Optimize the overall design of the power market and accelerate the construction of a unified national power market system

China Energy Storage Network News: Recently, the National Development and Reform Commission and the National Energy Administration issued the "Guiding Opinions on Accelerating the Construction of a National Unified Electricity Market System". The reporter interviewed relevant officials from the National Development and Reform Commission on the background of the document's issuance and the key tasks proposed in the document.

Q: What is the background and significance of the issuance of the "Guiding Opinions on Accelerating the Construction of a National Unified Electricity Market System"?

Answer: On November 24, 2021, General Secretary Xi Jinping presided over the 22nd meeting of the Central Committee for Comprehensively Deepening Reforms and reviewed and approved the "Guiding Opinions on Accelerating the Construction of a National Unified Electricity Market System". General Secretary Xi Jinping emphasized that it is necessary to follow the laws of power market operation and market economy, optimize the overall design of the power market, realize the sharing and mutual assistance and optimal allocation of power resources on a larger scale across the country, and accelerate the formation of a unified, open, orderly, safe, efficient, and well-governed power market system. The issuance of the "Guiding Opinions on Accelerating the Construction of a National Unified Electricity Market System" is an important deployment to deepen power system reform, a major measure to build a new power system, and an important part of building a high-standard market system.

Since the issuance of the "Opinions of the CPC Central Committee and the State Council on Further Deepening the Reform of the Electricity System" (Zhongfa [2015] No. 9) and its supporting documents in 2015, my country's electricity market construction has been steadily and orderly promoted, a multi-competitive entity pattern has been initially formed, the price mechanism has been further improved, the proportion of market-based trading electricity has increased significantly, and the reform dividends have been continuously released. In 2021, the national market-based trading electricity volume was 3.7 trillion kWh, a year-on-year increase of 17.2%, accounting for 44.6% of the total electricity consumption in the society, nearly 7 times the market-based trading electricity volume in 2015, with an average annual growth of about 40%.

At the same time, my country's current electricity market system is not perfect enough, and the supporting mechanism needs to be improved. There are large differences in market models, basic trading rules, price formation mechanisms, and other aspects of power markets in various regions. There are still market barriers to cross-provincial and cross-regional transactions. The strategic goals of carbon peak in 2030 and carbon neutrality in 2060 have put forward new requirements for the construction of the power market. It is urgent to accelerate the construction of a unified national power market system, promote the transformation of the power industry, promote the sharing and mutual assistance of power resources and optimize the allocation on a larger scale across the country, improve the stability and flexible adjustment capabilities of the power system, and achieve clean and low-carbon energy transformation and high-quality development at a lower cost through market-based means.

Q: What principles should be adhered to in building a unified national electricity market system? What is the construction goal?

Answer: The construction of a unified national electricity market system should follow the following principles. First, overall design and steady progress. Make a good overall design of the functional structure of the electricity market to achieve efficient coordination and organic connection of markets at different levels. Adhere to problem-oriented, actively and steadily promote market construction, and encourage exploration based on local conditions. Second, support transformation and ensure safety and reliability. Improve the system and mechanism, innovate the market model, promote the investment, production, trading and consumption of new energy, and give full play to the supporting role of the electricity market in the clean and low-carbon transformation of energy. Coordinate the promotion of market construction and grid operation management, prevent market construction risks, and ensure the safe and stable operation of the power system. Third, based on national conditions and learn from international experience. Based on my country's actual national conditions such as energy resource endowment, economic and social development, learn from the experience of international mature electricity market construction, give play to the advantages of the domestic market, adapt to the production and operation laws and development needs of the power industry, and scientifically and rationally design market models and paths. Fourth, take into account and make good connections. Take into account the electricity cost tolerance of enterprises and society, make good connections between the supply of basic public services and the construction of the electricity market, and ensure the relative stability of the supply of electricity public services and the electricity prices for residents and agriculture.

