of hydro plant i at time period t, and δ i,t denotes the water consumption rate. Q S i,t represents the water spillage of hydro plant i at time period t. (8) In addition, the model includes conventional constraints such as generator output upper and lower limits, generator ramping constraints, minimum up/down time constraints, maximum start-stop frequency constraints, hydropower reservoir capacity constraints, and hydropower generation control constraints. ...
As the second largest power source in the world, hydropower plays a crucial role in the operation of power systems. This paper focuses on the key issues of regulating hydropower stations participating in the spot market. It aims at the core challenges, such as the conflict of cascade hydro plants’ joint clearing, the lack of adaptability for different types of power supply bidding on the same platform, and the contradiction between long-term operation and the spot market. Through the construction of a water spillage management strategy and settlement compensation mechanism, the competitive abandoned water problem caused by mismatched quotations of cascade hydro plants can be solved. In order to achieve reasonable recovery of the power cost, a separate bidding mechanism and capacity cost recovery model are designed. Subsequently, the sufficient electricity supply constraint of the remaining period is integrated into the spot-clearing model, which can coordinate short-term hydropower dispatch with long-term energy storage demand. The operation of the Yunnan electricity spot market is being simulated to verify the effectiveness of the proposed method.
... Marketization provides inputs such as land, capital, labor for economic development. When the level of marketization is low, the above-mentioned production factors cannot freely flow and cannot be allocated according to market demand, while hindering the effective utilization of foreign investment and knowledge spillover effects, making it impossible for industries in the region to form economies of scale and promote technology spillovers (Xia, et al., 2016;Chuntian, et al., 2018), inhibiting the improvement of regional green economic efficiency. ...
... Enterprises in the agglomeration area are only "enterprise clusters" formed under the attraction of favorable government policies, and cannot produce economies of scale (Atuahene-Gima and Li, 2002). Second, the lower level of marketization enhances the government's allocation of resources, while the local government's performance appraisal and the more mobile mechanism of appointing and promoting officials lead local officials to pay more attention to the traditional industries that can bring political achievements during their tenure and compress support for high-tech industries, which is not conducive to the formation of the scale effect in industrial clusters in the shortest possible period (Yue, et al., 2015;Chuntian, et al., 2018). Third, in the factor market, excessive intervention by the government makes factor prices unable to truly reflect the supply and demand relationship, leading to distorted factor prices and increasing production costs for enterprises. ...
High-tech industries represent a country’s advanced productivity, technological level and innovation ability, they carry the characteristics of green industries in terms of resource-saving and being environmentally friendly, and their agglomeration has a significant impact on the development of green economy. The marketization process, as an important macroenvironment for the development of high-tech industries, not only relates to the motivation of high-tech industry agglomeration but also affects the effectiveness of the agglomeration effect. It is unclear whether marketization plays a role in the relationship between high-tech industry agglomeration and green economy efficiency and whether this role has heterogeneity. Taking China’s provincial panel data from 2001 to 2020, this paper constructs a panel threshold econometric model, and examines the threshold effect of the high-tech industry agglomeration impact on green economic efficiency under different marketization levels. 1) The high-tech industry agglomeration impact on green economic efficiency has a double-threshold effect due to the marketization level, with threshold values of 5.862 and 8.938, and the promotion effect is the highest in the second threshold range. 2) Under the influence of the government-market relationship, non-state economic development, market intermediary organization development and legal environment, the impact of high-tech industry agglomeration on green economic efficiency has a single-threshold effect, with threshold values of 7.4950, 12.1960 and 11.6100. After crossing the threshold values, the impact changes from negative to positive. Factor market development has a double-threshold effect, with threshold values 10.3100 and 14.9210, and the impact changes from negative to positive and gradually increases. 3) Among the major industries, the pharmaceutical manufacturing industry (3.978 and 9.639) and the computer and office equipment manufacturing industry (3.359 and 9.639) have a double-threshold effect due to the marketization level, and the medical equipment and instrumentation manufacturing industry (9.494) has a single-threshold effect. This study is of great significance for China as it would help optimize the market environment and stimulate the green economy effect of high-tech industry agglomeration; moreover, it would provide a reference for other developing countries and transition economies.
... Similarly, He et al. (2016) reviewed a regulatory policy to promote renewable energy consumption in China, highlighting the challenges faced by different development phases [2]. Meanwhile, Cheng et al. (2018) discussed the architecture of Yunnan's hydropower-dominated electricity market, focusing on regional market elements [3]. This regional imbalance results in a lack of comprehensive understanding of the challenges and difficulties that regions like Northwest China and Southwest China face in integrating renewable energy effectively. ...
... Similarly, He et al. (2016) reviewed a regulatory policy to promote renewable energy consumption in China, highlighting the challenges faced by different development phases [2]. Meanwhile, Cheng et al. (2018) discussed the architecture of Yunnan's hydropower-dominated electricity market, focusing on regional market elements [3]. This regional imbalance results in a lack of comprehensive understanding of the challenges and difficulties that regions like Northwest China and Southwest China face in integrating renewable energy effectively. ...
China has made significant progress in developing renewable energy, but challenges in integrating variable sources like wind, solar, and hydro power persist. Existing research has a regional focus and lacks a comprehensive understanding of integration challenges in specific regions. Moreover, research concentrates on individual energy types rather than multiple sources. Addressing these challenges requires a deeper analysis of market rules, incentives, and mechanisms for integrating numerous renewable energy types. The existing research also overlooks crucial aspects like energy consumption, grid planning, and power market mechanisms. To promote renewable energy integration effectively, policymakers must address these interconnected factors through comprehensive investigations and research efforts. This study proposes tailored solutions to encourage integration in China based on international experiences, such as Brazil’s contract markets and electricity redistribution mechanism, the Nordic spot market, and California’s negative pricing mechanism. The strategies derived from global practices for China’s renewable energy integration include diverse trading mechanisms, expanded contract markets, optimized local consumption, fortified grid infrastructure, and improved market mechanisms.
... The delayed construction of transmission pipelines and the excessive protection of thermal power plants by local governments have led to serious hydro curtailment issues [29,30,31]. In 2016, the curtailed hydropower generation in Sichuan and Yunnan had reached 28.7 TWh and 31 TWh, respectively, which accounted for 5.6% of the national hydropower generation in that year [32]. We therefore further examine the role of market segmentation caused by trade barriers and local protectionism in resource misallocation. ...
... Second, inter-provincial barriers and the lack of overall coordination in the electricity market have hindered the cross-regional allocation of hydropower resources. To promote economic growth, the provinces that receive transmitted power give priority to local thermal power plants to protect them and seize the power supply shares of West-to-East [32,56]. Table 2 also shows that the changes in aggregate output are mainly due to capital distortions, which account for 85%-90% of them in all 6 To prove the reliability of the results, we carried out a t-test on the potential productivity improvement between the southwestern region and the eastern and mid-southern region. ...
This paper analyzes the issue of improving total factor productivity (TFP) in the hydropower industry from the perspective of resource allocation and the role of market segmentation. Specifically, we decompose the loss of TFP into capital distortion and output distortion, finding that the potential production improvement of the southwestern region is higher than that in eastern and mid-southern China, which further indicating that hydropower plants in the hydro-endowed region face more severe input distortions. Meanwhile, small hydropower plants face more severe output distortions than medium and large plants. We apply the difference-in-differences approach to further examine the effect of market segmentation on aggregate productivity. The results show that market segmentation aggravates the input distortions of hydropower plants, and China’s Energy Saving Power Dispatch Approach policy has significant heterogeneous effects on mitigating the input distortions. Our detailed micro-level analysis sheds lights on the investigation of policy design in the renewable sector and the implications found can potentially be extended to other countries.
... With the integration of increased variable renewable energy generation [1] and advent of liberalized electricity market [2], much attention has been devoted on the development of pumped storage system, as it has many prominent advantages of ensuring the safe and steady operation of power grid. The 13th five-year plan of energy in China [3] puts forward the goal of strengthening the construction of powerregulating and improving the flexibility of system, with the key means of pumped storage plants. ...
... To the best of the author's knowledge, a coordination controller of VSPSP has been rarely reported in existing studies. (2) The adaptive strategy of maximum efficiency point tracking is the core of the coordination controller, determining the optimal operation of VSPSP. It should be taken seriously in the variable speed operation. ...
With the integration of increased variable renewable energy generation, much attention has been devoted on the development of pumped storage. The variable speed pumped storage technology has become a research focus due to its wide operating range, high production efficiency and strong power regulation ability. Moreover, the coordination controller is the key component of variable speed pumped storage plant (VSPSP), it can coordinate the joint operation of governor and converter. The coordinated controller is studied in this work. Aiming at the coordinated control between governor and converter, the novel adaptive strategy of maximum efficiency point tracking is proposed. First, the optimal efficiency curves are described based on model experiment; and then the optimal operating curves of variable speed unit in the operation region is presented based on the BP neural networks; the convergence analysis of mean square error and regression analysis are applied to verify the reliability of results. Aiming at the application of adaptive strategy in the coordination controller, and ensuring the real-time performance, a new effective digital interpolation method is put forward, using programmable logic controller. The signal flows of the control system in variable speed unit are clarified. The proposed adaptive strategy could be easily applied in engineering, providing a technical means for the efficient and flexible operation of VSPSP.
... In recent years, electric utilities are paying close attention to efficient, ecologic, and cost-effective electricity marketing [1,2,3,4,5,6,7]. The deployment of a network structure integrating renewable energy sources and localized energy management systems, referred to as microgrid, is one of the most important developments of the energy transition. ...
