2023年中国电力展望.pdf

Report/June 20232023 China Power Outlook:20 Key Trends for Power Market Playersrmi.org/22023 China Power Outlook:20 Key Trends for Power Market PlayersAuthorsZihao ChenShuo GaoYujing LiuZiyi LiuKang Wang,Sichuan Energy Internet Research Institute,Tsinghua UniversityAuthors listed alphabetically.All authors from RMI unless otherwise noted.ContributorsTing LiJialin TianQin ZhouContactsYujing Liu,yujingliurmi.orgShuo Gao,sgaormi.org Copyrights and CitationYujing Liu et al.,2023 China Power Outlook:20 Key Trends for Power Market Players,RMI,2023,https:/rmi.org/insight/2023-china-power-outlook-key-trends-for-power-market-players/.RMI values collaboration and aims to accelerate the energy transition through sharing knowledge and insights.We therefore allow interested parties to reference,share,and cite our work through the Creative Commons CC BY-SA 4.0 license.https:/creativecommons.org/licenses/by-sa/4.0/.All images used are from iS unless otherwise noted.About RMIRMI is an independent nonprofit founded in 1982 that transforms global energy systems through market-driven solutions to align with a 1.5C future and secure a clean,prosperous,zero-carbon future for all.We work in the worlds most critical geographies and engage businesses,policymakers,communities,and nongovernmental organizations to identify and scale energy system interventions that will cut greenhouse gas emissions at least 50 percent by 2030.RMI has offices in Basalt and Boulder,Colorado;New York City;Oakland,California;Washington,D.C.;and Beijing,Peoples Republic of China.Authors and Acknowledgmentsrmi.org/32023 China Power Outlook:20 Key Trends for Power Market PlayersExecutive Summary:Amid a Global Energy Crisis and Daunting Challenges,Chinas Power Market Reform Forges Ahead.5General Roadmap for Power Market Reform and Recent Progress.8“Regulating the middle and liberalizing the two ends”:Formulating the transmission and distribution tariff and redesigning the power pricing model.8Five steps for provincial power market development.101.Medium-to long-term(M2L)transactions.102.Spot market.113.Peak regulation service market.114.Ancillary services market(excluding peak regulation).12 5.Capacity compensation mechanism or capacity market.12More participants:Setting up both wholesale and retail markets.12Power is distributed over a broader area:Interprovincial and regional power markets.13Major focuses of power market reform in 2021 and 2022.14Outlook for the power market in 202325.15Medium-to Long-Term(M2L)Transactions.17The M2L market will usher in more market players,maintain a high trading ratio,and see rapid growth in total trading volume.17Coal-fired power will continue to play a role as a price cornerstone in the long run,but the pricing mechanism will gradually transition as the power structure changes.18Increased operating risk of coal-fired units associated with prioritized dispatch power sources.20Multiyear contracts are expected to become the primary risk control instruments for renewables projects.22Time-segmented M2L trading will be further promoted as an essential means of connecting with the spot market.24Spot Market.26Spot market development accelerated in 2022,and the provincial-level market will be fully established during the 14th Five-Year Plan period.26The spot market price cap and floor will gradually be deregulated,but its role in transmitting M2L prices will remain limited.29Interprovincial and regional spot markets are still in their early stages,but they hold great potential for promoting renewables and breaking down provincial price barriers.32Table of Contents2023 China Power Outlook:20 Key Trends for Power Market Playersrmi.org/4Energy storage has taken the first step in participating in the spot market,but it may have a difficult time reaching projected profits.33Retail Market.34As industrial and commercial users fully enter the market and grid agents gradually exit from electricity procurement,power retail companies are poised to capture a larger share of the market.34In the short term,generation-integrated retail companies will continue to maintain their advantage;however,risk control and customer service are key to long-term success.36Power retail packages are now being designed with greater differentiation to better meet customers risk preferences for price fluctuations.38Ancillary Services Market.39The updated Dual Rules add ancillary services suited to development of renewables to the New Power System.39Peak regulation may phase out,as frequency regulation and reserve ancillary services turn to marketization,with compensation mechanisms for other ancillary services optimized.40Peak regulation will gradually merge with the spot market.40Marketization of frequency regulation,reserve,and other ancillary services is accelerating.40Moment-of-inertia,ramping-up,and reactive-power services continue to be compensated,but their future paths differ.42The costs for ancillary services are passed