New situation, new tasks and key issues in the construction of the power market in the southern region

China Energy Storage Network News: Overall situation of the power market in the southern region

Electricity supply and demand in 2021

First, the economy has recovered rapidly and steadily, and electricity consumption has shown a high growth. The maximum load of the Southern Power Grid was 216 million kilowatts, an increase of 8.2% year-on-year (the maximum load after peak shifting was 227 million kilowatts, an increase of 13.7% year-on-year), setting a new record for 6 times; the total electricity consumption of the whole society was 1450.6 billion kilowatt-hours, an increase of 11.1% year-on-year, and an average increase of 8.0% over two years. Second, the supply of primary energy is insufficient, and the power supply continues to be in short supply. In 2021, the water inflow in the western basin continued to be dry and the flood season was late, the prices of coal and gas were high, and the thermal power generation capacity was insufficient. Starting from April, except for Hainan in the southern region, Guangdong, Guangxi, Yunnan and Guizhou provinces and regions have successively implemented long-term, large-scale orderly electricity consumption, and the peak shifting range is mainly controlled in the industrial field. Since October, the coal reserves have gradually improved, and there has been no peak shifting power restriction in the entire network since November 4. Third, the requirements for power supply guarantee have been resolutely implemented, and the power supply guarantee has achieved remarkable results. Under the strong leadership of the CPC Central Committee and the State Council, relevant parties in the southern region have carried out a lot of work. Overall, no situations have occurred that affected people's electricity consumption, and no major negative public opinion has occurred, which has effectively guaranteed the economic and social development of the five southern provinces and regions.

Electricity supply and demand in 2022

From the perspective of electricity demand, the growth of electricity consumption in the southern region faces many uncertainties, and it is expected to maintain steady growth. The maximum unified load is 241 million kilowatts, a year-on-year increase of 6.1%. From the perspective of supply capacity, it is estimated that the installed capacity of the entire network will be 427 million kilowatts by the end of 2022, of which clean energy installed capacity is 255 million kilowatts, accounting for 60%, and new energy installed capacity is 102 million kilowatts, accounting for 24%. However, there is still great uncertainty in the supply of power coal this year, and the supply guarantee of coal and gas has become the key to improving power supply capacity. From the perspective of supply and demand balance, the power supply and demand situation in the southern region will remain severe in 2022. Among them, Guizhou has insufficient power coal supply due to frequent coal mine accidents, resulting in serious obstruction of non-stop units. It is expected that Guangdong will have tight power supply throughout the year, and there will be a certain power supply gap in the second quarter; other provinces will experience periodic power shortages.

Market operation

First, the market system has been further improved. At present, the southern region has basically established an electricity market system with "two-level market coordinated operation, and close connection with spot and ancillary service markets in the medium and long term". The medium and long-term market is becoming more mature, forming a full-time, multi-variety trading system; the southern spot market (starting in Guangdong) took the lead in launching trial operation nationwide, and entered the continuous settlement trial operation in November 2021; the regional ancillary service market system gradually replaced the traditional "two detailed rules" compensation planning system, and the regional frequency regulation ancillary service market entered formal operation in July 2021, and the regional standby market was accelerated. Second, market players were further liberalized. By the end of 2021, the number of registered market players in the southern region exceeded 100,000, a year-on-year increase of 51.2%, including 747 power generation companies, 98,000 power users, and 920 power sales companies. Third, the degree of marketization has been further improved. In 2021, the amount of electricity traded in the southern region was 579.9 billion kWh, a year-on-year increase of 15.2%, accounting for 40% of the total electricity consumption in the society, nearly 6 percentage points higher than the national average (34.3%). Among them, the amount of electricity traded in the market in Yunnan accounted for about 70% of the total electricity consumption in the society, ranking first in the country; the amount of electricity traded in the market in Guangdong was about 295.2 billion kWh, ranking second in the country.