Load forecasting is essential for efficient microgrid management, providing key advantages in operational efficiency, cost control, and grid reliability. As microgrids become increasingly critical in the global transition toward decentralized renewable energy systems, accurately predicting load demand is vital for optimizing performance and ensuring a stable, resilient, and sustainable power supply. This study introduces a novel short-term load forecasting approach based on Belief Functions Theory (BFT). The proposed method employs information fusion techniques to combine multiple predictors, each with its own forecasting mechanism. Using lagged power values and weather data, the predictors generate estimated power values along with corresponding uncertainty or error levels. A mass function is assigned to each predictor, taking into account both prediction and error data, even when some information is missing. These mass functions are then merged to produce a final, reliable prediction. Application of this method to publicly available load datasets demonstrates its effectiveness, achieving a 12% reduction in forecasting error compared to state-of-the-art methods and delivering substantial improvements in computational efficiency.
... China is vigorously developing renewable sources as well, and new technologies for renewable energy are being promoted to obtain greater economic benefits [7], such as integrating renewable resources effectively through a well-established electricity market [8][9][10], and strengthening government regulation on renewable power generation and transmission [11]. Currently, China's current energy supply system operates in parallel with both "regulated and deregulated" power trading, and renewable energy sources are given priority for electricity generation and do not participate in the electricity market, which will lead to the expansion of the scale of unbalanced funds in the settlement. ...
Currently, both regulated and deregulated power trading exist in China’s power system, which has caused imbalanced funds in the electricity market. In this paper, a simulation analysis of the electricity market with wind energy resources is conducted, and the calculation methods of unbalanced funds are investigated systematically. In detail, the calculation formulas of unbalanced funds are illustrated based on their definition, and a two-track electricity market clearing model is established. Firstly, the concept of the dual-track system is explained, and the specific calculation formulas of various types of unbalanced funds are provided. Next, considering the renewable energy consumption, the market clearing model based on DC power flow is constructed and solved; by combining fitting methods of mid- and long-term curves, the unbalanced funds are calculated based on clearing results and formulas.
... The impacts of municipal incineration thus differ between these two provinces: 3.26 ktCO 2 eq/yr for Inner Mongolia and 6.27 ktCO 2 eq/yr for Jiangsu. In comparison, Yunnan province is endowed with plentiful hydropower resources, and a low grid emissions intensity of 0.456 kgCO 2 eq/kWh 28,29 . The power structure in Yunnan changes little over time, and therefore the grid intensity has a smaller effect on the overall environmental impact, with changes dependent mostly on the amount of waste generated. ...
Wind power supply chains are evolving as markets expand to reach climate goals. With the largest installed wind power capacity globally, China must deal with increasing composite turbine waste and anticipate its associated costs. Here we predict the quantity and composition of wind turbine blade waste based on historic deployment. A high-resolution database containing 14 turbine capacities (150–5500 kilowatts) was compiled based on 104 turbine models. The environmental and financial costs of waste treatment options were evaluated using a bottom-up approach. Based on current installations and future projections, 7.7 to 23.1 million tonnes of blade waste will be generated in China by 2050. Technologies exist to recycle glass fibre from blade waste, but these solutions vary in level of maturity and are not always commercially available, cost-competitive, or environmentally sustainable. Our findings can inform decision-makers in governments and industry on the pathways to carbon neutrality.
... As the new round of power market reform gradually enters deep water area, China's provinces and cities have established well-regulated and well-structured medium-and longterm power markets (Cheng et al., 2018;Liu et al., 2019;Yao et al., 2020).Because mediumand long-term transactions have relatively low risks and stable returns, they have become a "ballast stone" for market participants to avoid risks (Li et al., 2022). At the same time, they also plays a role in anchoring the spot market prices. ...
Cascade hydropower producers face two stages of risk when participating in medium and long-term market transactions: transaction risk during the bidding stage; and the operational risk during the scheduling and operation stage due to the uncertainty of runoff and market-clearing prices. Therefore, how to measure the above risks and make corresponding decisions has become an urgent problem for producers.This paper combines the real market structure and rules of a certain hydropower dominated market in Southwest China, and establishes a mid-term operation and trading decision-making method based on the Joint Information Gap Decision Theory (IGDT) and Prospect Theory. To address the main uncertainty variables that producers face in participating in transactions, this paper obtains the maximum fluctuation range of variables that satisfy the expected revenue in a robust model based on IGDT. Then, using Prospect Theory, a bidding strategy model that takes into account the psychological factors of producers is constructed within this range.To solve the nonlinear programming problem and address the accuracy issues caused by curve fitting during the solution process, a nonlinear programming combined with an improved stepwise optimization hybrid algorithm is employed.Using actual data from a hydropower grid in southwest China participating in the market as an example. The results indicate that the method provides the fluctuation range of runoff and market prices under different expected return targets, and can formulate reasonable bidding decisions and operation plans based on producers different risk preferences within this range.
... However, the development environment of China's electricity market is undergoing significant changes. In the primary stage of the market-oriented development of the "dual track system", where market-oriented electricity and traditional planned electricity coexist in China, as a leader in China's hydropower industry, how the TGLHS responds to marketization issues, participates in electricity market issues, and formulates electricity market trading strategies is not only related to the core interests of enterprises, but more importantly, to the functional positioning of hydropower in China's energy structure system [7,8]. Therefore, it is of great significance to contemplate the marketization of the Three Gorges hydropower system at the top level and conduct research on the trading strategy of the hydropower project. ...
China’s electricity market reform has posed a real challenge to the large-scale hydropower system. Taking the world’s largest watershed hydropower system, the Three Gorges large hydropower system (TGLHS), as the engineering background, this study analyzes the issues and strategies of dispatching and trading in the electricity market. The analysis indicates that the TGLHS exhibits unique difficulties because of transprovincial and transregional power transmission. Major issues including the multi-dimensional and multi-time-scale nested allocation of hydropower energy, the bidding and performance of cascaded hydropower plants in multiple electricity markets, as well as multiple uncertainties in the runoff; electricity prices in multiple markets are also elaborated upon. The corresponding suggested strategies are proposed to cope with the aforementioned issues: (1) for multi-dimensional and multi-scale nested allocation problems, it is necessary to comprehensively consider monthly market transactions and priority generation plans, and establish a profit maximization model; (2) propose a bidding decision-making linkage and segmented bidding optimization model for cascades upstream and downstream hydropower stations; (3) construct a model for decomposing the annual and monthly planned electricity consumption curves and developing operational plans for giant cascade power stations that are suitable for cross-provincial and cross-regional power transmission and transformation; (4) a runoff, electricity price, and market distribution model has been proposed, laying the foundation for further research on multi-scale optimization models for hydropower. Finally, prospects for research on the participation of large-scale hydropower systems in the electricity market are summarized, expecting to promote the marketization of large cascaded hydropower systems. The dispatching and trading of the TGLHS implies that it is important and necessary to explore market theories and methods considering hydropower characteristics and operation needs.
... As mentioned above, the apparent success of the electricity and natural gas network pricing reforms have confirmed the advanced nature of their pricing mechanisms [31]. Through the analysis, we decided to adopt the pricing mechanism for raw water pricediversion water prices to determine a comprehensive water price. ...
The uneven distribution of water resources in time and space restricts the development of society, which is a universal problem facing the world. To improve the ability to regulate water resources in water diversion projects and alleviate the contradiction between water resources and social development, China has decided to build water network projects (WNPs). A WNP is an integrated water supply system that includes multiple water sources and network water supply lines and integrates the functions of water supply, water delivery, and optimal allocation of water resources into a system that can supply water to many users. An appropriate water pricing mechanism is the key to ensuring the sustainable operation of water network projects. This paper presents a comprehensive water pricing model (WPM) for WNPs. The purpose of this model is to unify the water price measurement standard of WNPs and lay the foundation for water price marketization in the future. By applying the model to the Jiaodong WNP, it is found that the model is expected to improve the unbalanced use of water sources and the large difference in prices at water supply points (WSPs) in the project. This study not only provides a theoretical basis for water pricing reform but also has great potential to improve the efficiency of water resource use.
... Our results are consistent with previous studies that have found wind energy to be the most effective and efficient source of alternative energy in China [39]. Similarly, our finding of hydro energy's high potential to generate electricity is consistent with previous studies [40]. ...
The transition to renewable energy sources is crucial for mitigating the impacts of climate change and achieving sustainable development goals. In China, the rapid industrialization and urbanization have led to an increasing demand for energy, highlighting the urgent need to transition to alternative energy sources. This study aims to evaluate the effectiveness of alternative energy sources in China, considering multiple criteria such as cost, environmental impact, energy output, reliability, and scalability. We employed a Multi-Criteria Decision Analysis (MCDA) approach to compare and rank different energy sources based on these criteria. Our findings indicate that wind energy is the most effective alternative energy source overall due to its relatively low cost, high efficiency, moderate environmental impact, good scalability, and high reliability. However, geothermal energy had the lowest levelized cost of electricity (LCOE), while hydro energy performed well in terms of efficiency and reliability. The environmental impact of wind energy was found to be moderate but still less severe compared to other energy sources. Our study provides important insights into the trade-offs and considerations that policymakers and industry leaders must make when selecting which energy sources to prioritize. The findings highlight the need for a comprehensive and integrated approach to energy policy that balances economic, environmental, and social considerations. In conclusion, this study contributes to the literature by emphasizing the importance of considering multiple criteria when evaluating alternative energy sources. Our findings can inform policy decisions regarding the development of a sustainable and reliable energy mix in China, and have important implications for other countries seeking to transition to renewable energy sources.
