Large-scale utilization of wind power in China: Obstacles of conflict between market and planning

Abstract

The traditional strict planning system that regulates China's power market dominates power industry operations. However, a series of market-oriented reforms since 1997 call for more decentralized decision-making by individual market participants. Moreover, with the rapid growth of wind power in China, the strict planning system has become one of the significant factors that has curtailed the generation of wind power, which contradicts with the original purpose of using the government's strong control abilities to promote wind power development. In this paper, we first present the reasons why market mechanisms are important for large-scale utilization of wind power by using a case analysis of the Northeast Grid, and then we illustrate the impact of conflicts between strict planning and market mechanisms on large-scale wind power utilization. Last, we explore how to promote coordination between markets and planning to realize large-scale wind power utilization in China. We argue that important measures include implementing flexible power pricing mechanisms instead of the current fixed pricing approach, formulating a more reasonable mechanism for distributing benefits and costs, and designing an appropriate market structure for large-scale wind power utilization to promote market liquidity and to send clear market equilibrium signals.