China is experimenting with electricity markets to hasten its transition to a clean-energy system. Currently, its annual generation plan allocates roughly the same operational hours to coal power plants irrespective of their cost or efficiency. Eventually, this will be supplanted by wholesale markets, allowing more-flexible operation of its power system within and across provinces and regions. This is an important step.
The evolution of electricity markets in China will not be swift, painless or linear, thanks to political and economic obstacles as well as entrenched stakeholder interests. But if designed and governed well, markets hold promise for resolving the political challenges that will otherwise frustrate China’s transition to a clean-energy system. They can accelerate the replacement of relatively cheap coal-fired energy with renewable energy as the increasing scale of solar and wind installations drives their costs to parity.
Other countries’ experiences are useful for reference. But China’s electricity markets will ultimately need to develop along a trajectory that is adapted to the nation’s particular conditions and challenges. These include long distances between electricity resources and demand centres, the continued need for large-scale investment, the political need for an orderly transition, and China’s distinctive approach to governance and regulation.
Markets that allow electricity to be traded and coordinated across regions that cover long distances are likely to be more feasible in China than they have been in the United States or Europe.
Nature 562, 39 (2018)