ENERGYTRANSITIONENERGYTRANSITIONCHINACHINAFebruary2023December2021OIESPAPER:CE4OIESPAPER:ET06AndersHove,SeniorResearchFellow,OIESAndersHove,ResearchAssociate,OIESAssessingChina’spowersectorlow-carbontransition:aframingpaperThecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.iThecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsmembers.Copyright©2023OxfordInstituteforEnergyStudies(RegisteredCharity,No.286084)Thispublicationmaybereproducedinpartforeducationalornon-profitpurposeswithoutspecialpermissionfromthecopyrightholder,providedacknowledgmentofthesourceismade.NouseofthispublicationmaybemadeforresaleorforanyothercommercialpurposewhatsoeverwithoutpriorpermissioninwritingfromtheOxfordInstituteforEnergyStudies.ISBN978-1-78467-218-8Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.iiAcknowledgmentsTheauthorwouldliketothankGarySipengXieforassistancewithresearchinthepreparationofthispaper,aswellasDavidRobinson,PhilipAndrews-Speed,andMichalMeidanforreviewingandprovidinghelpfulcomments.Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.iiiExecutiveSummaryChina’slow-carbonenergytransitiondependsonthepowersectortakingthelead.Inthisassessment,weseektoanswerthreequestionsaboutChina’spowersectortransformation:1.Isthepowersectortransitionontrack,intermsofnon-fossilandrenewablecapacityandoutput?Overall,hydro,wind,solar,andnucleararescalingupcapacityataspeedexceedingwhatwouldbenecessarytopeakpowersectorcarbonemissionsbefore2030anddecarbonizetheelectricitysectorby2050.Renewableintegrationwillbemoreofachallenge,andtosomeextentmaydependonmarketreforms(seeitem2below).TechnologiessuchasCCUSandhydrogenforseasonalenergystoragefacehighuncertainty.2.AremarketreformsinthepowersectoraprerequisiteforChina’slow-carbontransition?Whilethereformeffortremainsapriorityofthegovernment,withstatedaimsofefficiencyandfacilitatingthelow-carbontransition,notonlyisprogressslow,butthelong-termdirectionofpowermarketinstitutionsremainsorientedtowardsadministrativemeasures,withcommand-and-controlpoliciesretainingtheupperhandovermarketforces.Notonlydoessecurityremainahigherprioritythanmarketreform,butreformsmayseekto“checktheboxes”ratherthanallowingsupplyanddemandtoplayadecisiveroleintheelectricitysector.Marketreformsmaybemoreaccuratelydescribedas“market-orientedexperiments”andeventhoughmorethoroughmarketreformscouldincentivizeinvestmentsanddispatchthatwouldacceleratethelow-carbontransitionandreduceitscost,administrativepoliciescanalsokeeptheenergytransitionontrack.3.AsChinapursuesthelow-carbontransitionandpowermarketreforms,doeffortsatinternationalexperiencesharingandtopicsofcooperativeresearchrequireadjustment?Todate,internationalcooperationonpowersectorcooperationhasfocusedonevaluatingthepotentialbenefitsofatargetmarketmodelinChina.ThisapproachisreflectedbothinpowersectormodellingofChina,aswellasinreportsonbestpracticesabroad.However,effortstohighlightprogressintechnologyorpolicy–bothinsideandoutsideChina–mayhavegreaterimpactonfuturepolicydiscussions.Withthisinmind,theconcludingsectionofthepapersketchesafewpotentialresearchtopicsonpowersectortechnologyandpolicy,includingstudiesongreenenergytrading,cleanheatingwithdistributedPV,andEVcharging.Theserepresentjustsomeofthepromisingtopicsforbothmodellingandcomparativepolicyresearchthatneednotdependonprogresswithpowermarketreforms.SuchresearchcanserveasareferenceforinternationalexchangesaimedatreducingcarbonemissionsandforfirmsseekingtounderstandChina’scleanenergydevelopmentThecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.ivContentsAcknowledgments...................................................................................................................................iiExecutiveSummary...............................................................................................................................iiiContents.................................................................................................................................................ivFigures...................................................................................................................................................ivTables.....................................................................................................................................................iv1.Introduction:Renewablesandelectrificationarerecognizedaskey..................................................12.Arerenewablesandelectrificationontrackformeetingthe2030–2060goals?................................3Yes3.Areenergyandpowermarketreformsontrack?Thisislessclear....................................................44.Whatisthetargetmarketmodel?.....................................................................................................115.Willthetargetmodelwork?...............................................................................................................136.Theresearchgap,andsuggestionsforfillingit................................................................................15FiguresFigure1:2020–2060electricitycapacitybysourceunderCETOCarbonNeutralScenario(CNS).......1Figure2:Chinanewenergyvehiclesales(NEV),2017–2022...............................................................4Figure3:2021–2022wholesaleelectricpowertradingshares...............................................................8Figure4:2021electricpowersalesbygeographyoftrading.................................................................8Figure5:StateGridEnergyResearchInstitutemapofdesertlocationsfornewcleanenergybases12Figure6:Mapof2021PVadditionsbyprovince(GW)........................................................................13TablesTable1:Chinagenerationmix,2015–2021,andincrementalincreaseinwindandsolarshare...........3Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.11.Introduction:RenewablesandelectrificationarerecognizedaskeyChina’spowersectordecarbonizationiscriticaltopeakingcarbonemissionsandachievingcarbonneutrality.Analystsconsiderdecarbonizingthepowersectorasbeingrelativelystraightforwardwhencomparedtothedecarbonizationofbuildings,industry,andtransportation–andmuchmoresothanthehardest-to-abateindustriessuchasaviationorlong-distanceheavy-dutytrucking.ManyareconcernedthatChina’scontinuedconstructionofcoalplantswilllockinhighemissions,delayingdecarbonizationofthepowersector.Topleadersrefertocoalasthefoundationor“ballaststone”oftheenergysystem,1whilesuggestingitsrolewillchange,especiallyinthepowersector.FollowingPresidentXiJinping’sSeptember2020announcementthatChinawouldpeakcarbonemissionsbefore2030andstriveforcarbonneutralityby2060,2severalfurtherannouncementshavehighlightedtheroleofthepowersectorforachievingthisvision.Inlate2021,thedirectorofChina’sNationalEnergyAdministrationcalledcoalthe“ballaststone”ofChina’senergysystem,essentialformaintainingenergysecurityevenduringalow-carbontransition.Oncoal,roughlyhalfofwhichisusedtogenerateelectricity,inApril2021PresidentXistatedthatChinawouldstrictlycontrolcoalpowerthrough2025andbegintophaseoutcoalthereafter3–alleviatingfearsthatarapidbuild-outofcoalpowermightleadtoanemissionspeaksubstantiallyabovepresentlevels,duetoananticipatorycoalrushtolockincoalplantinvestmentsbeforeacut-off.NotonlydoesChinacontinuetobuildcoalplants,butseveralinfluentialgovernmentbodies,suchastheChinaElectricityCouncilandtheElectricPowerPlanningandEngineeringInstitute,continuetoenvisionamajorcoalbuild-outtomeetgrowingelectricitydemand.4However,variousChinesegovernmentdocumentsspecifythatnewcoalplants,andeventuallyallcoalplants,shouldtransitiontoplayabalancingroleinthepowersystem,ratherthanbeingmainlyabaseloadpowersource,5thoughusingcoalplantsforrampingorpeakingcarriessignificantcostsintermsofenergyefficiencyandmaintenance.Theroleofcoalasabalancingresourcerepresentsanongoingareaofpotentialresearchthatcouldhelpclarifytheneedforcoal,givenrapidchangesincleanenergytechnologies.MajormodellingstudiesalsosuggestthatChinawillseektodecarbonizethepowersectorfirst.Accordingtoaprominentlow-carbondevelopmentpathwaystudypublishedbyTsinghuaUniversity’sInstituteofClimateChangeandSustainableDevelopment(ICCSD)immediatelyfollowingPresidentXi’s2030–2060announcement,non-fossilenergywouldaccountforroughly80percentofenergyby2050,theelectricitysectorwouldobtain90percentofenergyfromnon-fossilsources,whiletheelectricityshareinend-useenergyconsumptionwouldriseto55percent.6Similarly,theChinaEnergyTransformationOutlook,publishedbytheNationalDevelopmentandReformCommissionEnergyResearchInstitute(NDRCERI),anticipatesachievinganelectrificationrateof74percentinacarbon-neutralscenariofor2060,with95percentofelectricityobtainedfromrenewablesources.Electricityconsumptionwouldmorethandoubleunderthisscenario.7Figure1:2020–2060electricitycapacity(GW)bysourceunderCETOCarbonNeutralScenario(CNS)Source:ChinaEnergyTransitionOutlook,NDRCERI,20228Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.2Thevisionofrenewablesscale-upandelectrificationastheprimarypathstodecarbonizationalignswithanalysisfrominternationalorganizationsandNGOsworkingonmodellingChina’slow-carbonenergytransition.TheInternationalEnergyAgencyanticipatesthatrenewables–especiallysolarphotovoltaics–willprovidethelargestcontributiontodecarbonizationunderanadvancedpoliciesscenario.Underthisscenario,Chinawouldhave4.5TWofPVand1.5TWofwindby2060.TheIEAexpectsthatelectrificationandenergyefficiencywillplaythelargestroleinindustry,whileelectrificationofbuildingsandtransportiscriticaltothosetwosectors.UndertheIEA’sAnnouncedPledgesScenario(APS),electricityaccountsfor50percentofChina’sfinalenergydemandin2060,comparedto25percenttoday.Electrificationaccountsfor60percentoftransportcarbonreduction,comparedto5percenthydrogenunderthisscenario.Itanticipateselectricitydemandwouldroughlydoubleby2060.9Othermodelspresentsimilarfindings.Inits2018ReinventingFire:China,Low-CarbonScenario,publishedbytheRockyMountainInstitute,LawrenceBerkeleyNationalLaboratory,andtheNDRCERI,electricitywouldaccountfor41percentofend-usedemandin2050,12percentagepointshigherthaninthereferencecase,with82percentofelectricitycomingfromnon-fossilenergy.10Similarly,theEnergyFoundationChinaandUniversityofMaryland’s2022SynthesisReportontheeffectofElectrificationonChina’sCarbonNeutralityPathwaysnotesthat“electrificationisacorepartofChina’spathwaytocarbonneutrality,”andthisrequires“simultaneoustransitionsofelectrifyingend-usesectorswhiledecarbonizingtheelectricitysector.”Thereportspecificallytargetselectrificationofbuildingheating,EVsforpassengervehiclesandheavy-dutytrucks,andheatpumpsandelectricitydemand-sideflexibilityfromindustry.11ThereportdrawsonearlierworkfromtheUniversityofMarylandoncoalphase-outthatincorporatesassumptionsonincreasedelectricitydemandfromelectrificationofend-usedemand.12BackgroundonChina’spowersector:Ownershipandoperationofelectricitygridandpowergenerationassets:China’selectricitysectorisdominatedbystate-ownedenterprises(SOEs).Thetransmissionanddistributiongridsareownedbytwomaingridcompanies:StateGridCorporationofChina