The scenario assumes a substantial carbon price of USD 100/t. Fuel prices vary between USD 55/t and USD 80/t for coal, with a price of USD 11.8/MMBtu for natural gas (reflecting transport costs, see Annex A for details). The SDS results in 74% of installed power capacity being non-fossil. Of installed capacity, 51% is wind and solar PV. This translates into a non-fossil generation share of 72%, with 35% of generation from wind and solar PV.

Installed capacity and annual power generation from WEO 2018 for the two national scenarios are shown in Figure 28 and Table 11.

NPS modelling cases

High-level summary of results

Transitioning to economically optimised power system dispatch and improving regional co-ordination and interconnectivity is shown to dramatically reduce power system operational costs and VRE curtailment. In fact, using a combination of improved dispatch and interregional trade (via better utilisation and additional transmission investments), the modelling results show it is possible to effectively eliminate curtailment of VRE in China (Figure 29) while operating with significant VRE penetration. Although economic dispatch can substantially reduce national levels of VRE curtailment, the levels in some regions remain relatively high. The following sections provide further details on the effects of the different cases.

The different policy options considered – change of dispatch order, expanding interregional trade through full utilisation of existing transmission capacity and additional transmission investment – not only impact the generation mix and VRE curtailment levels, but also bring significant economic and environmental benefits.

The policy measures explored boost system flexibility and reduce operational costs and VRE curtailment.

In economic terms, moving from fair to economic dispatch leads to considerable reductions in annual power system operational costs. Figure 30 compares major operational costs in each case to identify the contribution of the policy measure. It includes fuel costs, other O&M costs and carbon emission costs. By changing the dispatch rule from fair to economic dispatch,48 operational costs decrease by around 10%, mainly from the reduction in coal consumption.49 Expanding interregional trade and additional investment in transmission lines helps further reduce operational costs, largely by reduction of average coal price due to the shift of coal generation to regions where cheaper fuel is available. Total savings from flexibility measures presented in the figure sum up to around USD 6 per megawatt hour, which means that the entire power system could save around USD 60 billion by adapting these measures.

Although a carbon price was assumed at USD 30 per tonne of CO2 in all NPS cases, it did not lead to switching from coal to gas in the merit order under economic dispatch. The price levels that would lead to a change in the merit order are between USD 70 and USD 110 per tonne of CO2 depending on coal technology. The change in merit order due to the carbon price is relevant in the SDS cases discussed in the next section.