The People’s Republic of China is deploying record levels of wind and solar PV, challenging the flexibility of its power system. At the same time, China has been making big steps towards implementing markets, and the goals announced in 2020 of carbon dioxide emissions peaking before 2030 and carbon neutrality before 2060 have added momentum to expand their footprint.
This report investigates the evolving flexibility requirements of China’s power system as it transitions towards a cleaner energy mix. The analysis aims to present a market-based policy toolkit that can enhance flexibility, especially during the 15th Five-Year Plan period (2026-2030), focusing on short-term flexibility solutions for the integration of variable renewable energy.
Though the main audience of this report is policy makers in China and experts from around the world intending to contribute to power sector reforms, the report also aims to be informative for generalist readers.
- Pages
- 99
- Published in
- France
- Rights Holder
- CC BY 4.0
- Rights URI
- https://www.iea.org/terms/creative-commons-cc-licenses
Table of Contents
- Meeting Power System Flexibility Needs in China by 2030 1
- Abstract 3
- Acknowledgements, contributors and credits 4
- Table of contents 6
- Executive summary 7
- China’s rapid wind and solar PV deployment is driving an increasing need for system flexibility 7
- Market reforms are needed to ensure that China meets its flexibility needs in 2030 and stays on track with its climate goals 8
- A policy toolkit for the 15th Five-Year Plan can unlock flexibility at the regional and national levels 10
- Background and motivation 11
- A transforming power sector landscape 11
- Flexibility as a cornerstone of electricity security 11
- Towards a national system of markets in China 12
- Addressing China’s flexibility needs over the next Five-Year Plan 13
- Structure of the report 13
- Chapter 1. Power system flexibility in China 14
- The growing need for flexibility 14
- Evolving approaches to address growing flexibility needs 14
- Flexibility needs across the regional diversity of China 15
- Assessment of flexibility needs in 2022 and 2030 16
- Overview of the model 17
- Flexibility across timescales 17
- Drivers of flexibility needs to 2030 17
- Flexibility resources in China towards 2030 21
- Thermal power plants: the current backbone of flexibility 24
- Coal plant retrofits are taking place in parallel with the construction of new flexible power plants 24
- Coupled heat and power production is limiting coal flexibility during the heating season 26
- Hydropower: essential for grid stability 27
- Pumped hydro has been the leading storage resource and is set to increase 28
- End use electrification: enhancing flexibility opportunities 29
- Managed EV charging offers a yet-to-be flexibility resource in a context of booming EV deployment 30
- Virtual power plants are demonstrating their ability to provide flexibility services while a viable business model is still lacking 33
- Interconnection, batteries and curtailment: managing surplus and deficits of VRE production 35
- Inflexible contracts limit the benefits of UHV transmission network 35
- Battery storage’s fast uptake will be a game changer for short-term flexibility provision 36
- Curtailment redline release suggests more widespread use of curtailment in grid operation 38
- Barriers to flexibility in China 40
- Chapter 2. Unlocking flexibility through power markets 42
- Power markets as key to flexibility 42
- Current state of power markets in China and barriers to flexibility 42
- Power market reforms and progress 42
- Medium- to long-term (MLT) contracts: dominant but inflexible 46
- Spot markets and economic dispatch 47
- Ancillary services: expanding product range and participation -1
- Retail markets: a shield for consumers against spot prices variations 55
- Time-of-Use (TOU) Tariffs as an efficient flexibility tool 56
- Residential pricing: a sensitive issue 57
- Capacity payments for coal plants: ensuring adequacy at the risk of price distortions in markets 59
- Unlocking flexibility through market mechanisms 63
- Battery storage contribution to flexibility depends on market design 65
- Demand-side flexibility becomes critical to complement supply-side flexibility 66
- Household demand flexibility can be harnessed by smart appliance management 68
- A national surplus market supports the buildout of the national system of markets 70
- Economic dispatch remains the most effective way to unlock flexibility 71
- The path to flexibility through market reforms 74
- Chapter 3. A policy toolkit for flexibility 76
- Building on key insights: barriers to flexibility in China’s power system 76
- Policy toolkit for flexibility and key recommendations for the 15th Five-Year Plan 76
- Medium- to long-term markets 77
- Spot markets 77
- Ancillary services markets 78
- Capacity markets 78
- Retail markets 79
- Grids 80
- National planning and market unification 80
- Step by step guide for toolkit implementation 82
- Step 1: Conduct flexibility needs assessment and assign responsibilities 82
- Step 2: Prioritise and tailor policy measures based on provincial or regional context 83
- Step 3: Implement tailored policies and integrate market improvements 84
- Step 4: Monitor and adjust policies based on performance 87
- The path forward 88
- Annex 90
- Modelling methodology 90
- Regional set-up and transmission capacity 90
- Electricity demand 92
- Generation and storage capacity 92
- Renewable generation profiles 92
- Representing levels of regional co-ordination 93
- Representing dispatching practices 93
- Representing demand and non-energy market participation 94
- Abbreviations and acronyms 96
- Units of measurement 97
