The upgrade of the electricity sales market is an inevitable trend

China Energy Storage Network: Since the launch of the new round of electricity reform, China's power market construction has been steadily and orderly promoted, a multi-competitive entity pattern has been initially formed, the role of the market in optimizing resource allocation has been significantly enhanced, and the proportion of market-based trading electricity has increased significantly. However, at the same time, problems such as an incomplete power market system, imperfect functions, inconsistent trading rules, and unbalanced and insufficient development of market entities still exist. In this regard, the "Guiding Opinions on Accelerating the Construction of a National Unified Power Market System" proposes to strictly enforce the access standards and conditions for power sales companies, guide social capital to participate in the power sales business in an orderly manner, give full play to the important role of power grid companies and state-owned power sales companies, improve the minimum power supply system, encourage power sales companies to innovate business models, and provide value-added services such as comprehensive energy management and load integration, which puts forward a clear direction for the next step of the development of power sales companies.

Over the past seven years, with the advancement of a new round of electricity reform, the electricity sales business has been gradually liberalized, and electricity sales entities have continued to enter the electricity market, and their market roles have become increasingly prominent. Since last year, driven by the goals of carbon peak and carbon neutrality, the construction of a new power system with new energy as the main body has been fully launched. Following the cancellation of the industrial and commercial sales electricity price catalog and the introduction of new management measures for electricity sales companies, in January this year, the National Development and Reform Commission and the National Energy Administration jointly issued the "Guiding Opinions on Accelerating the Construction of a National Unified Electricity Market System" (hereinafter referred to as the "Guiding Opinions"), which brought new opportunities for the construction of the electricity sales market under the unified electricity market system.

As a product of the new round of electricity reform, power sales companies have connected the wholesale and retail markets, aggregated users, and helped them avoid the risk of large fluctuations in the wholesale market. At the same time, they have innovated business models and provided value-added services. As the goals of carbon peak and carbon neutrality are promoted, the power sales market will play a positive role in promoting the transformation and upgrading of the power supply and demand sides.

Promote the improvement of the level of electricity marketization

In 2016, the second year of the implementation of the "Opinions of the CPC Central Committee and the State Council on Further Deepening the Reform of the Electricity System", the national power sales companies entered a stage of rapid growth. In May of that year, there were 559 registered power sales companies, and in October, the number increased to 1,150. In October of that year, the "Administrative Measures for the Access and Exit of Power Sales Companies" was issued. Driven by favorable policies, the number of power sales companies increased sharply, and by the end of the year, it had increased to 5,410. At the same time, data showed that in 2016, the national market-based trading electricity exceeded 1 trillion kWh, accounting for about 19% of the total electricity consumption in the society.

After years of development, the power sales industry has been subject to the survival of the fittest. As of the end of January 2021, there were more than 3,800 power sales companies in the State Grid operating area, and 890 power sales companies in the five provinces (regions) of the Southern Grid, totaling 4,690. Among them, Shandong and Guangdong ranked first in the number of power sales companies in the two major power grid operating areas. Taking Shandong as an example, the number of registered power sales companies, transaction scale, and market user volume currently rank first, second, and third in the country, respectively. From January to November 2021, the power sales agency of Shandong Power Sales Company sold 179.9 billion kWh of electricity, while the trading volume of users in the Shandong power market during the same period was 180.5 billion kWh, that is, the trading volume of Shandong Power Sales Company accounted for 99.65% of the total trading volume, providing power purchase services for more than 20,000 market entities.

According to statistics, in 2021, the national market-based trading electricity volume was about 3.5 trillion kWh, a year-on-year increase of 15.7%, accounting for more than 42% of the total social electricity consumption. The level of electricity marketization has been further improved, and power sales companies have played an important role in it.

More sound institutional safeguards

In November 2021, the "Measures for the Entry and Exit Management of Power Sales Companies" (hereinafter referred to as the old "Measures"), which once provided important institutional guarantees for the development of the power sales market, was abolished and replaced by the "Measures for the Management of Power Sales Companies" (hereinafter referred to as the new "Measures") issued by the National Development and Reform Commission and the National Energy Administration, which will play an important supporting role in accelerating the formation of a unified, open, competitive, orderly, safe, efficient and well-governed power market system.

In terms of the operation and management of power sales companies, the new Measures pay more attention to operability. For example, it requires the selection of entities with stable operations, good credit, sufficient capital reserves, and strong technical strength of personnel as guaranteed power sales companies; the guaranteed price links the agency power purchase price and the spot price. In the medium and long-term model, it is implemented at 1.5 times the agency power purchase price of the power grid enterprise. During the formal operation of the spot market, in principle, it should not be lower than 2 times the actual spot market average price; the bottom principle is set to increase the last line of defense - if all guaranteed power sales companies are unable to undertake the guaranteed power sales service due to operational difficulties and other reasons, the power grid enterprise will provide the guaranteed power sales service.

From the perspective of supervision, the new Measures have distinct characteristics of the times. In May last year, the Opinions on Accelerating the Improvement of the Socialist Market Economic System in the New Era issued by the CPC Central Committee and the State Council emphasized the need to strengthen market supervision innovation, improve the new regulatory mechanism based on "double random and one public" supervision (randomly select inspection objects, randomly select law enforcement inspectors, and promptly disclose the inspection situation and investigation results to the public), supplemented by key supervision, and based on credit supervision, and required the improvement of an inclusive and prudent regulatory system for new formats. The new Measures are in line with the spirit of the document and provide institutional guarantees for the stable and orderly development and effective supervision of the power sales market under the new situation.

In addition, the new "Measures" also provide accurate and unified descriptions of regulatory agencies, and are clearer in describing electricity, price regulatory departments, market supervision and management departments, energy regulatory agencies, electricity trading institutions and related responsibilities, greatly improving operability, guidance and accuracy.

High expectations for value-added services

In general, as an important participant in the electricity market, the current scale of the electricity sales market and the competitiveness of power sales companies are obviously insufficient, and the power purchasing strategy is relatively simple. In particular, the "price war" under the inertial thinking has affected the power sales companies from providing value-added services. At the same time, a considerable number of power sales companies are in the extensive development stage, highly dependent on price differences, and have a single profit model; they are weak in professional strength and lack the ability to control corporate risks. The rise in energy prices, especially coal prices, has magnified the above problems and aggravated the difficulty of power sales companies in operation.

In accelerating the formation of a unified, open, orderly, safe, efficient, and well-governed power market system, power sales companies will play an important role and are an important force in forming a diversified and competitive power market structure. Power sales are both an outlet for power production and an entrance for user services. Since electricity cannot be stored on a large scale, power production and consumption must be basically matched to improve economic efficiency and avoid waste of resources. With technological and institutional innovations, in the future industrial chain, consumption will determine production and occupy a dominant position in the industrial chain, while power sales are the core link in providing services for user power consumption.

In October 2021, the National Development and Reform Commission issued the "Notice on Further Deepening the Market-oriented Reform of Coal-fired Power Generation On-grid Electricity Prices", proposing that all coal-fired power generation electricity should enter the power market in principle. As a supporting policy, the "Notice on Organizing the Implementation of Power Grid Enterprises' Agency Power Purchase" was subsequently issued, emphasizing that after the cancellation of the industrial and commercial catalog sales electricity prices, users of 10 kV and above should, in principle, directly participate in market transactions, and those who are temporarily unable to directly participate in market transactions can be purchased by power grid companies on their behalf. At the same time, it is required to continuously narrow the scope of power grid companies' agency power purchases in light of the development of the local power market.