... Since 2017, China has organized and promoted the construction of spot markets in eight regions, including Southern China (starting from Guangdong Province) and Sichuan Province as the first batch of pilot projects [9,10]. It has been a developing trend for hydropower plants to participate in both the contract market and the day-ahead market [11,12]. Medium-and long-term contracts can lock the electricity price to avoid the risk of price fluctuation, but the price is generally low. ...
With the gradual opening of China’s electricity market, it is effective for cascade hydropower plants to simultaneously participate in both the monthly contract market and the day-ahead spot market to obtain higher power generation benefits. Hence, this paper studies the optimal decomposition model for the monthly contracted electricity of cascade hydropower plants considering the bidding space in the day-ahead spot market. The close hydraulic and electric connection between cascade hydropower plants, the implementation requirements of contracted electricity, and the uncertainty of the day-ahead market clearing price are all well considered. Several linearization techniques are proposed to address the nonlinear factors, including the objective function and the power generation function. A successive approximation (SA) approach, along with a mixed-integer linear programming (MILP) approach, is then developed to solve the proposed model. The presented model is verified by taking the decomposition of the monthly contracted electricity of cascade hydropower plants in China as an example. The results indicate that the developed model has high computational efficiency and can increase the power generation benefits compared with the conventional deterministic model. The effect of the penalty coefficient for imbalanced monthly contracted electricity is also evaluated, which provides a practical reference for market managers.
... As a result of economic development, environmental pollution problems brought by energy consumption always bother the world, with the increasingly serious environmental problems and technological breakthroughs, the widespread usage of new energy becomes the strategic option to solve the contradictions between economic development and environmental pollution, many scholars have researched from many aspects of new energy applications (Kittner et al., 2017;Markard, 2018;Cheng et al., 2018). Since the publication of the Renewable Energy Law in 2005, the Chinese government increases its attention to adjusting and transferring the traditional energy structure, increasing the policy support and feed-in for the new energy industry, to expect an effective adjustment and incentive mechanism of the government in the transformation of energy structure (Pei et al., 2015). ...
Orderly and rational market transaction is the foundation for the healthy development of industries, to analyze the market competitive behaviors and the choice of trading strategies in China's wind power industry, this paper adopted the data of Chinese listed wind power firms in 2011–2020. The research found that (a) the upstream firms as a whole in the wind power industry chain behave as the provider of net trade credit; (b) significant negative correlation between cash inflow and financial capacity of upstream enterprises; (c) the upstream market stands in a dynamic market competitive condition, the upstream firms with either relatively strong or relatively weak financial capacities contest for the market shares by constantly changing their trade preference strategies.
... The following principles and rules are followed in price setting. 1) Cost compensation, that is, material and manpower consumed in plant construction and power generation, shall be fully recovered through sale of energy; 2) Limited profit, that is, sufficient profit to attract capital, but not impose too onerous a burden on the purchaser [50], [51]; 3) Highlighting contributions, that is, the seasonal compensation and comprehensive contribution of reservoirs should be emphasized; and 4) Simple calculation. The total cost composition of a hydropower station during its operational period is shown in FIGURE 1. ...
Regional cross-border electricity trading is popular in price and cooperation. It is a reliable path to alleviate the shortage of power supply during rapid economic growth. As an important export commodity, the pricing options for hydropower directly relate to the cooperation intention of business parties. This study demonstrates the price formation methods and internal relationships of cascade hydropower stations in CBET. To simulate the decision-making of a bilateral forward contract, a bi-level optimization model was constructed, and the objectives of each layer represent the interests of both parties. The BOM was linearized with Karush-Kuhn-Tucker conditions and strong duality, and finally solved using mixed-integer linear programming. The prices of CHSs in southwestern China were calculated under different pricing options and the results were absorbed in an actual transaction case. Consequently, the complementarity between different exporting countries was verified. The most suitable pricing option for CBET was determined, that is the unified electricity price based on the marginal cost, to be
, which is 20% to 60% higher than the thermal and photovoltaic from other countries. Furthermore, national policy support and economic subsidies are key guarantees for the sustainable development of CBET, which can reduce the discount electricity price to below that of thermal generation by 30%.
The paper uses a social cost benefit analysis (SCBA) approach to measure the effects of the power system reform starting from 2015 in Jiangsu province, China. We review the background of Jiangsu power system and summarize the implemented policies since the publication of “Document #9.” Then we pick the average industrial and commercial retail price and analyze the sources of price reductions. We show that the nominal industrial and commercial price fell by 21.3 percent between January 2012 and May 2021. We then analyze the likely overall welfare change facing industrial and commercial customers using SCBA and conclude that there is a permanent gain equivalent to 9.1% lower prices per year mainly because of the reform. This figure is a significantly more positive consumer gain than that calculated in previous SCBAs of electricity reform in other countries.
JEL Classification: L94, Q48
Chinese electricity market reform poses huge challenges to hydropower operations and electricity trading. This study proposes a scheduling method coupling priority electricity and day-ahead trading for large hydropower plants. The study focuses on complex factors such as tariff uncertainty, different types of electricity settlement rules, and inter-provincial electricity transmission links. Spot market tariff scenarios are determined through the Latin hypercube and the K-means methods. A performance formulation of priority electricity deviation considering settlement assessment rules is established. A transmission description for different sub-plants and a triangular linear interpolation method based on binary independent branching mode are proposed to solve inter-regional transmission connections and hydraulic coupling in cascaded hydropower plants, respectively. Finally, the Big M method is employed to equivalently transform the complex non-linear problem into a mixed-integer linear programming (MILP) model. The method is verified with the day-ahead operation of four large hydropower plants downstream of the Jinsha River in China as a case study. Settlement assessment rules, inter-regional power transmission, and price uncertainty are analyzed in three different cases. Three conclusions are obtained: 1) the priority electricity performance rate and the price are positively correlated, which is useful to guide hydropower plants to actively participate in the market. 2) Introducing the prediction error of electricity price in the model can help avoid market decision risk and improve the expected return by approximately 1.2%. 3) Considering the settlement penalty rule is helpful for power generation enterprises to improve power allocation and thus seek higher revenue compared to traditional methods without considering it.
The global climate and environment are deteriorating. Countries have accelerated the development of the carbon market. The interaction and integration research between electricity market and carbon market helps to better reduce carbon emissions. To understand the knowledge domains and evolution of carbon–electricity markets, we downloaded 54,739 related articles from the Web of Science Core Collection between 1991 and 2022 based on the themes of the “electricity market” and “carbon market”. CiteSpace visual software was used to perform cooperative analysis, keyword co-occurrence analysis and cocited analysis. Based on the visual analysis results, we further conducted qualitative analysis of hot research directions and analyzed the development direction of the coupling relationship. We found that there exists mechanism correlations, price interactions, transaction information interactions and transaction behavior interactions, which have an impact on low-carbon investment decisions, power structure optimization and carbon emission reduction. In the future, the development of a low-carbon economy and the integration of renewable energy into the grid will lead to more frequent electricity–carbon markets interactions.
China's west has long been framed as an undeveloped frontier, set apart by poverty and a resource-based economy. Since the 2000s, however, utility-scale renewable energy infrastructure has expanded rapidly in western China, promising local economic benefits tied to national low-carbon transition. This paper contends that these benefits have been precarious and unevenly distributed. I argue that utility-scale renewable energy has remade western China as a “low-carbon frontier,” a resource-rich region that generates low-carbon value for the national green economy. I highlight three features of low-carbon frontiers: they are constructed as spaces of exploitable low-carbon resources, creating an investment boom; they are enclosed through new land arrangements and infrastructure construction, rapidly and with little coordination; and they are reliant on external markets and policy decisions, entrenching dependency. These conditions make it difficult for frontier regions to capture sustained economic development benefits from the boom in the absence of persistent central state supports. I analyse these features by comparing two sets of technologies with similar, but ultimately diverging, trajectories: small and large hydropower in China's south-west, and solar and wind in the north-west.
China is currently pursuing a new round of electricity reform, aiming to establish cost-bidding wholesale electricity markets to replace the current centrally planned electricity economy. Cost minimization-oriented marketization can reshape generation priorities from an economic and low-carbon perspective. However, while the existing literature mainly focuses on the operation, emission, and curtailment evaluation of renewables after electricity market reform, few studies have well addressed the impact of the reform on long-term generation portfolios. Here, we analyze the impacts of China’s electricity reform on generation portfolios based on a refined model describing China’s electricity system operation and planning modes before and after marketization, i.e., centrally planned-electricity operation (CPO) and a competitive wholesale-electricity market (CWM), respectively. By comparing the generation portfolios of six provinces in 2020 and 2030, we conclude that China’s marketization could significantly reduce the proportion of thermal generation by 0.81%-27.48%, of which the market share of low-capacity but coal-heavy generators (<300 MW) could potentially drop by more than 50%. The provincial diversity highly depends on the existing power resource configuration, e.g., the penetration level of renewables and the proportion of thermal generation. In addition, we discover that marketization has a limited impact on renewable expansion planning. In contrast to CPO, CWM can slightly increase the investment in wind and solar energy by less than 1% owing to a relatively high levelized cost of energy (LCOE) of wind and solar energy. Therefore, we further conduct a sensitivity analysis of the renewable LCOE, and it indicates that a reduction in wind investment costs to 2500-5000 CNY/kW (LCOE reaching 0.102-0.204 CNY/kWh) and solar investment costs to 2000-6000 CNY/kW (LCOE reaching 0.107-0.320 CNY/kWh) can effectively promote renewable portfolios.
