The pricing mechanism of the new power system must be improved as soon as possible. The pricing mechanism of hydropower, energy storage, offshore wind power, etc. needs to be clarified.

China Energy Storage Network: The power market is an important part of building a new power system, and an effective price mechanism is the core of the power market's self-regulation and healthy operation. With the issuance of the "14th Five-Year Plan for Modern Energy System", the relevant price mechanism needs to be improved urgently.

Implementing green and low-carbon concepts through price reform

Since the second half of 2021, relevant departments have intensively issued more than 20 policies on prices, market mechanisms, energy conservation and carbon reduction, involving electricity price reform, market construction, new energy consumption and other fields, with unprecedented intensity, sending a clear signal to economic and social development and energy and power operations. In particular, the "Notice on the Action Plan for Deepening Price Mechanism Reform during the 14th Five-Year Plan Period" issued by the National Development and Reform Commission proposed key tasks for price reform in the "14th Five-Year Plan" period to cooperate with the goals of carbon peak and carbon neutrality from the two aspects of energy supply and consumption, reflecting the concepts of green consumption, low-carbon transformation, market support, and price priority. Against this background, for power companies, the following principles need to be clarified:

Actively grasp the laws of power transformation and development. The central power companies promote the goals of carbon peak and carbon neutrality, which is driven by external factors such as carbon reduction and pollution reduction, energy transformation, and internal requirements such as clean development of enterprises. Relevant policies are gradually being improved. Costs are bound to increase. The construction of a new power system involves major interest adjustments and cost increases. On the one hand, it is the transfer of benefits from the old power system to the new power system; on the other hand, it is the cost paid by economic and social development to support the construction of a new power system. Policies and markets need to complement each other. The incentive price policy of my country's green and low-carbon policy system is a baton, which needs to match the time and space rhythm of economic and social development. This will be conducive to promoting the close integration of effective governments and effective markets.

Power market price reform is the focus

During the 14th Five-Year Plan period, in order to scientifically plan price policies and market rules and enhance the competitiveness of power generation companies, it is necessary to handle the relationship between development and emission reduction, the overall and the local, long-term goals and short-term goals, and the government and the market, and it is necessary to focus on electricity market price reform.

Reflect the commodity value of electricity. With the deepening of electricity market reform and the expansion of the spot market, accurately reflecting the value of various power sources in the electricity market and maintaining a reasonable price ratio of the value of various power sources are the focus and difficulty of electricity price reform. This includes cost compensation for the "three-in-one" (coal-fired power energy conservation and consumption reduction, heating transformation, and flexibility transformation and manufacturing), and also requires the market to correctly identify the environmental value of electricity, electric energy, etc. in time and space, and to achieve effective connection between the electricity market, green certificate market and carbon market. At the same time, after power generation companies are transformed into comprehensive energy suppliers, they need to clarify the cost and pricing of related products such as electricity, heat and cold.

The new costs need to be borne fairly by society. The construction of new power systems, especially the construction of large-scale wind and solar bases focusing on deserts, Gobi and wastelands and the realization of cross-provincial transmission, requires the addition of new thermal power, coal-fired power flexibility transformation, pumped storage and other energy storage and UHV lines, grid interconnection lines, as well as accurate load forecasting technology and weather forecast systems. The cost of power generation, transmission and system stability will increase, and it needs to be borne scientifically and fairly among various market players.

Electricity prices should reflect both market competition and policy requirements. As the prices of primary energy rise at home and abroad, electricity prices will enter an upward range, which will in turn increase social energy costs and affect economic and social development. When local governments implement national macro policies, they need to implement differentiated electricity price policies for high-energy-consuming enterprises in light of actual conditions, which will help eliminate backward production capacity. However, from the perspective of the electricity market, stable loads are high-quality users. At the same time, many high-energy-consuming products are exported overseas, and the cost of energy use will affect their international competitiveness. Therefore, electricity prices are affected by multiple factors such as market supply and demand, macro-control, and economic and social development. They should reflect both market competition and policy requirements.

Price signals need to be scientifically reflected and smoothly transmitted. Market construction aims to achieve the highest efficiency under equilibrium conditions, and the scarcity of resources will inevitably be reflected in prices. The market-oriented reform of the power industry needs to meet the requirements of the construction of a new power system, and the scarcity of various resources is not exactly the same. Among them, existing thermal power is a valuable resource and an important basis for ensuring sufficient capacity in the power market. It must have a basic living space; the power grid channel is an important carrier for the consumption of new energy. Factors such as fair distribution, usage rules, cost recovery and charging pricing will determine whether it can operate efficiently; the price signals of market entities such as sources, networks, and loads need to be scientifically reflected and effectively transmitted to end users.

At present, it is necessary to clarify the pricing mechanism of hydropower, energy storage, offshore wind power, etc.

The Sichuan-Tibet region contains a large amount of hydropower resources, but the development is difficult, the cost is high, and it is difficult to consume. It needs to be transmitted over long distances through ultra-high voltage. The premise is to clarify the overall layout of local hydropower development and wind and solar power, the cost of bundled transmission, and the price of hydropower. Although the relevant departments have issued a pricing method for pumped storage power stations, it has not been implemented. Further research is needed on the pricing basis and policies, and other energy storage facilities also need to improve the price mechanism. The cost of submarine cables has a great impact on offshore wind power's participation in the power market competition, and the offshore wind power pricing mechanism needs to be clarified. The connection mechanism for cross-provincial power transmission to participate in the inter-provincial power market is not yet perfect and needs to be further optimized.

In addition, on the premise of maintaining overall stability in residential, agricultural and utility electricity prices, it is necessary to further optimize policies such as tiered electricity prices, time-of-use electricity prices, and differentiated electricity prices, improve market rules, and ensure fair burdens for all types of users.

In short, the price mechanism is not only the core of the efficient operation of the power market, but also the key to improving the efficiency of power trading. We need to conduct in-depth analysis of the historical evolution, background, and impact of the electricity price policy, study and solve new problems and difficulties, ensure the overall stability of power supply and prices, protect the bottom line of people's livelihood, and promote the healthy and stable operation of the economy and society.

(The author is a specially appointed expert of China Price Association)