- •Abstract
- •Highlights
- •Executive summary
- •Actions to boost flexibility and investment
- •Modelling analyses
- •Spot markets and trade
- •Advanced power system flexibility
- •International implications
- •Findings and recommendations
- •Report context and objectives
- •Drivers of change in power systems
- •Rapid growth of wind and solar PV
- •Power system flexibility
- •Phases of VRE integration
- •Priority areas for system transformation
- •Modelling approach
- •Spot markets and regional trade
- •Advanced power system flexibility
- •Investment certainty
- •Renewable energy policy
- •Market design and planning
- •Wholesale market design
- •Retail market design
- •Upgraded planning frameworks
- •International implications
- •Technical analysis
- •Introduction
- •Context and status of power system transformation in China
- •Background
- •Economically shifting gears
- •Ecological civilisation
- •Power system transformation
- •Brief introduction to China’s power system
- •Current status of power system in China
- •General perspective
- •How the power system works in China
- •Historical evolution
- •Power sector reform in 2015
- •Challenges in China’s power sector
- •Planning
- •Interprovincial and interregional trading
- •Dispatching order
- •Benchmark pricing system
- •Renewable development and integration
- •Emerging trends in system transformation in China
- •Introducing flexible market operation
- •Establishing spot markets
- •Incremental distribution grid pilots
- •Unlocking the retail side
- •Power plant flexibility pilots
- •Realising optimised planning
- •Five-year plan
- •Long-term strategy
- •Technological innovation and electrification
- •Distributed energy
- •Multi-energy projects, microgrids and “Internet+” smart energy
- •Digitalisation
- •Demand-side management/demand-side response
- •Electricity storage
- •EV development
- •Clean winter heating programme
- •Summary
- •References
- •Power system transformation and flexibility
- •Three global trends in power systems
- •Low-cost wind power and solar photovoltaics
- •Digitalisation
- •Rise of DER
- •Distributed solar PV
- •Electricity-based clean heating
- •Implications for power systems
- •Flexibility as the core concept of power system transformation
- •Properties of VRE generators
- •Phases of system integration
- •Different timescales of system flexibility
- •Layers of system flexibility
- •Redefining the role of system resources
- •Differentiating energy volume and energy option contributions
- •Evolving grids
- •From passive demand to load shaping
- •Implications for centralised system resources
- •Operational regime shifts for thermal assets
- •Matching VRE to system requirements
- •Increasing need for advanced grid solutions
- •Deploying advanced grid solutions
- •Multiple deployment opportunities for large-scale storage
- •Optimising the use of PSH
- •Embracing the versatility of grid-scale batteries
- •Synthetic fuels and other long-term storage options
- •Large-scale load shaping
- •Industrial demand response
- •Efficient industry electrification
- •Implications for DER
- •System benefits of energy efficiency
- •Mobilising the load through EVs
- •Targeting energy efficiency for system flexibility
- •Engaging distributed battery storage
- •Distributed generation for system services
- •Aggregation for load shaping
- •References
- •Policy, market and regulatory frameworks for power system transformation
- •Basic principles to unlock flexibility
- •Wholesale market design
- •General setup
- •Short-term markets (minutes to hours)
- •Medium-term markets (month to three years)
- •Long-term investment market (three years and beyond)
- •Economic dispatch and rapid trading
- •Cross-regional trade of electricity
- •Benefits of regional power system integration
- •Centralised versus decentralised models of integration
- •Market integration in the European Union
- •Market organisation
- •Attracting investment in low-carbon generation capacity
- •SV as a key concept for renewable and low-carbon energy development
- •System-friendly VRE deployment
- •German market premium system
- •Mexican clean energy and capacity auctions
- •Pricing of externalities
- •Impact of CO2 pricing on daily and long-term operations in the power market
- •Policy packages and interactions
- •Electricity sector design
- •Retail markets and distributed energy resources
- •Retail pricing reform
- •Degrees of granularity for retail tariffs
- •Compensating DER
- •Implications for general policy design
- •Revisiting roles and responsibilities
- •The DSO-TSO interface
- •Aggregators
- •Role of ISOs
- •Centralised and decentralised platforms for DER engagement
- •Elements of structural reform