,whichrunsthegridinmostofChinaandisoneoftheworld’slargestfirms;andChinaSouthernGrid,whichrunsthegridinfivesouthernprovinces.FiveSOEgenerationcompaniesownapproximately60percentofthecountry’sgenerationassets–bothcoalandrenewables–withtheremainderbeingownedbysmallercompanies,almostallstate-ownedormainlystate-owned.Therearealsotwomajorstate-ownednuclearcompanies.Regulationandplanning:China’snationalenergypolicyissetprimarilybytheNationalDevelopmentandReformCommission,themaineconomicplanningbodyactingundertheStateCouncil,andtheNationalEnergyAdministration,whichisapartoftheNDRC.Provincialofficials,alongwithprovincialofficialsfromthesetwoagencies,havewidelatitudetoplanandmanagetheelectricitysectoratthelocallevel.ThereisnoindependentregulatorofChina’sgridorgenerationcompanies,andSOEpowercompaniesparticipatedirectlyinenergypolicyplanning.Capacityandoutput:Chinahastheworld’slargestelectricitygenerationcapacity,withover2.5TWofcapacityinstalledattheendof2022,ofwhichthermal(mainlycoal)accountedfor1.3TW,hydro413GW,nuclear55GW,wind365GW,andsolar393GW.Coalaccountedfor58.4percentofelectricityproduction,comparedto36.2percentfornon-fossilenergy.13Windandsolarcombinedproduced14percentofelectricityin2022,upfrom12percentthepreviousyear.Wholesaleandretailpricing:Chinahassoughttograduallyintroducemarketreformsinpowerpricing,bothviamid-to-long-term(MLT)bilateralcontracts(generallyfromonemonthtooneyearinduration)andlimitedspotmarkettrading.However,wholesalepricesarestillregulatedonthebasisofabenchmarkcoaltariffandfluctuateaboveandbelowthebenchmarksubjecttocapsandfloors,thoughcertainenergy-intensiveindustriesmaypaypricesabovethecaps.Windandsolarplantstypicallyreceiveeitherafixedfeed-intariffpaymentformostoftheirenergy,orarecontractedunderlonger-termgridparitycontracts,definedasrenewablecontractssetatorbelowthebenchmarkcoaltariff.Carbonemissions:Thepowersectorisresponsibleforapproximately45percentofthecountry’sgreenhousegasemissions,mainlyfromcoal-firedpower.Chinahassetannualtargetsforincreasingtheefficiencyofitscoalfleet–whichisnewerthanthatofmostothercountries–aswellasoveralllong-termtargetsforincreasingthetotalshareofnon-fossilenergy.Furtherresources:Formoreonthepowersector,includingfuelmixandtrendsforcapacityandgeneration,seethe2022“GuidetoChineseClimatePolicy”,whichalsoincludesanupdatedchapteronpowermarketreforms.14Formoreontheinstitutionalgovernanceofthepowersectorandhowitbothhelpsandhindersthelow-carbontransition,seeour2021paper,“Softwareversushardware:howChina’sinstitutionalsettinghelpsandhindersthecleanenergytransition.”15ERR能研微讯微信公众号：Energy-report欢迎申请加入ERR能研微讯开发的能源研究微信群，请提供单位姓名（或学校姓名），申请添加智库掌门人（下面二维码）微信，智库掌门人会进行进群审核，已在能源研究群的人员请勿申请；群组禁止不通过智库掌门人拉人进群。ERR能研微讯聚焦世界能源行业热点资讯，发布最新能源研究报告，提供能源行业咨询。本订阅号原创内容包含能源行业最新动态、趋势、深度调查、科技发现等内容，同时为读者带来国内外高端能源报告主要内容的提炼、摘要、翻译、编辑和综述，内容版权遵循CreativeCommons协议。知识星球提供能源行业最新资讯、政策、前沿分析、报告（日均更新15条+，十年plus能源行业分析师主理）提供能源投资研究报告（日均更新8~12篇，覆盖数十家券商研究所）二维码矩阵资报告号：ERR能研微讯订阅号二维码（左）丨行业咨询、情报、专家合作：ERR能研君（右)视频、图表号、研究成果：能研智库订阅号二维码（左）丨ERR能研微讯头条号、西瓜视频（右)能研智库视频号（左）丨能研智库抖音号（右)Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.32.Arerenewablesandelectrificationontrackformeetingthe2030–2060goals?Yes.Chinaisleadinginrenewableenergycapacityandgeneration,althoughitsshareintheenergymixremainssmall.Althoughwindandsolarproducedonly12percentofChina’selectricityin2021,16theirsharehasbeenrisingatasteadypaceofover1percentagepointannually.Onwind,Chinanowhasone-thirdofglobalcapacity,andleadstheworldwith37GWofnewinstallationsin2022,reaching365GWintotal.17Insolar,year-endtotalcapacityreached307GW,andChinaadded87GWin2022,upfrom53GWin2021.18ChinaalsodominatesthemanufacturingofbothsolarPVandbatteries.In2020,Chinaaccountedfor76percentofglobalpolysiliconproduction,96percentofPVwaferproduction,78percentofPVcellproduction,and70percentofglobalPVpanelproduction.19AccordingtotheIEA,Chinaproducesthree-quartersofalllithium-ionbatteriesandishometo70percentofproductioncapacityforcathodesand85percentforanodes.20Chinaisalsoinvestingbillionsinrenewableenergyprojectsoverseas,includingincountriesthatarepartoftheBeltandRoadInitiative(BRI).21China’scleanenergytransitionisacceleratingrapidly,atleastinthepowersectorandtransportation.Atthepresentrateofannualwindandsolarcapacityadditions,Chinawouldexceedits2030targetof1200GWofwindandsolarbyover300GW,reaching1544GW.22Evenso,windandsolarinstallationsarelikelytocontinuetoincrease:installationlevelsforsolarPVreached87GWforthefirsttimein2022,andprovincialfive-yearplanssuggestthatChinawilladdover800GWofwindandsolarby2025,toppingthe2030targetatleastfiveyearsaheadofschedule.23IntermsofthewindandsolarcapacityneededtoachieveChina’scarbonneutralitygoalsfor2060–estimatedat4–6TWwindandsolarcombined–thiswouldputChinaontracktoachieveathirdorevenhalfofthenecessarytotalcapacityby2030.Asforelectricitygenerationshare,windandsolarhavegrowntheircombinedshareby1.3percentannually,from3.9percentin2015to11.7percentin2021.Simplyextrapolatingthisto2030,andassumingnuclearandhydrosharesremainedconstant,wouldimplyChinawouldroughlymeetitstargetfora39percentnon-fossilelectricityshareby2025.Theactualchangeingenerationsharewilldependoneconomicgrowthandelectricitydemandgrowth,whichhaveshownincreasedvolatilitysincetheonsetoftheCovidpandemicin2020.The39percentnon-fossiltargetmaybeconservative:withrenewablecapacityadditionslikelytogrow,andanaccelerationofnuclearconstruction,China’sgenerationsharetargetscouldwellbeexceededunlesshydrounderperformsduetoclimatefactors.Table1:Chinagenerationmix,2015–2021,andincrementalincreaseinwindandsolarshareSource:DataadaptedfromCEC,tablebyAndersHove,OIES,2022Forelectrification,thesituationismorecomplexduetothenumberofsectorsandtechnologiesneeded.Fortransportationelectrification,Chinaisagainfaraheadofitstargets.Chinahasanofficialtargetfornewenergyvehicles(batteryelectricvehicles,plug-inhybrids,andfuelcellvehicles)toachievea20percentshareofnewvehiclesalesby2025,butthe2022marketsharesurpassed25percent,upfromjust5percentin2020.24WhilemineralandbatterysupplyconstraintsarelikelytoslowthegrowthofEVadoption,atleastinthenearterm,25electrificationoftransportisstillvastlyexceedingexpectations.20152016201720182019202020212022Hydropower19.4%19.5%18.6%17.6%17.8%17.8%16.0%15.6%Thermalpower73.7%71.8%71.0%70.4%68.9%67.9%67.4%65.8%Nuclearpower3.0%3.5%3.7%4.2%4.8%4.8%4.9%4.8%Windpower3.2%3.8%4.7%5.2%5.5%6.1%7.8%8.8%Solarpower0.7%1.1%1.8%2.5%3.0%3.4%3.9%4.9%Non-fossilshare26.3%28.2%29.0%29.6%31.1%32.1%32.6%34.2%Windandsolarshare3.9%4.9%6.5%7.8%8.6%9.5%11.7%13.7%Incrementalwindandsolar1.0%1.6%1.2%0.8%1.0%2.2%2.0%Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.4Figure2:Chinanewenergyvehiclesales(NEV),2017–2022Source:CPCAandCAAM,2021and2022Todate,therapidincreaseinelectricvehiclesishavingonlyaminorimpactoncarbonemissions.ThoughChinahadover10millionEVsontheroadinmid-2022,gasoline(usedbyalmostallpassengercars)accountsforjust27percentofChina’soilconsumption,anddieselafurther26percent,mostlyforfreightbutalsoforsomeindustrialuses.26BloombergNewEnergyFinanceestimatesthatEVsarealreadysaving1.5millionbarrelsperdayofglobaloildemand,andtheInternationalEnergyAgencyin2021estimatedthatChinawillaccountforatleasthalftheoildisplacementfromEVadoptionin2030.27Onalife-cyclebasis,withthepresentelectricitymix,ChineseEVsofferemissionsthatare40–60percentlowerthaninternalcombustionvehiclesinallregionsofChina.28Basedonthisestimate,typicalvehicleusage,andanassuming15millionEVsontheroadinChinaattheendof2022,EVswouldreduceannualtransportationCO2emissionsbyanet29milliontons,versusroughly784milliontonsofannualtransportationCO2emissionsin2019.29AssumingEVsreachwellover50percentmarketsharebylaterthisdecade,theywillgraduallybegintodisplacegasolinedemand–althoughrisingcarownershipandlongvehiclelifetimesinChinawillattenuatethisshift.Accordingtoonestudy,replacing60percentofthefossilvehiclefleetwithEVswouldraiseelectricityconsumptionby410TWhin2050,or4.5percent.30ChangesindieseldemandfortruckingaremoreuncertaingiventhelowerpenetrationofEVtrucksinlong-haulshipping,buthereaswellChinaismakingprogresswithelectrification.IfChinaisexceedingexpectationsinrenewableadditionsandelectricvehicles,isthatsufficient?Orareadditionalreformsneededtomeetthecountry’sdecarbonizationgoals?3.Areenergyandpowermarketreformsontrack?Thisislessclear.AnalystsassumepowersectordecarbonizationwillbemostefficientifChina’spowersectoradoptspracticesusedinothermajorpowermarkets,whilelearningfromtheirpastmistakes.Inthis,variousexpertshaveadvocatedforChinatoadoptliquid,high-volumespotpowermarketscoveringalargegeographicalarea,pricingelectricityonthebasisofshorttimeintervalstoencouragedemandflexibility,andencouragingtheparticipationofdistributedgenerationandstorage.31Chinesedocumentsalsoemphasizetheneedformajorreformsinthepowersector,speakingofa“revolutioninenergyproductionandconsumption,”the“decisiverole”ofmarketsinsettingprices,and“marketleading”theenergytransition.32Furthermore,Chinesepolicydocuments,includingthe14thFive-YearPlan,emphasizeinternationalcooperationasanimportantpillarofthetransition.ThestatedgoalsofChina’spowermarketreformsincorporatebothdecarbonizationaswellasefficientpricesignalstoimproveeconomicefficiencyofthepowersector,includingeffectiveintegrationofcleanenergy.ANovember2022spotmarketpolicydraftissuedbytheNEAsummarizes:“Thegoalofbuildinganelectricpowerspotmarketistoformelectricitypricesignalsthatreflecttimeandspatialcharacteristicsandreflectchangesinmarketsupplyanddemand,andplayadecisiveroleintheallocationofelectricpowerresources;toimprovetheregulationcapacityof2.7%4.5%4.7%5.4%13.4%25.6%0.0%5.0%10.0%15.0%20.0%25.0%30.0%-1,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,000201720182019202020212022NEVsalesNEVshareThecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.5thepowersystem,promotetheconsumptionofrenewableenergy;ensurethesafeandreliablesupplyofpower;guidethelong-termplanningandinvestmentofpower;andpromotethetransformationofthepowersystemtoonethatisclean,low-carbon,secureandefficient.”Thislistofgoalsismorespecificthanthelistofprinciplesinthe2015DocumentNo.9onDeepeningReforminthePowerSector,whichincludedmaintainingenergysecurityandreliability,promotingcompetition,maintainingthepeople’slivelihood(includinglowpricesforresidentialconsumers),energyconservationandemissionsreduction,promotingtechnologyinnovation,andadheringtoscientificmanagementprinciples.33Notunreasonably,Chinahasmovedcautiouslyinadoptingreforms,pilotingeachelementinturn,usuallyatasmallscale.Analystshavenotedthatevenaftermarketinstrumentsareadopted,majorobstaclestomarketsplayingasupportingroleremain.Evenasmoremarketinstrumentscomeintoplay,thegovernmentcontinuestointroducenewadministrativecontrols,enhancingtheroleofplanningovermarkets,whileemphasizingthemarketelementsrhetorically.Provincialandotherstateactorshavewide-rangingabilitiestodesignmarketsandinterveneintheiroperationsinwaysthathindertheemergenceofshort-orlong-termpricesignals.34IfChinacontinuestopursuepowermarketreformsthatneverreachthismarketmodel,canthecountryreachahighpenetrationofrenewableenergyby2030andfullpowersectordecarbonizationby2060?Toanswerthisquestion,itisusefultoconsiderhowthegovernmenthasframedmarketreformovertime,andwhetherthishaschanged.