Media discourse reflects and shapes social and public opinion, which is crucial to the policy-making and energy system deployment. In this study, we focus on exploring the impact of media discourse on social perceptions towards biomass energy utilization in the different economic areas of China via free-expression surveys guided by the framework of socio-political evaluation of energy deployment (SPEED), which are posted and promoted in social networks. A systematical benefit-risk analysis in each SPEED framework has been discussed. Responses to the survey questions regarding the impact of media discourse on social perceptions towards biomass energy utilization in each SPEED benefit-risk framework are processed by natural language processing, and then analyzed via the word network model in social network services where several network-based indices are computed. The hidden keywords addressing the impact of media discourse on social perceptions towards biomass energy utilization are revealed. This study is to serve the public communication and implementation strategies on biomass energy deployment and utilization, and unveil the often-overlooked social influences affecting energy system change.
To fully utilize the energy resources, inter-provincial electricity trading have been conducted in multiple Chinese provincial power grids. This paper proposes a two-phase market clearing framework to facilitate inter-provincial electricity trading in Chinese power grids. In Phase one, the pre-processing of bid curves is implemented to address the multi-segment bid behaviors of massive market participants. As the pre-processing methods, network partition, curve aggregation and curve approximation are developed to reduce the computation complexity. In Phase two, a bi-level model is established to depict the market clearing process, which includes the upper-level model for inter-provincial trading and the lower-level model for intra-provincial trading. Those two models are iteratively solved by passing the optimal electricity purchase price and electricity demands to each other. Numerical experiments based on the IEEE systems and the practical Chinese inter-provincial power grids are carried out to verify the validity and scalability of the proposed framework. The simulation results indicate that: 1) the pre-processing of bid curves effectively reduce the computational burdens; 2) the inter-provincial market promotes the utilization of energy resources and increases the total social welfare. Further, the errors caused by the pre-processing methods are analyzed and the availability of the proposed framework is discussed.
With the rapid development of the calcium carbide (CaC2) industry in China, the growth in CaC2 demand is confronting an increasing pressure to reduce environmental emissions. However, the environmental impacts of CaC2 production remain poorly understood. Life cycle assessment is employed in this study to provide a comprehensive analysis of the environmental performance of CaC2 production in China. The results show that the environmental load of the semi-closed furnace process is higher than that of the closed furnace process. Electricity supported by thermal power is the most sensitive factor. A significant regional layout of CaC2 production, adjoining the coal-electricity-intensive areas, has been observed in China. The sustainable scenarios are developed to evaluate the environmental reduction potential in terms of technical progress and electric grid improvement. It is noted that increasing the proportion of renewable power in the electric grid has obvious environmental benefits for CaC2 production. The average energy conservation and emission reduction index of CaC2 production in the northwest China is 1.81–2.10 times higher than that in the southwest China. The findings of this study will give a reference for the decision-makers to take conducive emission reduction measures for the sustainable development of the CaC2 industry in China.
With the reform of China's electricity market, the cascade hydropower plants' participation in the portfolio electricity market is an effective way to improve power generation profits and avoid risks. Hence, an optimized scheduling model for cascade hydropower plants simultaneously participating in both the daily contract market and the day-ahead spot market is developed. The dynamic water delay between the cascade hydropower plants, the uncertainty of the day-ahead market clearing price and the operating constraints of individual units are considered to make the model more realistic. To improve the solution efficiency, several linearization approaches are proposed to convert the original model into a scenario-based MILP problem, which can be solved by the efficient solver. The real-world case studies demonstrate that the developed model ensures appreciable power generation benefits while keeping the cascade hydropower plants in safe and stable operation. Moreover, compared with other water delay time formulations which we consider to be the most advanced in previous literature, the scheduling plan obtained from the proposed model is more realistic and computationally efficient. The impact of the penalty coefficient for the contract electricity imbalance is also analyzed, which can provide effective references for the market operators when formulating electricity trading rules.
Over the past few decades, China has built a batch of high proportion hydropower systems (HPHSs) in southwest China. In these HPHSs, it is very common that the upstream and downstream stations belong to different stakeholders. This situation often leads to unreasonable clearing results with a mismatch between power generation and water release when the upstream and downstream power stations independently participate in the electricity spot market. In addition, HPHSs have highly non-convex nonlinear constraints. The integrated consideration of the above factors and other operational constraints make the day-ahead market clearing (DAMC) for HPHSs very challenging. Therefore, this paper proposes a novel practical DAMC method to determine the optimal quarter-hourly clearing plan of hydropower stations for HPHSs. First, the non-convex nonlinear hydraulic constraints of cascade hydropower stations are replaced by a set of linear dynamic constraints (LDCs), reducing the computational complexity. Second, a mixed-integer linear programming model coupled with LDCs is constructed to minimize the total purchase cost. Third, a control boundary update strategy is proposed to update the LDCs through accurate hydraulic checks. The above steps constitute an iterative solution framework of “model optimization-constraint update”, which ensures the efficiency of the model solution and the feasibility of clearing results. The developed method is applied to China Yunnan Power Grid, a high proportion hydropower grid, to optimize the DAMC results for hydropower stations. Different hydrological and price scenarios such as high bid price, low bid price, flood season, and dry season are selected to verify the effectiveness of the presented method. The experiments demonstrate that the proposed method can effectively avoid the mismatch problem between power generation and water release and obtain reasonable hydropower clearing results in an acceptable computational time. The study provides a valuable technical approach for the DAMC of HPHSs in China and other places worldwide.
Hydropower is booming in Asian river basins originating on the Tibetan Plateau and adjoining mountain ranges – often referred to as the “Third Pole.” These plants generate significant power for Asia’s megaregions; they also dramatically alter environments, economies, and livelihoods in mountainous regions. Yet, current understanding of these developments is limited to specific rivers or countries, obscuring the important relational drivers and characteristics of the boom. In this article, we deploy a novel powershed framework – defined as the material and socio-political infrastructure linking electricity supply and demand areas – to analyze and compare the regional power geographies that shape Third Pole hydropower development. Using this framework, we identify ten powersheds across China, Southeast Asia, and South Asia basins that incorporate the vast majority of new hydropower generation. Our analysis reveals a clear trend towards developing large-scale hydropower in the mountains for the purpose of exporting electricity to megaregions. These powersheds are complex and in flux, crossing political and basin boundaries in ways that defy traditional hydropower analyses. This article thus reveals power export to be the main driver of the boom and its characteristics; it also provides a framework for analyzing power geographies worldwide.
Promoting a hydro-dominated electricity market (HEM) is greatly challenging. This study analyzes impacts and challenges of electricity market on hydro-dominated power system operations. The analysis indicates that the HEM exhibits unique difficulties including spatiotemporal hydraulic coupling of cascaded hydropower plants, runoff uncertainties, nonlinear operation constraints, coordination of multiple time scales, as well as transprovincial and transregional power transmission. Two kinds of suggestions are presented to overcome these difficulties for different market objects. The hydropower enterprises are suggested to improve generation prediction level, reconstruct market-based operation rules, implement multiscale nested operations and bidding, strengthen collaborative bidding of different stakeholders, and analyze market demands and competitors. The goal is to improve their competitiveness. The market operators should make efforts to develop accuracy and efficiency of clearing models and predetermine feasible hydropower bidding intervals to ensure power balance and prevent unreasonable spillage. Moreover, a practical and convenient electricity trading platforms is required. It is implied that there is strong necessity to explore characteristic market theories and application technologies combined with hydropower characteristics and actual dispatching needs.
Hydrologic uncertainty and economic uncertainty both affect market-oriented hydropower operation. For medium-term cascade hydropower operation, the uncertainties of daily reservoir inflow and market clearing power price can pose risks to operation, especially when power stations participate in multiple power markets. It is difficult to obtain the fluctuation range of uncertain variables for different expected power sale profits, and to plan the operation range of cascade hydropower stations. For a cascade hydropower system dispatching power to two markets, this work developed a risk assessment method for medium-term optimal cascade hydropower operation based on information gap decision-making theory (IGDT). We established a bilevel stochastic IGDT model for the main hydrologic and economic uncertainties in hydropower market participation. The lower-level model solves the minimum robustness profit or maximum opportunity profit from power sale, and the upper-level model solves the maximum robustness fluctuation range or minimum opportunity fluctuation range of the uncertain variables for different expected profits. Then we converted the bilevel model to two equivalent single-level models, and provided solutions. The proposed method does not require the probability distribution of uncertain variables, which is often unavailable; moreover, it reduces computational complexity while ensuring accuracy of results. The proposed method can provide decision makers with reasonable power dispatch options. This work used a cascade hydropower system in Southwest China as a case study. The proposed method provided acceptable fluctuation range of uncertain reservoir inflow and power price under different expected profits, and provided the operation range to guarantee the expected profit. Decision makers with different risk preferences can evaluate various strategies to optimize medium-term cascade hydropower operation to ensure the expected profit.
Hydropower is the most economically developed renewable energy source in China. In the twenty-first century, the era of clean and low-carbon development, hydropower can meet the continuous growth of energy consumption and help China achieve its goal of carbon neutrality by 2060. In 2019, China’s installed hydropower capacity was 358.04 GW, and hydropower consumption was 1.132 × 10¹⁶ kJ, with a growth rate of 5.5%, well above the global average of 0.8%. Although China's hydropower achievements are renowned worldwide, hydropower development in China still faces challenges in relation to environmental, technological, economic and social issues. In this paper, we first review the history, achievements and current situation of China’s hydropower development and summarize the specific challenges mentioned above. Then, we take the Dadu River Hydropower Base as a case study. This project ranks fifth among China’s 13 largest hydropower bases, and the construction of 14 cascade hydropower stations was completed in December 2020, accounting for 61.3% of the total planned installed capacity of 28 cascades, with 3 more still under construction (accounting for another 16.3%). We comprehensively describe the background, tasks and exploitation of hydropower development in the Dadu River basin and highlight current practices, including exploration of environmental protection and ecological restoration, technical innovation, supporting facility construction, economic promotion and resettlement. Finally, based on the identified practices and lessons, we propose feasible suggestions for China's future hydropower development.
