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Reforming the Operation Mechanism of Chinese Electricity System: Benefits, Challenges and Possible Solutions

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  • Hao Chen
  • Chi Kong Chyong
  • Zhifu Mi
  • Yi-Ming Wei

Abstract

A new wave of electricity market reform was launched by the Chinese government in March 2015, and one of its major objectives was to optimize the power system operation by reforming the low-efficient equal share dispatch mechanism. To provide scientific decision-making support for the current reform, we establish a mixed-integer linear programming optimization model to simulate the post-reform results, and the reform benefits are subsequently estimated by comparing those results with the pre-reform results. Then, we develop a political economy framework to identify the challenges associated with implementation of economic dispatch. At last, we propose several regulatory and market measures to address these identified challenges.

Suggested Citation

  • Hao Chen & Chi Kong Chyong & Zhifu Mi & Yi-Ming Wei, 2020. "Reforming the Operation Mechanism of Chinese Electricity System: Benefits, Challenges and Possible Solutions," The Energy Journal, , vol. 41(2), pages 219-246, March.
    • Handle: RePEc:sae:enejou:v:41:y:2020:i:2:p:219-246
    DOI: 10.5547/01956574.41.2.hche
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    Cited by:

    1. Chenxi Xiang & Xinye Zheng & Feng Song & Jiang Lin & Zhigao Jiang, 2023. "Assessing the roles of efficient market versus regulatory capture in China’s power market reform," Nature Energy, Nature, vol. 8(7), pages 747-757, July.
    2. Chen, Hao & Liu, Simin & Liu, Qiufeng & Shi, Xueli & Wei, Wendong & Han, Rong & Küfeoğlu, Sinan, 2021. "Estimating the impacts of climate change on electricity supply infrastructure: A case study of China," Energy Policy, Elsevier, vol. 150(C).
    3. Wang, Jiexin & Wang, Song, 2023. "The effect of electricity market reform on energy efficiency in China," Energy Policy, Elsevier, vol. 181(C).
    4. Chen, Hao & Cui, Jian & Song, Feng & Jiang, Zhigao, 2022. "Evaluating the impacts of reforming and integrating China's electricity sector," Energy Economics, Elsevier, vol. 108(C).
    5. Zheng, Xuemei & Menezes, Flavio & Nepal, Rabindra, 2021. "In between the state and the market: An empirical assessment of the early achievements of China's 2015 electricity reform," Energy Economics, Elsevier, vol. 93(C).
    6. Pollitt, M., 2021. "Measuring the Impact of Electricity Market Reform in a Chinese Context," Cambridge Working Papers in Economics 2137, Faculty of Economics, University of Cambridge.
    7. Bai-Chen Xie & Jun Xu & Michael G Pollitt, 2020. "What effect has the 2015 power market reform had on power prices in China? Evidence from Guangdong and Zhejiang," Working Papers EPRG2010, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    8. Yang Xu & Jiahua Hu & Yizheng Wang & Weiwei Zhang & Wei Wu, 2022. "Understanding the Economic Responses to China’s Electricity Price-Cutting Policy: Evidence from Zhejiang Province," Sustainability, MDPI, vol. 14(18), pages 1-24, September.
    9. Fan, Jing-Li & Li, Zezheng & Li, Kai & Zhang, Xian, 2022. "Modelling plant-level abatement costs and effects of incentive policies for coal-fired power generation retrofitted with CCUS," Energy Policy, Elsevier, vol. 165(C).
    10. Wang, Peng-Tao & Wei, Yi-Ming & Yang, Bo & Li, Jia-Quan & Kang, Jia-Ning & Liu, Lan-Cui & Yu, Bi-Ying & Hou, Yun-Bing & Zhang, Xian, 2020. "Carbon capture and storage in China’s power sector: Optimal planning under the 2 °C constraint," Applied Energy, Elsevier, vol. 263(C).
    11. Cao, Jing & Ho, Mun S. & Ma, Rong & Zhang, Yu, 2024. "Transition from plan to market: Imperfect regulations in the electricity sector of China," Journal of Comparative Economics, Elsevier, vol. 52(2), pages 509-533.

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    More about this item

    Keywords

    Power system operation; Economic dispatch; China; MILP; Optimization;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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