2024 China Power Market Outlook

2024ChinaPowerMarketOutlook:10KeyTrendsforMarketPlayers Report/July2024 AboutRMI RMIisanindependentnonprofitfoundedin1982thattransformsglobalenergysystemsthroughmarket-drivensolutionstoalignwitha1.5°Cfutureandsecureaclean,prosperous,zero-carbonfutureforall.Weworkintheworld’smostcriticalgeographiesandengagebusinesses,policymakers,communities,andNGOstoidentifyandscaleenergysysteminterventionsthatwillcutclimatepollutionatleast50percentby2030.RMIhasofficesinBasaltandBoulder,Colorado;NewYorkCity;Oakland,California;Washington,D.C.;Abuja,Nigeria;andBeijing,People’sRepublicofChina. AuthorsandAcknowledgments Authors ZihaoChenShuoGaoYiJiangTingLiYujingLiuZiyiLiuJialinTian KangWang,Cross-straitTsinghuaResearchInstitute LiyueZhang Authorslistedalphabetically.AllauthorsfromRMIunlessotherwisenoted. Contacts ShuoGao,sgao@rmi.org CopyrightsandCitation ShuoGaoetal.,2024ChinaPowerMarketOutlook:10KeyTrendsforMarketPlayers,RMI,2024, https://rmi.org/insight/2024-china-power-market-outlook-10-key-trends-for-market-players/. RMIvaluescollaborationandaimstoacceleratetheenergytransitionthroughsharingknowledgeandinsights.Wethereforeallowinterestedpartiestoreference,share,andciteourworkthroughtheCreativeCommonsCCBY-SA4.0license.https://creativecommons.org/licenses/by-sa/4.0/. AllimagesusedarefromiStock.comunlessotherwisenoted. TableofContents ExecutiveSummary5Energy 1Twenty-threeprovinceshaveinitiatedthe(trial)operationofthepowerspotmarket, andtherenewablesoutputshapesthepeak-valleypatternofspotprices.8 2Time-of-useelectricitypricingpolicyiteratesfrequently,withspotpricesplaying aguidingrole.15 3Thepowerretailmarkethasmadeimprovementsinexpandingusercoverage, diversifyingretailcompanies,andconveyingwholesalemarketsignalstoretailmarket.24 TransmissionandDistribution 4T&Dtariffsbetterreflectthecostsofgridoperations;transmissionlosses andsystemoperationfeesarenowlistedexplicitlyonelectricitybills.28 CapacityPricing 5Thecoalpowercapacitypricingmechanismisintroduced,reconstructingtheelectricitypricestructureofbothpowergeneratorsandconsumers, andsupportingthetransformationofcoalpower’srole.33 AncillaryServices 6Theancillaryservicesmarketpricingmechanismisimprovedandstandardized; renewablesandenergystorageownersmayneedmarketstrategyadjustments.37 RenewablesandEnergyStorage 7Themarket-orientedtransactionsofrenewablesarescalingup,bringingchallenges toprojectprofitabilityinthelongrunduetopricefluctuations.39 8AsdistributedPVgrowsrapidlyinChina,developersshouldcloselymonitor gridaccessandfeed-inpricepolicies.42 9Independentenergystorageexpandsmarketparticipation;theenergymarket isstilltheirprimaryrevenuesource.45 10Thegreenpowerandgreenelectricitycertificatemarketscontinuetoexpand, witharelativelyrelaxedsupply–demandrelationshipintheshortterm.49 Endnotes55 ExecutiveSummary Launchedin2015,thesecondroundofpowermarketreforminChinahasbeenunderwayformorethannineyears.Since2020,withtheannouncementofthedualcarbontargetandtheNewPowerSystem,i thepowermarketsystemhasalsobeendesignedtosupportacceleratedrenewablepowerdevelopment,promotethelow-carbontransformation,andsupportNewPowerSystemconstruction. Overthepastyear,powermarketreformhasmadecomprehensiveprogress,andtheelectricitypricingsystemhasbeenfurtherrefinedandimproved.Atthenationallevel,multiplecomponentsintheelectricitymarketandpricingsystem,includingtransmissionanddistribution(T&D)tariffs,thepowerspotmarket,powercapacityprice,andancillaryservicesmarkets,haveallundergoneimportantupdates,favoring NewPowerSystemconstructionandrenewableenergyaccess.Theseupdatesprofoundlyinfluencethecompositionofindustrialandcommercial(I&C)electricitypricesandsetarefinedpriceformationmechanism(seeExhibit1): •T&Dtariff:Thetariffforthe2023–25periodwasreleased.UnlikethebundledT&Dtariffinthepast,thetransmissionlossandsystemoperationfeesareseparatedfromthenewT&DtariffeffectiveinJune2023. •Powerspotmarket:Thefirstnational-levelbasicruleforthepowerspotmarketwasreleasedinlateSeptember2023,whichstandardizesthemarketconstructionpath,ruledesign,andmarketoperationrequirementsacrossprovinces.InDecember2023,afterfiveyearsoftrialoperation,theGuangdongandShanxipowerspotmarketswerethefirsttoenterformaloperation,openinganewchapterinthe constructionandoperationofthepowerspotmarket. •Powercapacityprice:InNovember2023,thecoalpowercapacitypricemechanismwasestablished.Startingin2024,therevenueofcoal-firedunitstransformedfromenergypriceonlytoatwo-partmechanismofenergyprice+capacityprice. •Ancillaryservicesmarkets:TheNationalDevelopmentandReformCommission(NDRC)andtheNationalEnergyAdministration(NEA)issuedanoticeonelectricityancillaryservicesmarketsinFebruary2024,standardizingtheservicetypes,marketdesign,andpriceceilingsettingforancillaryservicesmarketsacrossthecountry. iThedualcarbontargetcallsforChinatopeakcarbondioxideemissionsby2030andachievecarbonneutralityby2060. TheNewPowerSystemhasrenewableenergyasthemainstay. Exhibit1ElectricitypricestructureforI&CusersinChinain2024 Feed-inprice(on-gridprice) Pricecomponent Basedonmarkett