Progress of reform

First, strengthen the implementation of electricity price reform policies to effectively guarantee electricity supply. 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" (Development and Reform Price [2021] No. 1439). The power trading institutions in the southern region actively promoted the implementation of policies, established and improved a market-oriented electricity price formation mechanism that can "rise and fall", further enhanced the enthusiasm for power generation through price signals, and strengthened market price and market power monitoring to stabilize market expectations. After the issuance of Document No. 1439, by the end of 2021, 17,000 new industrial and commercial users had registered in the southern region, accounting for 17% of the cumulative registrations; the amount of direct trading transactions in 2022 increased by 18.5 billion kWh year-on-year, and the annual direct trading prices in Guangdong, Guangxi, Yunnan, Guizhou, and Hainan increased by 21.4%, 26.0%, 13.1%, 28.6%, and 17.0% year-on-year, respectively. Second, innovate and improve the power trading mechanism, and actively integrate it into serving the "dual carbon" goals. In 2021, the CPC Central Committee and the State Council issued important policy documents such as "Opinions on the Complete, Accurate and Comprehensive Implementation of the New Development Concept and the Carbon Peak and Carbon Neutrality Work" and "Action Plan for Carbon Peaking Before 2030" in response to the "dual carbon" goals. The power trading institutions in the southern region actively built a power market mechanism that adapts to the low-carbon transformation and development of energy, and jointly issued the "Southern Regional Renewable Energy Power Consumption Trading Rules (Trial)" and "Southern Regional Green Power Trading Rules (Trial)". Organize and carry out renewable energy power consumption transactions in the southern region. In 2021, it took the lead in establishing a price signal for renewable energy power consumption warrants in the country. In 2022, the trading scale hit a domestic record high, with a total of 7.7 million hydropower consumption certificates and 2.8 million non-hydropower consumption certificates traded, equivalent to 10.5 billion kWh of power consumption. Undertake the national green power trading pilot, trade 1.63 billion kWh of electricity, establish a "power price + environmental premium" price mechanism, and stimulate the green power consumption capacity of the southern region. Third, vigorously promote the independent and standardized operation of trading institutions to ensure market fairness and efficiency. The power trading institutions in the southern region adhere to the strategies of joint-stock establishment, market-oriented operation, legal operation, and standardized management, and promote the establishment and operation of trading institutions in a standardized manner. They are the first in the country to form a diversified equity structure. Among them, four trading institutions in Guangzhou, Guangdong, Kunming, and Guizhou have successfully realized the collection of trading service fees. On this basis, we actively implement the reform requirements of the "Implementation Opinions on Promoting the Independent and Standardized Operation of Power Trading Institutions" (Development and Reform Committee Reform [2020] No. 234), and take the lead in fully completing the shareholding reform of trading institutions. At present, the proportion of power grid equity in each trading institution in the southern region does not exceed 45%; the innovative implementation of cross-holdings between trading institutions has laid a good foundation for further implementation of institutional integration and market integration; the newly added shareholder units are basically third-party professional research institutions, which further reflects the independence and standardization of the operation of the trading institution platform.

New tasks facing the construction of power market under the new situation

With the issuance of the "Guiding Opinions on Accelerating the Construction of a National Unified Electricity Market System" (NDRC [2022] No. 118), China's electricity market construction has shifted gears and accelerated, and the electricity market-oriented reform has entered a new stage.

The unified large market is accelerating, and the construction of the power market needs to implement new requirements and undertake new missions. Document No. 118 requires the acceleration of the construction of a unified national power market system, the improvement of a multi-level unified power market system, and the guidance of coordinated operation of power markets at all levels. However, judging from the current market progress, there are still problems such as an incomplete power market system, imperfect functions, inconsistent trading rules, and market barriers to cross-provincial and cross-regional transactions. Under the national unified power market system, there is inevitably a contradiction between overall and local interest adjustments. It is necessary to further strengthen top-level design and system promotion, guide the coordinated operation and integrated development of power markets at all levels, and formulate unified trading technology standards and data interface standards in terms of technology to promote the effective connection and interconnection of systems.