through bidding. Given the status quo of Chinese
businesses, the creation of a pricing mechanism
for auctioning initial emission rights will need to
evolve from mostly free allowances to a growing
number of auctioned allowances.
4.3 Create a Unified, Efficient
and Flexible Electricity
Market
4.3.1 The Goal of Electricity Market
Reform
Electricity market reform is intended to:
(i) design a unified nationwide electricity
market to allow the free flow of resources
across the country, integrate provincial
markets in a phased manner and eliminate
the barriers to energy trading between
them;
(ii) increase the types of energy traded
between provinces and regions, and
enlarge the number of participants in the
market;
(iii) create a market mechanism that promotes
inter-provincial and interregional grid
connections for the exchange of clean
energy; and gradually introduce auxiliary
service
market
mechanisms,
like
inter-provincial and interregional peak
shaving, to increase clean power trading
volumes across domestic borders;
(iv) expand the size of the electricity market
through mergers or fusions to reduce the
concentration ratio of power generators;
and
(v) develop a variety of power products such
as contracts for difference and mediumand long-term contracts and futures to
mitigate fluctuations in electricity prices
and ensure stable revenues for all market
participants.
4.3.2 Establish an Efficient Pricing
Mechanism
• Deregulate prices. Price deregulation should
proceed step by step. It could start upstream
and develop into downstream, beginning with
input fuels and progressing through to generation and network access and eventually to
retail.
Fig. 23 China’s carbon
trading market system
Overview: High-Quality Energy for High-Quality Growth …
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