- •Policy principles for DER
- •Upgraded planning frameworks
- •Integrated planning incorporating demand-side resources
- •Integrated generation and network planning
- •Integrated planning between the power sector and other sectors
- •Interregional planning
- •Including system flexibility assessments in long-term planning
- •Planning for distribution grids
- •Improved screening/study techniques
- •Including local flexibility requirements in planning techniques
- •Policy principles for planning and infrastructure
- •Transition mechanisms to facilitate system reforms
- •Mexico’s legacy contracts for the regulated supplier
- •Transition from the public service regime
- •Transition from the private-party regime (self-supply)
- •Treatment of “stranded costs” in the United States
- •References
- •Power system transformation pathways for China to 2035
- •General trends in China’s power system evolution
- •Achieving a “Beautiful China”
- •Key variables for system transformation
- •Different power system pathways
- •Two main scenarios for 2035
- •Power sector modelling cases analysed for the NPS
- •Power sector modelling cases analysed for the SDS
- •Description of power system model used for analysis
- •Power sector modelling results
- •Comparing basic features of the WEO 2018 NPS and SDS results
- •NPS modelling cases
- •High-level summary of results
- •Value of moving from fair dispatch to economic dispatch
- •Value of unlocking interregional trading
- •A closer look at VRE-rich regions
- •SDS modelling cases
- •High-level summary of the results
- •Understanding an SDS power system without advanced flexibility options: SDS-Inflex
- •Assessing individual flexibility options
- •Understanding the value of DSR deployment: SDS-DSR
- •Understanding the value of electricity storage: SDS-Storage
- •Understanding the value of smart EV charging: SDS-EV
- •Assessing portfolios of flexibility options
- •Understanding the value of a portfolio of DSR and EVs: SDS-DSR+EV
- •Understanding the value of a portfolio of storage and EVs: SDS-Storage+EV
- •Understanding the value of a combined portfolio of smart EV charging, DSR and storage: SDS-Full flex
- •Summary
- •References
- •Summary and conclusions
- •Power system transformation in China
- •China has already embarked on its own pathway to power system optimisation.
- •Integrating variable renewable energy and an orderly reduction of coal power will be the primary challenges for successful power system optimisation.
- •Power system flexibility will become the most important attribute of a transformed power system.
- •Different layers of the power system need to be addressed in order to achieve system transformation successfully.
- •The alignment and integration of different policies and measures in the power sector and related sectors are pivotal to long-term success.
- •Optimising the dispatch of power plants is a fundamental prerequisite for reducing power generation costs and preserving VRE investability.
- •Creating short-term markets and robust short-term price signals can greatly facilitate power system transformation and reduce system-wide energy prices.
- •The optimised use of existing and soon-to-be-built transmission lines can substantially reduce renewable energy curtailment and integrate additional wind and solar capacity.
- •Optimising power system operation is bound to trigger the market exit of inefficient coal generators; this process is likely to need active management.
- •Innovative options to further accelerate progress towards a “Beautiful China”
- •Optimised use of demand-shaping techniques is critical to unlock very high shares of renewable energy cost-effectively.
- •Electric mobility has great potential for integrating renewable energy, but only if charging patterns are optimised.
- •Applying digital technologies to the distribution grid and at the customer level can unlock additional flexibility and is an opportunity for economic development.
- •Additional considerations for markets, policies, regulation and planning
- •Advanced renewable energy policies can minimise integration challenges.
- •Advanced design of wholesale markets, including markets for system services, is an important tool to accelerate power system transformation.
- •Changes to electricity tariffs could help optimise the deployment and use of distributed energy resources (DER).
- •Integrated long-term planning that includes demand shaping and advanced options for energy storage is a crucial foundation for a successful transformation of the power system.
- •International implications
- •Accelerated progress on power sector optimisation could bring substantial benefits for China and the world.
