How to break through and achieve success in the inter-provincial power market

China Energy Storage Network: Electricity marketization reform is an important institutional guarantee for promoting the revolution of energy production and consumption in China. From the current practice, the main contradictions and difficulties in the construction of China's power market lie in the cross-provincial power consumption and power balance. Due to the generally reverse distribution characteristics of China's power resource-rich areas and power load centers, it is difficult for most provinces to balance their power production and consumption, and it is even more difficult to remain immune when encountering a serious imbalance in power supply and demand. Therefore, the newly added power installed capacity and power, whether it is traditional forces such as thermal power and hydropower, or new market elites such as wind power and photovoltaic power, are facing the objective needs and practical pressure of cross-provincial consumption. In particular, a large proportion of hydropower in the southwest and wind and solar power generation in the "Three Norths" and western regions must be transmitted to other provinces for consumption. This trend will gradually intensify in the future. During the "14th Five-Year Plan" period, the national cross-provincial and cross-regional power transmission capacity will exceed 350 million kilowatts, and the annual power transmission will reach about 1.5 trillion kilowatt-hours. Whether these outputs can be reasonably consumed, or whether these inter-provincial electricity can be successfully traded, all depend on whether the inter-provincial electricity market is perfect, whether the price is reasonable, and whether the contradictions of relevant stakeholders can be effectively resolved through the market mechanism. Therefore, the top-level design and promotion of my country's future electricity market must grasp the inter-provincial market as the leader and "bull's nose".

Current status and existing problems of cross-provincial power trading in my country

In recent years, my country has taken some measures to break down the barriers between provinces in power trading. The national level has continuously issued policies to encourage the flexible implementation of inter-provincial and inter-regional power transmission and reception plans. Relying on the two national power trading centers in Beijing and Guangzhou, cross-provincial bilateral consultations, centralized bidding, listing and other trading methods have been developed on the basis of inter-provincial planned electricity volume, ushering in an era of parallel development of power transmission and reception plans and market transactions.

But in essence, my country's current cross-regional and cross-provincial electricity transactions are almost all medium- and long-term transactions (currently only a very small part is piloting spot transactions). In essence, it is the original planned electricity volume plus a slight fluctuation, and there is no obvious breakthrough in the dispatching mechanism based on the province. Under the medium- and long-term transaction mode, in the current cross-provincial electricity market transactions, most of the power generation companies at the sending end can only report the quantity but not the price, while the receiving end users are mainly represented by the provincial power grid companies. The producers (power generation companies) and consumers (power users) have not really "met" to negotiate and bargain, but have been simply "represented" by the power grid companies and local governments. In this process, producers and consumers are institutionally isolated, market information transparency is not high, and power generation companies and users have weak voice. Therefore, my country's current cross-provincial and cross-regional transactions are not real power market transactions.

There are still many challenges to establish a real cross-provincial electricity market. The biggest uncertainty factor comes from the system and policy. That is, under my country's fiscal and taxation system where provinces are entities and each has its own business, all sectors of society have doubts about the cross-provincial power balance and are worried that it will be difficult to achieve fair competition and ensure a safe and stable power supply. In the past few years, regional power grid companies within the State Grid system were changed to branches, and relevant dispatching rules and development plans were adjusted. The construction and operation of power grids were not designed according to regions, which weakened the ability of provinces in the same region to share electricity. The new round of power system reform is driven by provinces as the main body, which has solidified the power management functions of provincial governments and indirectly provided the so-called legal and policy basis for "one province, one policy".

Affected by the above factors, the implementation of cross-provincial power transmission and reception plans has become increasingly difficult in recent years, the game between governments, enterprises and users at the transmission and reception ends has intensified, it is difficult to find a balance between the interests of all parties, and the barriers and thresholds for inter-provincial power transactions are getting higher and higher.

Limitations and drawbacks of my country's provincial power market

Overall, my country's provincial power market has "congenital deficiencies". Except for a few provinces with large power consumption, such as Guangdong, Jiangsu, and Shandong, my country's provincial power market is currently mostly oligopolistic or monopolistic. Generally speaking, two or three of the five major central power generation groups and provincial government energy investment companies occupy a large market share, and the market concentration is high. The market share of a single enterprise is not less than 30%. The recent regional integration of coal and power resources promoted by the State-owned Assets Supervision and Administration Commission in the northwest and other regions has further strengthened this monopoly. Due to the "monopoly" of a few power generation groups in the provincial market, most of which are state-owned enterprises, and the limited room for maneuver of supply and demand resources in the market, the power distribution companies and users have weak voice, and the degree of competition and substitutability between various power sources and different enterprises is not high, which makes the provincial market competition very insufficient, and it is difficult to truly play the role of survival of the fittest, and it is also difficult to build a sound, efficient and mature market.

Constrained by the above factors, some provincial markets have become a tool for local governments to reduce electricity prices in the name of competition. Under the banner of local protectionism, it is difficult for external electricity to compete fairly with local electricity on the closed platform of the provincial market, and it is not even qualified to participate in the competition. Even if a provincial spot market is established in the future, it will be difficult to truly play a role in optimizing resource allocation due to the high market concentration, unreasonable market structure, and fragile supply and demand relationship. In other words, since the positioning and functions of the provincial market are inconsistent with the strategic needs of my country's cross-provincial balanced consumption of electricity, and there are even major conflicts of interest, the provincial market has no willingness and ability to take on the task of optimizing the allocation of national power resources. At present and in the future, the provincial market is not the main battlefield for optimizing the allocation of my country's power resources and improving quality and efficiency, nor can it solve the main contradictions in my country's power supply and demand balance and system optimization.

The consequences of the lack of inter-provincial electricity markets

In the power market environment and institutional arrangements where the province is the entity, out of the instinct of seeking benefits and avoiding harm, each province will give priority to ensuring the power consumption of the province. In the future power development planning and policy formulation, it will also give priority to new installations in the province, and the enthusiasm for receiving external power is not high. Since the external power in the future will mainly be clean energy such as hydropower, wind power and photovoltaic power, the unreasonable abandonment of water, wind and photovoltaic power will become more and more serious in the long run, and even form a long-term path dependence inertia and interest solidification pattern.

These tendencies and trends are reasonable from a local perspective, but from a national perspective, they will lead to a dilemma where the provincial market is dominated by one company, the regional market is left with no resources, and national resource optimization is just empty talk. It will be very costly to break this pattern of segmentation and blockade in the future, and the implementation of the national clean and low-carbon transformation strategy will also be greatly discounted. Therefore, it is necessary to adhere to the national power reform as a whole, break down the barriers between provinces with a clear-cut stand, and accelerate the substantial promotion of the construction of the cross-provincial power market.

Response strategies and major measures

Through the above analysis, it can be seen that only by establishing, expanding and improving the cross-provincial market can we overcome the limitations and drawbacks of the provincial market, effectively solve the contradiction of uneven energy resources and economic bearing capacity between different regions and provinces in my country, tap the potential of complementary and mutual assistance in regional power and energy markets, and use market and economic means to resolve the administrative contradictions and conflicts of interest of "province as entity". For the problems that have been exposed, we must objectively and rationally analyze, improve the system, clarify the rules, guide scientifically, and implement policies in a classified manner.