Sichuan issued the 2020 electricity trading guidance: continue to open the market to accumulate power and connect spot

Recently, the Sichuan Supervision Office of the National Energy Administration and the Sichuan Provincial Department of Economics and Information Technology jointly issued the "Guiding Opinions on Power Trading in Sichuan in 2020" (hereinafter referred to as the "Opinions"). Compared with 2019, the "Opinions" have adjusted or added many rules, and clarified the relevant criteria for connecting to the spot market. Some people believe that this "Opinion" sends a signal that Sichuan is one step closer to officially opening the spot market.

Lowering the assessment threshold is beneficial to market transactions

The reporter noticed that compared with the "Guiding Opinions on Power Trading in Sichuan in 2019", this "Opinion" has made a number of adjustments. Among them, the deviation assessment threshold for market power users, power sales companies, and grid companies in the wholesale area has been adjusted to ±3%, while the deviation assessment threshold stipulated in 2019 was ±4%. In addition, the total deviation assessment fee of the power sales company is at least 20%, which should be shared by the retail users whose power consumption deviation exceeds the power consumption deviation assessment threshold.

In this regard, some industry experts pointed out that the lowering of the deviation assessment threshold means stricter assessment. "But this adjustment actually lowers the threshold on the power consumption side to the same level as the power generation side, which is a manifestation of greater fairness. It also conforms to the original intention of setting up deviation assessment by making electricity transactions more balanced through the market."

Deviation assessment is always a headache for power sales companies and power users. In recent years, there are many power sales companies that have withdrawn from the power market because they cannot accurately grasp the deviation of electricity consumption and cannot afford the assessment costs.

Liu Yi, chairman of Sichuan Energy Investment and Sales Co., Ltd., analyzed to reporters that the adjustment of the deviation assessment threshold and the responsible entity in the "Opinion" will be more beneficial for power sales companies to participate in market-related businesses this year. "Sichuan has a large proportion of hydropower, and the difference between wet and dry seasons is large. In addition, the impact of the epidemic in the first quarter will cause large fluctuations in power deviation this year. Controlling the deviation threshold space will have a stronger constraint on the market transaction entities, which is conducive to market entities to establish a sense of deviation assessment. In addition, users must jointly bear the deviation, which also constrains all market entities to consider the deviation, which is more conducive to spot trading."

The above-mentioned "Opinion" also mentioned that it is necessary to carry out market operation monitoring and simultaneously build a market monitoring indicator system. The power trading center will form market analysis reports based on market monitoring conditions on a monthly, quarterly and annual basis and disclose market monitoring and analysis information in a timely manner.

The above-mentioned industry experts believe that the "Opinion" stipulates that market electricity users participating in multi-variety transactions shall be subject to deviation assessment according to the three categories of retained electricity, conventional direct purchase, and unplanned trading varieties. At the same time, the frequency and methods of electricity transactions will increase in 2020. In addition, the construction of an electricity monitoring system has been clarified. For trading entities, the risk of deviation assessment penalties is controllable.

Spot market still needs transition, hydropower is the key consideration

The Opinion clearly states that Sichuan should establish an electricity market that is mainly based on medium- and long-term transactions and supplemented by spot transactions. “In order to connect with the spot market, after the spot market officially starts continuous trial operation, the results of medium- and long-term transactions should form an electricity curve.”

Wu Junhong, director of the Smart Energy Department of East China Electric Power Design Institute, analyzed that the relevant rules in the Opinion are in preparation for spot trading. "Under the existing rules, Sichuan will conduct 7 bilateral negotiations, 6 platform concentrations and 1 duplex listing every month. Compared with 2019, it has almost doubled, and the transaction frequency is higher. It is the most direct way to connect with spot trading. In addition, the Opinion also emphasizes the safety verification rules, and the pre-safety verification of the unit's power generation capacity is also a way closer to spot trading."

However, Wu Junhong also said that the Opinion does not mean that "spot trading is coming", and that the arrival of spot trading still requires a transition. "Spot trading still needs a process, but the top-level design may be released first. Once the top-level design is in place, it will be more reasonable to make a transition and connection plan around it."

Liu Yi also further analyzed that the current difficulties in promoting spot trading in Sichuan are not on the power consumption side, nor on the power sales side. "From the perspective of international and domestic power market construction, market players, especially the power sales side, actually prefer spot trading. After the development of spot trading, the participation of market players will help power sales companies to make plans and adjustments in the middle, and play their role as a 'reservoir'. However, at this stage, due to the complex power structure of the Sichuan market and the large proportion of hydropower, if spot trading is to be promoted, the difference between wet and dry seasons and the balance between water and fire still need further research and clearer solutions."

Regarding the addition of hydropower consumption demonstration transactions and the increase in the annual hydropower underproduction assessment standards mentioned in the Opinions, Wu Junhong believes that these relevant rules are formulated in accordance with the characteristics of hydropower and play an important role in ensuring market fairness. "Sichuan is rich in hydropower, which is indeed a key point to be considered in the future spot market."