Reform and renewables in China: The architecture of Yunnan's hydropower dominated electricity market. (October 2018)

• Record Type: Journal Article
• Authors: Cheng, Chuntian; Chen, Fu; Li, Gang; Ristić, Bora; Mirchi, Ali; Qiyu, Tu; Madani, Kaveh
• Is Part Of: Renewable & sustainable energy reviews. Volume 94(2018)
• Page Start: 682
• Page End: 693
• Publication Date: 2018-10
• Subjects: OECD Organization for Economic Cooperation and Development -- TWh Terawatt Hours -- GWh Gigawatt Hours -- SPCC State Power Corporation of China -- SGCC State Grid Corporation of China -- CSG China Southern Power Grid -- NDRC National Development and Reform Commission -- SERC State Electricity Regulatory Commission -- YNPX Yunnan Power Exchange -- YNPG Yunnan Power Grid -- RMB Renminbi (Yuan) Official Currency of the PRC -- PRC People's Republic of China -- EOEC Ex-ante Obligatory-use Electricity Contract -- MTQ Minimum Trade Quantity -- UHV Ultra-High Voltage -- DOP Difference of Prices; Electricity market -- Hydropower -- Power industry reform -- Renewable energy; Renewable energy sources -- Periodicals; Power resources -- Periodicals; Énergies renouvelables -- Périodiques; Ressources énergétiques -- Périodiques; 333.794
• DOI: 10.1016/j.rser.2018.06.033
• Languages: English
• ISSNs: 1364-0321

Abstract

Abstract: Reforms currently under way in China's electricity markets bear important implications for its decarbonization objectives. The southwestern province of Yunnan is among the provinces piloting the current iteration of power market reforms. As such, lessons from Yunnan will inform future market reform and renewable energy policies in China and potentially elsewhere. The dominance of hydropower in Yunnan's energy portfolio and the particular transmission constraints it faces, offer an interesting case study of the challenges of decarbonization. We report on market architecture reforms and aggregate market data collected from the Yunnan Power Exchange. We review four elements in the reformed market architecture. Market pricing rules, transitional quantity controls, the generation rights market, and inter-provincial trade. The specifics of market reform reflect a compromise between decarbonization, inter-provincial competition, grid security and development objectives and contribute to understanding of how the dual transitions of hydropower decarbonization and market liberalization interact. We conclude on six insights regarding the role of the grid operator, security checks on trade, integration of cascade hydropower, the inclusion of renewables in the generation rights market, price controls, and market participant price uncertainty. Highlights: Yunnan's electricity market suffers from hydropower oversupply and low demand. Market reform has supported decarbonization and spillage reduction. Generation rights and interprovincial trade were particularly helpful in this regard. Electricity trade remains controlled due to compromises between competing policy constraints. Opportunities for further reform and potentially feasible recommendations are discussed.