Electricity Market In China Research Articles

Potential impact of (CET) carbon emissions trading on China’s power sector: A perspective from different allowance allocation options

Abstract In Copenhagen climate conference China government promised that China would cut down carbon intensity 40–45% from 2005 by 2020. CET (carbon emissions trading) is an effective tool to reduce emissions. But because CET is not fully implemented in China up to now, how to design it and its potential impact are unknown to us. This paper studies the potential impact of introduction of CET on China’s power sector and discusses the impact of different allocation options of allowances. Agent-based modeling is one appealing new methodology that has the potential to overcome some shortcomings of traditional methods. We establish an agent-based model, CETICEM (CET Introduced China Electricity Market), of introduction of CET to China. In CETICEM, six types of agents and two markets are modeled. We find that: (1) CET internalizes environment cost; increases the average electricity price by 12%; and transfers carbon price volatility to the electricity market, increasing electricity price volatility by 4%. (2) CET influences the relative cost of different power generation technologies through the carbon price, significantly increasing the proportion of environmentally friendly technologies; expensive solar power generation in particular develops significantly, with final proportion increasing by 14%. (3) Emission-based allocation brings about both higher electricity and carbon prices than by output-based allocation which encourages producers to be environmentally friendly. Therefore, output-based allocation would be more conducive to reducing emissions in the Chinese power sector.

Electricity regulation and electricity market reforms in China

The electricity industry of China has been in a process of reforms since the 1980s. This paper gives a review on the three main stages of reforms in China so as to trace out key features of various reform measures including those for power investment financing, the separation between government and power enterprises, and the division between power generation firms and power grids. The findings suggest that further regulatory change in China's electricity market reform is necessary when integration of the electricity markets and increased competition are paving the way ahead for a market-oriented structure. Prospective electricity regulation in the form of a strong legal system and effective institutions that protect market competition and promote appropriate incentives for efficiency are suggested in the paper.

Easing the Transition to a Competitive Electricity Market in China

The current Chinese IPP structure is ill-suited to China9s current circumstances, as it critically over-stretches both the structure of the Chinese electricity system and the strength of the Chinese commercial legal system. As a result foreign investment in Chinese IPPs has slowed considerably. Tolling agreements could provide a reasonable and beneficial interim structure within the limits of the current commercial legal system while avoiding (or at least minimizing) the stresses created by the systemic conflicts of interest currently present in the system. And by allocating real (and not just apparent) risk to the parties best able to bear them while facilitating an increasing competitive electricity system, tolling agreements can lead to a modern electricity system providing maximum benefit to China.