Lessons learned from power industry reform and electricity spot market trial operation in Southern China

Abstract

Following the new round of electricity market reform, the spot market in Guangdong province has successfully entered the trial operation stage recently and is considered as the first pilot in China. In this paper, we review the performance of the trial operation of the electricity spot market in Guangdong. We discuss two main challenges encountered in Guangdong's market reform including the imbalanced funds caused by dual-track pricing and the compensation to gas power generators. The dual-track pricing refers to the two different settlement systems in the Guangdong trial market, one for the non-market electricity traded via the "priority power generation plan," and another traded via the spot market. While the dual-track pricing is inevitable since the Chinese government is accustomed to a gradual approach to economic reforms, it does lead to the serious problem of imbalanced funds which caused a lot of controversies. Furthermore, we discuss a case when a large number of renewable energy generators join the market. For the gas generator compensation, the market operator has three alternatives based on the present long-term transaction market. We employ a Hybrid Experimental Learning (HEL) approach to study which alternative is most in the interest of the gas generators.