To what extent will China's ongoing electricity market reforms assist the integration of renewable energy?

Abstract

Poor renewable energy (RE) integration is posing a huge challenge to China's electricity sector. This paper examines the extent to which China's power sector reforms will assist RE integration, and issues to effective implementation. It demonstrates that a well-established electricity market could provide practical solutions to RE integration challenge. China's existing power sector regime heavily regulated by administrative planning constrains RE integration. The on-going electricity reforms (new reforms) in the country such as the transmission and distribution (T&D) tariff reform, the direct trading of electricity, among others, along with new RE policies such as full purchase of guaranteed RE generation and green certificate system, should assist RE integration in the country. However, there are a number of implementation challenges such as the intervention from local governments in direct electricity trades and the lack of a quota system for RE, among others. If these challenges are not properly addressed, the potential positive impacts of the new reforms on RE integration will be undermined. It is recommended that the central government strengthen top-level design and supervision, design and build up electricity spot markets, push forward the regional electricity markets, and facilitate the establishment of a renewable quota system.