Thread by @YanQinyq

🚨China Power Sector Reform

🇨🇳NDRC just released Guidance on Speeding up establishing National Uniform Power Market

This is HUGE news 🎉

2025: preliminary completion 2030: finalizing national power market

Set up national Power Exchange

This new milestone document set out key components of China power market following the Document No.9 in 2015 kicking off the second round of power sector reform

ndrc.gov.cn/xxgk/zcfb/tz/2…

It is official: China power sector liberalization will speed up! 🚀

This monumental guideline has already been approved on 24 November 2021 at 22nd meeting of the central committee for deepening overall reform.

“the development of a unified national market system for electric power.”

news.cn/english/2021-1…

Today the economic planner NDRC and energy regulator NEA officially released the document, which lays the foundation for top-level design of China national power market and starts a new era for China’s power sector reform ⚡️

Why push forward the power sector reform?

Market mechanism is more efficient and can enhance price formation, price pass through and resources allocation (such as renewables integration, demand side management), help achieving Dual Carbon goals📉

This high level guidance sets out:

principles, objectives, system, functions, trading mechanisms, planning and supervision of the construction of a unified national electricity market

“Establish multi-level unified power market”

(🇪🇺 market coupling)

Here are some more highlights of this Guidance:

To begin with, this DOESN'T means we will see a 🇨🇳nationwide dayahead power market immediately

It's a 10-year project building up mid- to long-term +Spot+Ancillary services markets and cross-province trading

2025: national unified electricity market system will be initially completed:

-national market will run in parallel to provincial (district, city)/regional power markets
-integrated design of mid- /long-term + spot + ancillary services

2025 🇨🇳 power market (cont.):

⚡️🍀significant enhancement in cross-provincial/regional market-based resources allocation (...transmission, I think) and green power trading

☀️🔋establish initially trading and pricing scheme promoting new energy and storage

2030: national unified electricity market system will be basically completed:

-Adapting to the requirements of New Power System
-Joint operation of national and provincial (district,city)/regional markets
-New Energy fully participate in power trading

2030 🇨🇳 power market (cont.):

-Market entities will compete equally and choose independently
-Electricity resources will be further optimally allocated on a national scale

The above time horizon reflects the overall objective of establishing nationwide power market:

-restore the commodity properties of Electricity on a larger scale across the country
-allocate resources more optimally within a larger region (RE integration)

The speeding up of nationwide power market and more efficient market design will help China to deploy more renewables, which are dominantly located in the western part of the country vs load centers in the east and south.
⚡️cross-provincial trading

The 🇨🇳national unified power market does not mean 'nationwide dispatch'

It will be a 'multi-level unified electricity market system' (...reminding me of European single market in electricity 🇪🇺)

Key steps as in the Guidance:

Building upon and fully utilize Beijing and Guangzhou Power Exchange (aka State Grid and Southern Grid)
enhance power trading platform management and cross-province/region trading
research to establish National Power Exchange

The pathway towards 🇨🇳national power market:

-Steadily pushing forward provincial (district, city)/regional power markets

Regional markets: Beijing-Tianjin-Hebei, Yangtze Delta, Guangdong–Hong Kong–Macau Greater Bay Area, etc.
(...Nord Pool, CWE)

On enhancing cross-province power trading, the Guidance stressed 'further collaboration and opening up', i.e. removing the barriers.

This is in line with the signal from the new Cross-Province Spot Trading rules last November:

https://twitter.com/YanQinyq/status/1463403723946930177

The Guidance sets different tone for the segments of power market:

Mid-/Long- term trading: sustained advance
Spot trading: actively and steady progress
Ancillary services: continued improvement
Market entities: diverse and competitive

Hence, Mid-/Long-term power trading which are currently dominating power trading will remain the main market for several years until the spot markets get mature
and there are ongoing work to ensure linkage between mid-/long-term trading with spot trading

Following the publication of this Guidance, China spot power trading pilots will advance further🙌

NDRC official confirmed today that the second batch of 6 pilots are expected to launch trial trading late June:

https://twitter.com/YanQinyq/status/1390226767865163776

It also puts further expansion of power trading in 'diverse and Competitive market entities':

-orderly opening up the power generation and consumption plan
-push the priority generation (gas power, CHP, new energy, nuclear) into power market in batches

The above statement is a powerful message.

It continues the power market scope expansion last October which push all coal-fired generation and all industrial and commercial users into market:
ndrc.gov.cn/xxgk/zcfb/tz/2…

4⃣ key aspects in 'establishing unified power market trading system'

1.standardize basic trading rules/technical standards
2.Enhance electricity price formation scheme
3.Efficient linkage b.t. market-based trading and dispatch
4. Info sharing/disclosure

Point 2 above discussed market-based mechanism for coal-power tariff, enhance power price passthrough, steady tariff for residential, agriculture etc.. clean heating users into market

Transmission tariff (properly handle policy-induced cross-subsidy)

Two more highlights in 'establishing market scheme adapting to new power system'

-Establish capacity costs recovery mechanism incl. capacity compensation, capacity market, scarcity pricing etc. Boost pump hydro 🔋 VPP

-Explore further Green Power Trading

China's new high-level Guidance on establish nationwide power market will also have implications for national Carbon market #OCTT

''Establish an effective linkage between green power trading and green certificate trading and carbon emissions trading.''

Oh, this ends up to be a very long thread....

But I will not hide how EXCITED I feel about the official release of this monumental policy on power sector reform 🥳 and the pathway towards a unified 🇨🇳market similar to European single market in electricity