Follow market rules to achieve rebalancing of electricity supply and demand

Deepen supply-side reform and proactively reduce "ineffective supply". On the one hand, we must continue to implement the "13th Five-Year Plan" national and local government policies on resolving excess coal-fired power capacity and eliminating backward production capacity, and implement "mandatory shutdown" for coal-fired power units below 300,000 kilowatts that do not meet the requirements; on the other hand, the power generation industry must seize the opportunity and use the shutdown compensation policy to implement "active shutdown" according to local conditions for some old and small units that are over-age, have no hope of turning losses into profits, do not meet energy consumption, environmental protection and safety standards, and are unable to invest in transformation, or illegal coal-fired power units that have not been approved and have incomplete certificates and licenses, so as to improve equipment utilization efficiency.

Follow the market rules, carefully lay out "new stalls", and achieve the rebalancing of supply and demand in the electricity market. During the "13th Five-Year Plan" period, the state prohibits the construction of new coal-fired power in Beijing-Tianjin-Hebei, Yangtze River Delta, Pearl River Delta and red and orange warning provinces, and suspends the construction of 150 million kilowatts of coal-fired power nationwide. At present, we must not blindly launch new projects just because the actual growth of electricity consumption in the "13th Five-Year Plan" is better than expected and the utilization hours of coal-fired power have slightly rebounded. The current utilization hours of coal-fired power in my country, which are around 4,200, cannot be simply compared with what the United States thinks is reasonable and realistic. China and the United States have different conditions, development stages, and systems and mechanisms. The United States is a developed country that relies on oil and gas, market mechanisms, and scientific electricity prices. my country has strived to restore the hours to 4,800-5,500 hours by promoting supply-side reforms. This is in line with national conditions, history, and reality, and is conducive to reducing idle equipment and investment waste, and is conducive to coal-fired power companies reducing energy consumption, turning losses into profits, and sustainable development. It is conducive to ensuring the economy of coal-fired power to support my country's lower electricity price level.

Third, upgrade and transform to activate the stock. What should we do with the 1 billion kilowatts of coal-fired power units distributed across the country? According to different business environments, we should treat them differently on the basis of elimination and shutdown, optimize technical and economic indicators through different upgrades and transformations (ultra-low emission transformation, energy-saving transformation, flexibility transformation, etc.), achieve the "two lows and one high" (low emission, low energy consumption, high efficiency) energy supply level, enhance the comprehensive energy service capabilities of "cold, hot, electric, and water" multi-energy co-supply, enhance the auxiliary service capabilities such as frequency regulation, peak regulation, and voltage regulation, and enhance the competitiveness of the power market.

In fact, in July 2017, 16 ministries and commissions issued the Opinions on Promoting Supply-side Structural Reform and Preventing and Resolving the Risk of Overcapacity in Coal-fired Power Generation (Document No. 1404), which systematically deployed the upgrading and transformation of coal-fired power generation units, requiring the following goals to be achieved during the 13th Five-Year Plan period: 420 million kilowatts of ultra-low emission transformation; 340 million kilowatts of energy-saving transformation; and 220 million kilowatts of flexibility transformation. At present, significant results have been achieved. By the end of 2018, 810 million kilowatts of ultra-low emission transformation had been completed, accounting for 80% of the national coal-fired power generation unit. More than 40 million kilowatts of coal-fired power flexibility transformation was completed in the "Three Norths", of which 23.8 million (about 60%) were in the Northeast. The paid peak-shaving auxiliary service fee in the Northeast was 2.78 billion yuan, with an average price of 0.525 yuan, which was higher than the local coal-fired benchmark electricity price. Practice has proved that flexibility transformation technology is mature, with a transformation cost of 120-400 yuan per kilowatt. It can participate in peak-shaving services better than energy storage, gas-fired power, and pumped storage. It is one of the realistic options for coal-fired power and is also conducive to the consumption of new energy.

