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Changing economics of China’s power system suggest that batteries and renewables may be a lower cost way to meet peak demand growth than coal

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  • Kahrl, Fritz
  • Lin, Jiang

Abstract

Concerns around reliability in China's electricity sector have rekindled interest in a traditional solution: building more coal-fired generation. However, over the past decade China's electricity sector has seen significant changes in supply costs, demand patterns, and regulation and markets, with falling costs for renewable and storage generation, "peakier" demand, and the creation of wholesale markets. These changes suggest that traditional approaches to evaluating the economics of different supply options may be outdated. This paper illustrates how a net capacity cost metric - fixed costs minus net market revenues - might be a useful metric for evaluating supply options to meet peak demand growth in China. Using a simplified example with recent resource cost data, the paper illustrates how, with a net capacity cost metric, electricity storage and solar PV may be a more cost-effective option for meeting peak demand growth than coal-fired generation.

Suggested Citation

  • Kahrl, Fritz & Lin, Jiang, 2024. "Changing economics of China’s power system suggest that batteries and renewables may be a lower cost way to meet peak demand growth than coal," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt83v0m2zw, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt83v0m2zw
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    References listed on IDEAS

    as
    1. Kahrl, Fredrich & Williams, James H. & Hu, Junfeng, 2013. "The political economy of electricity dispatch reform in China," Energy Policy, Elsevier, vol. 53(C), pages 361-369.
    2. Abhyankar, Nikit & Lin, Jiang & Kahrl, Fredrich & Yin, Shengfei & Paliwal, Umed & Liu, Xu & Khanna, Nina & Phadke, Amol A & Luo, Qian, 2022. "Achieving an 80% Carbon Free Electricity System in China by 2035," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt9183b502, Department of Agricultural & Resource Economics, UC Berkeley.
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    Keywords

    Economics; Applied Economics; Affordable and Clean Energy; Energy Modelling; Energy management; Energy systems;
    All these keywords.

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