downstream in the power system.43While the ancillary services market presents opportunities for novel energy storage,it remains challenging for them to become the primary source of revenue.45Capacity Mechanisms.46Capacity mechanisms currently exist only in Shandong and Guangdong,but are expected to roll out more broadly.46The regulated capacity payment will be Chinas primary capacity mechanism in the near future.48Transmission and Distribution(T&D)Tariff Mechanism.51Energy storage may be included in the cost audit for transmission network;the decline in T&D tariffs may halt.51The lack of user load and administrative support has slowed the progress of distribution grid expansion(DGE)in China.53Endnotes.55rmi.org/52023 China Power Outlook:20 Key Trends for Power Market PlayersExecutive Summary:Amid a Global Energy Crisis and Daunting Challenges,Chinas Power Market Reform Forges AheadIn the past 20 years,the reform of Chinas power system and market has seen several breakthroughs.The Notice of the State Council on the Power Industry Reform Plan(Document No.5),released in 2002,broke the vertical integration of the power system,separating generation businesses from the grid companies.Opinions of the CPC Central Committee and the State Council on Further Deepening the Reform of the Electric Power System(Document No.9)and a series of supporting documents released in 2015 further introduced competition in the wholesale,distribution,and retail businesses paving the way for nationwide pilots of medium-to long-term(M2L)transactions and large-scale spot markets.In September 2020,China announced its targets of reaching peak carbon emissions by 2030 and achieving carbon neutrality by 2060 twin goals now referred to as“Dual Carbon.”Since then,policies and markets in various industries and fields have been evolving toward these goals.The power sector plays a critical role in reaching these targets.The power sector is the largest emitter of CO2 in China,responsible for about 40%of annual emissions.The development and utilization of low-carbon power generation technologies can accelerate the transition to a low-carbon economy.At the same time,transformation of other sectors such as industry,transportation,and construction depends on end-use electrification.Thus,promoting the development of low-carbon electricity will help move the entire society toward the Dual Carbon goals.To achieve Dual Carbon in the power sector requires not only technological innovation,but also market reform.In October 2021,the Communist Party of China Central Committee and the State Council issued Opinions on Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy,which is the top-level“1+N”policy plan for achieving the Dual Carbon targets.The document emphasizes the need to strictly control fossil fuel energy consumption and aggressively develop nonfossil energy.It also calls for further comprehensive market reforms of the power system and improvement of the power pricing mechanism,and support for large-scale development of renewable energy and energy storage technologies.Under the guidance of the Dual Carbon top-level design,the National Development and Reform Commission(NDRC)and the National Energy Administration(NEA)jointly issued the Guiding Opinions on Accelerating the Construction of a National Unified Power Market System in January 2022,to promote the establishment of the New Power System one that is suited for China with expanded capacity for renewable energy consumption.The document emphasizes the transformation of the energy structure and market mechanisms that support a New Power System with a high degree of penetration by renewables.It sets clear goals and direction for reform during the 14th Five-Year Plan(202125)and 15th Five-Year Plan(202630)periods:to 2023 China Power Outlook:20 Key Trends for Power Market Playersrmi.org/6establish a national unified power market system that fits the New Power System by 2030.Development of the power market is essential to meeting the Dual Carbon goals.Looking back at the power reform process,it becomes clear that reform is about adjusting anchor points and seeking a balance among multiple goals.Reform is not only about introducing competition,improving efficiency,and optimizing resource allocation,but also about increasing the penetration rate of zero-carbon electricity while ensuring low-carbon,stable operation of the power system.Indeed,as the penetration rate of renewables generation continues to increase globally,the issue of stability has become a worldwide concern.After the global energy crisis and domestic seasonal power shortages between 2021 and 2022,the importance and urgency of renewable energy have come into clear focus.While Europe leads the world in penetration of renewables and marketization of its power system,it is pursuing further power market reforms to encourage more renewable power generation and greater flexibility of its power system in the face of the energy crisis.Further