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This paper focused on the stable operation and control strategy of the hydro-turbine governing system (HTGS) in an isolated-grid operation mode. The stable operation of a hydropower station in isolated-grid operation mode is important for the safe operation of a power system. A regional power grid can be isolated from a main grid due to factors such as natural disasters, grid failures, and human errors. The Lunzua hydropower station in Zambia is often forced to operate as an isolated grid. To ensure its safe and stable operation, we conducted isolated-grid regulation tests in conjunction with field testing of HTGS and determined the parameters of the HTGS for stable operation of the isolated grid. In the field test, we first set the no-load and initial parameters for the isolated-grid mode through the no-load disturbance tests. Through simulated isolated-grid operation tests, we verified and further tuned the initial parameters. Meanwhile, we propose a control strategy for the transition between large-grid and isolated-grid modes. Through operational tests, we determined the parameters for stable operation in isolated-grid mode. During testing, we found that the water flow inertia time constant Tw was too large and the inertial time constant Ta of the impulsive generator was too small, which resulted in a narrow stability range of proportional–integral–derivative (PID) controller parameters for isolated-grid operation. The governing stability for isolated-grid operation was thus sensitive to the PID parameters. Since the isolated-grid field operation test of the HTGS of the Lunzua hydropower station was completed in August 2016, the generator units have maintained safe and stable operation in large-grid and isolated-grid modes, which validated the isolated-grid operation parameters and control strategy for the transition between large-grid and isolated-grid modes as determined by our test method. The methods of field test and control strategies used for isolated-grid operation have important practical value for the isolated grid operation of hydropower stations.
The fast and stable regulation of pumped storage is a basic guarantee for supporting various scenarios of renewable energy system. The operator pursues sensitive tracking performance, while underestimates the dynamic characteristics of hydraulic system and damping characteristics of pumped storage unit (PSU). These may aggravate the wear-tear of PSU operation, and decrease the frequency stability of power system. Therefore, a systematical study of improving overall regulation performance is conducted by applying PSU modeling, co-optimization and operation evaluation. First, the novel small signal model is proposed and the high-order hydraulic damping model is further derived. Apart from the ultra-low frequency oscillation mode, a new frequency oscillation mode caused by surge tanks is captured. Second, the co-optimization strategy is presented to coordinate the stability-tracking conflict. And then a comprehensive evaluation model, integrating 14 indicators is conducted to quantify the PSU performance and its contribution to power system, driving the favorable decision making of operators. Compared with the original scheme, the overall performance of PSU is improved by 20.76%, at the cost of 10.88% tracking capacity. The comparison of three measures including 12 scenarios verifies the competitive advantage of co-optimization strategy in multi-machine system. This paper supplies a novel tool for performance enhancement of PSU. It may have potential value in the stability of renewable energy systems with multiple hydropower units.
Recently, the solar photovoltaic power, a promising renewable energy, is witnessing a rapid development period. However, it is often difficult to perfectly capture the generation of solar photovoltaic plants because of various factors (like weather condition, solar radiation and human activities), increasing the operational risk and cost of power system. Hybrid energy system proves to be an effective measure to address this problem. Motivated by this practical necessity, this paper develops a novel hybrid gravitational search algorithm to solve the coordinative operation model of multiple hydropower reservoirs and solar photovoltaic power plants. In the proposed method, the gravitational search algorithm is set as the unified framework; the neighborhood search strategy is used to improve the convergence rate by considering the social information and individual experience; the adaptive mutation strategy is used to improve the population diversity by elite conservation and mutation operator; the modified elastic-ball strategy and constraint handling technique are used to enhance the solution feasibility. The simulation results of numerical functions demonstrate the superiority of the developed method in convergence rate and global search ability. The hydro-solar operation results in different cases show that compared with the traditional methods, the proposed method can yield high-quality scheduling schemes to alleviate the peak shaving pressure of power system. Thus, the novelty of this paper is to provide an effective HGSA method for solving the complex engineering optimization problem.
Under the medium- and long-term electric markets, cascaded hydropower stations face a series of practical challenges due to the uncertainty of inflow and market price. For long-term dispatch scheduling, the allocation of power generation in multimarkets is critical, including clean energy priority consumption market, inter provincial market and intra provincial market in order to maximize the operator’s expected revenue and reduce the market operation risks. Based on the hydro-dominant electricity market structure and settlement rules, we propose a long-term optimal operation method for cascade hydropower stations considering the uncertainty of multiple variables. First, a seasonal autoregressive integrated moving average model is used to handle the time-varying and seasonal characteristics of inflow series by using a copula connect function to fit the joint distribution of the monthly inflow, the clearing price of the intra provincial market and the delivery volume of the inter provincial market. Then, uncertain chance-constrained programming is established. Finally, a developed particle swarm optimization algorithm embedded in a Monte Carlo simulation is solved for hydropower operation policies, and the maximum revenue, resource allocation and scheduling strategy are obtained under the corresponding risk tolerance. Taking the actual data of cascaded hydropower stations in Yunnan Province, China, as an example, a simulation analysis is carried out. The results show that the proposed method can reasonably describe the uncertainty and correlation between the variables, realizing the optimal allocation of resources among multimarkets, and provide references for the long-term optimal operation of cascade hydropower stations in a multimarket environment. The results also show that the decision strategies should be determined considering the decision-maker’s risk preference.
In international climate change negotiations, China's role is an issue of perennial concern. In particular, the lack of quantitative, absolute emissions commitments from China has often been the focus of this concern. In line with changing domestic and international contexts, China is recalibrating its stance and strategy. Its participation in international climate change negotiations has evolved from playing a peripheral role to gradually moving to the center. This article examines China's stance and role in international climate change negotiations from a historical perspective. In so doing, the article discusses the evolution of international climate negotiations and China's stance in the lead‐up to and at the Paris conference. With Paris behind us, the focus is now turning to the implementation of the Paris Agreement. The article discusses post‐Paris focuses, generally in the international context and in particular in China's context. They both affect the outcomes of post Paris subsequent negotiations and hold the key to actually achieving desired outcomes. WIREs Clim Change 2017, 8:e443. doi: 10.1002/wcc.443
This article is categorized under: Policy and Governance > International Policy Framework
A major share of China's total carbon dioxide (CO2) emissions is from the electric power sector. To solve this problem, Chinese government has implemented many renewable energy policies in the electric power sector. In China, the most popular renewable energy policies are Feed-in tariff (FIT) and renewable portfolio standard (RPS). This paper first introduces the current development of renewable electricity generation. Second the design plan and implement of FIT and RPS in China's thermal electricity generation sector are summarized in this paper. Third this paper establishes a complementary mode of FIT and RPS which can provide a stable environment to make the FIT and RPS work together. Finally, based on the above analysis, this paper proposes relative suggestions for the implementation of FIT and RPS in China making recommendation for the development of electricity generation from renewable energy.
This chapter describes the evolution of China's electricity industry and market since the mid-1990s. Many structural reforms were undertaken between 1997 and 2003, but since that time reform has stalled and competitive power markets have not been introduced. This failure to pursue reform has arisen from changing domestic energy priorities and perceptions of the crises in liberalized power markets in other countries. The current state of the power sector has allowed China's government to pursue its current objectives of investing in new generation and transmission capacity, reducing national energy intensity, and building renewable energy plants through traditional administrative instruments. But at the same time, the large generation and transmission companies have been able to strengthen their positions in the sector. Further radical reform of the power sector is unlikely in the near future, though the government will continue to make minor adjustments in order to promote the transition to a low-carbon economy.
The Chinese government has implemented electricity reform during the reform era, but the process has been accompanied by widespread power shortages and political struggles among state agencies. This paper addresses this contradiction by explaining two interrelated outcomes: the transformation of the state regulatory structure and the development of corporatized state-owned enterprises.
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This paper examine the short and long terms causal relationship between electricity consumption and real GDP in China through vector error correction model, which can avoid the false causal relationship. The results of the VECM reveal the co-integration relationship between real GDP and electricity consumption and the presence of unidirectional causality from electricity consumption to economic growth in the short-run and long-run, which is subsequently verified in two different sub-phases. And then we come up with some suggestions that China should modulate the supply structure of electric power and pick up speed to adjust industry structures.
Though the reforms announced by the Chinese government in the spring of 1998 appear to be substantial and wide ranging, by themselves they may have little impact either on the effectiveness of government or on the performance of the state industries. Two outstanding problems are the structure and allocation of responsibilities within the government, and the excessive power of the state companies. The tasks of regulation and policy formulation in the energy sector should be clearly allocated in a simple administrative structure which specifically excludes any role for the state companies. The present structure of the state-owned energy industries is such that these companies have a great deal of power, not only in the market but also with respect to the government.
This paper discusses the relationship between regulation and contracts in infrastructure industries and the role of economic regulation, including the relationship between contracts and licences. The paper starts with a short survey of the relevant economic and legal issues. The main part of the paper presents examples of how infrastructure contracts, including concession contracts, have been combined with monitoring and enforcement by external regulatory agency. The examples discussed include UK railways and electricity supply from 1840 onwards, French water and toll road concessions and their regulation, as well as experience with contracts and regulation for private finance in infrastructure in developing countries over the last 25 years. These examples provide evidence of both successes and failures from which lessons are drawn. The paper concludes with a short discussion of the role that regulatory agencies can potentially play in supporting private finance in infrastructure, enabling simpler contracts, resolving contract misunderstandings and providing processes for ordered renegotiations.
