Role of demand response in the decarbonisation of China's power system

Abstract

Realising China's carbon peaking and neutrality commitments requires a fundamental transformation to a renewable-dominant power system, presenting new challenges to the balance between power supply and demand. In addition to enhancing flexibility on the supply side, it is necessary to fully exploit the flexibility resources on the demand side. Accordingly, flexible load resources using a demand response (DR) mechanism are expected to play a crucial role. In this study, a DR module was developed for an optimal capacity expansion and operation model, the China renewable energy planning and operation (REPO) model. Three different DR behaviours were modelled, namely load shedding, short-term load shifting, and long-term load shifting. Under a forecasted carbon price, DR in eight major industries can achieve an annual cost saving of approximately 16.8 billion yuan and reduce carbon emissions by approximately 106 million tons by 2030. Investment in DR is cost-effective, particularly because the cost saving is nearly 3 times the present value in 2025 and about 4.3 times in 2030. Moreover, DR has a positive effect on reducing the installed capacity demand of coal power and energy storage, which is conducive to increasing the proportion of renewable energy generation and restraining the fluctuation of marginal power generation cost.