Unified power market on track

Technicians install solar photovoltaic panels at a power station in Zigui county, Hubei province, in November. (ZHENG JIAYU/FOR CHINA DAILY)

China is on track to establish a national unified power market by 2029 with a preliminary structure to be established by 2025, further integrating renewable energy sources while optimizing the distribution of power across the vast national grid, said industry experts.

Clear pathways will be defined for renewable energy participation, while mechanisms to ensure reasonable returns on renewable energy investments will be explored, according to the National Unified Power Market Development Plan Bluebook released by the China Electricity Council in Beijing on Friday.

A national unified power market is a system where electricity is bought, sold and distributed across the entire country in a standardized way. It connects all regions, ensuring equal access to power, promotes competition and allows for efficient pricing.

The goal is to improve energy reliability, lower costs and integrate renewable energy sources like solar, wind and hydropower into the grid more effectively. Such a market also ensures fair regulation and supports investment in modern energy infrastructure.

According to the bluebook, before 2025, more than 50 percent of renewable energy will be integrated into the market and all of the renewable energy will fully participate in the market by 2029, with steady progress in the marketization of hydropower, nuclear power and distributed renewable energy.

With increasing pressure to absorb the ever-climbing amount of renewable energy in the country, market mechanisms needed to handle the volatility and forecasting challenges of renewable energy are still underdeveloped, making it necessary to design a market system and trading mechanisms that are tailored to the characteristics of renewable energy to better support its integration into the market, it said.

S&P Global Commodity Insights had previously forecast that China aspires to establish a national unified power market preliminarily by 2025 and at a basic level by 2030.

Power market reform in China has made major strides forward since late 2021, with all coal-fired power entering market trading, abolishment of regulated retail tariffs for commercial and industrial (C&I) power users, start of pilot trading of green power contracts, and liberalization of ancillary services, it said.

China is already accelerating the pace of renewable energy market integration, said Pan Yuelong, supervision chairman of the council.

In 2023, the total market-based electricity transactions for renewable energy nationwide reached 684.5 billion kilowatt-hours, accounting for 47.3 percent of all renewable energy generated, with some large power companies seeing their share of renewable energy in market transactions exceed 50 percent, said Pan.

The scale of green power and green certificate trading also continues to expand. In the first half of 2024, the national green power trading volume reached 151.93 billion kilowatt-hours, a year-on-year increase of 233 percent, while 160 million green certificates were traded, he said.

According to the council, the volume of electricity traded in the national market has also been climbing, reaching 5.67 trillion kilowatt-hours in 2023, accounting for 61.4 percent of total electricity consumption nationwide. The market size has grown nearly fivefold since 2016.

The volume of inter-provincial and inter-regional market transactions nationwide approached 1.2 trillion kilowatt-hours, highlighting the increasing role of the market in optimizing the allocation of electricity resources over a larger geographic area, it said.

The scale of medium- and long-term electricity transactions has continued to grow. In 2023, medium- and long-term transactions accounted for more than 90 percent of the total electricity traded in the market, effectively playing a key role in ensuring supply stability and price control.

Zhang Lin, director of the council's planning and development department, said it is necessary to incentivize the role of various flexible power sources, to better reflect the capacity and regulatory value of conventional units, while expanding the ways in which new energy storage can participate in the market and establishing market mechanisms to leverage the regulation capabilities of pumped-storage hydroelectric stations.

Further optimization and improvement of green power and green certificate trading are also necessary. This involves continuously expanding the scale of green power trading and enhancing the issuance and trading mechanisms for green certificates, she said.