Economic and environmental benefits of market-based power-system reform in China: A case study of the Southern grid system

Date Published
01/2020
Publication Type
Journal Article
Authors
DOI
10.1016/j.resconrec.2019.104558
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.

Journal
Resources, Conservation and Recycling
Volume
153
Year of Publication
2020
Pagination
104558
ISSN Number
09213449
Short Title
Resources, Conservation and Recycling
Keywords
Organizations
Research Areas
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