(Foramorecompletetimelineofelectricpowermarketreforms,seethe“GuidetoChineseClimatePolicy”,chapter8.35)Overall,high-levelframingcontinuestoemphasizetheroleofmarketsWhilethepresentphaseofelectricpowermarketreformkickedoffin2015,severalimportantvisionsformarketreformsintheenergysectorprecededpowermarketreforms.ThecommuniqueissuedaftertheThirdPlenarySessionofthe18thCPCCentralCommitteeinNovember2013statedthatmarketsshouldplaya“decisiverole”intheallocationofenergyandenvironmentalresources,36settingthestageforfuturereformsinthepowersector,aswellasforcoal,oil,andgas.Marketreformsandenvironmentalpolicyshouldreinforceoneanother.In2014,XiJinpingdeliveredhis“energyrevolution”speech,inwhichhelisted“fourrevolutionsandonecooperation”:37Arevolutioninenergyconsumption,includingcontrolsonenergyconsumption,energyefficiencyinindustry,shiftingtheeconomicstructureinanenergy-efficientdirection,andpromotingthriftyenergyconsumptionthroughoutsociety.Arevolutioninenergysupply,includingcleanandefficientcoal;integrationofcoal,nuclear,andrenewables;andstrongerpowergrids.Arevolutioninenergytechnology,promotinglow-carbonenergytechnologies,andpursuinginnovationintechnology,businessmodels,andintegrationofenergywithotherfields.Arevolutioninenergymarkets,“unswervingly”promotingmarketreforms,treatingenergyasatradeablecommodity,buildingacompetitivemarketstructure,determiningpricesmainlythroughthemarket,changingthewaythegovernmentsupervisesthemarket,andimprovingthelegalstructure.Cooperationwithothercountriesontheenergyrevolution“toachieveenergysecurityunderopenconditions,”whilerelyingmainlyondomesticenergysourcesforconsumption.Giventhisoverallguidance,relevantgovernmentbodiesmovedquicklytoinstitutereforms,particularlyinthepowersector.The2015publicationofDocumentNo.9onDeepeningReforminthePowerSectorpresentedalistofpowermarketreformswhichChinawouldeventuallyadopt–includingspotmarketsandancillaryservicesmarkets–withoutacleartimelineforadoptingthesereforms.38Ingeneral,marketreformshavemademostprogressinadoptingmid-to-long-termbilateralpowercontractsbetweenlargeconsumersandgenerators,generallyforperiodsofonemonthoroneyear.Pricingoftransmissionanddistributionhasalsobeenreformed.SpotmarketsareatthepilotphaseinroughlyhalfofChina’sprovinces,ancillaryservicesmarketsarebeingpiloted,andsomeprovinceshavealsoadoptedcapacitymarkets.Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.6Marketreformshavealsotargetedrenewableenergy,aboveallbyscalingbackorwithdrawingadministratively-determinedsubsidies,startingwiththeeliminationoffeed-intariffsformostnewonshorewindandPVstartingin2019–2020.Anewauction-basedprogram,theGridParityprojects,providednewwindandPVprojectswith20-yearnegotiatedpowerpurchaseagreements,startingin2019,providedtheycouldofferpricesatorbelowprevailinggridtariffs.39Avoluntarygreenpowermarketwasestablishedin2017,thoughitsdesignprimarilyfocusedonreplacingfeed-intariffsubsidies,secondarytradingwasnotpermitted,andpurchasevolumeswerealmostnon-existent.40Inlate2022,anewgreenpowermarketpolicyclarifiedthatgreencreditswillserveasanaccountingsystemforimplementingquotasforenergyconsumption;provincescancovertheirexcessiveconsumptionwithgreencertificates.41Todealwithhighlevelsofcurtailment,thegovernmentestablishednewrulesforminimumpurchaseofrenewableenergyin2016,defining“fullpurchase”ofwindenergyas1800–2000hoursperyear,and1300–1500hoursforsolar.42Forplantsbuiltpriorto2020stillreceivingthesubsidizedfeed-intariffunder20-yearcontracts,onlywindandsolarproductionwithinthisguaranteedminimumwouldqualifyforthefeed-intariffpayment.Thepolicyencouragedprovincestosetupadditionalmarketsforselling“excess”renewableenergyproductionbeyondthesemandatoryamounts,includingviainterprovincialtrading.Foryears,someprovinceshadfloutedeventhereducedminimumoperatinghoursrequirements,andpreventedrenewablesourcesfromsellingpowerbeyondobligatoryminimums.43Meanwhile,thegovernmentcontinuestopromotemarketreformsinvarioushigh-leveldocuments.The14thFive-YearPlanforaModernEnergySystemincorporatesasectioncallingformarketstoplaya“leading”roleinthenewenergysystem,andrepeatslanguagecallingformarketstoplaya“decisive”role.44InaWeChatarticle,theNDRCintroducedthe“sixprinciplesandfivesimultaneouslies”ofthemodernpowersystem,showinghowChinaseekstoevolvefromacentralizedtoahybridpowersectormodel,whileenablingmarketstoplayaleadingrole.45“Marketleading”islistedasthesixthprinciple.Thefivesimultaneousliesspecificallyrefertowaystointegraterenewableenergy:Thecountrywillsimultaneouslypursue(1)centralanddistributedenergy,(2)onshoreandoffshoreenergy,(3)localconsumptionofrenewablesandsendingrenewableenergytootherprovinces,(4)developingstand-aloneandhybridrenewableplants,(5)developingsinglelocationfacilitiesandaggregatingmultiplefacilities.Otherfive-yearplandocumentsandpublicationshavepromotedongoingmarketreforms,thoughthelanguageisambiguousinsomeinstances.Forexample,theStateCouncil’s2022NoticeontheModernizationPlanofMarketSupervisionofthe14thFive-YearPlansetsouttheobjectiveofestablishingaunified,open,competitive,andorderlymodernmarketsystem–toimprovethesocialistmarketeconomicsystem.46Thisbuildsona2021StateCouncildocumentstatingthatthe14thFive-YearPlanshouldstrivetoestablishahigh-standardmarketsystem,with“moredynamic”marketplayers,andtoshowprogresstowardsmarket-basedallocationoffactors.47Similarly,theMinistryofCommerce’sfive-yearplancallsformarketstoplayadecisiveroleinresourceallocation,plansto“stimulatemarketentitiestocreatenewdevelopmentvitality,”andimprovethe“efficiencyandeffectivenessoftheallocationofproductivefactors.”48Variousdocumentsonenergystoragehavehighlightedtheroleformarkets.The14thFive-YearPlanforNewEnergyStorageaffirmsthecentralroleofanindependentmarketfordevelopingrenewableenergystorage,statesthatenergystorageshouldparticipateinvariouspowermarkets,andthatnewmarketmechanismsareneededtoaccomplishthis.49The14thFive-YearPlanincludes“market-orienteddevelopmentofnewenergystorage”asonesteptowardsachievingcarbonneutrality.50InFebruary2022,theNDRCissuedaguidingopinionsettingouttheclearesttimelineyetforpowermarketreforms.51Thedocumentenvisionsapreliminaryintegratednationalpowermarketby2025,involvingcollaborationbetweenthenationalmarketandtheprovincialorregionalmarkets,jointoperationofmid-andlong-termbilateralcontractmarkets,spotmarkets,andancillaryservicemarkets.By2030,thenationalmarketwouldbebasicallyestablished,includingfullparticipationofrenewableenergy,andparticipationofallmarketplayersonanequalfooting.TheNEA’slate-2022spotmarketpolicyforeseesthecomponentsofthenationalmarketdesigntaskasincludingthefollowingeightelements:52Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.71.Inter-provincialandprovincial/regionalspotmarkets,withday-ahead,intraday,andreal-timemarkets.2.Connectionsbetweenthemedium-andlong-termmarketandthespotmarket.3.Connectionsbetweentheancillaryservicemarkets–suchaspeak-shaving,frequencyregulationandbackup–withthespotmarket.4.Participationofnewenergy(windandsolar)intheelectricitymarket.5.Participationofemergingmarketentitiessuchasenergystorage,distributedpowergeneration,loadaggregators,virtualpowerplants,andnewenergymicro-grids.6.Participationofuserswhodirectlyparticipateinthespotmarket,electricitysalescompanies,andthird-partyelectricitypurchasers–onanequalfootingwithgenerators.7.Explorationofacapacitycompensationmechanism.8.Introductionofnewmarketplayersintointer-provincialmarketsandstrengtheningtheirroleinpriceformation.Variousdocumentsandhigh-levelspeechesalsocallforintegrationofpowermarkets,greenpowertrading,andcarbonmarkets.InNovember2021,theStateCouncilexpresseditsdesireto“strengthenthecoordinationofpowertrading,energyusetradingandcarbonemissiontrading.”53In2022,PengLifromStatePowerInvestmentCorporation,oneoftheBigFivepowergenerationfirms,said,“Thethreemarkets[power,carbon,andgreencertificates]areseparate,butsupporteachotherandhavedifferentrulesandfunctions,whicheffectivelyavoidstheconfusionofmarkettradingrulesunderthemulti-objectiveorientation.”54Coveringthe20thPartyCongress,theEconomicDailyreportedPresidentXi’scallforaneconomicsystemthat“improvesthecarbonpricingmechanism,aswellasstrengthensthecoordinationofcarbonemissionrightstrading,energyuserightstrading,andpowertrading.”55ThepowershortagesinSeptember2021alsoledtoimportantchangestothepowermarkets,typicallydescribedasasweepingmarketreformofpowerprices,eventhoughtheadministratively-setbenchmarkcoaltariffscontinuetoplayanimportantroleinsettingmarketprices.Thepowershortagewasprimarilycausedbyadisconnectbetweenhighphysicalcoalprices(coalpricesweremainlysetbymarkets)andpowermarkets,wherepriceswerecapped.TheNDRCannouncedthatinsteadoffluctuatinginabandof10percentbelowand15percentabovethebenchmarkprice,thebandwouldwidento20percentaboveandbelowthebenchmarkprice,withenergyintensiveindustriesfacingnocap.Administratively-setpricescheduleswouldbecancelledandallcustomersputintothebilateralmid-to-longtermpowermarkets,withthegridcompanyactingasthepurchaserforcertaincustomerclasses.56Althoughpricesremaintightlycontrolled,andthereformactuallyre-regulatedphysicalcoalpricesandimposednewadministrativecontrolsonminesandpowerplants,rhetoricallythemeasurewasportrayedasamajorliberalization.TheNDRCstatedthiswould“deepenthemarket-orientedreformofelectricitypricesforcoal-firedpowergeneration…Chinawillorderlyliberalizetheon-gridelectricitypriceforallcoal-firedpowergeneration,expandtherangeoffluctuationsinmarkettransactionelectricityprices,andpromoteindustrialandcommercialuserstoenterthemarket.”WanJinsong,DirectorofthePricingDivisionattheNRDCstated,“Thecoreofthereformistotrulyestablishamarket-orientedelectricitypricemechanismthat‘canfallandrise’.”57PengShaozong,DeputyDirectorofPricingDivisionstatedthatthereformwould“makeelectricitypricesmoreflexibletoreflectchangesinelectricitysupplyanddemandandcostchanges,easetheoperatingdifficultiesofcoal-firedpowergenerationcompanies,encouragecompaniestoincreaseelectricitysupply,curbunreasonableelectricitydemand,improveelectricitysupplyanddemandconditions,andbetterensureasafeandstablesupplyofelectricity.”58The20thPartyCongressincludedmarketreforms,thoughwithfewermentionsthaninpreviousyears.ThePartyCongressReport’smainemphasisisonenergysecurity,withmentionsoftheeconomyormarketreformsfardownfromearlieryears.Regardingreform,theReportprovidesalmostanequalbalanceofattentiontomarketsandadministrativemeasures.Inthesectiononcleanenergy,theReporthighlightsinthefirstsentencetheimportanceofChina’slongstandingenergyconsumptionandintensityquotas,thenpivotstoimprovingthecarbonemissionstradingsystem.Notably,theReportdoesnotmentiontheroleofenergymarketsorpricereformsintheenergysector.Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.8Inpractice,evenenergyregulatorshavenotedtheslowspeedofmarketreforms.InNovember2018,theNationalEnergyAdministrationstated,“Inthefaceoftheslowprogressoftheconstructionoftheelectricityspotmarketpilotprojectandthedifficultyinstartingthetrialoperationbeforetheendoftheyearasoriginallyplanned,theNationalDevelopmentandReformCommissionandtheNationalEnergyAdministrationhavetakenactiontosupervisethebattle.”59Fouryearson,Chinahasspotmarketpilotsinhalfofitsprovinces,butmostarestilloperatingatlowvolumes.Wheremarketreformshavetakenplace,theyoperatedifferentlyfromthoseelsewhere.Mid-to-long-termbilateralmarketsaccountfor80percentofpowertradingvolume,whilespotmarketsoccupytheremainder.Almostalltradingiswithinprovince,withlittletradingamongprovinces,exceptonalong-termcontractbasis,oftenoverdedicated,single-directionhigh-voltagetransmissionlines.BecauseMLTcontractsareeffectivelyphysicalcontracts,asopposedtofinancial,theylockintransmissioncongestion(aconditionwherethelowest-priceelectricitycannotflowwhereitisneeded)andnon-merit-orderdispatch.60Evenduringperiodsofphysicalshortages,long-termcontractarrangementsmaytakeprecedence.In2021,duringpowershortagesinNortheastChina,short-termelectricityexportswerepausedwhilemedium-tolong-termexportcontractscontinuedtobehonoured.61Therefore,whilelocalresidentsintheNortheastexperiencedblackoutsinSeptember2021,theregioncontinuedtoexportelectricitytoShandong.62DuringtherecentSichuanpowercrisis,bidirectionalpowerlinesrequiredadeclarationofemergencytoprovidepowerinthedirectionneeded.63Figure3:2021–2022wholesaleelectricpowertradingsharesSource:CEC2022,2023Figure4:2021electricpowersalesbygeographyoftradingSource:FangXiaosong,EPPEI2022Within-province,81.4%Inter-provincialdedicatedtransmission,13.3%Inter-provincialbilateraltrading,5.0%Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.9InDecember2022,theNDRCandNEAfurtherreinforcedtheroleofmonthlyandannualcontracts.Thenoticestatedthatmarketreformsshouldbeaccelerated,butthat90percentofindustrialelectricitydemandshouldbecontractedthroughthemid-to-long-termmarket.64Theworkreportalsostatedthatplannedinter-provincialpowertradesshouldbe90percentcontractedonanannualbasis.Thesepoliciesappeardesignedtopromotecertaintyonpricesandenergysupply,andrelieveindustryworriesaboutenergyshortages.However,suchtargetsfurthersignalthelowpriorityattachedtodevelopingspotmarketsasameansofpricediscovery.Contractingtransmissionayearinadvancealsofurtherreinforcestherigid,single-directiontransmissionmodelthatpreventstheemergenceofflexible,regionalmarkets.Wholesalepricesremaintightlyregulated,whilesegmentedspotmarketshowspricevolatility:Wholesalepowerprices,includingspotmarketprices,arecappedat20percentabovethebenchmarkcoaltariff,withtheexceptionofenergy-intensiveindustries,whichmayfacehighercapsattheprovinciallevel.AsYuanJiahaioftheNorthChinaElectricPowerUniversitynotes,“Atpresent,China’sspotmarketpricefluctuationsarestilltoostable,andtransactionpricesarerelativelylow.”65Atthesametime,lightly-tradedinterprovincialpowermarketscanseehugepriceranges:“InGansuProvince,whichisaprovincialpilotspotmarket,electricityfrequentlytradesateitherthelowestpriceorthehighestprice.Thelowestpriceforinter-provincialtransactionsislessthanRMB0.3/kWh,andthehighestismorethanRMB4/kWh,implyinghugevolatility.”66Renewableenergyparticipatesincertainspotmarketsasaprice-taker,meaningitslowmarginalcostsdonotaffectthemeritorderdirectlythrougheconomicdispatch.Spotmarketshavecreatedproblemsforrenewablegenerators,asspotpricesoftenfallbelowtheoperatingcostsofthermalplants,whichareabletorelyonMLTmarketsforthemajorityoftheiroutput.Forexample,inShanxiprovince,mostcoalpoweristradedontheMLTmarket,butmostwindandsolartradesinthepilotspotmarketatpriceslessthanhalfofthecoalbenchmarktariff.67Overall,spotmarketshaveyettoplayafullroleinsettingprices.Provincialofficialsdesignmarketstobluntanyimpactonpreferredsectors,adjustingpricesforlocalconditionstomeetvariousindustrialplanningtargets.68Thelackofaneffectivespotmarketforpriceformationalsopreventsretailcompetitionfromhavingitsfulleffect.Provinceshavealsocreatedcapacitymarketsthatpotentiallydistortpricesandeffectivelyofferoff-marketsubsidiestocoalpower.Capacitymarketsmayofferflat,per-kWorevenper-kWhpaymentstoallthermalcoalplants,potentiallydistortingspotpricesfurther.69In2020ShandongintroducedacapacitypaymentforcoalgeneratorswithaflatRMB0.0991/kWhpayment,andin2022modifiedthistomultiplytheRMB0.0991/kWhpaymentbyatime-of-usepricedifferential.(Inotherwords,theper-kWhcapacitypaymentmaybedoubledatpeakhours,andhalvedattimesoflowdemand.)AccordingtotheShandongPowerTradingCentre,“Thecompensationmechanismrealizestheorganiccoordinationofmeetingpeakload,priorityconsumptionofrenewableenergy,andcompensationforcoal-firedcapacity;givesadecisiveroleofmarketsinresourceallocation;andpromotesnewenergyconsumptionintheprovince.”70Themarket-distortingeffectsofpayingcoalgeneratorsanadministrativelysetpriceforallkWhgeneratedisnotacknowledged.Provincesoftensaddlerenewableenergywithcoststhatmightbedeterminedbythemarket,orotherwiseinterveneinsettingprices.Inmostprovinces,renewablegeneratorsaremandatedtoinstallenergystorageasaconditionofapproval,effectivelyplacingthecostofnewstorageonrenewablegenerators.Guizhouhasrequirednewrenewableplantstopairwithcoalgeneratorsforflexibilityupgrades,potentiallytransferringsuchupgradecoststorenewables.71Renewablegeneratorsmayalsobeaskedtopayfor“ancillaryservices”–whichinChinaincludescoalplantramping–effectivelytransferringthecostofflexibleoperationsfromthespotmarkettorenewablegenerators.In2021,Liaoningprovince“encouraged”windandsolartosellaminimumproportionofpoweratRMB0.1/kWh,farbelowmarketpricesorcoalpowertariffs.72New2022nationalspotmarketrulesgivewidelatitudeformarketinterventionandprovincialcontrols:InlateNovember,theNationalEnergyAdministrationissuedapairofpolicydraftsoutliningprinciplesandmanagementrulesforthespotmarkets.73Spotmarketrulesarefairlygeneral,andallowforsignificantvariationamongprovinces.Therulescallforestablishingpricecapsandfloorsaswellascapacitymarkets,essentiallymakingthesearequirement.Settingthepricecapsshouldconsideraffordabilityandnationaleconomicpriorities.Theruleslistseveralcircumstancesthatwouldrequireamarketintervention.Potentialinterventionsincludesuspensionoftradingandareturntoregulatedpricing.Thecircumstancesincludethevaguestatementthat“othersbelieveinterventionisneeded,”asThecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.10wellassimplypricesbeing“volatile”or“high”–termswhicharenototherwisedefinedandmaybeleftambiguoustoenablebroadlatitudeforinterpretation.Carbonmarketsareanextensionoftheadministrativestate.Carbonmarketsandpowermarketsareeffectivelyseparate,sincecarbonallowancesareissuedtogeneratorsonanintensitybasis,andthereisnooverallemissionscapthatwouldleadallowancepricestobeincorporatedinwholesaleprices.Thedesignofthemarketalsoappearsintendedtosupplyindustrywithasurplusoffreeallowancestoalleviateanyriskofhighpricesaffectingoperationsorinvestment.Asidefromthesefundamentaldesign-relatedaspects,theprovincial-levelimplementationhasalsoreinforcedtheroleofthestateinmanagingindustry.AsGoronandCassisawrotein2017,74carbonmarketpilotsdidnotresultinregulatoryinstitutionsandincentivesthatwouldtransferresponsibilitytomarkets–anobservationthatremainsvalidin2022.Localgovernmentsarenotcommittedtomarketindependenceortransparency,andtheyexpectmarketpricestoremainsubjecttofrequentpoliticalguidanceandshort-termmanagement.Marketsalsoplaylittlepartinpowersectorplanningandinvestment.Administrativeplanningoftentakestheformofquotasthatresemblemarketsonlysuperficially.Theprovincialrenewableobligation,oftencomparedtotheRenewablePortfolioStandard(RPS)inmanyUSstates,isonlysetayearinadvance,basedonthecapacityeachprovinceexpectstohaveinstalled.Provincialplanningandgridcompanycalculationsof“renewableabsorptioncapacity”continuetodominaterenewableplanning.Coalplantinvestmentalsoappearsdrivenbywhatplannerswillapproveratherthanbythemarket.“Atpresent,the‘dual-track’economicsystemwithChinesecharacteristicsisbasedonaplannedeconomy,supplementedbythemarket,”writesYeZe,DirectoroftheChinaElectricityPriceResearchCenter.(Emphasisadded.)“Intermsofspecificoperation,theplannedeconomyandtheregulatedeconomymainlyaimatthepublicandbasicgoalsofthepowerindustry,whilethemarketeconomyfocusesonthegoalofresourceallocationandefficiency.”75Therearepoliticalandinstitutionalobstaclestoreform:Gridcompaniesretainacentralroleinoperatingpowermarkets,andareexpectedtoleadanddesignpowermarketsthatwillfundamentallyaffecttheirpositionsastransmissionanddistributionmonopolieswithinthepowersector.76ThelargeroleofSOEgenerationcompaniesalsoaffectsmarketdesign.Bothgridcompaniesandgeneratorsknowthatinanypowersupplyshortfall,theywillbecalledupontosupplypower,77notnecessarilybasedonagreedmarketprices.Fornow,whencoalpowerstilldominatesthepowersysteminmostregions,generationandgridcompanieshaveaninterestinconservingaprovincial-basedsystem,withhigh-voltagecorridorstocarrypoweroverlongdistances,ratherthaninvestinginameshgridthatwouldenablemoreefficientandlower-costmarketoperation.Thelackofindependentregulationoftheelectricitysectorinhibitsprogresstowardssuchadesign,78thoughtransmissionconstraintsandlagginginvestmentinnewtransmissionarealsocommonworldwide.Provincialgovernmentscontinuetohaveaprominentroleinthepowersector,particularlyduringtimesofoversupplyorundersupply.Conflictsbetweenprovincesalsoaffecttheoveralldesignofthepowersystem,79andtherelativelowvolumeofinter-provincialpowertrading.TheinfluenceofprovincialplanningcanpartlyaccountforChina’sfocusonbuildingsingle-directionpowerlinesdedicatedtosupplyingfirm,physicalpowertoreceivingprovinces,asopposedtoamoreefficientmeshgridthatcouldprovideflexibilityacrosswideregions.Provincialgovernmentsalsoplayanactiveroleinpowermarkets,suchasallocatingoperatinghoursfordifferenttypesofpowerplants–oftenafterthestartoftheyear.80Thisaffectstheefficiencyofdispatchwithintheprovincewhilealsoinhibitingtheemergenceofhigh-volumespotmarkets.Provincesalsotaketheleadinapprovingpowerplants,andincalculatingthe“renewableconsumptioncapacity”thatdetermineshowmanywindandsolarplantscanbebuilt.Thecentralgovernmenthastriedtocounterbalancethisinfluencewithquotasforrenewableconsumption,minimumoperatinghoursrules,andatrafficlightsystemforapprovingnewcoalplants.Tosumup,China’scentralandprovincialgovernmentscontinuetopromotepowermarketreformwithasteadyintroductionofnewmeasures,butinmanycasesthesenewpolicieshaveadominantadministrativeandplanningcomponent.Inaddition,provincialgovernmentsandotherstateactorsretainwidelatitudetointerveneinorconstrainmarkets,reducingordistortingtheeffectofpricesignalsondispatch,trading,andinvestmentdecisions.AsDavidsonandPearsonhavewrittenrecently,Chinesepolicymakersappeartohaveadifferentperceptionofthenatureandpurposeofmarkets,seeingthemasawaytoextendoroptimizeadministrativeplanningintheshort-term,ratherthanasplayingaleadingroleinguidinginvestmentandpowersystemoperationtoachievenationalpolicyThecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.11objectives.Theywritethatmarketreformsarebestseenas“market-orientedexperiments”ratherthaneffortstocreatemarketsthatwouldreducetheroleofadministrativeplanningatanylevel.81Whilemorethoroughmarketreformscouldincentivizeinvestmentsanddispatchthatwouldacceleratethelow-carbontransitionandreduceitscost,administrativepoliciescanalsokeeptheenergytransitionontrack.4.Whatisthetargetmarketmodel?Formorethan25years,internationalandChineseexpertshavedevelopedpolicyrecommendationsforChina’slow-carbonenergytransitionthatincorporatevariousaspectsofthefollowing:(1)marketreformsintheelectricitysector,(2)distributedenergy,and(3)sectorcouplingenabledbymarkets.OrganizationsprovidingsuchinputincludetheWorldBank,InternationalEnergyAgency,EnergyFoundationChina,theWorldResourcesInstitute,theRegulatoryAssistanceProject,theNaturalResourcesDefenseCouncil,theUKProsperityFund,theDeutscheGesellschaftfürInternationaleZusammenarbeit(GIZ)Sino-GermanEnergyPartnership,andAgoraEnergiewende.82TherealsoexistsabodyofscholarlyresearchalongsimilarlinesfromCambridgeUniversity,theLawrenceBerkeleyNationalLaboratory,HarvardUniversity,andothers.83Inrelationtoestablishingelectricitymarkets,thetoprecommendationshaveincluded:Establishinganindependentregulator;84Adoptingeconomicdispatch,ideallyviaaspotpowermarketwithshorttradingintervals,andoveralargegeographicalarea;85Encouragingflexibleinterprovincialandinter-regionalelectricitytrading;86Creatingnon-discriminatorycapacitymarketsbasedonavailabilityandspeedofresponse;87Incorporatingcarbonpricesandotherexternalitiesinwholesalepowermarkets.88Thebenefitsofadoptingsuchmarketmeasuresarelowercost,greaterefficiency,moreefficientinvestment,andgreateropennesstomoremarketplayers,whichcouldspurinnovation.Subsequently,asChina’spowerreformhasevolved,variouscriticismshaveemerged,generallydrawingonthetargetmarketmodeldescribedabove.Forexample,MLTbilateralmarketsreliantonphysicalpowersupplyhavetendedtoinhibiteconomicdispatchandconstrainpowertradingamongprovinces.Capacitymarketsthatrewardonlycoalplants,andcompensatethemonaper-kWorper-kWhbasissetbyofficials,havegoneintheoppositedirectionfromthetargetmarketmodel.89Paymentstocoalplantstobecomemoreflexiblehavetendedtocrowdoutlesscostlyalternatives,suchasinter-provincialpowertrading.90Greenpowertradingandprovincialrenewableobligationshavetendedtoresembleadministrativequotasratherthanmarkets.Thenationalcarbonmarket,withitsfreeallocationbasedonhistoricalemissionsintensitybenchmarks,hasneverincorporatedcostpass-throughtowholesaleelectricityprices,nordoesitplayaroleineconomicdispatch.ExpertsoftenemphasizethephysicaldifferencesofChinathatimplyitsenergyrevolutionmustdepartfromthoseelsewhere.Forexample,theconcentrationofthebestwindandsolarresourcesinthenorthandwestisoneofthereasonsChinahasfocusedonlong-distance,ultra-highvoltagetransmissionlines,andcanexplainthehighcurtailmentfigures–withNorthwestChinaaccountingfor58percentofChina’scurtailmentin2016despitehavingarelativelysmallershare(33percent)ofthecountry’swindandsolar.91Suchargumentstendtofocusontheenergypotentialofremoteareas,whileoverlookingtheeconomicviabilityandattractivenessofwindandsolarinpopulousregions.92Inthislineofargument,eachregionshouldfocusmainlyoncertainpowersourcesratherthanothers,andtradeoverlongdistances.93Yetin2021,over70percentofnewsolarcapacitywasaddedinthemostpopulousprovincesofeasternandcentralChina,andwindhadbecomemoreevenlydistributedamongprovincesthaninpreviousyears.Thisshiftmayresultinpartfromtransmissionconstraintsthathaveslowedexpansionofrenewablesinwesternregions,aswellasfrompoliciesandsubsidiestargetedatdistributedsolar.WhileChina’s14thFive-YearPlanemphasizesconstructionofcleanenergybasesindesertregions,Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.12suchastheGobiDesert,italsostatesthateasternprovincesshouldseekgreaterself-sufficiencybyconsumingmorelocal,distributedenergy–aninterestingcontradiction,sinceeasternprovincesarealsomarkedonthemapasrecipientsofenergyfromcleanenergybases.Figure5:StateGridEnergyResearchInstitutemapofdesertlocationsfornewcleanenergybasesSource:SGERI,202294Ondistributedenergy,variousorganizationshavepromotedgreaterattentiontoitspotentialversusthelargerenewableenergybasespromotedbythegridandgenerationcompanies.95OnestudyofBeijingshowedthatthecity’sgreatermetropolitanareahadthepotentialfor11GWofrooftopsolar,enoughtoprovide49percentofthecity’selectricityduringdaylighthours,or25percentofannualelectricityconsumption.96StudiesofWuhanandNanjingalsoshowedsimilarresults.97AstudybyateamatChina’sMinistryofNaturalResourcesestimatedthat11percentofChina’surbanrooftopareawassuitedforPV,sufficientfor14,000squarekilometresofsolar,or75percentmorethanestimatedfortheUS.Shandong,Jiangsu,andGuangdongofferedthelargestamountofurbanrooftopareasuitedtoPV,98potentiallyequivalentto830GWofsolarPVcapacity.99Asidefromhighlightingthecountry’srooftopsolarpotential,analystshavealsopointedtothebenefitsofdistributedenergyforreducingsystemcosts.100Chineseofficialviewsondistributedenergyarefavourable,butambiguous.ThoughdistributedenergyisamajortrendinChina,aswellasafocusofseveralpolicydocuments,thereisawidespreadviewinChinathatthecountryislargelyunsuitedtodistributedenergyduetodenseurbandistrictswithhigh-risesandfewsingle-familyhomes.Forexample,ChenKangping,CEOofJinkoSolar,hasstatedthat“China’surbanhigh-risesareunsuitablefordistributedsolar…Thisisduetopotentialchangesintopfloorpropertyownership.Suchunclearownershipofbuildingrooftopsisalsoaconcernforphotovoltaiccompanies.”101Agrivoltaics(PVcombinedwithagriculture)isanemergingsubsetofdistributedenergythathasfacedspecificbarriersinChina.The14thFive-YearPlanspecificallycallsforawiderangeofagrivoltaics,includinginbothcropandpastureareas.However,justafewmonthsaftertheplanwasissued,theMinistryofNaturalResourcesreiterateditsoppositiontoagrivoltaicsinanylanddevotedtofoodagriculture.Inadocumentissuedinmid-2022,MNRallowsmoreflexibilityforusingstatelandandunusedlandforPV,whilealsotighteningrestrictionsonusingcultivatedareasforPV.102Thispointstointer-ministerialandinter-governmentalconflictsasabarriertocleanenergyuptakeincertaingeographies(agriculture,urbanareas).Insomecases,internationalexperiencesharingcouldprovideevidenceofbenefitsorstrategiesforresolvingcompetinggoalsthatwouldhelpalleviatesuchdisputes.KubuqiBadainJaranGurbantunggutKumtagQaidamHainanGobiTenggerUlanBuheNorthofTianshanGobiThecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.13Figure6:Mapof2021PVadditionsbyprovince(GW)Source:GIZ2022,basedonNEAdataSeveralinternationalandChineseexpertshavealsohighlightedthebeneficialroleofelectrification,inwhichelectrificationofend-usesectorsprovidespositivevaluetotheelectricitymarketbyprovidinglow-orno-costflexibility,therebyreplacingtheneedforcostlyinvestmentsincentralizedstorage,transmissionanddistributioninfrastructure,andgenerationassets.In2019,theIEAnotedtheriseoftheelectricvehiclemarketinChina,andmodelledthebenefitsofusingvehicle-to-gridtechnologyinsteadofstationarybatteriestobalancerenewableenergyoutputwhenwindandsolarachieveahighpenetration.GIZ,NRDC,andothershaveanalysedmorespecificcaseswhereV2Gcouldbenefitthegrid.103TheGermanEnergyAgency(dena)andNRDChavealsopromotedindustrialdemandresponse(demand-sideflexibility),suchasinthealuminiumsector,asafieldwhereelectrificationandpowermarketscouldbemutuallyreinforcing.104(Thedenastudysuggestedthealuminiumsectoronitsowncouldprovideflexibleloadequalto2.3percentofChina’saverageload,withtherightincentives.)5.Willthetargetmodelwork?China’suniquecircumstancesarenottheonlyfactorarguingagainstadoptionofsomeoftheaboverecommendations.Indeed,reportinginChinahasoftenhighlightedproblemsanddifficultiesinpowermarketsabroad,callingintoquestiontheirvalueforChina.Occasionally,therearesuggestionsthatothercountriesplacelessvalueonreliableelectricitythanChina;indeed,thephrase“energysecurity”inChinahastendedtoemphasizethecountry’sdomesticenergyproductionandelectricitysupplies,asopposedtothevulnerabilityofimports.Officially,China’scentralgovernmentendorsescooperationonthelow-carbonenergytransitionatthehighestlevels.China’sconceptofanenergyrevolutionexplicitlyincludesinternationalcooperationasoneoffiveelements.105Notably,internationalcooperationonthelow-carbontransitiondoesnotexplicitlyrefertostudyofinternationalmarketmodelsortrends,buttendstoemphasizetechnologycooperationandparticipationinmultilateralinstitutions.Yet,thetextofthe14thFive-YearPlanexplicitlynotestheimportanceofinternationalpowermarkettrends,alludingtoseveralaspectsofthe“targetmodel”describedabove:“Energyproductionisgraduallychangingtocombinebothcentralizedanddecentralizedmodels,fromlargebasesandlargenetworkstoincludeaparalleltransformationwithmicrogridsandsmartmicrogridsthatpromotesuptakeofnewenergysourcesandlowereconomiccosts.”Atthesametime,inEuropeandNorthAmerica,electricitymarketsfacenewuncertainties,andthetransitiontodistributedenergyandelectrificationremainsatanearlystage.ThecurrentmarketconditionsintheEuropeanelectricitymarket,andproposalsforaninframarginalpricecapinthespotSouthChinaSeaIslandsHeilongjiang1.0Xinjiang0.5Jiangsu2.3Zhejiang3.6Shanghai0.3Fujian0.8TaiwanHainan0.3Guangxi1.1Yunnan0.6Sichuan0.0Chongqing0.1Guizhou1.5Hunan0.6Hubei2.6Jiangxi1.4Anhui3.4Henan3.8Jilin0.1Liaoning0.8Hebei7.3Beijing0.2Tianjin0.1Shandong10.7Tibet0.0Qinghai0.6Gansu1.6InnerMongolia1.7Ningxia1.9Shaanxi2.3Shanxi1.5Guangdong2.3SouthChinaSeaThecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.14market,havebeenpickedupintheChinesemedia,ashasGermany’sactivationofthecountry’scoalplantcapacityreserve.106Forexample,inearly2022,aStateGridexpertcommented,“TherelativelyaggressiveenergytransformationinEuropeancountriessuchasGermanyhascontributedtotheriseinelectricitypricesduringthiscrisis.”107InAugust,aChineseeconomicmagazinecalledEuropeanenergymarkets“terminallyill,”attributingthisto“energyspotmarketpriceslinkedtothecostofthermalpower.”108Similarly,majorpoweroutagesinTexasandCalifornia–bothofwhichhavelongexperiencewithwholesalepowermarkets–haveprovokedcriticalcomments.109Asidefromtheserecentevents,Europeisstillintheprocessofdevelopingavisionforacommonenergymarket.110Inpractice,fromthe1990sonwards,powermarketrestructuringwasinitiallyintendedtoimprovecompetitionandreduceinefficientinvestment,111andwasnotnarrowlytailoredforthelow-carbonenergytransition,eventhoughmerit-orderdispatchhasclearlyhelpedpromoterenewableintegration.ThereisnouniformmarketdesignorclearexemplarforChinatoadopt.112AsinChina,localofficialsincountrieswithcompetitivepowermarketshaveoccasionallyoptedforout-of-marketpaymentsforcoalandnuclearcapacity,113andtheissueofcapacitymarketsremainsacontentiousone.114Problemswithrenewableintegrationarealsoevidentinthefieldofbuildingnewtransmissionanddistributioninfrastructure,whichiscriticaltobothreliabilityandmarketefficiency.115Utilitiesinmanyregions,eventhosewithcompetitivewholesalemarkets,haveoptedagainstopeninguptransmissionplanning.InTexas,oneofthefirststatestoadoptwholesalepowermarkets,thelackoftransmissiontoneighbouringstateswaspartlyresponsibleforpoweroutagesin2021(thoughotherfactorsplayedalargerrole).116Ondistributedenergyaswell,barrierstomarketentryremainhigh,evenwhentheeconomicssupportagreaterrolefordistributedenergy.Similarly,fordemand-sideflexibility,progressoutsideofChinahasbeenslow.IntheUSandEurope,smartmeterroll-outshavefaceddelaysandresistance,andeffortstogivecustomersgreateraccessandcontrolovertheirelectricitymeterdatahavemadefitfulprogress.117Whilemanymarkets–notablyGermanyandAustralia–haveseenuptakeofhomeenergystorage,aggregationofdemand-sitedstorageremainsatanearlystage.ForEVsmartchargingandV2G,thestoryissimilarlyoneofslowprogress,withmanypilotsbutfewcountriesoperatingsuchresourcesatscale.Electricheatpumpsalsoofferapotentialavenuefordemand-sideflexibilityandbeneficialelectrification,buttheyfacenumerousbarriersinpractice,includingtheabsenceofatrainedworkforce,118apoorly-insulatedbuildingstock,lackofinformationforcustomers,andthelock-inofexistingsupplierswiththeirownpreferredtechnologies.119(ManyofthesebarriersarecommoninChinaaswell.)Competitivewholesalepowermarketsareconducivetointegratingrenewableenergyandencouragingtheintroductionofflexibleenergytechnologiesonthegeneration,storage,anduserside.120However,internationalexperiencewithmarketsisdecidedlymixedintermsofresolvingtheenergytrilemmaofmaintainingareliable,affordable,andenvironmentallysustainableenergysystem.Inaddition,thereareongoingdebatesinmanycountrieswithlong-functioningcompetitivewholesalepowermarketsabouthowthesemarketsmayneedtochangetoenableanearly100percentcarbon-freeenergysystem.Whilethissimplyreflectstheincompletenessoftheenergytransitioneverywhere,nottomentionglobalenergycrisesrelatedtofossilfuelsupplyratherthancleanenergy,thefactthatmarketsremainaworkinprogressinEuropeandNorthAmericaaffectstheattractivenessofmorethoroughpowermarketreformsinChina.Withsomejustification,ChinesecommentatorsportraytherelativestabilityanddeliberateslownessofChina’scleanenergyadoptionandmarkettransitionasapositivecontrastwiththeexperienceofEuropeortheUS.AdministrativeplanningwillretaintheupperhandinguidingChina’senergytransitioninthepowersectorandinseveralotherfields.Afastertransitiontomerit-orderdispatch,spotmarketscoveringalargegeographicalarea,andalevelplayingfieldforallplayerswouldimprovetheefficiencyandreducetheoverallcostoftheenergytransition.However,inthenear-term,Chinaislikelytorelyonadministrativeplanningtoguideitsenergytransitionatalllevels,andinternationallow-carbonenergytransitionresearchshouldreflectthis.Thisdoesnotmeanthatinternationalmarketmodelshavenorelevance,orthatexperiencesharingonmarketdesignshouldbeputonhold.Rather,actorsincleanenergyandenergytransitioncooperationshouldreducetheemphasisonmarketpolicyandenhancecooperationontechnologypolicy.Thisincludes,inparticular,fieldsthatareemerginginimportance,suchassectorcouplingbetweenrenewableenergyandhydrogen,EVs,andheating.Afterall,ChinaisThecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.15wellaheadofothercountriesinscalinguprenewableenergy,batterymanufacturing,andelectricvehicles.Chinahasthepotentialtotransferlessonsonscale-upandintegrationfromthesetechnologiestoother,morechallengingfieldssuchasheatingandtransport.Arguably,doingsodoesnotdependonmarketreforms.ThisdoesnotimplythatChina’senergytransitionmustdefyexpectationsofenergytransitiontheory.Resistancebyincumbentplayersandtheiralliesingovernmenttocleanenergy-supportivemarketreformsisatypeofsociotechnicalregimeresistanceexpectedduringanymajorsociotechnicaltransition,andsuchresistancehasbeencommoninthepowersectorsofothercountries.121Evenincountrieswithindependentregulators,electricpowercompanieshaveprovenadeptatblockingorslow-walkingtop-downreforms,thankstoinformationasymmetryandlimitedtimeavailabletopursuereformagendasatthehighestlevels.122Further,theconceptofnichemanagementalignswellwiththescale-upofcleanenergytechnologyinChinatodate:becauseoftheirsmallsizeandfundamentallydifferentcharacteristics,disruptivetechnologiesinitiallyposelittlethreattoexistingsociotechnicalregimes,enablingthemtogrowwithinprotectednichescreatedeitherbypolicymakersormarketdemand.123Whilenichesmaydependon“market-likeconstructs,”fullmarkettransformationisnotaprerequisite,andmoregradualtransitionsarecommon.124Forrenewableenergyandelectricvehicles,whichhavealreadyreachedcommercialscale,thesetechnologieswillstillconstituteasmallfractionofChina’sprimaryenergyuseorvehiclestockforyears.ThesupportofChina’scentralgovernmentwilllikelyremainstrong,sinceitdependsmoreontheeconomicdevelopmentpotentialofthesetechnologiesthantheirpotentialtorevolutionizemarkets.Thestatewilllikelyattempttomuddlethrough–meaning,adoptingincrementalpolicychangeswithlowerpoliticalcostsandfewerrisks–promotingcleanertechnologiesthroughadministrativemeansthatkeepexistingregulatoryoreconomicstructureslargelyintact.Willsuccessinrenewableenergyandelectricvehiclestranslatetootherfields?Thisisobviouslyhardertoknow.Ina2021“SoftwareversusHardware”paper,125myOIEScolleaguesandIarguedthatinstitutionalconstraintshavethepotentialtoslowChina’slow-carbonenergytransition,especiallyasthattransitionshiftsfromsimplyscalingupthemanufacturingofrelativelymodularandself-containedmanufacturedgoods(solar,batteries,wind,EVs)towardstheintegrationofcleanenergytechnologiesinbroaderenergysystems,whichwillberequiredbytheelectrificationofend-usesintransportation,buildings,andindustry.However,theeconomicandtechnologydevelopmentbenefitsforelectrificationwillgrowovertime,andtheadministrativestatehasplanningtoolsavailabletopushforwardchangesinseveralofthesefields.Toaccelerateintegrationofrenewablesonthedemandside,researchthatmodelsthebenefitsandsharespracticesfrominternationalcaseswillcontinuetohavevalueforpolicymakingaudiencesinChina.Thiscouldinclude,forexample,modellingthebenefitsofpairingheatpumpswithsolar,orcasestudiesofpoliciestoencouragevehicle-to-gridtechnology.6.Theresearchgap,andsuggestionsforfillingitThefocusforresearchonChina’senergytransitionemphasizestheadoptionofcleanenergy,electrification,andrenewables.Thecontentofsuchresearchfrequentlyfocusesoneitherhigh-levelmodellingoronpolicyrecommendationsrelatedtopowermarketreform.Thisleavesasubstantialgap,bothinmicrofields(suchasEVcharging,distributedenergy,orgreenpowermarkets),andincreativeideasforadministrativepoliciesandincentives.Herearesomeaspectsoftheenergytransitionthatcouldbenefitfromgreaterresearchandcooperation,withanemphasisonthreetopicsthatOIESplanstopursueinthenextyear:Researchongreenpowermarketsandsupplychains:Chinafirstadoptedapolicyongreencertificatesin2017,andbegannationaltradingofgreenpowermarketsinmid-2021.Solarandwindpower-purchaseagreementsarealsoincreasinginnumber.However,greenpowertradingvolumesarestillsmall,marketsdifferfromprovincetoprovince,andgreenpowerpricinghasremainedatapremiumtospotmarketpricesdespiterenewablesbeingatorbelowgridparityinmanyregions.CompaniesseekingtogreentheirsupplychainsandoperationsinChinacanbenefitfromobjectiveresearchontheevolutionandlikelyfuturedevelopmentingreenpowermarkets,andrenewableenergyoverall.ResearchonEVs,EVcharging,andEVchargingtobalancerenewables:ChinaisleadingtheEVrevolution,andthecountryhasrolledoutextensivecharginginfrastructure,whichisThecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.16criticalsincemanylackaccesstohomecharging.However,China’schargingexperiencesuffersfrommanyofthesamedeficienciesininteroperabilityandmaintenancenotedelsewhere.Smartcharging,demandresponse,andvehicle-to-gridareatanearlystageinChina,thoughChinaalreadyhashundredsofsmartchargingpilots,andatleast60V2Gdemonstrationstationsin14provinces,providing170GWhofpeakshavingcapability.126Gatheringandsharingdata,experience,andprojectionsofEVmarketsandEVchargingwillbenefitfrominterdisciplinaryandcomparativeresearch.ResearchandmodellingwithpublicdatacanalsohelpclarifytheroleofEVadoptionanddifferentchargingpoliciesonChina’srenewableintegration,carbonemissions,andfuturegasolinedemand.StudyingandsuggestingfurtherevolutionofsuccessfulChinesepolicieswherestatecoordinationhascreatedresults:EveninfieldswhereChinahaslaggedothercountries,suchasdistributedsolar,administrativeincentiveshavecreatedmajorsuccessesatscale.Forexample,China’sWholeCountyPVprogram,whichcoversover600counties(almosthalfofChina’scounties),mandatesrooftopsolaron20percentofresidentialrooftops.127Couldcombiningorexpandingsuchaprogramtoincorporateheatpumpsorenergystoragefurtherboostitsimpact?Moreattentionshouldbepaidtosuchexamplesthatcombinestrongelementsofplanningwitheconomicincentivestocreatenewmarkets.PromotingresearchinthefieldslistedabovedoesnotdetractfromongoingeffortstopromotemarketreformsinChina.Indeed,inthelongrun,thedevelopmentofdistributedenergyandsectorcouplingwithawidervarietyofuserscouldbenefitfromamoreliberalizedpowermarket,whereuserscansharetheeconomicgainsofmoreflexibletechnologies,whilealsoacceleratingthosebenefitsthroughgreaterinteractionwithotherusersthroughthemarket.Whilemarketreformsarenotaprerequisitefordecarbonization,thefieldremainsanimportanttopicforresearchandinternationalcollaboration,givenhowmarketsinteractwithinvestmentinnewcoalcapacityandeffectiveintegrationofrenewableenergy,andgiventheongoingmediacoverageinsideChinaofinternationalpowermarketdevelopmentsandrelatedenergysecurityproblems.PolicymakersoutsideofChinawillcontinuetorequireregularupdatesonChina’smarketreforms.Insummary,technologyadoptionislikelytocontinuetooutpacemarketreformsoverthenextfewyears.Thecentralgovernmenthasremainedcommitted,atleastonpaper,tohigh-levelmarketreformgoals.However,duetoinstitutionalbarriersandcompetingincentivesattheprovincialandindustrylevels,itseemsunlikely,sofar,thatmarketreformswillresultinmarketsthatplayadecisiveroleinsettingpricesthatinfluencetheallocationofenergyorenvironmentalresources.Thismeansthatthereisanincreasinggapbetweentherhetoricandtherealityofpowermarketreform,withthecentralgovernmentaccepting“market-oriented”reformsthatleaveadministrativerulessuchasadministrativeplanningtargets,benchmarkcoalprices,pricecaps,andorderlypowerconsumptionrulesinplaceasthemainforcesguidinginvestmentinandoperationofthepowersector.Overtime,thebiggestfactorthatmighthelpovercomethisresistancecouldbearisingshareofrenewableenergythatgivesprovincialandindustryplayerstheincentivetoshifttowardsmarketpricingforitsflexibilitybenefits.Whilethelackofanefficientpowermarketwillresultininvestmentinefficiencies–over-investmentincoalcapacityandlargecleanenergybases,lessinvestmentinflexibledemandordistributedenergystorage–thestrongcentralgovernmentcommitmenttothe2030–2060goalsandtoenergytechnologyforeconomicdevelopmentmeansthatprogressoncleanenergyadoptionislikelytocontinue.Internationalcollaboration,andcomparativeresearchonChina’senergypolicy,canhaveagreaterimpactifthefocusislessonmarketpricingasapanacea,andmoreonthetechnicalpotentialofpoliciesandtechnologiesforcleanenergyintegration.ThesecouldincludestudiesrelatedtoEVcharging,electrificationofheating,anddistributedenergy–fieldsthathavealreadyseenyearsofstudy,butwhereinternationalexperienceanddataarechangingrapidlyandwhere,duetotheirnascentstateofdevelopment,substantialroomremainsforanalysingandprovingtheirbenefits.Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.171“2022年能源工作怎么干？路线图来了[Howwill2022energyworkgo?Roadmapout],”NationalEnergyAdministration,24December2021,athttp://www.nea.gov.cn/2021-12/24/c_1310391384.htm.2XiJinping,“StatementbyH.E.XiJinping,PresidentofthePeople'sRepublicofChina,attheGeneralDebateofthe75thSessionoftheUnitedNationsGeneralAssembly,”22September2020,athttp://www.xinhuanet.com/english/2020-09/23/c_139388686.htm.3DavidStanwayandCateCadell,“PresidentXisaysChinawillstartcuttingcoalconsumptionfrom2026,”Reuters,22April2021,athttps://www.reuters.com/world/china/chinas-xi-says-china-will-phase-down-coal-consumption-over-2026-2030-2021-04-22/.4ALiang,““十四五”期间，煤电是“再建”还是“再见”[Inthe14thFive-YearPlanperiod,iscoalacaseof‘buildmore’or‘bye-bye’?],”InternationalEnergyNet(In-en),27November2020,athttps://www.sohu.com/a/434774354_257552.5YangYang,“发改委：淘汰关停的煤电机组关而不拆，转为应急备用和调峰[NDRC:Haltdemolitionofclosedcoalplants,transformingthemforpowerreserveandpeakshaving],”ThePaper,3November2021,athttps://m.thepaper.cn/newsDetail_forward_15204416.6HeJiankunetal.,‘China’sLong-termLow-CarbonDevelopmentStrategyandPathway’,InstituteofClimateChangeandSustainableDevelopmentatTsinghuaUniversity,19October2020,athttps://mp.weixin.qq.com/s/S_8ajdq963YL7X3sRJSWGg.7“ChinaEnergyTransformationOutlook:ExecutiveSummary,”NationalDevelopmentandReformCommissionEnergyResearchInstitute,4November2022,athttps://ens.dk/sites/ens.dk/files/Globalcooperation/2021-11-04_ceto21_summary_en-final_0.pdf.8“ChinaEnergyTransformationOutlook:ExecutiveSummary,”NationalDevelopmentandReformCommissionEnergyResearchInstitute,4November2022,athttps://ens.dk/sites/ens.dk/files/Globalcooperation/2021-11-04_ceto21_summary_en-final_0.pdf.9“AnenergysectorroadmaptocarbonneutralityinChina,”InternationalEnergyAgency,September2021,athttps://www.iea.org/reports/an-energy-sector-roadmap-to-carbon-neutrality-in-china.10“ReinventingFire:China,”RockyMountainInstitute,LawrenceBerkeleyNationalLaboratory,NationalDevelopmentandReformCommissionEnergyResearchInstitute,2018,athttps://rmi.org/insight/reinventing-fire-china/.11ShaFuandShaYu,“SynthesisReport2022onChina’sCarbonNeutrality:ElectrificationonChina’sCarbonNeutralityPathwaysSPM,”EnergyFoundationChina,14November2022,athttps://cgs.umd.edu/research-impact/publications/synthesis-report-2022-chinas-carbon-neutrality-electrification-chinas.12RynaYiyunCuietal.,“Aplant-by-plantstrategyforhigh-ambitioncoalpowerphaseoutinChina,”NatureCommunications,16March2021,athttps://www.nature.com/articles/s41467-021-21786-0.13“国家能源局发布2022年全国电力工业统计数据[NEApublishes2022nationalelectricitystatistics],”NationalEnergyAdministration,16January2023,athttp://www.nea.gov.cn/2023-01/18/c_1310691509.htm?mc_cid=b4822883e5&mc_eid=1f5ebaac4b;“中电联发布2023年度全国电力供需形势分析预测报告[CECpublishes2023nationalelectricpowersupply-demandforecastreport],”ChinaElectricityCouncil,19January2023,athttps://cec.org.cn/detail/index.html?3-317477&mc_cid=b4822883e5&mc_eid=1f5ebaac4b.14DavidSandalowetal.,“GuidetoChineseClimatePolicy,”OxfordInstituteforEnergyStudies,October2022,athttps://chineseclimatepolicy.oxfordenergy.org/.15AndersHove,MichalMeidan,andPhilipAndrews-Speed,“Softwareversushardware:howChina’sinstitutionalsettinghelpsandhindersthecleanenergytransition,”OxfordInstituteforEnergyStudies,December2021,athttps://www.oxfordenergy.org/publications/software-versus-hardware-how-chinas-institutional-setting-helps-and-hinders-the-clean-energy-transition-2/.Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.1816“2021electricity&otherenergystatistics(preliminary),”ChinaEnergyPortal,27January2022,athttps://chinaenergyportal.org/en/2021-electricity-other-energy-statistics-preliminary/.17“2022年风电全年装机37.63GW,”Beijixing,18January2023,athttps://news.bjx.com.cn/html/20230118/1283838.shtml。18“国家能源局举行新闻发布会发布2021年可再生能源并网运行情况等并答问[NEAholdspressreleaseeventfor2021renewableenergyintegrationstatusreportandQ&A,”NationalEnergyAdministration,29January2022,athttp://www.gov.cn/xinwen/2022-01/29/content_5671076.htm.19“USSolarPhotovoltaicManufacturing,”CongressionalResearchService,5May2022,athttps://crsreports.congress.gov/product/pdf/R/R47093.20“GlobalSupplyChainsofEVBatteries,”InternationalEnergyAgency,July2022,athttps://iea.blob.core.windows.net/assets/961cfc6c-6a8c-42bb-a3ef-57f3657b7aca/GlobalSupplyChainsofEVBatteries.pdf.21ChristophNedopil,“ChinaBeltandRoadInitiative(BRI)InvestmentReportH12022,”GreenFinance&DevelopmentCenter,FISFFudanUniversity,Shanghai,July2022,athttps://greenfdc.org/wp-content/uploads/2022/07/GFDC-2022_China-Belt-and-Road-Initiative-BRI-Investment-Report-H1-2022.pdf.22Authorcalculations,basedon635GWcombinedwindandsolaratyear-end2021,assumingsteady48GWannualwindadditionsand53GWannualsolarPVadditions.23VincentShaw,“ChinesePVIndustryBrief:Chinamayinstallupto100GWofsolarthisyear,”PVMagazine,22July2022,athttps://www.pv-magazine.com/2022/07/22/chinese-pv-industry-brief-china-may-install-up-to-100-gw-of-solar-this-year/;“874.037GW！30省/市“十四五”时期新增风光装机目标[874.037GW!30provincialandmunicipal14thFive-YearPlansexpectnewwindandsolarcapacitytargetsof875GW],”InternationalEnergyNet(in.en.com),5October2022,athttps://www.163.com/dy/article/HITQHOQH0511I1A0.html.24“2022年中国汽车工业经济运行情况,”ChinaAssociationofAutomobileManufacturers,12January2023,athttps://mp.weixin.qq.com/s/Q5panuxqNkNX7a28k_2RTg.25“GlobalEVOutlook2022Securingsuppliesforanelectricfuture,”InternationalEnergyAgency,May2022,athttps://iea.blob.core.windows.net/assets/ad8fb04c-4f75-42fc-973a-6e54c8a4449a/GlobalElectricVehicleOutlook2022.pdf;“Morethan300newminesrequiredtomeetbatterydemandby2035,”BenchmarkIntelligence,6September2022,athttps://source.benchmarkminerals.com/article/more-than-300-new-mines-required-to-meet-battery-demand-by-2035.26FiguresprovidedbyMichalMeidan,OxfordInstituteforEnergyStudies,calculationbasedondatafromChinaCustomsandChinaNationalBureauofStatistics.27“ElectricVehicleOutlook,”BloombergNewEnergyFinance,2022,athttps://about.bnef.com/electric-vehicle-outlook/;“GlobalEVOutlook2021,”InternationalEnergyAgency,April2021,athttps://www.iea.org/reports/global-ev-outlook-2021.28FangWangetal.,“Thedriversofdecarbonizingbatteryelectricvehicles(BEVs)inChina:therecentprogressandfutureperspectives,”TsinghuaSchooloftheEnvironment,2022,draftunderreview.SeealsoGeorgeBieker,“Aglobalcomparisonofthelife-cyclegreenhousegasemissionsofcombustionengineandelectricpassengercars,”InternationalCouncilonCleanTransportation,July2021,athttps://theicct.org/wp-content/uploads/2021/12/Global-LCA-passenger-cars-jul2021_0.pdf.29EVemissionsreductionsof0.152kg/kmversusICEfromFangWangetal.,“Thedriversofdecarbonizingbatteryelectricvehicles(BEVs)inChina:therecentprogressandfutureperspectives,”TsinghuaSchooloftheEnvironment,2022,draftunderreview;12,600km/yearannualdrivingisbasedonanationalsurveyconductedbytheBeijingTrafficResearchInstitute,andisfromZhangShaojun,“ProgressoffutureenvironmentalperspectivesoftransportationdecarbonizationinChina,”PowerPointpresentation,TsinghuaSchooloftheEnvironment,2021.TheIEAestimatesChina2019CO2emissionsof9.8billiontons,andtransportationemissionsaccountedfor8%ofthisfigure.Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.1930BoLietal.,“Electricvehicle’simpactsonChina’selectricityloadprofilesbasedondrivingpatternsanddemographics,”EnergyReports8(1),April2022,athttps://doi.org/10.1016/j.egyr.2021.11.003.31SeereferencesbelowunderTargetMarketmodel.32TheFourRevolutionswasintroducedin2014:“习近平发表讲话强调积极推动能源生产和消费革命[XiJinpingpublishesspeechemphasizingpromotionofenergyproductionandconsumptionrevolution,”SinaFinance,14June2014,athttp://finance.sina.com.cn/money/fund/20140614/141319413598.shtml.Thephrase“decisiverole”wasintroducedin2013:“中共中央关于全面深化改革若干重大问题的决定[DecisionoftheCentralCommitteeoftheCommunistPartyofChinaonSeveralMajorIssuesConcerningComprehensivelyDeepeningReform],”CentralPeople’sGovernmentofPRC,15November2013,athttp://www.gov.cn/jrzg/2013-11/15/content_2528179.htm.The14thFive-YearPlanOutlineand2035workplanincludesthephrase“marketleading”asoneofitsprinciples.“中华人民共和国国民经济和社会发展第十四个五年规划和2035年远景目标纲要,”ChinaStateCouncil,13March2021,athttp://www.gov.cn/xinwen/2021-03/13/content_5592681.htm;The14thFive-YearPlanforaModernEnergySystemalsoincludesthephrase.“国务院关于印发十四五市场监管现代化规划的通知[TheStateCouncilissuedthe“14thFive-YearPlan”NoticeofMarketSupervisionModernizationPlan],”StateCouncilofChina,14December2021,athttp://www.gov.cn/zhengce/content/2022-01/27/content_5670717.htm.33“关于进一步深化电力体制改革的若干意见（中发9号）[OpinionsonFurtherDeepeningtheReformofPowerSystem(DocumentNo.9)],”ChinaStateCouncil,9April2015,athttps://www.ndrc.gov.cn/fggz/tzgg/ggkx/201504/t20150409_1077736.htmlorhttp://fjb.nea.gov.cn/pufa_view.aspx?id=31434.34SeeZhangSufangandPhilipAndrews-Speed,“StateversusmarketinChina’slow-carbonenergytransition:Aninstitutionalperspective,”EnergyResearch&SocialScience66,August2020,athttps://doi.org/10.1016/j.erss.2020.101503.35DavidSandalowetal.,“GuidetoChineseClimatePolicy,”OxfordInstituteforEnergyStudies,October2022,athttps://chineseclimatepolicy.oxfordenergy.org/.36“中共中央关于全面深化改革若干重大问题的决定[DecisionoftheCentralCommitteeoftheCommunistPartyofChinaonSeveralMajorIssuesConcerningComprehensivelyDeepeningReform],”CentralPeople’sGovernmentofPRC,15November2013,athttp://www.gov.cn/jrzg/2013-11/15/content_2528179.htm.37“习近平发表讲话强调积极推动能源生产和消费革命[XiJinpingpublishesspeechemphasizingpromotionofenergyproductionandconsumptionrevolution,”SinaFinance,14June2014,athttp://finance.sina.com.cn/money/fund/20140614/141319413598.shtml.38“关于进一步深化电力体制改革的若干意见（中发9号）[OpinionsonFurtherDeepeningtheReformofPowerSystem(DocumentNo.9)],”ChinaStateCouncil,9April2015,athttps://www.ndrc.gov.cn/fggz/tzgg/ggkx/201504/t20150409_1077736.htmlorhttp://fjb.nea.gov.cn/pufa_view.aspx?id=31434.39“国家发展改革委国家能源局关于积极推进风电光伏发电无补贴平价上网有关工作的通知,发改能源[2019]19号[NDRCandNEAnoticeonpromotingwindandPVgridintegrationwithoutsubsidies],”NationalDevelopmentandReformCommissionandNationalEnergyAdministration,7January2019,athttps://www.ndrc.gov.cn/xxgk/zcfb/tz/201901/t20190109_962365.html.Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.2040“关于试行可再生能源绿色电力证书核发及自愿认购交易制度的通知,发改能源[2017]132号[NoticeRegardingTrialImplementationofRenewableEnergyGreenElectricityCertificatesandVoluntaryProcurementandTradingInstitutions,NDRCEnergy(2017)No.132],”ChinaNationalDevelopmentandReformCommission,MinistryofFinance,andNationalEnergyAdministration,6February2017,athttp://www.nea.gov.cn/2017-02/06/c_136035626.htm.Forcritiques,seeYeZe,“我国可再生能源绿色证书自愿认购交易规则评价与建议[NationalRenewableEnergyGreenCertificateVoluntaryPurchaseandTradingRules:AnAssessmentandSuggestions],”ChinaPower,30June2017,athttps://www.chinapower.com.cn/guandian/20170630/82827.htmlandhttps://www.sohu.com/a/153973342_418320;AndersHoveandDanielWetzel,“Chinaisplanningprovincialquotasforcleanenergy,”ChinaDialogue,23April2018,athttps://www.chinadialogue.net/blog/10574-China-is-planning-provincial-quotas-for-clean-energy-/en;ShengnianXu,“CurrentSituationofGreenElectricityCertificates,”GlobalEnvironmentalInstitute(GEI)China,29April2018,athttp://www.geichina.org/en/gei-insight-current-situation-of-green-electricity-certificates/.41“国家发改委：新增可再生能源消费不纳入能源消费总量控制[NDRC:Incrementalrenewableconsumptionwon’tcounttowardsenergyconsumptioncontrols],”XinhuaNet,17November2022,athttps://www.chinanews.com/gn/2022/11-17/9896248.shtml.42“风电、光伏保障性收购年利用小时数核定公布[Wind,PVguaranteedpurchasehourspublished],”XinhuaNet,1June2016,athttps://www.cspplaza.com/article-7249-1.html.Nationally,in2021windproducedfor2,246hours,oracapacityfactorof25%,withsomeprovincesmorethan20%abovethat.Forsolar,thenationalaveragewas1,161hours,a13%capacityfactor,withsomeprovincesabove1,400hours.