Inter-provincial spot trading: a new means of cross-provincial and cross-regional resource mutual assistance

China Energy Storage Network News: The "Inter-provincial Electricity Spot Trading Rules" released this time are a summary and enrichment of the long-term operating experience of the inter-regional inter-provincial surplus renewable energy spot trading pilot. The breadth and depth of the market have made great progress. The implementation of the new rules will greatly enhance the inter-provincial market's ability to optimize resource allocation on a large scale. On August 18, 2017, the inter-regional inter-provincial surplus renewable energy spot trading pilot was officially launched. Since its commissioning, various market links such as transaction organization, dispatch execution, and transaction settlement have withstood the test of actual operation. The market is active and operates smoothly, achieving large-scale source-load complementarity, tapping the potential of cross-regional power transmission, and discovering the time and space value of inter-provincial power commodities. Over the past four years, the cumulative transaction volume of renewable energy electricity has exceeded 25 billion kWh, effectively improving the level of new energy utilization.

In order to further implement the requirements of Several Opinions of the CPC Central Committee and the State Council on Further Deepening the Reform of the Electricity System (No. 9 of the Central Committee of the Communist Party of China and the State Council [2015]), establish a standardized cross-provincial and cross-regional electricity market trading mechanism, and give full play to the role of the market in allocating resources and adjusting surpluses and shortages, the State Grid Corporation of China, based on the pilot of inter-regional and inter-provincial surplus renewable energy spot trading, combined with the actual needs of ensuring the safe and stable operation of the power grid, ensuring reliable power supply, and promoting the consumption of clean energy, has studied and compiled the "Inter-provincial Electricity Spot Trading Rules (Trial)". The National Development and Reform Commission and the National Energy Administration have officially approved it recently, which is of great significance for achieving the dual goals of new energy consumption and power supply under the new power system, and is an important milestone in the construction of my country's electricity spot market.

I. Main features of inter-provincial electricity spot trading

Compared with inter-regional and inter-provincial surplus renewable energy spot trading, inter-provincial spot trading rules have the following characteristics:

First, the market coverage is larger and wider. Inter-provincial electricity spot transactions have been expanded from cross-regional inter-provincial transactions to all inter-provincial transactions. Provinces within the region can conduct inter-provincial transactions, further opening up inter-provincial barriers. For example, under the new inter-provincial market mechanism, Chongqing can purchase Sichuan hydropower through the inter-provincial market. After the market scope is expanded, the guiding role of the price mechanism can be fully utilized, the enthusiasm of buyers and sellers can be mobilized, and it will help promote the balance of electricity and improve the efficiency and benefits of optimal resource allocation.

Second, the trading sequence is advanced, the frequency is increased, and the trading mechanism is more perfect. In order to provide market members with more time for market analysis and competitive decision-making, the rules advance the time for issuing the inter-provincial contact line pre-plan from the morning of D-1 to the afternoon of D-2, and complete the clearing of the inter-provincial electricity spot market before noon on D-1. This sequence design is conducive to the efficient inter-provincial electricity spot trading, regional auxiliary service trading and provincial electricity spot trading by the three-level dispatching of the State Grid. At the same time, the frequency of intra-provincial electricity spot trading has increased from 5 times of cross-regional electricity spot trading to 12 times. After increasing the frequency of intra-day trading, it can better adapt to the volatility of new energy output, which is conducive to further promoting the consumption of new energy and meeting the needs of intra-day adjustments. In addition, the intra-provincial electricity spot trading has been changed from the "inquiry mode" of cross-regional electricity spot trading to the "competition mode", and the transaction price formation mechanism is more reasonable, which is conducive to reflecting the supply and demand situation and giving play to the price discovery function of the market.

Third, the role conversion of market players in the inter-provincial spot electricity trading process is more flexible. The inter-provincial spot electricity trading has designed a flexible role conversion mechanism for power purchase and sale transactions. Each province can choose the power purchase and sale identity at different times of the day according to the power supply and demand situation in the province. However, in the same period, it is not possible to organize power generation enterprises to sell power and purchase power in the inter-provincial spot electricity trading. This mechanism is in line with the current positioning of the inter-provincial market and reduces the complexity of the coordination of the two-level markets between provinces and within the province.

