China Power System Transformation Power system transformation pathways for China to 2035

Due to it having the highest share of VRE and the cheapest fuel price, the NWR experiences the greatest change in generation mix due to implementation of flexibility measures.

SDS modelling cases

Compared to the NPS, the SDS presents a very different 2035 power system in terms of installed capacity. The SDS system reflects a trajectory that emphasises clean energy options in order to reduce environmental impacts, notably air pollution and CO2 emissions. The SDS employs a mix of low-carbon options to achieve these objectives, including nuclear power and CCS. Most importantly the scenario features a much higher share of VRE relative to the NPS suite of cases. It assumes that power sector reforms have led to the implementation of economic dispatch and the optimal utilisation of transmission capacity for all cases. Due to the paramount importance of power system flexibility in the SDS, the sensitivity analysis presented below explores the value of different innovative measures that can provide flexibility.

High-level summary of the results

As explained earlier in the chapter, three distinct groups of flexibility options are analysed in the SDS modelling: smart charging of EVs, advanced DSR programmes, and electricity storage deployment. In order to consider the value of these flexibility measures, an inflexible version of the SDS (SDS-Inflex) was established without the presence of these measures, in order to serve as a benchmark for comparison. This allows metrics on cost, benefit and technical impact to be explored for each flexibility measure. Notably, because all flexibility options explored in the NPS are assumed to be implemented – economic dispatch, improved interregional trading and additional investment in transmission infrastructure – the power sector modelling presented in the SDS cases sheds light on the value of more advanced flexibility measures for transforming a power system. In summary, the following advanced power system flexibility options are considered:

Approximately 300 GW of residential, commercial, agricultural and industrial-sector load contributing to DSR programmes are in place in 2035, with enrolled resources spanning space heating and cooling, water heating, refrigeration and cleaning appliances.

220 million EVs are made available under smart charging schemes in China in 2035, which corresponds to approximately 250 GW of peak EV charging load and 800 terawatt hours of total annual EV charging load.

Over 100 GW of pumped storage hydro and over 50 GW of battery energy storage are deployed.

The investigated flexibility options lead to annual operational cost savings of between 2% and 11% relative to the SDS-Inflex case (Figure 37). Due to a substantial CO2 price of USD 100/t, CO2 emission cost savings are an important driver of operational cost savings in the SDS cases. In addition, flexibility options reduce peak net demand and thus bring additional benefit to the system through reduced generation investment requirements. The flexibility measures also provide environmental benefits by reducing annual power sector CO2 emissions by between 4% and 14% (Figure 39).

In the case of electricity storage, the flexibility options themselves also require substantial capital investment. In order to assess the full suite of costs and benefits for these measures, the impacts of changed investment requirements have also been included in the analysis by converting capital expenditure (CAPEX) figures into annual payments. This allows comparison of the flexibility options’ costs and benefits for the overall power system. In all cases, benefits are higher than costs, although they differ significantly in their cost–benefit ratio (Figure 38). The following sections explore the different cases in more detail.

Figure 37. Annual operational cost savings from different flexibility options, 2035, SDS

Notes: Y-axis does not begin at 0.0 to enhance reader comprehension of trends; MWh = megawatt hour.

All modelled flexibility options significantly reduce annual power system operational costs.