Incentive Mechanisms to Integrate More Renewable Energy in Electricity Markets in China

Abstract

China has made significant progress in developing renewable energy, but challenges in integrating variable sources like wind, solar, and hydro power persist. Existing research has a regional focus and lacks a comprehensive understanding of integration challenges in specific regions. Moreover, research concentrates on individual energy types rather than multiple sources. Addressing these challenges requires a deeper analysis of market rules, incentives, and mechanisms for integrating numerous renewable energy types. The existing research also overlooks crucial aspects like energy consumption, grid planning, and power market mechanisms. To promote renewable energy integration effectively, policymakers must address these interconnected factors through comprehensive investigations and research efforts. This study proposes tailored solutions to encourage integration in China based on international experiences, such as Brazil’s contract markets and electricity redistribution mechanism, the Nordic spot market, and California’s negative pricing mechanism. The strategies derived from global practices for China’s renewable energy integration include diverse trading mechanisms, expanded contract markets, optimized local consumption, fortified grid infrastructure, and improved market mechanisms.