Fourth, the market clearing mechanism is more complete and efficient. Inter-provincial electricity spot trading highlights the impact of inter-provincial and some intra-provincial key transmission channels, and introduces a simplified grid model with partitions. A centralized clearing mechanism that considers the available transmission capacity, network losses and transmission fees of cascade channels is adopted. The market clearing supports the quotations of both buyers and sellers, which can promote the maximization of social welfare on the basis of meeting the security constraints of the grid.

Fifth, the content of information disclosure is more standardized and transparent. Information transparency is the basis for the efficient operation of the market. As trading varieties gradually enrich and market players gradually diversify, market players have higher demands for market operation transparency. In accordance with the requirements of the "Measures for Information Disclosure of the Electricity Spot Market (Interim)" (National Energy Regulatory Commission [2020] No. 56), the inter-provincial electricity spot trading rules clarify the specific content of information disclosure such as public information, public information, and private information, and propose that market members should disclose electricity market information in a timely, accurate, and complete manner, clarify the provisions on information confidentiality and sealing, and further standardize the compliance of market operations.

Sixth, it is encouraged to use market-based means to adjust deviations. Taking into account the stable operation characteristics of DC channel power transmission, in order to reduce the safety risks of the power grid, the rules stipulate that the results of inter-provincial power spot transactions do not change with the actual power generation and consumption of market entities in principle. For the actual implementation deviations of market entities, the rules recommend that they be resolved in accordance with the provincial power spot trading rules. For example, the rules clearly state that for power generation enterprises in the sending-end spot provinces, if they fail to generate power according to the number due to their own reasons, the less power generation can be purchased at the spot price in the provincial power spot transaction.

2. Inter-provincial spot transactions have effectively brought into play the role of cross-provincial and cross-regional resource mutual assistance

Under the recent high coal prices, coal-fired power companies are facing operational difficulties and their willingness to generate electricity has declined, which has affected the achievement of medium- and long-term coal-fired power transactions between provinces, and has had a certain impact on the priority purchase of power within the province and the balance of power supply and demand by provinces that purchase power from outside. Inter-provincial power spot transactions provide a market-based means for cross-provincial and cross-regional resource mutual assistance for large power grids.

Inter-provincial spot trading is based on the power balance of each province and the willingness of market players to declare prices. It matches the demand for power purchase and sale in a market-oriented manner, coordinates the resources of the entire network to achieve optimization and mutual assistance, and will play a positive role in ensuring power supply for the entire network. For the sending provinces, market players can sell the balanced surplus power in the inter-provincial power spot trading. The winning bid income can encourage power plants to actively generate peak power and increase power transmission. For the receiving provinces, under the tense situation of power supply and demand, some provinces are willing to actively purchase electricity in the inter-provincial power spot trading to compete for more surplus power outside the province to meet the power demand of the province. Inter-provincial power spot trading can give full play to the regulatory role of the market and price mechanism, guide the rational flow of electric energy, adjust surplus and shortage, and promote the large-scale optimization of energy resources.

III. Suggestions

With the release and implementation of the inter-provincial electricity spot trading rules, a complete inter-provincial electricity market system covering medium- and long-term and spot trading has been basically established, and the market framework of "unified market, two-level operation" has been initially formed. In order to give full play to the role of inter-provincial electricity spot trading, combined with the new situation of provincial spot pilot promotion, rapid growth in the proportion of new energy, and strong demand for green electricity from users, it is necessary to focus on the connection between provincial electricity spot trading and inter-provincial electricity spot trading. For the spot pilots that have been put into trial operation, it is necessary to deeply analyze the changes and impacts of the inter-provincial electricity spot trading rules, focusing on adjustments in the connection of transaction varieties, pricing mechanisms, market entities, transaction cycles, transaction timing, etc. For the spot pilots that are about to be put into trial operation, it is necessary to fully incorporate the consideration of inter-provincial electricity spot trading in the process of improving the plan and writing the rules, and do a good job in connecting the inter-provincial and intra-provincial markets. (The author is the Party Secretary and Deputy Director of the Electric Power Automation Institute of the China Electric Power Research Institute)