By 2025, Asia is projected to account for half of the world's electricity consumption, with one-third of global electricity to be consumed in China. [1] China is the world's largest electricity producer, having overtaken the United States in 2011 after rapid growth since the early 1990s. Contact online >>
By 2025, Asia is projected to account for half of the world''s electricity consumption, with one-third of global electricity to be consumed in China. [1] China is the world''s largest electricity producer, having overtaken the United States in 2011 after rapid growth since the early 1990s.
At the national level, the past year has witnessed notable progress in key components in the electricity market and pricing system, including transmission and distribution tariffs, the power spot market, power capacity price, and ancillary services markets, favoring the New Power System construction and renewable energy access. These updates
Power markets are an instrument used globally to ensure electricity security while maintaining affordability and incentivising decarbonisation. The People''s Republic of China (hereafter, "China") has been making big steps towards implementing markets, and the goals announced in 2020 of carbon dioxide emissions peaking before 2030 and
China has now begun to establish a competitive electricity market and relatively independent power trading exchange centres. In 2019, market-based electricity trading accounted for 30% of the total generating capacity. At the same time, the electricity retail market has been gradually relaxed.
EMT analysis is based on open-source data and models related to China''s electricity market, policies, and power system. Our team creates modeling and simulation tools for China''s new power system. We monitor the latest developments in the power sector and offer open access to datasets andmodels that explore electricity market developments.
The Fengcheng-Meili Yangtze River Crossing project, in Wuxi, Jiangsu, will be able to meet the daily electricity demand of about 8 million households and significantly improve the energy exchange between the two sides of the Yangtze River. (Image: Alamy)
The average temperature across the world this July was 17.23C, the highest monthly temperature on record and a reflection of both global warming and El Niño conditions. High temperatures have persisted throughout much of China since June, driving a surge in electricity load and bringing forward the annual summer peak in electricity consumption.
In the Beijing-Tianjin-Hebei region, high temperatures came early and raised grid load by more than 30% compared with the same period last year. Sichuan and Yunnan, China''s two biggest generators of hydropower and major bases for "west-to-east power transmission", saw hydroelectricity output fall by 24.4% and 43.1% respectively in May, on account of high temperatures and drought conditions. All this prompts troubling reminders of the power shortages of 2021 and the peak load electricity restrictions in Sichuan and Chongqing during summer 2022.
How does China, with one-third of global power generation and the world''s most complex power grid, ensure secure power supply? Even more significant for the power industry, which accounts for 40% of China''s carbon emissions, is its key role on the road to peak carbon. The sector''s low-carbon transformation will be crucial for achieving the dual-carbon goals.
In 2015, China launched a new round of reforms –when the State Council issued its Opinions on Further Deepening the Reform of the Power System (known as document no. 9) – spurring the pace of construction of the market for electricity, and of the spot market in particular. Market trading of electricity has risen year by year since then, and the market has gradually taken shape as one in which electricity is traded mainly at the provincial level and mainly involving medium-to-long-term deals between power generators, users and sellers.
In spatial terms, since the release of document no. 9, China''s electricity market has been constructed around provinces as the basic unit. Reformed transmission and distribution tariffs, which apply nationwide, are likewise being piloted at the provincial level, with two-thirds of provinces now comprehensively trialling the electricity reforms.
According to statistical analysis (see chart below), nationwide market trade in electricity (including intra- and inter-provincial trading) increased year by year between 2017 and 2022, from 1,632 terawatt-hours (TWh) to 5,254 TWh, leaping from 25.9% to 60.8% as a share of China''s total electricity consumption.
Intra-provincial trading currently accounts for more than 80% of the market-traded electricity in China. The rest is traded inter-provincially, rising in share – with fluctuations – from 17.9% in 2017 to 19.7% in 2022. The volume of electricity traded on the intra-provincial market last year totalled 4,218 TWh, compared with 1,036 TWh on the inter-provincial market, both amounts being three times higher than in 2017.
While intra- and inter-provincial market trading of electricity continues to expand, it can be seen from a series of policy documents issued by the government last year that "establishing a unified national electricity market" has now been elevated to national strategy. Expectations for the future cross-provincial and cross-regional electricity market are high, especially considering the needs to promote optimal allocation of resources and smooth out inter-regional surpluses and shortages.
Early last year, the National Development and Reform Commission (NDRC) and National Energy Administration (NEA) issued the Guiding Opinions on Accelerating the Construction of a National Unified Power Market System. This included proposals for systematically planning and progressing the construction of a national, multi-level, unified electricity market system by 2030, on the basis that existing provincial-level electricity markets will be retained.
Released in March of the same year, the 14th Five Year Plan (FYP) for a modern energy system provides for listing "the establishment of a unified national electricity market" among the key electricity reforms of the FYP period.
In January this year, "the establishment of a unified national electricity market" headed the NEA''s list of Energy Regulatory Work for 2023. The document also stressed the need to draw up plans and parameters for developing the electricity market, move forward with the electricity market mechanism for southern China, and accelerate construction of electricity markets in the Yangtze River Delta, the Beijing-Tianjin-Hebei region, and elsewhere.
In terms of timeframes, electricity trading currently comprises medium-to-long-term (MLT) transactions in the main, supplemented with spot trading. Being a commodity that is produced, distributed and consumed in real time, and that cannot be stored in large quantities, electricity has to be precisely controlled by the dispatching authorities. The wholesale market for electricity, when traded as a commodity, is usually divided into the MLT market and the spot market, according to duration of trading cycle.
Things are now changing. China has been setting up more flexible, inter-provincial and inter-regional spot markets to complement the MLT market, since trial operation of the spot market in 2018. The pace of construction of spot markets is accelerating.
At present, intra-provincial transactions account for the bulk of trade on China''s power market. Nationwide, more than 80% of market-traded electricity in the last five years has been traded within provinces and less than 20% between provinces. And even in 2022, inter-provincial spot trading accounted for less than 1% of total market-traded electricity. Factors underlying the predominance of intra-provincial over inter-provincial trading are reflected in the following three facets.
The second is inter-provincial transmission. There is still a need to optimise and improve inter-provincial and inter-regional transmission channels. For example, last year''s power restrictions in Sichuan exposed the problem of channels linking Sichuan with other provinces being mainly one-way lines for outward transmission. While Sichuan''s capacity for outward transmission was about 30 gigawatts (GW), only 6 GW of support electricity was available in the other direction during the shortages, making for serious difficulties in the coordination of incoming emergency power supply.
The third facet is barriers between provinces. There are objective barriers presenting challenges to inter-provincial trading, because inter-provincial and inter-regional exchanges of electricity involve much manoeuvring by provinces on issues relating to economic development and security of supply.
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