Abstract

China Power System

Transformation

Assessing the benefit of optimised operations and advanced flexibility options

Abstract

China Power System Transformation has a two-fold objective. First, it provides a summary of the state of play of power system transformation (PST) in the People’s Republic of China (“China”) as well as a comprehensive discussion of PST internationally. This includes a comprehensive review of all possible sources of power system flexibility (power plants, grid infrastructure, storage, and demand-side response) and a detailed discussion of market, policy, and regulatory frameworks to effectively mobilise power system flexibility. Second, it presents findings from a detailed power sector modelling exercise for China in 2035, building on the 2018 World Energy Outlook New Policies and Sustainable Development Scenarios. The modelling identifies the establishment of spot markets and trade between provinces as two of the main elements to improve system operation efficiency in China. In order to integrate very high shares of variable renewables consistent with the WEO SDS, activating the demand side – especially electric vehicles – and targeted use of electricity storage are found to be crucial for an accelerated transformation of the Chinese power system.

Highlights

•The rise of low-cost wind and solar power, deployment of distributed energy resources (DER) and increasing digitalisation are accelerating change in power systems around the world, including the People’s Republic of China (“China”). With the right framework conditions in place, these trends can combine, leading to a much stronger integration between the demand and supply sides while allowing a more rapid uptake of variable generation resources, notably wind and solar power. “Power system transformation” describes the processes that facilitate and manage changes in the power sector in response to these novel trends.

•Power system flexibility – a concept that goes beyond power plant flexibility – is the crucial element for a successful transformation of the power system at growing proportions of wind and solar power in China. Traditionally, flexibility has been associated with the more flexible operation of coal power plants in China. However, the concept of power system flexibility is much broader. Apart from power plants, it can be provided by grid infrastructure, demand-side response, and electricity storage. Changes to market, policy, and regulatory frameworks are crucial for unlocking flexibility.

•Establishment of spot markets and trade between provinces are two of the main elements to promote power system transformation in China. Building on the World Energy Outlook

(WEO) New Policies Scenario, modelling results indicate that if current efforts to implement economic dispatch, boost short-term inter-regional trading and expand transmission interconnectivity succeed, annual power system operational costs in 2035 can be reduced by 15% or USD 63 billion (United States dollars) annually, and power sector CO2 emissions reduced by up to 750 million tonnes per year.

•Power system flexibility is the most important cornerstone of a fundamentally transformed Chinese power system which achieves the goals of the Paris Agreement. Building on the

WEO Sustainable Development Scenario, modelling results indicate that utilising advanced flexibility measures such as smart electric vehicle charging, demand-side response, and electricity storage can support the reliable integration of extremely high shares of variable generation without any substantial variable renewable energy curtailment in 2035, while simultaneously reducing power system operational costs between 2-11% and reducing the need for fossil generation capacity by up to 30%. Other clean energy technologies such as nuclear power and carbon capture and storage benefit from flexibility in the form of increased utilisation.

•Accelerated progress on power sector transformation could bring substantial benefits in China and the world. An accelerated transformation of the Chinese power system could bring significant benefits in the drive to limit climate change in line with the Paris Agreement. China can use the path of power system transformation to make accelerated progress in restructuring its economy towards a pattern of growth in advanced high-quality industrial sectors, while making clean energy technologies affordable for countries around the world – including today’s developing countries, which will see a rapid increase in energy demand over the coming years.