The specific goal is: by 2025, the national unified electricity market system will be initially established, the national market will operate in coordination with the provincial (autonomous region, municipality)/regional market, the medium- and long-term electricity, spot, and auxiliary service markets will be designed and jointly operated, the market-based allocation of cross-provincial and cross-regional resources and the scale of green electricity transactions will be significantly increased, and market transactions and price mechanisms conducive to the development of new energy and energy storage will be initially formed. By 2030, the national unified electricity market system will be basically established, adapted to the requirements of the new power system, the national market will operate in coordination with the provincial (autonomous region, municipality)/regional market, new energy will fully participate in market transactions, market players will compete equally and make their own choices, and electricity resources will be further optimized across the country.

Q: How to understand the multi-level unified electricity market system?

Answer: Improving the multi-level unified power market system mainly includes the following aspects: First, we must accelerate the construction of the national power market. We must improve the operation and management of the power trading platform and the cross-provincial and cross-regional market trading mechanism, study and promote the timely establishment of a national power trading center, and establish a corresponding market management committee. Second, we must steadily advance the construction of provincial (autonomous region, municipality)/regional power markets. Give full play to the basic role of provincial (autonomous region, municipality) markets in the national unified power market system, improve the efficiency of power resource allocation within the province, and ensure the basic balance of local power. Encourage the construction of regional power markets that are compatible with major national regional strategies and optimize regional power resource allocation. Third, we must guide the coordinated operation of power markets at all levels. Promote the construction of national markets, provincial (autonomous region, municipality)/regional power markets in an orderly manner, and strengthen the mutual coupling and orderly connection between markets at different levels. When conditions are ripe, support the integration and development of provincial (autonomous region, municipality) markets with the national market, or support the integration and development of multiple provincial (autonomous region, municipality) markets with the national market after they have formed a regional market. Promote the exploration of the establishment of a power trading center consortium and establish a sound coordinated operation mechanism. Fourth, we must orderly promote open cooperation between cross-provincial and cross-regional markets. According to the principle of increasing the volume first and then the stock, the priority power generation plan across provinces and regions shall be liberalized in a classified manner. A mechanism for multiple market players to participate in cross-provincial and cross-regional transactions shall be established, and direct transactions between power generation enterprises and power sales companies and users shall be encouraged and supported. The dynamic connection between cross-provincial and cross-regional markets and the provincial market in terms of the economic responsibility price formation mechanism shall be strengthened, and the allocation of power resources shall be optimized by making the best use of the cross-provincial and cross-regional abundant channels.

Q: How to further improve the functions of the electricity market?

Answer: Improving the functions of the electricity market mainly includes the following tasks: First, continue to promote the construction of the medium- and long-term electricity market. Further play the basic role of the medium- and long-term market in balancing long-term supply and demand and stabilizing market expectations, further improve the trading mechanism and market trading methods, better widen the peak-valley price difference, and guide users to reduce peaks and fill valleys. Second, actively and steadily promote the construction of the electricity spot market. Guide the spot market to better discover the real-time price of electricity and accurately reflect the relationship between electricity supply and demand. Organize and implement the pilot construction of the electricity spot market, promote various entities to participate in the spot market, strengthen the connection between spot trading and the liberalization of priority power generation and consumption plans and medium- and long-term transactions, and establish a reasonable cost diversion mechanism. Third, continue to improve the power auxiliary service market. Promote the power auxiliary service market to better reflect the market value of flexible and adjustable resources, enrich transaction categories, improve transaction mechanisms, strengthen orderly coordination between markets, and make good connections in terms of transaction timing, market access, and price formation mechanisms. Fourth, cultivate diversified competitive market entities. Classify and promote various priority power generation entities to participate in the market, promote commercial users to fully participate in the market in batches, and guide social capital to participate in the power sales business in an orderly manner. Improve the minimum power supply system to ensure power supply reliability, encourage power sales companies to innovate business models and provide value-added services. Guide user-side adjustable loads, energy storage, distributed energy, new energy vehicles, etc. to participate in market transactions, and fully stimulate and release the flexible adjustment capabilities of the user side.