Reducing the environmental impact of supplying electricity is a key to China's sustainable development, and a focus of both domestic and international concerns with greenhouse gas emissions. The environmental performance of the electricity sector is strongly affected by its institutional arrangements: regulatory frameworks, wholesale markets, pricing mechanisms, planning and coordination, and enforcement and incentive mechanisms. These arrangements are set to change as electricity reforms inaugurated in 2002, but sidetracked by several years of supply shortages, are being resumed. In this paper we examine the impact of electricity reform on environmental sustainability by analyzing case studies of four environmental initiatives in the electricity sector: retirement of inefficient generators, installation of pollution control equipment, renewable energy development, and efforts to promote energy efficiency. We find that implementation of these policies falls short of objectives for two main underlying reasons: conflicting priorities between central and provincial governments, and ineffective regulation. Sustainability will be best served not by redoubling short-term supply-oriented, market-based reforms, but by better aligning central and provincial government incentives, and by developing competent, independent regulation at the provincial level. China's central government and sub-national governments in industrialized countries can both contribute to the latter goal.
This paper discusses the lessons learned from electricity sector liberalization over the last 20 years. The attributes of reform models that have exhibited good performance attributes are identified, drawing on empirical analysis of market structure, behavior and performance in many countries. Wholesale and retail market competition and network regulation performance evidence are discussed. Technical, economic, and political challenges to improving the efficiency of what continue to be partial liberalization programs in many countries are considered.
Regulation is part of the complex web of a nation’s public policy. To understand regulatory design, then, it is imperative
to understand the general determinants of public policy. The purpose of this essay is to highlight the usefulness of a transactional
approach to public policy determination in understanding the origins, nature and the evolution of the institutions of regulation.
As it merits an essay in a volume on the New Institutional Economics, we approach public policy as a (complex and often intertemporal)
transaction among policy makers. As such, the nature and features of public policies are impacted by the type of contracts
facilitated by the institutions—i.e., the rules of the political game—of the country in question. Here, then, we analyze the
institutional determinants of regulatory policy making by looking at regulation as the outcome of complex intertemporal exchanges
among policy makers. As in normal economic transactions, efficient intertemporal exchanges require safeguarding institutions.
In their absence, we will observe the development of non-cooperative and shortterm behavior, inflexible rules to avoid political
opportunism, and in general low quality regulatory policies.
This paper reviews the incentives for pursuing a low-carbon electricity sector that are embedded in China's regulatory and policy framework. To do so, we first describe the industry structure and the regulatory framework. Second, we explicitly review the policies that were developed to promote energy efficiency and renewable energy. These policies range from the introduction of legal requirements to undertake particular actions to pricing mechanism and financial incentives. Based on this, we tease out the challenges faced by a sector governed by a myriad of complex arrangements, different institutions and agents who face different and often conflicting incentives for pursuing environmental and energy efficiency objectives. Finally, we provide suggestions to scientifically set up low-carbon policies and to achieve the expected goals with minimum social cost.
China has the richest hydropower resources in the world. Yunnan's exploitable hydropower resources rank third in China, second only to Tibet and Sichuan Province. Yunnan has experienced soaring growth in installed hydropower capacity in the past several decades. The fast development of hydropower makes the province one of the main producers and exporters of hydroelectricity. However, with inconsistencies between hydropower development and various related resources, more and more hydropower generation has been curtailed in recent years. The increasing curtailment of hydropower generation not only caused large-scale waste of sustainable energy, but also impaired the potential higher contribution of hydropower for GHG emission reduction. This paper provides an overview of the hydropower resources and their development in Yunnan and systematically analyzes the constraints causing the curtailment of hydropower generation. We argue that there are several constraining factors such as slowdown of economic growth, inadequate transmission capacity due to a weak grid structure, inconsistency between power grid companies and local government, and uneven distribution of precipitation seasonally and annually. Recommendations are made to alleviate or eliminate hydropower curtailment in Yunnan and other hydropower rich areas.
Small hydropower (SHP) has a global reputation as a ‘green’ low-carbon energy source that improves rural livelihoods and contributes to local economic development. In China, SHP has grown rapidly since the early 2000s, particularly in the water-rich provinces in the country's southwest. However, because SHP plants in China are privately-operated and approved by local governments, there is an incentive to construct large, multiple-cascade systems to generate as much power as possible. In many areas, this has led to over-development of SHP and associated negative environmental and social impacts. In this paper, we identify the factors that shape geographies of SHP over-development, what we refer to as ‘shades’ of green energy. We then analyze the direct and indirect impacts of over-development. We draw on interviews and electricity generation data from six prefectures in Yunnan province, one of the world's largest hydropower producing regions. We find that prefectures that operate in a semi-autonomous way in electricity management and industrial planning are most prone to over-develop SHP, since they depend on hydropower revenues from electricity generation and local energy-intensive industries. We also find that over-development of SHP causes streamflow reductions and unstable electricity generation, and in some areas, drives an increase in environmentally-destructive mineral processing and reduces irrigation water access. These findings suggest a need for coordinated river basin planning on small watersheds and a reassessment of the role of SHP in local economic development.
According to the structure of energy, economy, power grid and market of Yunnan province in China, the new electricity market structure, trading mechanism and information disclosure mechanism are designed based on the theories of incentive compatibility, game in depth and information asymmetry. The three-step trading system of “point-to-point”, “back-to-back”, “face-to-face” is put forward to achieve a trading mode centered on long-term transactions and supplemented by short-term transactions. Monthly bilateral transactions are carried out on the basis of the annual bilateral transactions and the price adjustment mechanism is designed to make the “point-to-point” bilateral trade more flexible. Declaring multi-block and multiple prices is allowed to improve the close rate of “back-to-back” centralized trading. Transaction opportunities of “face-to-face” self-listed trading are increased by giving buyers and sellers the rights to take turns. Day-ahead transactions are introduced to help the market subject control bias and improve the contract compliance rate. Yunnan electricity market mechanism has achieved good practical results. In 2016 Yunnan market transaction power reached 59 TW·h. The overall contract compliance rate was more than 96%. The proportion of clean energy power generation reached 92.7%. Thus the Yunnan electricity market model is becoming more and more mature.
The use of hydropower has expanded in recent years in southwest China, playing a key role in the success of China's West-to-East energy strategy. Although installed hydropower capacity has reached a record high, the problem of abandoned water has intensified and has been gradually highlighted by researchers. Abandoned water has resulted in a significant waste of carbon-free and inexpensive renewable energy, which is not conducive to China's goals to reduce emissions to save energy. This waste has seriously affected the development of China's hydropower industry. Therefore, now is the time to analyze the main reasons for the abandoned water problem and to identify the crux of the problem. In this paper, we collected the actual operation data of all the power stations in the case area and established the mathematical model according to the quantity of abandoned water as well as the actual and the theoretical output curve of the power station to quantify the abandoned water into energy loss. We then classified the abandoned water according to three groups of causes, namely, generation-side, line-side, and market-side causes. In 2016, the total energy loss of abandoned water of Sichuan Province was 28.73 × 10⁹ kW h, of which the generation-, line-, and market-side causes account for 7.76%, 11.68%, and 80.56% of the energy loss, respectively. Therefore, the market-side causes are the main cause for the abandoned water problem. Such market-side causes primarily include the imbalance between electricity supply and demand, the provincial barriers of the local government system and its mechanisms, and the hysteresis congestion of the transmission lines. Seizing the favorable opportunity presented by new power system reforms in China, this study proposes several market-oriented measures to improve hydropower consumption capacity.
2018 IEEE. Restructuring an electricity sector entails a complex realignment of political and economic institutions, which may both delay and distort the achievement of satisfactorily competitive conditions. In research and planning for policy interventions in power systems under these varied regulatory environments, typical operational models may neglect important interactions between techno-economic criteria and political constraints, leading to poor understanding of underlying causes of inefficiency and to inappropriate recommendations. We develop tractable formulations of the unit commitment problem based on integer clustering of similar units that endogenize important political factors in the Northeast grid region of China. We demonstrate the importance of these interactions on operations and provide a set of options for researchers to explore further pathways for China's ongoing power system reforms. For example, wind integration, a key policy priority, is inhibited by the interaction of institutions limiting short- A nd long-term sources of flexibilities in interprovincial trade.
Based on a mix of original archival research and an extensive literature review, this article assesses the history of the People’s Republic of China’s national energy policies since 1949. We divide this history into six phases: Emergence (1949–1957), Socialist construction (1958–1965), Turbulence (1966–1978), Reform (1979–2000), Contestation (2001–2014), and Transition (2015-present). Over the whole history of more than sixty years, China’s energy production and consumption grew at a surprising speed, while energy intensity exhibited early fluctuations and a subsequent gradual decrease after the turbulence phase. In tracing this history, the article offers new historical and policy insights into the world’s largest developing country and a theoretical contribution to the role of the state in shaping economy and society through energy policy. The article lastly offers an in-depth exploration of how command-and-control style administrative intervention and low levels of market liquidity have had a prophylactic effect on innovation and competition.
A number of analyses, meta-analyses, and assessments, including those performed by the Intergovernmental Panel on Climate Change, the National Oceanic and Atmospheric Administration, the National Renewable Energy Laboratory, and the International Energy Agency, have concluded that deployment of a diverse portfolio of clean energy technologies makes a transition to a low-carbon-emission energy system both more feasible and less costly than other pathways. In contrast, Jacobson et al. [Jacobson MZ, Delucchi MA, Cameron MA, Frew BA (2015) Proc Natl Acad Sci USA 112(49):15060-15065] argue that it is feasible to provide "low-cost solutions to the grid reliability problem with 100% penetration of WWS [wind, water and solar power] across all energy sectors in the continental United States between 2050 and 2055", with only electricity and hydrogen as energy carriers. In this paper, we evaluate that study and find significant shortcomings in the analysis. In particular, we point out that this work used invalid modeling tools, contained modeling errors, and made implausible and inadequately supported assumptions. Policy makers should treat with caution any visions of a rapid, reliable, and low-cost transition to entire energy systems that relies almost exclusively on wind, solar, and hydroelectric power.