Of course, the current flexibility transformation of coal-fired power and participation in deep peak regulation also bring great losses to power generation equipment. Some power plants are already on the verge of losses, and it is difficult to invest in transformation costs. Even without any technical transformation, it is not a long-term solution. Therefore, coal-fired power companies must break through the constraints and risks of a single power generation business and enter the fields of cogeneration, power distribution and sales, energy storage and energy saving, frequency regulation and peak regulation, and cold, hot, electric, and water supply from a strategic height, so as to achieve the integration of heat source and network, generation, distribution and sales, and multi-energy cogeneration and auxiliary services, and cultivate new growth points for benefits.

Fourth, peak management and strict control of increments. In formulating power planning and planning for future development, we must keep pace with the times, change the inertial thinking and common development problems of the past power shortage period, and achieve reform and innovation based on the characteristics of the new normal of the economy and changes in power supply and demand.

Introduce peak management to prevent large-scale planning. Looking back at the 13th Five-Year Plan for Electricity, one of the biggest highlights is the goal of controlling coal-fired power generation capacity within "1.1 billion kilowatts and reducing the proportion to 55%" by 2020, and a series of safeguard measures. Without this "ceiling" and blind development, coal-fired power will not be 1.1 billion kilowatts by 2020, but 1.25 billion kilowatts, or even more, and the days of coal-fired power will be even more "difficult". It is predicted that in 2030, energy demand will mainly rely on clean energy, and coal-fired power will reach a peak of 1.3 billion kilowatts; in 2050, coal-fired power generation will drop to 600 million kilowatts, and a modern energy system will be built. Therefore, when the country compiles future medium- and long-term plans for electricity, it is necessary to strengthen coal-fired power peak management, consider both supply guarantee and overcapacity, and consider the balance of the electricity market.

Abandoning scale expansion, development needs new concepts. In the future, power generation enterprises will face market competition and survival of the fittest. First of all, they should change the past willful development mode of "scale thinking" and "investment hunger", but should rely on planning, be market-oriented, and use value thinking to achieve high-quality development; secondly, they should focus on the main business of electricity, consolidate traditional advantages such as coal-electricity integration, cogeneration, industrial-financial integration, and road-port supporting facilities; thirdly, they should seize the opportunities of power market reform, energy ecological reconstruction, and cross-industry integration, promote strategic transformation, structural adjustment, and optimize layout, focus on "green" development, extend "downward", expand "outward", and intervene in "new" business forms, and systematically optimize the development pattern to achieve vertical "source-grid-load-storage-use", horizontal multi-energy complementarity, industrial synergy, and regional balance.

Fifth, market competition and policy support. The state should encourage coal-fired power to compete in the market and adjust supporting policies in a timely manner to achieve the survival of the fittest. In order to promote the healthy development of coal-fired power, coal-fired power must participate in market competition and form a market pricing mechanism in the long run. However, in the current transition period of market-oriented reform, it is necessary to retain, adjust and optimize old policies and introduce new supporting policies. In recent years, the coal-electricity linkage policy has been shelved. Some coal-fired power plants in the northeast, southwest, northwest and other places have made more money than they have lost, and their debt ratio has exceeded 100% for many consecutive years. Some power plants have a debt ratio of 200% and rely on entrusted loans to survive. Even if the coal-electricity linkage is not restarted nationwide, local difficult areas should try to restart it. In the current market-oriented transactions, the transaction electricity price is subject to price control and targeted transactions by local governments. Some environmentally friendly power plants cannot obtain ultra-low emission electricity price compensation. I hope that this will change in the next step. In market transactions, power generation companies and coal companies should be encouraged to sign medium- and long-term coal contracts with "base price + floating price". According to the current implementation effect, the base price is high and the electricity price basically cannot reflect the changes in coal prices. At the same time, the state should encourage coal-electricity joint ventures and corporate restructuring to build a coal-electricity industry chain and supply chain. In addition, it is possible to explore the establishment of a two-part electricity price, power generation rights trading, and capacity market construction to ensure the sustainable development of system backup resources and coal-electricity.