reforms are aimed at providing more protection for electricity consumers and local manufacturers while meeting climate commitments.The coming years are a crucial time for China to peak its carbon emissions and promote power market reform:First,some provinces are still in the initial stages of short-term trading markets,such as spot markets and ancillary services markets.They will require further consolidation in order to operate smoothly.Second,long-term transactions,such as renewable multiyear contracts,still lack the stability as investments to attract capital on a large scale.Therefore,there is ample room for improvement in this area.Third,the coordination of multilevel markets,cross-regional dispatching,and trading presents challenges to establishing a national unified power market by 2025.It is imperative to break down administrative barriers and optimize resource allocation.We anticipate that these areas will undergo intensive reforms in the next few years.RMI has been closely observing the reform of Chinas power market.In the past year,we published Power Market and Pricing Mechanism Reform in China:A Vital Step toward Zero-Carbon Electricity Growth and New Power System.The report focused on the goal of finalizing a unified national power market system by 2030 that fits the New Power System.It explored electricity pricing mechanisms that are suitable for China and the growth of zero-carbon generation.We also examined,at the provincial level,Qinghais goal of building a zero-carbon power system by 2030 in our report Northwestern China Power System Decarbonization:Moving toward Zero-Carbon in Qinghai Province.These reports focus on longer-term solutions and address the trends in power market reform.They provide a comprehensive suite of analyses of specific conditions and challenges faced by the power industry.Beginning this year,we will expand our coverage to include shorter time frames by providing annual reviews and outlook reports to answer the question:what will happen next in Chinas power market reform?This report aims to provide readers who are interested in Chinas power marketization process with comprehensive and in-depth insights while supporting the development of the power market and the New Power System.The various sections of this report will analyze the power markets components,including the electricity market,ancillary services market,capacity market,and transmission and distribution(T&D)pricing.We will examine recent market developments and provide an outlook on power marketization in the next one to three years(see Exhibit ES1).2023 China Power Outlook:20 Key Trends for Power Market Playersrmi.org/7Exhibit ES1:20 key trends for Chinas power market reform in 202325Electricity marketM2L marketThe M2L market will usher in more market players,maintain a high trading ratio,and see rapid growth in total trading volume.Coal-fired power will continue to play a role as a price cornerstone in the long run,but the pricing mechanism will gradually transition as the power structure changes.There will be increased operating risk of coal-fired units associated with prioritized dispatch power sources.Multiyear contracts are expected to become the primary risk control instruments for renewables projects.Time-segmented M2L trading will be further promoted as an essential means of connecting with the spot market.Spot marketSpot market development accelerated in 2022,and the provincial-level market will be fully established during the 14th Five-Year Plan period.The spot market price cap and floor will gradually be deregulated,but its role in transmitting M2L prices will remain limited.Interprovincial and regional spot markets are still in their early stages,but they hold great potential for promoting the consumption of renewables and breaking down provincial price barriers.Energy storage has taken the first step in participating in the spot market,but it may have a difficult time reaching projected profits.Retail marketAs industrial and commercial users fully enter the market and grid agents gradually exit from electricity procurement,power retail companies are poised to capture a larger share of the market.In the short term,generation-integrated retail companies will maintain their advantage;however,risk control and customer service are keys to long-term success.Power retail packages are now being designed with greater differentiation to better meet customers risk preferences for price fluctuations.Ancillary services marketThe updated“Dual Rules”add ancillary services suited to development of renewables to the New Power System.Peak regulation may phase out,as frequency regulation and reserve ancillary services turn to marketization,with compensation mechanisms for other ancillary services optimized.The costs for ancillary services are passed downstream in the power system.While the ancillary services market presents opportunities for novel energy storage systems,it remains challenging