China’s energy resources and electricity load show reverse regional distribution, along with serious imbalance of energy supply and demand between eastern and western regions. Inter-regional power transmission is considered to be the key strategic measure to balance the national resources allocation and satisfy various regional long-term benefits. In this study, a multi-region power sector optimization model is developed from the perspective of bottom-up modeling. Power transmission technologies are considered in detail. Moreover, the sub-module of inter-regional coal transportation is introduced into the model. Based on above framework, this study analyzes quantitatively the optimum inter-regional power transmission planning under various policy scenarios, and estimates its impacts on renewable energy, NOx and SO2 emissions, and coal transportation from a long-term perspective. The results show that ultra high voltage lines will become the main carrier of inter-regional power transmission in the future. The construction of transmission line between some regions such as from East Inner Mongolia to northern China, and from northwest China to central China can bring economic savings. Inter-regional power transmission is an effective way to promote the utilization of renewable energy in Inner Mongolia and northwest China, and plays an important role in controlling NOx and SO2 emissions in central and eastern China but has limited effect on the national total emissions. Moreover, it could reduce the inter-regional coal transportation significantly.
The political success of the Paris COP 21 in 2015 contrasted sharply with the diplomatic breakdown at Copenhagen six years before in 2009. Contributing to this success was China’s emergence as a more positive participant in the international climate change negotiations. Despite efforts to reduce energy and carbon intensity since the mid-2000s, Chinese negotiators in Copenhagen were careful not to link domestic action on climate change to any presumptions of international obligation. This stands in marked contrast to Paris where, for the first time, China was willing to commit to an absolute cap on emissions subject to international measurement, reporting, and verification (MRV). This article examines what changed between 2009 and 2015 such that China was able to play a more constructive role in the global climate regime. It argues that a key driver of change was China’s shift to a ‘New Normal’ model of economic development. Beginning in the 12th Five Year Plan Period (2011–2015), China’s economic policy prioritized a transition from energy-intensive growth based on heavy industry, exports and investment, to a more balanced economy characterized by slower growth, an increasing role for services and domestic consumption, and a focus on innovation and low-carbon technologies. This transition gave China the opportunity to re-formulate its priorities in international climate negotiations and helped pave the way for increased climate cooperation with the US, the lack of which had been a major roadblock to success in Copenhagen. Progress was further facilitated by a range of external factors, including impressive French diplomacy in the run-up to COP21 and the important shift to a bottom-up, voluntary approach to commitments.
Policy relevance
This article analyses the reasons behind China’s more constructive engagement at COP 21 in Paris, which contributed to the Conference’s successful outcome. It is important for policy makers to better comprehend China’s shifting position and the motivations behind it, given the country’s key role in keeping temperature rise at a safe level. The deal reached in Paris now needs to be implemented, and success is by no means guaranteed. A deeper understanding of the position of this key player can only help with the negotiation process, implementation phase, and further negotiations that are needed to strengthen targets.
Forum papers are thought-provoking opinion pieces or essays founded in fact, sometimes containing speculation, on a civil engineering topic of general interest and relevance to the readership of the journal. The views expressed in this Forum article do not necessarily reflect the views of ASCE or the Editorial Board of the journal.
The mitigation of climate change requires a near total decarbonisation of the power generation sector by 2050. Decisions on the amount of generating capacity, the types of technologies, and their operation are crucial to achieving emission targets. As power plants operate in an interconnected system, their evaluation should be based on their contribution to overall system performance as opposed to their individual costs when operating in isolation. In this contribution, we present a methodological approach for deriving the Levelised Value of Electricity (LVOE) as a new metric determining the value of a technology to the electricity system. The methodology is based on a mixed-integer linear program (MILP) which simultaneously optimises the electricity system design and operation. It considers both security of supply and environmental aspects and presents the technology value as a function of the prevalent system conditions. An illustrative study on the LVOE of Carbon Capture and Storage (CCS) power plants reveals how the economic deployment of CCS could reduce total system cost in the future UK energy system.
Power demand in China has increased rapidly in the past decade, and it is projected to grow even further. To gain insights into how this demand growth could optimally be met, addressing regional differences such as resource distribution and power demand, is crucial. For long-term planning purposes, using a multi-regional mathematical model that divides China's power sector into regions overcomes the limitations of viewing as a single network. Reflecting how inter-regional power transmission could best be utilized is critical in understanding how flows between regions could be optimised. In this paper, a multi-regional model that reflects actual grid infrastructure with an objective function to maximize accumulated total profits gained by the power generation sector from 2013 to 2050 is proposed. A case study is provided to illustrate how inter-regional power transmission could influence the regional deployment of technologies under different policy scenarios. The results show that energy subsidies and national targets will remain important to the deployment of renewable energy in both the short and long term. In addition, potential downside implications of lower demand growth on the long-term prospects of long-distance inter-regional power transmission and options, such as more flexible electricity pricing mechanisms, to limit the effects are discussed.
Building on Oliver Williamson's original analysis, the contributors introduce new ideas, different perspectives and provide tools for better understanding changes in the approach to regulation, the reform of public utilities, and the complex problems of governance. They draw largely upon a transaction cost approach, highlighting the challenges faced by major economic sectors and identifying critical flaws in prevailing views on regulation. Deeply rooted in sector analysis, the book conveys a central message of new institutional economics: that theory should be continuously confronted by facts, and reformed or revolutionized accordingly. © Claude Ménard and Michel Ghertman 2009. All rights reserved.
More than a decade ago, in Chinas electric power industry, the investment for generation side and power grids was inadequate and the gap between power supply and demand kept enlarging. In order to relief the problems above, power industry reform has been carried out in 2002 under the guidance of "No. 5 Document" by the Central Government. The reform in 2002 has made a series of achievements, including the enhancement of operation efficiency of power industry and the fulfillment of power demand all over the country. During the past decade, as the rapid development of the society and economy, the external environment of Chinas power industry has changed greatly. However, the pricing and planning mechanism of Chinas power industry still operates following the requirements of "No. 5 Document", this has led to a number of problems including twisted pricing mechanism, irrational power system planning, inefficient utilization of renewable energy and so on. These problems have not only hindered the development of power industry in China for quite a long time, but also brought negative influence on the business operation of upstream and downstream industries. Therefore, Chinese government has issued "No. 9 Document" in 2015 and launched a new round of power industry reform. Policies were carried out to form new pricing mechanism, new policies about renewable energy generation and power system planning process to solve the problems mentioned above. This paper has reviewed the history of reform in 2002 and summarized the existing problems of Chinas power industry. Besides, the main policies of "No. 9 Document" were deeply analyzed, and their significance as well as backwards were illustrated. At last, solutions were proposed accordingly and these solutions have considerable theoretical and practical significance to Chinas electric power industry reform in the future.
Over the last fifteen years the world's largest developing countries have initiated market reform in their electric power sectors from generation to distribution. This book evaluates the experiences of five of those countries - Brazil, China, India, Mexico and South Africa - as they have shifted from state-dominated systems to schemes allowing for a larger private sector role. As well as having the largest power systems in their regions and among the most rapidly rising consumption of electricity in the world, these countries are the locus of massive financial investment and the effects of their power systems are increasingly felt in world fuel markets. This accessible volume explains the origins of these reform efforts and offers a theory as to why - despite diverse backgrounds - reform efforts in all five countries have stalled in similar ways. The authors also offer practical advice to improve reform policies.
One of the key challenges for China's transition towards sustainable development is how to supply adequate and reliable electric power by an environmentally benign electricity sector. This paper examines to what extent environmental concerns have been integrated into economic regulation and the difficulties of doing so under the current regulatory framework. It finds that there has been a failure to adequately and systematically incorporate environmental considerations into the formulation and enforcement of electricity regulation. As a result, some of the potential gains of the adopted emission-control measures have not materialised and challenges remain for future adoption of other pollution-reduction initiatives.
Both supply- and demand-oriented solutions are important in cleaning up the electricity sector. However, their successful deployment calls for the removal of various barriers. This paper looks at China's electricity industry, one of the world's largest emitters of greenhouse gases, by relating the regulatory framework to the environmental dimension of sustainable electricity development. It develops an analytical framework by drawing upon the literature on the deployment of supply- and demand-side solutions, regulatory governance, and environmental policy integration. The paper finds that, in China's electricity sector, environmental considerations are subordinate to economic and development goals in policymaking and enforcement. Under the current regulatory framework, regulatory policies/instruments are not conducive to removing barriers to the effective deployment of the solutions.
The inefficient utilization of clean energy and distorted pricing mechanism are the most critical problems that have hampered the reform of China's electric power industry for many years. A large number of clean energy generators have recently been constructed, but water spillage at hydroelectric facilities and wind curtailment persist due to integration challenges. The adjustment of electricity price has relied on executive orders of the Chinese government and the National Development and Reform Commission (NDRC). Distorted prices that are not derived from a market economy have seriously hampered the development of China's electricity market. Therefore, in recent years, the Chinese government has issued a number of reform measures concerning “direct power-purchase for large users”. The main idea of this pricing mechanism is to form direct negotiations between large users and generators to determine the electricity price. To a certain extent, this pricing mechanism is conducive to the electricity market reform in China. However, the coordination between clean energy generation and thermal power generation under the policy of “direct power-purchase for large users” has become the key issue in China's electric power industry. This paper summarizes the policies of “direct power-purchase for large users” in different provinces in China. The electricity market in Yunnan, for which the contradiction between thermal power generation and hydropower generation is increasingly severe, is the focus of the research. At last, a feasible electricity market scheme has been derived to coordinate thermal power generation and hydropower generation. This scheme has considerable theoretical and practical significance to the future of China's electricity market reform.
