Two main scenarios for 2035

46 2017 is the last year for which complete statistics from the China Electricity Council (CEC) are available. The 2018 WEO uses 2017 as its formal reference year, i.e. the year from which energy system projections originate.

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load) are entered into the PLEXOS® production cost modelling framework for the power sector modelling exercise. For both the NPS and the SDS, the production cost modelling exercise then analyses different cases. For each scenario, all cases share the same installed generation capacities and electricity demand. However, the cases differ in several operational and flexibility aspects (see below). This allows the benefits of optimised operations and advanced flexibility strategies to be studied in detail. Importantly, the NPS and SDS provide two very different contexts for carrying out the detailed modelling.

NPS

The NPS aims to provide a sense of where today’s policy ambitions are likely to take the energy sector in China. It incorporates not just the policies and measures that government has already put in place, but also the likely effects of announced policies, as expressed in official targets or plans. The IEA reading of the national policy environment is also influenced by policies and targets adopted by subnational authorities, i.e. by provinces, cities and municipalities, in addition to the commitments made by the private sector.

The way that policy intentions are reflected in the NPS depends on the extent to which their realisation is supported by specific policies and implementing measures. Where these are in place, announced targets are assumed to be met or indeed exceeded, where macroeconomic, cost or demand trends point to this. However, given that announced policy intentions are often yet to be fully incorporated into legislation or regulation, the prospects and timing for their full realisation depend on our assessment of the institutional context and relevant political, regulatory, market, infrastructure and financing constraints. With respect to the electricity sector, the NPS represents a power system with the principal targets of Document No. 9 power reform being achieved.

Power sector modelling cases analysed for the NPS

In the NPS, Document No. 9 targets are expected to be met, i.e. the market will play a decisive role, there will be much less administrative intervention and the power system will be efficient and clean with low curtailment of renewables. Applying economic dispatch and removing restrictions on interregional trading are identified as the two most critical factors in this scenario. The original WEO NPS assumes the implementation of economic dispatch, optimised trading and increased interconnection between provinces. For this report, different cases are analysed to assess the benefits of different options.

Various cases are set under this scenario to simulate the power system after unlocking dispatch and cross-regional trading in order to provide deeper insights into the value of adopting these measures. In order to assess their effect it is necessary to construct a baseline case (known as “NPS-Inflex”) that does not include the measures. In a second modelling step the measures are introduced, allowing benefits to be assessed through comparison.

The first measure considered is the dispatch order. In the NPS-Inflex case the modelling exercise assumes the current practice of a fair dispatch, which allocates fixed full-load hours to each type of technology. Under an optimised dispatch case known as “NPS-Dispatch”, the modelling assumes an economic dispatch protocol that, on an hourly basis, dynamically allocates utilisation of power plants based on their operational (mainly fuel) costs. In this study the existing government policy of providing gas generators with a generation allocation is preserved – thus, the dispatch protocol modelled is not a pure economic dispatch.

The second measure considered is the trade of electricity between regions. This measure has two different dimensions and is explored in three separate cases. The first dimension influencing trade is the way in which existing transmission lines are utilised. In the NPS-Inflex

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case, transmission usage patterns reflect China’s current power sector framework that constrains regional trade and permissible utilisation of lines is set to 2017 levels. A more optimised trading approach is implemented in a case known as “NPS-Flow”, where the use of transmission lines can be optimised freely. However, the use of generation capacity remains constrained to fair dispatch. Under a case named “NPS-Operations”, both dispatch and trade are used in an optimised fashion.

The second dimension influencing trade is the availability of new interconnection lines. Here, the analysis considers two sets of conditions. Under NPS-Operations, only lines expected to be built by 2022 are made available. Under an “NPS-Full flex” case, additional transmission infrastructure investment is made between 2022 and 2035, bringing total interconnection capacity from 230 GW (2022) to around 410 GW (2035), and is accompanied by optimised transmission utilisation and economic dispatch.

The NPS-Full flex case corresponds to the NPS included in the WEO. There are minor differences between the NPS in WEO 2018 and the NPS-Full flex case due to the higher spatial granularity used in the analysis for this report (see Annex A for details). Further details on the installed capacity and the generation mix are presented below, together with the modelling results.