“国家能源局举行新闻发布会发布2021年可再生能源并网运行情况等并答问[NEAholdspressconferencetoissue2021renewableintegrationstatisticsandrespondtoquestions],”NationalEnergyAdministration,29January2022,athttp://www.gov.cn/xinwen/2022-01/29/content_5671076.htm.43“刘汉元代表：落实可再生能源保障性收购和优先上网政策[LiuHanyuan:Fullyimplementrenewableguaranteedpurchaseandprioritydispatchpolicies],”SolarOFWeek,5March2021,athttps://solar.ofweek.com/2021-03/ART-260006-8440-30488119.html.44http://www.nea.gov.cn/1310524241_16479412513081n.pdf.Seepage6:“深化改革，扩大开放。充分发挥市场在资源配置中的决定性作用，更好发挥政府作用，破除制约能源高质量发展的体制机制障碍，坚持实施更大范围、更宽领域、更深层次的对外开放，开拓能源国际合作新局面。”45“一图读懂划重点、明方向！“十四五”可再生能源工作这样干,”NationalDevelopmentandReformCommission(WeChatpost),1June2022,athttps://mp.weixin.qq.com/s/lQZmAdTz6GvZzKpvVgzI9w.46“国务院关于印发十四五市场监管现代化规划的通知[TheStateCouncilissuedthe“14thFive-YearPlan”NoticeofMarketSupervisionModernizationPlan],”StateCouncilofChina,14December2021,athttp://www.gov.cn/zhengce/content/2022-01/27/content_5670717.htm.47“中华人民共和国国民经济和社会发展第十四个五年规划和2035年远景目标纲要[TheFourteenthFive-YearPlanfortheNationalEconomicandSocialDevelopmentofthePeople’sRepublicofChinaandOutlineofLong-termGoalsfor2035],”GovernmentofChina,13March2021,athttp://www.gov.cn/xinwen/2021-03/13/content_5592681.htm.48“十四五国内贸易发展规划[14thFive-YearPlanDomesticTradeDevelopmentPlan],”MinistryofCommerce,27October2021,athttp://images.mofcom.gov.cn/scjss/202201/20220113153436864.pdf.49“国务院关于印发十四五市场监管现代化规划的通知[TheStateCouncilissuedthe“14thFive-YearPlan”NoticeofMarketSupervisionModernizationPlan],”StateCouncilofChina,14December2021,athttp://www.gov.cn/zhengce/content/2022-01/27/content_5670717.htm.Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.2150“十四五新型储能发展实施方案解读[Interpretationofthe14thFive-YearPlanNewEnergyStorageDevelopmentImplementationPlan],”NationalEnergyAdministration,21March,2021,athttp://www.nea.gov.cn/2022-03/21/c_1310523223.htm.51“我国将加快建设全国统一电力市场体系[Chinawillacceleratedevelopmentofaunifiednationalpowermarketsystem],”NationalDevelopmentandReformCommission,3February2022,athttps://www.gov.cn/xinwen/2022-02/03/content_5671824.htm.52“关于进一步深化电力体制改革的若干意见（中发9号）[OpinionsonFurtherDeepeningtheReformofPowerSystem(DocumentNo.9)],”ChinaStateCouncil,9April2015,athttps://www.ndrc.gov.cn/fggz/tzgg/ggkx/201504/t20150409_1077736.htmlorhttp://fjb.nea.gov.cn/pufa_view.aspx?id=31434.53“中共中央国务院关于完整准确全面贯彻新发展理念做好碳达峰碳中和工作的意见[OpinionsoftheCentralCommitteeoftheCommunistPartyofChinaandtheStateCouncilonCompletely,AccuratelyandComprehensivelyImplementingtheNewDevelopmentConcept],”ChinaCouncilforInternationalCooperationonEnvironmentandDevelopment,3November2021,athttp://www.cciced.net/xwzx/hfyw/202111/t20211103_130032.html.54“碳排放、可再生能源配额、绿证关系二十问！[Twentyquestionsontherelationshipbetweencarbonemissions,renewableenergyquotas,andgreencertificates!],”Beijixing,17October2022,athttps://news.bjx.com.cn/html/20221017/1261357.shtml.55“认真学习宣传贯彻党的二十大精神加快发展方式绿色转型[Conscientiouslystudy,publicizeandimplementthespiritofthe20thNationalCongressoftheCommunistPartyofChina:Acceleratethegreentransformationofthedevelopmentmode],”ChinaEconomicDaily,7November2022,athttp://www.ce.cn/xwzx/gnsz/gdxw/202211/07/t20221107_38213308.shtml.56“建立能跌能涨的市场化电价机制—我国进一步深化燃煤发电上网电价市场化改革[Establishamarket-orientedelectricitypricemechanismthatcanfallandrise–Chinafurtherdeepensthemarket-orientedreformofon-gridelectricitypricesforcoal-firedpowergeneration],”GovernmentofChina,12October2021,athttp://www.gov.cn/xinwen/2021-10/12/content_5642153.htm.57“建立能跌能涨的市场化电价机制—我国进一步深化燃煤发电上网电价市场化改革[Establishamarket-orientedelectricitypricemechanismthatcanfallandrise–Chinafurtherdeepensthemarket-orientedreformofon-gridelectricitypricesforcoal-firedpowergeneration],”GovernmentofChina,12October2021,athttp://www.gov.cn/xinwen/2021-10/12/content_5642153.htm.58“建立能跌能涨的市场化电价机制—我国进一步深化燃煤发电上网电价市场化改革[Establishamarket-orientedelectricitypricemechanismthatcanfallandrise–Chinafurtherdeepensthemarket-orientedreformofon-gridelectricitypricesforcoal-firedpowergeneration],”GovernmentofChina,12October2021,athttp://www.gov.cn/xinwen/2021-10/12/content_5642153.htm.59“电力现货市场试点难产国家发改委督战[Thepowerspotmarketpilotisdifficulttocreate;theNationalDevelopmentandReformCommissionwillsupervisethebattle],”NationalEnergyAdministration,19November2018,athttp://www.nea.gov.cn/2018-11/19/c_137617389.htm.60MichaelR.DavidsonandIgnacioPérez-Arriaga,“AvoidingPitfallsinChina’sElectricitySectorReforms,”TheEnergyJournal,Vol.41,No.3.2020,athttps://doi.org/10.5547/01956574.41.3.mdav.61“东北居民用电的燃煤之急，何解？创创锦囊[WhatisthesolutiontotheurgencyofburningcoalforelectricityconsumptionbyNortheastresidents?ChuanchuanZhinang],”CKGSBChuangCommunity,29September2021,athttps://ee.ckgsb.com/chuang/content/news_detail/959.62“东北缺电何以至此？会常态化吗？[WhyistheresuchashortageofpowerintheNortheast?Willitbenormalized?],”SinaNews,4October2021,athttps://news.sina.com.cn/c/2021-10-04/doc-iktzscyx7812321.shtml.Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.2263“全力保障民生用电四川启动三级保供电调控措施[Makeeveryefforttoensurepeople’slivelihoodandelectricityconsumptionSichuanlaunchestier3powersupplyguaranteecontrolmeasures],”GovernmentofSichuan,16August2022,athttps://www.sc.gov.cn/10462/10464/13722/2022/8/16/24bf8f6ec55044338064b77b4e67dd15.shtml;YuanJiahaietal.,“四川高温限电痛点在何处，如何防止重演？[WhatarethepainpointsofSichuan’spowersupplyundertheheatwaveandhowtopreventthemrecurring?],”Caixin,6September2022,athttp://zhishifenzi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ectDirectorwithGIZ.83Seeforexample,MichaelPollittetal.,“ReformingtheChineseElectricitySupplySector:LessonsfromInternationalExperience,”CambridgeUniversity,2017,athttps://doi.org/10.17863/CAM.39160;HenryLeeetal.,FoundationsforaLow-CarbonEnergySysteminChina,Cambridge,England:CambridgeUniversityPress,December2021;JiangLinetal.,“Enhancinggridflexibilityunderscenariosofarenewable-dominantpowersysteminChina,”LawrenceBerkeleyNationalLaboratory,August2021,athttps://eta-publications.lbl.gov/sites/default/files/final_national_plexos_081221_addappen_3.pdf;ShuangquanLiuandMichalDavidson,“ChinaTradingPower:ImprovingEnvironmentalandEconomicEfficiencyofYunnan’sElectricityMarket,”HarvardKennedySchoolBelferCenterforScienceandInternationalAffairs,2021,athttps://www.belfercenter.org/sites/default/files/2021-03/YunnanMarketReform.pdf.84MaxDupuyandFrederickWeston,“ANewFrameworkforChina’sPowerSector,”RegulatoryAssistanceProject,23March2015,athttps://www.raponline.org/blog/a-new-framework-for-chinas-power-sector/;“Low-CarbonPowerSectorRegulation:OptionsforChina,”RegulatoryAssistanceProject,February2015,athttps://www.raponline.org/wp-content/uploads/2016/05/rap-worldbank-lowcarbonpoweroptionsforchina.pdf.Thecontentsofthispaperaretheauthor’ssoleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.2485“China’sPowerSectorTransformation,”InternationalEnergyAgency,2019,athttps://www.iea.org/reports/china-power-system-transformation;MaxDupuyandFrederickWeston,“ANewFrameworkforChina’sPowerSector,”RegulatoryAssistanceProject,23March2015,athttps://www.raponline.org/blog/a-new-framework-for-chinas-power-sector/;“Low-CarbonPowerSectorRegulation:OptionsforChina,”RegulatoryAssistanceProject,February2015,athttps://www.raponline.org/wp-content/uploads/2016/05/rap-worldbank-lowcarbonpoweroptionsforchina.pdf.86“China’sPowerSectorTransformation,”InternationalEnergyAgency,2019,athttps://www.iea.org/reports/china-power-system-transformation;MaxDupuy,“MakingChina’sElectricityMarketsWorkforCleanEnergy,”RegulatoryAssistanceProject,25July2018,athttps://www.raponline.org/blog/making-chinas-electricity-markets-work-clean-energy/;ZhengYanan,etal.,“QuantifyingpowersectorflexibilityinGermanyandChina’sJing-Jin-Jiregion,forbetterintegrationofrenewables,”EnergyResearchInstituteoftheNationalDevelopmentandReformCommission,DeutscheGesellschaftfürInternationaleZusammenarbeit(GIZ),NorthChinaElectricPowerUniversity,August2020,athttps://www.energypartnership.cn/home/events/quantifying-power-sector-flexibility-in-germany-and-china/;YuanJiahaiandZhangJian,“电力系统灵活性提升：技术路径、经济性与政策建议[Improvingpowersystemflexibility:technologypathways,economicanalysis,andpolicysuggestions],”NaturalResourcesDefenseCouncil,July2022,athttp://www.nrdc.cn/Public/uploads/2022-07-18/62d4c2e313df1.pdf.87“CommentsonGuangdongelectricitymarketdraftpolicydocuments,”RegulatoryAssistanceProject,September2018,athttps://www.raponline.org/wp-content/uploads/2018/09/RAP-Guangdong-market-comments-2018-sep-21.pdf;“CommentsonNationalEnergyAdministration’s‘AdvancingElectricitySpotMarketImplementation’,”RegulatoryAssistanceProject,March2019,athttps://www.raponline.org/wp-content/uploads/2019/03/rap-comments-NEA-march-2019-spot-market-policy-EN.pdf.88“TheRoleofChina’sETSinPowerSectorDecarbonisation,”InternationalEnergyAgency,April2021,athttps://www.iea.org/reports/the-role-of-chinas-ets-in-power-sector-decarbonisation.89“CommentsonGuangdongelectricitymarketdraftpolicydocuments,”RegulatoryAssistanceProject,September2018,athttps://www.raponline.org/wp-content/uploads/2018/09/RAP-Guangdong-market-comments-2018-sep-21.pdf;“CommentsonNationalEnergyAdministration’s‘AdvancingElectricitySpotMarketImplementation’,”RegulatoryAssistanceProject,March2019,athttps://www.raponline.org/wp-content/uploads/2019/03/rap-comments-NEA-march-2019-spot-market-policy-EN.pdf.90JiangLinetal.,“Largebalancingareasanddispersedrenewableinvestmentenhancegridflexibilityinarenewable-dominantpowersysteminChina,”iScience25(2),18February2022,athttps://doi.org/10.1016/j.isci.2022.103749.91“西北新能源电力市场大而不强[Thenorthwestnewenergypowermarketislargebutnotstrong]”,Beijixing,15September2022,athttps://news.bjx.com.cn/html/20220915/1255195.shtml.92“外输不畅：吉林风电有劲无处使[Unsmoothexport:Jilinwindpowerhasnowheretouseit],”NationalPeople’sCongress,2September2012,athttp://www.npc.gov.cn/zgrdw/npc/zt/qt/2013zhhbsjx/2013-09/02/content_1812529.htm;“专家解读：破译西北新能源高比例发展的市场化密码[ExpertInterpretation:Decipheringthemarket-orientedcodeforthehigh-proportiondevelopmentofnewenergyinNorthwestChina],”Beijixing,28September2022,athttps://guangfu.bjx.com.cn/news/20220928/1257762.shtml.93“中国能源版图悄然重构：中西部将以风能、太阳能为主[China’senergylandscapeisquietlyrestructured:thecentralandwesternregionswillbedominatedbywindenergyandsolarenergy],”HuaxiaEnergy,1September2014,athttps://hxny.com/nd-7570-0-7.html.94PowerPointpresentationofStateGridEnergyResearchInstitute,29October2022.95MinYuanetal.,“PotentialandVisionofDistributedRenewableEnergyintheYangtzeRiverDeltaReg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