- •References
- •Annexes
- •Annex A. Spatial disaggregation of national demand and supply
- •Modelling regions and interconnections
- •Defining modelling regions and regional interconnections
- •Creating regional electricity demand profiles
- •Generating hourly load profiles for each region
- •Allocating generation capacity between regions
- •Method used for calculating CAPEX savings
- •References
- •Acronyms
- •Acknowledgements, contributors and credits
- •Table of contents
- •List of figures
- •List of boxes
- •List of tables
China Power System Transformation Acronyms
Acronyms
AC |
Alternating current |
ACER |
Agency for the Cooperation of Energy Regulators |
AEMO |
Australian Energy Market Operator |
AGC |
Automatic generation control |
ASEAN |
Association of South East Asian Nations |
BEV |
Battery electric vehicle |
BRP |
Balance responsible parties |
CACM |
Capacity allocation and congestion management |
CAISO |
California Independent System Operator |
CAPEX |
Capital expenditure |
CCS |
Carbon capture and storage |
CEC |
China Electricity Council |
CFE |
Comisión Federal de Electricidad |
CGE |
Computable general equilibrium |
CHAdeMO |
CHArge de MOve charging standard |
CR |
Central region |
CRM |
Capacity remuneration mechanisms |
CSG |
China Southern Power Grid |
DER |
Distributed energy resources |
DES |
Distributed energy systems |
DLR |
Dynamic line rating |
DNG |
Distributed natural gas |
DNO |
Distribution network operators |
DSI |
Demand-side integration |
DSM |
Demand-side management |
DSO |
Distribution system operator |
DSR |
Demand-side response |
ED |
Economic dispatch |
EIM |
Energy Imbalance Market |
ENTSOG |
European Network of Transmission System Operators for Gas |
ER |
East region |
ESO |
Electricity system operator |
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China Power System Transformation Acronyms
ETS |
Emissions trading system |
EUPHEMIA |
Pan-European hybrid electricity market integration algorithm |
EV |
Electric vehicle |
FACTS |
Flexible alternating-current transmission system |
FCA |
Forward capacity allocation |
FCAS |
Frequency control ancillary services |
FCR |
Frequency containment reserve |
FERC |
Federal Energy Regulatory Commission |
FIT |
Feed-in tariffs |
GCL |
Golden Concord Group Limited |
GDP |
Gross domestic product |
GW |
Gigawatts |
HVDC |
High-voltage direct current |
ICT |
Information and communications technology |
IEA |
International Energy Agency |
IPP |
Independent power producers |
IRP |
Integrated resource plan |
ISO |
Independent system operator |
LCOE |
Levelised cost of electricity |
LED |
Light-emitting diodes |
LMP |
Locational marginal price |
MRC |
Multi-regional coupling |
MW |
Megawatt |
NARUC |
National Association of Regulatory Utility Commissioners |
NCR |
North central region |
NDRC |
National Development and Reform Commission |
NEA |
National Energy Administration |
NEV |
New energy vehicle |
NPS |
New Policies Scenario |
NSR |
Shandong region |
NWR |
Northwest region |
O&M |
Operation and maintenance |
OCGT |
Open-cycle gas turbines |
OPEX |
Operational expenditure |
PCI |
Projects of Common Interest |
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China Power System Transformation Acronyms
PCR |
Price coupling of regions |
PHEV |
Plug-in hybrid electric vehicle |
PJM |
Pennsylvania-New Jersey-Maryland Interconnection |
PLEF |
Pentalateral Energy Forum |
PPA |
Power purchase agreement |
PSH |
Pumped storage hydropower |
PV |
Photovoltaics |
PVPS |
Photovoltaic power systems |
QSTS |
Quasi-static time-series |
REDZ |
Renewable energy development zones |
REE |
Red Eléctrica de España |
RPM |
Reliability pricing model |
RSC |
Regional security coordinators |
RTO |
Regional transmission organisations |
SAARC |
South Asian Association for Regional Cooperation |
SCED |
Security-constrained economic dispatch |
SDS |
Sustainable Development Scenario |
SERC |
State Electricity Regulatory Commission |
SGCC |
State Grid Corporation of China |
SME |
Small and medium-sized enterprises |
SPC |
State Power Corporation |
SV |
System value |
SWR |
Southwest region |
TECO |
Tampa Electric Company |
TPS |
Tradeable performance standard |
TSO |
Transmission system operators |
TYNDP |
Ten-Year Network Development Plan |
UC |
Unit commitment |
UHVDC |
Ultra-high-voltage direct-current |
VALCOE |
Value-adjusted levelised cost of energy |
VoS |
Value-of-solar |
VPP |
Virtual Power Plant |
VRE |
Variable renewable energy |
WEM |
World Energy Model |
WEO |
World Energy Outlook |
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Acknowledgements, contributors and credits |
Acknowledgements, contributors and credits
The China Power System Transformation report was prepared by the International Energy Agency (IEA) System Integration of Renewables (SIR) Unit in collaboration with the World Energy Outlook (WEO) team. The Energy Efficiency Division (EEfD), Gas Coal and Power Markets Division (GCP), and the Energy and Environment Division (EDD) also provided substantial input.