China's West–East Power Transmission is aimed at optimizing resources allocation, and promoting the common economy development of both east and west regions. However, some problems emerged in cross-province electricity trade in recent years. It is in great need of trading mechanism improvements for government and power grid enterprises to further improve parties' enthusiasm involved in West–East Power Transmission. This paper takes south route as the research object, and in-depth analysis of benefits distribution of current southern route is made as well as problems in tariff mechanism, and the impact of national policy and industry development on West–East Power Transmission is elaborated. Finally, all the factors related to the smooth progress of West–East Power Transmission are consolidated to offer some constructive ideas.
The transition to a cleaner and more cost-efficient electricity system in China is political-economic as well as technological. An example is the reform of China's method of dispatching power plants, which potentially affects the economic relationships between consumers and producers, between grid and generating companies, and between central and provincial governments. Historically, coal-fired power plants in China all received roughly the same number of operating hours, regardless of efficiency or cost. In 2007, Chinese government agencies began to pilot “energy efficient dispatch,” which requires that generators be dispatched on the basis of thermal efficiency. Using a case study of Guangxi Zhuang Autonomous Region in southern China, we evaluated potential energy and cost savings from a change to energy efficient dispatch. We found that the savings are at best relatively small, because large, efficient generators already account for a significant share of total generation. Moreover, as an administrative policy that does not change economic incentives, energy efficient dispatch exacerbates imbalances and center-provincial tensions in the current system. We argue that incentive-based dispatch reform is likely to produce better outcomes, and that the keys to this reform are empowering an independent regulator with pricing authority and establishing a formal, transparent ratemaking process.
The market-oriented reform in electricity industry has become a global trend since 1980s. Although China's electricity industry has been reformed since 1978, the substantial reform has not been conducted until 1985. Before 1985, China's power industry had been absolutely monopolized by the central state-owned companies. The absolute monopoly has been broken since 1985, when the Chinese government opened doors for non-central state-owned investment entities and foreign investors in power supplies in order to solve the chronic power shortage. In 2002, the comprehensive electricity reform plan entitled Scheme of the Reform for Power Industry was enacted. However, implementation of this plan was delayed due to electricity supply shortages. Even worse, a new kind of monopoly has been developed under the background “the state advances, the private sector retreats” in late years. In some sense, the former absolute monopoly has transformed the current relative monopoly. We contend that the relative monopoly has reversed the market-oriented reform in China's electric industry. If the relative monopoly remains unchanged, it will be harmful to public welfare.
Current economic doctrine offers to its students a basic relationship between the number of firms that produce for a given market and the degree to which competitive results will prevail. Stated explicitly or suggested implicitly is the doctrine that price and output can be expected to diverge to a greater extent from their competitive levels the fewer the firms that produce the product for the market. This relationship has provided the logic that motivates much of the research devoted to studying industrial concentration, and it has given considerable support to utility regulation.2
More then just a textbook, A Theory of Incentives in Procurement and Regulation will guide economists' research on regulation for years to come. It makes a difficult and large literature of the new regulatory economics accessible to the average graduate student, while offering insights into the theoretical ideas and stratagems not available elsewhere. Based on their pathbreaking work in the application of principal-agent theory to questions of regulation, Laffont and Tirole develop a synthetic approach, with a particular, though not exclusive, focus on the regulation of natural monopolies such as military contractors, utility companies, and transportation authorities. The book's clear and logical organization begins with an introduction that summarizes regulatory practices, recounts the history of thought that led to the emergence of the new regulatory economics, sets up the basic structure of the model, and previews the economic questions tackled in the next seventeen chapters. The structure of the model developed in the introductory chapter remains the same throughout subsequent chapters, ensuring both stability and consistency. The concluding chapter discusses important areas for future work in regulatory economics. Each chapter opens with a discussion of the economic issues, an informal description of the applicable model, and an overview of the results and intuition. It then develops the formal analysis, including sufficient explanations for those with little training in information economics or game theory. Bibliographic notes provide a historical perspective of developments in the area and a description of complementary research. Detailed proofs are given of all major conclusions, making the book valuable as a source of modern research techniques. There is a large set of review problems at the end of the book.
With the introduction of market-oriented measures in China's power sector in the mid-1980s, electricity sale prices to the grid companies--on-grid electricity tariffs--became the focus of the energy industry, thus affecting all related stakeholders, including fuel suppliers, power generators and end-use consumers. A number of changes have gradually been undertaken in terms of electricity tariff settings and their implementation to address specific requirements of the expansion of the power industry at each stage of its development. On-grid electricity tariffs had been used as a key lever to attract investment in power generation at an early stage of reform and then to encourage competition in the power industry. In response to the rising concerns about environmental protection and the promotion of clean energy utilisation, tariffs have progressively been developed for renewable electricity generation, which has contributed to massive expansion of the renewable power industry in China. This paper reviews key milestones of the development of on-grid electricity tariffs in China, examines the tariff-setting mechanisms of coal-fired power plants and renewable power generation, analyses the factors associated with the adjustments of the tariff levels and discusses the options for further reform and more effective electricity pricing.
With social economic reform in the past decades, the power industry of China is gradually evolving from a highly integrated one toward an electricity market, which can be characterized based on the transition of the power dispatch principle. To attract investment in the power generating industry, China introduced non-state-owned power plants to the original system of a highly vertically integrated power industry with annual power generation quota guarantees, which makes the traditional economic dispatch principle not applicable. The newly debuted energy saving power dispatch (ESPD) is an attempt to fully exploit the maximum energy savings and was implemented by an administrative code. Starting in August 2007, the pilot operation of the ESPD was implemented in five provinces, but after two years, it is still not widely applied all over the country. This paper details the transition of China's power dispatch principle with particular attention to its origin and content. Moreover, the factors that influence the ESPD's actual energy saving effect are discussed, as well as the sustainability of the policy.
The electricity industry of China has been in a process of reforms since the 1980s. This paper gives a review on the three main stages of reforms in China so as to trace out key features of various reform measures including those for power investment financing, the separation between government and power enterprises, and the division between power generation firms and power grids. The findings suggest that further regulatory change in China's electricity market reform is necessary when integration of the electricity markets and increased competition are paving the way ahead for a market-oriented structure. Prospective electricity regulation in the form of a strong legal system and effective institutions that protect market competition and promote appropriate incentives for efficiency are suggested in the paper.
The passing of the Renewable Energy Law (REL) in 2005 demonstrated China’s commitment to renewable energy development. In the 3 years after the REL, China’s renewable electricity capacity grew rapidly. From 2006 to 2008, China’s wind capacity installation more than doubled every year for 3 years in a row. However, three facts prevent us from being optimistic about China’s renewable electricity future. First, considered as a share of total capacity, renewable electricity capacity is decreasing instead of increasing. This is due simply to the rapid growth of fossil fuel capacity. Second, a significant amount of renewable generation capacity is wasted because it is not connected to the electricity grid. Finally, renewable electricity plants are running at a low level of efficiency. Based on an in-depth analysis of China’s existing renewable energy policy, we suggest that these challenges should be dealt with by introducing a market-based mandatory renewable portfolio requirement coupled with strong regulatory monitoring of grid enterprises.
In the past two decades, China has experienced a series of regulatory reforms in its electricity industry, aimed at improving power production efficiency. The central planning system was broken up and the market-oriented modern enterprise system was established. Furthermore, the former vertically integrated electricity utilities were divested and the generation sector was separated from the transmission and distribution networks. In this paper, we intend to estimate the impact of regulatory reforms on production efficiency of fossil-fired generation plants using the plant-level national survey data collected in 1995 and 2004. Applying the econometric method of Differences-in-Differences, we estimate the effects of these reforms on the demand for inputs of employees, fuel and nonfuel materials. The results show that the net efficiency improvement in labor input associated with the regulatory reforms is roughly 29% and the gains in nonfuel materials are about 35%, while there is no evidence of efficiency gains in fuel input associated with the electricity reforms.
This paper discusses the main competition issues that arise in electricity systems dominated by hydro generation, arguing that technological differences between hydro and thermal plants may allow hydropower producers to exert market power in different and subtler ways compared to thermal generators. The key for market power in hydro-based systems is the strategic allocation of a given amount of output across periods, rather than a straightforward reduction of total output. The paper examines the interaction between strategic hydro reservoir operation and transmission capacity constraints, and summarizes the implications of market power for system reliability. A review of recent relevant literature is included. Finally, possible interventions to mitigate market power are analysed.
Despite considerable progress in understanding electricity markets and how best to introduce market reform, many design and implementation issues remain. At a more fundamental level, there is no consensus on which model would work best in a given situation and what constitutes a “functional” market.
This paper narrative argues that industrial economies have been locked into fossil fuel-based energy systems through a process of technological and institutional co-evolution driven by path-dependent increasing returns to scale. It is asserted that this condition, termed carbon lock-in, creates persistent market and policy failures that can inhibit the diffusion of carbon-saving technologies despite their apparent environmental and economic advantages. The notion of a Techno-Institutional Complex is introduced to capture the idea that lock-in occurs through combined interactions among technological systems and governing institutions. While carbon lock-in provides a conceptual basis for understanding macro-level barriers to the diffusion of carbon-saving technologies, it also generates questions for standard economic modeling approaches that abstract away technological and institutional evolution in their elaboration. The question of escaping carbon lock-in is left for a future paper.