7.5.1 Reform Difficulties
and Approaches to Resolve
Them
A reforming power market needs to solve six
problems urgently.
First, how to allocate power resources optimally; how to design an effective market mechanism to transmit abundant power resources in
west China to the load centres in east China; how
to make the market set a reasonable price for
clean energy; and how to design an effective
auxiliary services market mechanism to absorb
clean energy across provinces and regions.
Solutions:
• market scope: design a nationwide unified
electricity market to allow the free flow of
resources across the country;
• roll-out: starting with provincial markets,
promote deep integration of provincial markets step by step to eliminate the trade barriers between provinces with a market
mechanism;
• increase the types of trading in provinces and
regions: gradually introduce trans-provincial
and interregional spot trading (starting with
medium- and long-term trading), and increase
the number of participants by engaging users
and
power
sales
companies
in
trans-provincial and interregional trading; and
• build a market mechanism that promotes the
inter-provincial and interregional grid connection of clean energy, and gradually introduce
auxiliary service market mechanisms, such as
peak shaving, to increase trading volumes of
clean power between provinces and regions.
Second, how to launch provincial markets;
how to design the power market while taking into
consideration the differences between provinces
in terms of market concept, environment and
maturity; how to coordinate the relationship
between planning and the market; how to coordinate the relationship between medium- and
long-term trading and spot trading; how to
coordinate
the
relationship
between
intra-provincial power resources and other provinces’ power resources; and when to make the
spot market open.
Solutions:
• choose a suitable power market model based
on local conditions, the market strength of
power plants, power supply and demand,
lessons learned from established markets,
technical conditions and new energy; and
• increase the types of trading categories and
expand power trading step by step, taking
medium- and long-term trading first, and then
spot trading.
Third, how to solve the problem of dominant
companies when establishing a provincial power
market. Oligopoly is a serious issue in some
provincial markets, such as Zhejiang and Qinghai. In the process of supply-side reform, centrally
administered
state-owned
energy
enterprises are very likely to be restructured,
intensifying their dominance of provincial power
markets.
Solutions:
• expand the scope of the power market,
through coupling or fusion, to reduce the
concentration of power producers in any one
market;
• build a strict regulatory system, setting an
upper limit for the market share of power
generation companies, forcing those with a
large share to disclose information; and
• spin off or sell the assets of those power
generation companies with a high market
share.
Fourth, how to change a provincial market
into a national market, in which each provincial
market chooses its path of evolution and support
measures based on actual conditions.
514
S. Yaodong and A. Gillespie
and Approaches to Resolve
Them
A reforming power market needs to solve six
problems urgently.
First, how to allocate power resources optimally; how to design an effective market mechanism to transmit abundant power resources in
west China to the load centres in east China; how
to make the market set a reasonable price for
clean energy; and how to design an effective
auxiliary services market mechanism to absorb
clean energy across provinces and regions.
Solutions:
• market scope: design a nationwide unified
electricity market to allow the free flow of
resources across the country;
• roll-out: starting with provincial markets,
promote deep integration of provincial markets step by step to eliminate the trade barriers between provinces with a market
mechanism;
• increase the types of trading in provinces and
regions: gradually introduce trans-provincial
and interregional spot trading (starting with
medium- and long-term trading), and increase
the number of participants by engaging users
and
power
sales
companies
in
trans-provincial and interregional trading; and
• build a market mechanism that promotes the
inter-provincial and interregional grid connection of clean energy, and gradually introduce
auxiliary service market mechanisms, such as
peak shaving, to increase trading volumes of
clean power between provinces and regions.
Second, how to launch provincial markets;
how to design the power market while taking into
consideration the differences between provinces
in terms of market concept, environment and
maturity; how to coordinate the relationship
between planning and the market; how to coordinate the relationship between medium- and
long-term trading and spot trading; how to
coordinate
the
relationship
between
intra-provincial power resources and other provinces’ power resources; and when to make the
spot market open.
Solutions:
• choose a suitable power market model based
on local conditions, the market strength of
power plants, power supply and demand,
lessons learned from established markets,
technical conditions and new energy; and
• increase the types of trading categories and
expand power trading step by step, taking
medium- and long-term trading first, and then
spot trading.
Third, how to solve the problem of dominant
companies when establishing a provincial power
market. Oligopoly is a serious issue in some
provincial markets, such as Zhejiang and Qinghai. In the process of supply-side reform, centrally
administered
state-owned
energy
enterprises are very likely to be restructured,
intensifying their dominance of provincial power
markets.
Solutions:
• expand the scope of the power market,
through coupling or fusion, to reduce the
concentration of power producers in any one
market;
• build a strict regulatory system, setting an
upper limit for the market share of power
generation companies, forcing those with a
large share to disclose information; and
• spin off or sell the assets of those power
generation companies with a high market
share.
Fourth, how to change a provincial market
into a national market, in which each provincial
market chooses its path of evolution and support
measures based on actual conditions.
514
S. Yaodong and A. Gillespie