Simon MÜLLER and LI Xiang coordinated the project and are the main authors of the report. Peerapat VITHAYASRICHAREON coordinated the power sector modelling. Modelling and quantitative analysis was carried out by Craig HART, Yugo TANAKA and LI Yanning with input from Grecia Sofia RODRIGUEZ JIMENEZ and Christine DEDE. Enrique GUTIERREZ co-authored the chapter on “Power system transformation and flexibility” with input from Szilvia DOCZI. Stéphanie BOUCKAERT and Timothy GOODSON provided significant inputs for developing hourly electricity demand profiles with support from Apostolos PETROPOULOS. Davide D’AMBROSIO provided inputs on electricity generation capacity. Brent WANNER advised on the application of WEO scenarios in the analysis. Marco BARONI (External consultant) coordinated the regional disaggregation of electricity generation capacity and provided guidance on the modelling. Edith BAYER, Cyril CASSISA, Kathleen GAFFNEY, César Alejandro HERNÁNDEZ ALVA, Ernst KUNEMAN, Cédric PHILIBERT, and Matthew WITTENSTEIN contributed to drafting of the report. Owen ZINAMAN (External Consultant) co-authored report summaries and provided substantial input to the chapter on “Power system transformation pathways for China to 2035”
YANG Lei, Senior Advisor to the Executive Director, provided invaluable guidance and support for the project. The authors are also grateful for the analytical and general support from the IEA China Liaison Office and the China Electric Power Planning and Engineering Institute.
Keisuke SADAMORI, Director of Energy Markets and Security, and Paolo FRANKL, Head of the Renewable Energy Division (RED) at the IEA, provided comments and guidance. Laszlo VARRO, Chief Economist, and Peter FRASER, Head of the IEA Gas, Coal and Power Markets Division (GCP), reviewed the report and provided valuable advice. David BENÁZERAF and Alan SEARL from APP, Alberto TORIL and Michael WALDRON from ESIO, Marine GORNER and Jacopo TATTINI from ETP, Stephan LORENCZIK from GCP, Hideki KAMITATARA and Pharoah LE FEUVRE from RED, and Uwe REMME (STO) provided valuable comments and feedback. WAN Hai (GER) provided valuable guidance and background information.
This work was carried out with funding from and in support of the IEA Clean Energy Transitions Programme. The authors would like to thank the funders of the Clean Energy Transitions Programme: Canada, Denmark, the European Commission, Finland, Germany, Italy, Japan, New Zealand, Sweden, Switzerland and the United Kingdom.
The authors are grateful for the comments received from: Patrick ADIGBLI (Restore), Masafusa ATSUTA (MHPS), Peter BOERRE (Independent Consultant), Rina BOHLE-ZELLER (Vestas), Andreas FELDMUELLER (Siemens), Hannele HOLTTINEN (Independent Consultant), JIANG Liping and JIAO Bingqi (SGERI), Kazuhiro KURUMI (METI), Mara Marthe KLEINER (Agora Energiewende), Debbie LEW (GE Power), LI Jiangtao (SGERI), LI Songzhe (EV100), LOU Qihe (SGCC), Luigi Mazzochi (RSE), Hakon Mosbech (COWI), Marianne NAJAFI (EDF), QU Haoyuan (SGERI), Mathis ROGNER and David SAMUEL (IHA), Kaare SANDHOLT (CNREC), Oliver SCHMIDT (Imperial College), SHAN Baoguo (SGERI), SUN Xiaomei (China5e), WANG Hao
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China Power System Transformation |
Acknowledgements, contributors and credits |
(Environmental Defense Fund), WANG Shunchao (EPPEI), Dan WETZEL (WRI), XU Yang (EV100), Henri ZELLER (Fraunhofer ISIT), ZHANG Shuwei (Agora Energiewende), ZHANG Jingjie (CEC), ZHU Yanyan (GE Power).
Justin French-Brooks was the primary editor of this report. The authors would also like to thank the IEA Communication and Information Office, in particular Astrid Dumond, Katie Lazaro and Therese Walsh, for their assistance in production.
Comments and questions on this report are welcome and should be addressed to SIR@iea.org.
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