• Coordinate investment in decentralised
resources. A coordination problem arises
when independent developers that lack
information about the plans of other developers make similar investments, creating
overinvestment or, if the developers are risk
averse, underinvestment. Either way, the
result can be inefficient. Solutions include
formal processes for multilateral resource
planning and the publication of current and
consented resources, as used by the transmission and distribution system operators of
Spain and Ireland.
• Determine how decentralised resources will
be controlled. While distribution networks
today are largely passive, an active network is
capable of accommodating distributed
resources. As the electricity system becomes
more active and complex, a single system
operator may start to rely on intermediaries
(such as virtual power plants) and partners
(such as distribution system operators) to
assist with system balancing. New systems of
control, with new computational requirements, administrative rules and institutional
characteristics may then be employed,
reflecting new operational vulnerabilities.
• Balance data transparency with security. As
information communications technology
infrastructure expands, the amount of data
from the power system grows. The data systems need their own infrastructure, with
public access to facilitate competition and
optimise operations. Meanwhile, the distribution of data across resources creates new
risks of cyberattack and privacy loss, which
can be solved through adequate protocols.
2.2.3 Roadmap for Efficient Network
Arrangements
This section presents a suggested roadmap for
the development of network arrangements in
China, as the country simultaneously carries out
large-scale investment, market reforms and
decarbonisation of its power system. These
options are based on international best practice
and leading thinking on future arrangements, as
set out in Sects. 2.2.6 and 2.2.7.
The roadmap is based on the following
guiding principles:
• Strong markets need strong government.
Market-based solutions have the potential to
identify and deliver cost-effective investment
and operation of power systems. However,
both markets and natural monopoly networks
benefit from a strong government that takes
an active role in ensuring institutional incentives are aligned with public policy objectives. Network incentives can be aligned
through separation of roles (unbundling) or
strong regulation.
• The institutional framework can be developed
progressively. Wholesale institutional reform is
challenging and disruptive. At the outset, small
changes in current practice and small-scale
pilots may provide proof-of-concept sufficient
to build consensus for larger-scale reforms.
The roadmap suggests the following:
(1) Immediate actions
• Continue the market liberalisation programme. Phase 1 of the DRC-Shell cooperation suggested a programme of electricity
market liberalisation; consistent with this,
China’s 13th Five-Year Plan (2016–20) aims
to improve the systems by which markets
play the decisive role in resource allocation. It
will be important to continue with the market
liberalisation programme to deliver a more
advanced and efficient electricity system.
• Rationalise investment planning. Clearly
defined metrics for reliability and economic
efficiency help network planners to identify
efficient investments. Meanwhile, the application of the “beneficiary pays principle”
encourages investment that increases productivity and avoids diverting national resources
to stimulate regional output. Together, these
approaches, when applied at national and
regional level, facilitate greater interconnection and sharing of generation services.
• Implement a coordinated approach to
investment. The use of a common investment
82
W. Xiaoming et al.
resources. A coordination problem arises
when independent developers that lack
information about the plans of other developers make similar investments, creating
overinvestment or, if the developers are risk
averse, underinvestment. Either way, the
result can be inefficient. Solutions include
formal processes for multilateral resource
planning and the publication of current and
consented resources, as used by the transmission and distribution system operators of
Spain and Ireland.
• Determine how decentralised resources will
be controlled. While distribution networks
today are largely passive, an active network is
capable of accommodating distributed
resources. As the electricity system becomes
more active and complex, a single system
operator may start to rely on intermediaries
(such as virtual power plants) and partners
(such as distribution system operators) to
assist with system balancing. New systems of
control, with new computational requirements, administrative rules and institutional
characteristics may then be employed,
reflecting new operational vulnerabilities.
• Balance data transparency with security. As
information communications technology
infrastructure expands, the amount of data
from the power system grows. The data systems need their own infrastructure, with
public access to facilitate competition and
optimise operations. Meanwhile, the distribution of data across resources creates new
risks of cyberattack and privacy loss, which
can be solved through adequate protocols.
2.2.3 Roadmap for Efficient Network
Arrangements
This section presents a suggested roadmap for
the development of network arrangements in
China, as the country simultaneously carries out
large-scale investment, market reforms and
decarbonisation of its power system. These
options are based on international best practice
and leading thinking on future arrangements, as
set out in Sects. 2.2.6 and 2.2.7.
The roadmap is based on the following
guiding principles:
• Strong markets need strong government.
Market-based solutions have the potential to
identify and deliver cost-effective investment
and operation of power systems. However,
both markets and natural monopoly networks
benefit from a strong government that takes
an active role in ensuring institutional incentives are aligned with public policy objectives. Network incentives can be aligned
through separation of roles (unbundling) or
strong regulation.
• The institutional framework can be developed
progressively. Wholesale institutional reform is
challenging and disruptive. At the outset, small
changes in current practice and small-scale
pilots may provide proof-of-concept sufficient
to build consensus for larger-scale reforms.
The roadmap suggests the following:
(1) Immediate actions
• Continue the market liberalisation programme. Phase 1 of the DRC-Shell cooperation suggested a programme of electricity
market liberalisation; consistent with this,
China’s 13th Five-Year Plan (2016–20) aims
to improve the systems by which markets
play the decisive role in resource allocation. It
will be important to continue with the market
liberalisation programme to deliver a more
advanced and efficient electricity system.
• Rationalise investment planning. Clearly
defined metrics for reliability and economic
efficiency help network planners to identify
efficient investments. Meanwhile, the application of the “beneficiary pays principle”
encourages investment that increases productivity and avoids diverting national resources
to stimulate regional output. Together, these
approaches, when applied at national and
regional level, facilitate greater interconnection and sharing of generation services.
• Implement a coordinated approach to
investment. The use of a common investment
82
W. Xiaoming et al.