The metrics used to quantify the system benefits of flexibility measures are reductions in the cost of fuel, operation and maintenance (O&M), and carbon dioxide (CO2) emissions. Other benefits assessed are reductions in VRE curtailment and reductions in other air pollutant emissions. Finally, the utilisation of conventional power plants is also examined to shed light on the operational impacts on different regions. For the NPS-Full flex case, the cost of additional grid investment is also considered.

The different cases are summarised in Table 9.

Four different cases are compared to a baseline scenario in order to assess the benefits of more optimised system operation and additional transmission interconnection.

SDS

The SDS offers an integrated pathway to achieve a range of energy-related goals crucial for sustainable development: climate stabilisation, cleaner air and universal access to modern energy, while also reducing energy security risks. This scenario starts with a certain vision of the energy sector’s destination and then works back to the present.

The Sustainable Development Scenario, introduced for the first time in the WEO-2017, starts from selected key outcomes and then works back to the present tosee how they might be

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achieved. The outcomes in question are the main energy-related components of the Sustainable Development Goals, agreed by 193 countries in 2015: (1) Delivering on the Paris Agreement. The Sustainable Development Scenario is fully aligned with the Paris Agreement’s goal of holding the increase in the global average temperature to “well below 2 °C”. (2) Achieving universal access to modern energy by 2030. (3) Reducing dramatically the premature deaths due to energy-related air pollution.

These three goals are interlinked and can be achieved through an integrated approach. Under the SDS, higher levels of installed capacity are seen from nuclear and renewable technologies, particularly wind, solar and hydropower, with less from fossil fuel generation and 15% of installed fossil fuel capacity having carbon capture and storage (CCS). In addition, this scenario involves a greater role for flexibility options, including storage, demand response, EVs, electrification and energy efficiency. With respect to the electricity sector, the SDS reflects a power system that is consistent with the “Beautiful China” initiative in 2035.

Power sector modelling cases analysed for the SDS

The SDS provides an ideal environment to investigate the benefits and costs of different advanced power system flexibility options. Importantly, all SDS cases assume optimised dispatch, optimised interregional trade and additional transmission investment between 2022 and 2035. This is because the SDS is assumed to build upon progress made through Document No. 9 reform efforts. The original WEO SDS assumes sufficient advanced flexibility to integrate VRE without uneconomic levels of curtailment. For this analysis, different cases are developed and compared to shed light on the value of each flexibility option in more detail.

The first case analysed under the SDS is a baseline case. This case does not include measures included in the original WEO SDS, notably any flexibility measures beyond economically optimised dispatch, interregional trade and increased transmission interconnection. The installed generation capacity and demand structure in this and all other cases are identical with the values specified in the SDS in WEO 2018. This case is referred to as “SDS-Inflex” and it is used as a reference point for comparison with other cases to quantify the incremental benefits arising from the deployment of advanced flexibility options.

In the next step a number of cases are analysed that only include the addition of a single advanced flexibility measure. These measures are: 1) DSR, 2) electricity storage, and 3) smart EV charging.

DSR is seen as a key measure by Chinese policy makers for enhancing power system flexibility (NDRC, 2017). It can be a crucial resource for a system with high shares of VRE, considering that VRE introduces additional variability and uncertainty into power systems that can require more system flexibility to be properly managed. In cases that include DSR deployment, 300 GW of load shiftable from the residential and service sectors is deployed, comprising space heating and cooling, water heating, refrigeration and cleaning appliances. These loads, depending on their nature, can be shifted within a specific window (either one, five or eight hours), with the ability for the aggregated loads to be controlled between 0% and 200% of the peak load. Depending on power system requirements and usage constraints on flexible load, only a portion of the maximum 300 GW are used in system operation. The case where only DSR resources are deployed is referred to as “SDS-DSR”. Industrial demand side response is not included in this case, but is explored in a separate analysis (see Box 25).

Electricity storage, especially PSH and electric batteries, is in China’s midand long-term energy strategies (NEA, 2016; NDRC, 2016). PSH capacity is planned to reach around 40 GW by 2020. Fuel cell, hydrogen and lithium-ion battery technologies and materials are highlighted in the long-term energy strategy. In cases that feature additional storage, deployment of over

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