Prof. ST Hsieh
Director, US-China Energy Industry Forum
February 20, 2022
China celebrated the end 2022 Beijing Winter Olympics with a spectacular closing ceremony today. As the following report indicates, the Game ushered in China’s long march towards Carbon neutrality by 2060. By then many will not remember who Eillen Gu is, but China and the world will celebrate this new Long March.
China’s power industry keeps transforming, from the State Ministry of Electric Power to State Electric Power Company, then five power generation companies with an independent State Power Grid Co. It wasn’t easy and every major transformation faced years of uncertainties. Along way, China has built an impressive HVDC long distance super energy highway system. China’s power is highly regulated with price controlled by NRDC. We wish China’s “flexible green electricity grid” will successfully lead to a fully unified power market in China soon
China Looks To Unify Power Markets As Part Of Its Green Energy Push
Editor OilPrice.com Sun, February 20, 2022, 8:00 AM
As the 2022 Winter Olympic Games head into their final few days in Beijing, the excitement over the event already seems to be fading, but the changes that the games have brought to China will endure for years to come. As part of its initiative to conduct the world’s first “green” Olympic Games, China has rolled out a remarkable new energy grid in order to power the event with 100% renewable energy.
The state-of-the-art “flexible green electricity grid” powering the games is the first of its kind, and holds enormous potential for being able to send renewable energy across vast distances through the use of direct currents. “The winter Olympic games has accelerated the construction of the Zhangbei renewable energy flexible direct current (DC) grid,” CarbonBrief reported in a detailed breakdown of the event’s energy mix. “The Beijing 2022 games rely on this newly-built infrastructure in Zhangjiakou City, a $2bn project launched in June 2020 to distribute wind and solar power, with pumped hydro storage to regulate the variations in output.” Zhangjiakou, a city neighboring Beijing, contains more renewable energy capacity within its metro area than most entire countries.
The grid being used to power the games is just the beginning. It’s the first phase of what is to become an even more groundbreaking, far-reaching reform of Chinese energy markets. In order to meet its own ambitious decarbonization targets, China will have to majorly reform the way that energy is produced, traded, and transported across the nation’s vast geography. China aims to reach peak carbon dioxide emissions by just 2030 and carbon neutrality by 2060.
At present, reaching these goals will be all but impossible due to the fragmented nature of China’s power markets. Operating at a provincial level, many coal-rich regions continue to rely almost entirely on dirty thermal energy. Inter-provincial power trading is regulated by government contracts, which are based on state-controlled pricing that does not reflect market dynamics. “A unified power market could help improve cross-provincial power trading and realise the vast potential of renewables in China by promoting clean power generated in China’s western region to fulfil demand in the power-hungry east,” the South China Morning Post recently reported based on statements by Andy Chen, senior analyst at Beijing-based consultancy firm Trivium China. Such a market would also present a huge shift in thinking away from state-controlled prices toward a more market-driven approach.
Amidst the energy crisis last fall, many coal plants were forced to cease operation as the cost of production exceeded state-capped coal prices, forcing any plant that chose to stay open to operate at a loss. In response to the crisis, the Chinese government announced in October that industrial and commercial energy users were required to enter the trading market.
This flood of new volume to the market may pose a challenge for energy regulators as the country adjusts to a unified market. “Currently, about 45 per cent of China’s total power generation is included in the power market, but it is dominated by mid- to long-term trading while the short-term spot power market, which is relatively more flexible, is still in the pilot stage,” the Morning Post reports.
A unified power market holds great potential, and could even be critical to China’s decarbonization efforts, but achieving and implementing it will be much easier said than done. The size and scope of the project, in addition to the massive trading volumes that can be expected, stand to make the unified energy market a heroic feat. China’s top government agencies, the National Development and Reform Commission (NDRC) and the National Energy Administration, however, remain undaunted, and have continually pushed the plan in recent policy documents, underlining their commitment to a green energy transition. “The directive to build a nationally unified power market signals that policymakers are committed to pursue a more renewables-based future,” Chen was quoted.
By Haley Zaremba for Oilprice.com