China To Set Up Unified Power Market To Avoid Energy Crises

China plans to launch by 2025 a unified nationwide power market system to ensure grid flexibility and stability and avoid a repeat of the energy crisis in the autumn of 2021.

The power market trading system will see provincial and regional markets cooperate, which would improve cross-provincial and cross-regional market allocation of resources and green power trading scale, China’s Xinhua news agency reported, quoting guidelines jointly released by the National Development and Reform Commission and the National Energy Administration.

Chinese authorities aim to fully complete the nationwide electricity market trading system by 2030 when renewable energy generation will be included and fully participate in market transactions.

“This should remove the market distortions that triggered the power supply crisis in late 2021,” Philip Andrews-Speed, a senior researcher at the Oxford Institute of Energy Studies, told Bloomberg before the Chinese guidelines were released. 

A nationwide power market in China could also spare utilities from losses, which they had accumulated at the end of last year because of surging commodity prices and the caps on consumer bills, Bloomberg notes.

For example, the three largest power producers in China, which account for 44 percent of total generation capacity in the country, swung to losses in the third quarter of 2021 amid soaring coal prices and the state policy of price caps for consumers.

The energy crisis in China, which resulted in blackouts in September and October, started to ease in November, top government officials said at the time, adding that more work must be done to ensure power and heating supply through the winter.   

Soaring coal prices and the energy crisis hit China in the third quarter and continued into the beginning of the fourth quarter. In September, the world’s second-largest economy restricted power use in at least 20 regions and provinces that contribute more than half to the Chinese economy.

Surging coal prices and power shortages in China slowed the growth of its economy in the third quarter and were threatening to spill over into the global supply chains in the fourth quarter.

By Charles Kennedy for Oilprice.com

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