balance in power systems with a high penetration
of renewables is to increase electricity trading
through interconnected grids. As the largest
battery manufacturer and generator of renewable
power in the region, China could take the lead in
cooperation and governance reforms to facilitate
cross-border grid interconnections with neighbouring countries.
China and its regional partners should harmonise national electricity markets to enable power
trading through such interconnections. Connecting
high renewable supply areas with load centres
requires regional planning to avoid lock-in of
fossil-based assets and infrastructure and lock-out
of renewables. Further, as electricity markets
become increasingly interconnected the risk of
cyberattack is best mitigated by strengthening and
harmonising regulations across jurisdictions.
China can benefit from the opportunities to
export surplus electricity and reduce electricity
costs through grid interconnections and balancing: regional electricity trading saves consumers
money and decreases the capacity margin
requirements for China and its partners. Cooperation on energy interdependence can build trust
among partners, creating wider benefits.
Regarding electricity market reform (EMR),
regional differences in capacity, dispatch and
balancing and political willingness to align
reforms may be difficult to overcome. A stepped
approach to EMR could be adopted, so that the
benefits of progressive reform are tangible to
each partner country.
4 Systematically Build
a High-Quality Energy System:
Policy Suggestions for Promoting
the Energy Revolution
4.1 Structural Change Is Necessary
for China’s Energy
Revolution
China’s strategic goal of supporting high-quality
economic development with high-quality energy
requires China to create a global and modern
energy system with effective market mechanisms, moderate macro-control, vibrant enterprises and clean, low-carbon, economic, efficient,
secure and reliable energy. To achieve this, the
government has a key role to play in setting the
policy framework that levels the playing field
between low- and high-carbon sources of energy.
Once the government does this, markets will seek
out the cheapest energy sources and drive innovation in low-carbon technologies and investment in enabling infrastructure.
4.1.1 Strategic Goals
• Well-designed market system. The objective is
to create a modern energy market system based
on harmonisation, openness and orderly competition. Market monopolies will be eliminated.
Instead, a market will be shaped comprising
large energy companies cooperating, coexisting
and competing fairly with a range of companies
of different scale and ownership across the
energy value chain—in energy production,
transmission and sales. This will address issues
such as the misallocation of resources caused by
the unequal status of market players and disorderly competition.
• Sound price mechanism. In competitive segments, prices will be decided by the market. In
natural monopoly segments such as pipeline
transmission, prices will be controlled by the
government. A price mechanism and a fiscal and
taxation system that truly reflect market supply
and demand, resource scarcity and environmental impact will be created to address current
unreasonable price formation mechanisms.
• Well-regulated government management. To
clearly define the boundary between government and market and the new round of government
reforms,
several
high-level,
consolidated and independent energy management authorities will be created, integrating functions such as industrial development,
Five-Year Plans, and energy policies and
regulations. They will operate according to
the principles of “what is not mandated by the
law shall not be done, what is not prohibited
Overview: High-Quality Energy for High-Quality Growth …
27
of renewables is to increase electricity trading
through interconnected grids. As the largest
battery manufacturer and generator of renewable
power in the region, China could take the lead in
cooperation and governance reforms to facilitate
cross-border grid interconnections with neighbouring countries.
China and its regional partners should harmonise national electricity markets to enable power
trading through such interconnections. Connecting
high renewable supply areas with load centres
requires regional planning to avoid lock-in of
fossil-based assets and infrastructure and lock-out
of renewables. Further, as electricity markets
become increasingly interconnected the risk of
cyberattack is best mitigated by strengthening and
harmonising regulations across jurisdictions.
China can benefit from the opportunities to
export surplus electricity and reduce electricity
costs through grid interconnections and balancing: regional electricity trading saves consumers
money and decreases the capacity margin
requirements for China and its partners. Cooperation on energy interdependence can build trust
among partners, creating wider benefits.
Regarding electricity market reform (EMR),
regional differences in capacity, dispatch and
balancing and political willingness to align
reforms may be difficult to overcome. A stepped
approach to EMR could be adopted, so that the
benefits of progressive reform are tangible to
each partner country.
4 Systematically Build
a High-Quality Energy System:
Policy Suggestions for Promoting
the Energy Revolution
4.1 Structural Change Is Necessary
for China’s Energy
Revolution
China’s strategic goal of supporting high-quality
economic development with high-quality energy
requires China to create a global and modern
energy system with effective market mechanisms, moderate macro-control, vibrant enterprises and clean, low-carbon, economic, efficient,
secure and reliable energy. To achieve this, the
government has a key role to play in setting the
policy framework that levels the playing field
between low- and high-carbon sources of energy.
Once the government does this, markets will seek
out the cheapest energy sources and drive innovation in low-carbon technologies and investment in enabling infrastructure.
4.1.1 Strategic Goals
• Well-designed market system. The objective is
to create a modern energy market system based
on harmonisation, openness and orderly competition. Market monopolies will be eliminated.
Instead, a market will be shaped comprising
large energy companies cooperating, coexisting
and competing fairly with a range of companies
of different scale and ownership across the
energy value chain—in energy production,
transmission and sales. This will address issues
such as the misallocation of resources caused by
the unequal status of market players and disorderly competition.
• Sound price mechanism. In competitive segments, prices will be decided by the market. In
natural monopoly segments such as pipeline
transmission, prices will be controlled by the
government. A price mechanism and a fiscal and
taxation system that truly reflect market supply
and demand, resource scarcity and environmental impact will be created to address current
unreasonable price formation mechanisms.
• Well-regulated government management. To
clearly define the boundary between government and market and the new round of government
reforms,
several
high-level,
consolidated and independent energy management authorities will be created, integrating functions such as industrial development,
Five-Year Plans, and energy policies and
regulations. They will operate according to
the principles of “what is not mandated by the
law shall not be done, what is not prohibited
Overview: High-Quality Energy for High-Quality Growth …
27