Working Paper 006: Economic and environmental benefits of market-based power-system reform in China: provincial versus regional grid optimization

TitleWorking Paper 006: Economic and environmental benefits of market-based power-system reform in China: provincial versus regional grid optimization
Publication TypeUnpublished
Year of Publication2019
AuthorsAbhyankar, Nikit, Jiang Lin, Xu Liu, Froylan Sifuentes
Date Published09/2019
KeywordsChina; Southern Grid; Power Market Reforms; Dispatch Modeling; CO2 Emissions
Abstract

China, whose power system accounts for about 13% of global energy-related CO2 emissions, has begun implementing market-based power-sector reforms. This paper simulates power system dispatch in China’s Southern Grid region and examines the economic and environmental impacts of market-based operations. We find that market-based operation can increase efficiency and reduce costs in all Southern Grid provinces—reducing wholesale electricity costs by up to 35% for the entire region relative to the 2016 baseline. About 60% of the potential cost reduction can be realized by creating independent provincial markets within the region, and the rest by creating a regional market without transmission expansion. The wholesale market revenue is adequate to recover generator fixed costs; however, financial restructuring of current payment mechanisms may be necessary. Electricity markets could also reduce the Southern Grid’s CO2 emissions by up to 10% owing to more efficient thermal dispatch and avoided hydro/renewable curtailment. The benefits of regional electricity markets with expanded transmission likely will increase as China’s renewable generation increases.

URLhttps://btjrc.lbl.gov/working-paper-series
Refereed DesignationDoes Not Apply