In China, generator dispatch—which largely determines how the vast fleet of power plants are used on an hour-by-hour basis—has long been inefficient and a major obstacle to meeting China’s air quality and clean energy goals. In addition to the curtailment of wind, solar, and hydro energy, inefficient dispatch means that relatively dirty coal-fired power plants are often used even when relatively efficient coal-fired power plants are available as replacements. Dispatch practices in China have also been a barrier to investment in flexible resources such as natural-gas-fired power plants and demand response. Several RAP reports are available on this subject, including our explanations of dispatch reform in the context of China’s overall power sector challenges, a survey of relevant international experience, and our technical primer on system operations in China.
Friday’s announcement that China will implement a national emissions trading system also included a commitment to create a new “green dispatch” system, which will prioritize power generation from renewable sources and establish guidelines to accept electricity first from the most efficient and lowest-polluting fossil fuel generators. Although this is not the first Chinese policy announcement regarding dispatch—in fact, there have been many years of pilots and discussion of the issue, including mention in the recent amendments to China’s Air Law—it represents a significant new commitment from the top of the Chinese government to improve the situation.
China’s Current Approach to Dispatch
In most provinces, grid company dispatch centers dispatch power plants (that is, allow individual units to feed electricity into the grid) based on a goal of allowing each generator its allocated number of annual operating hours. Government planning agencies determine the allocated hours annually. This is very different from every other major country in the world, where dispatch is optimized by the system operator based on a “merit order” approach that seeks to minimize short-run costs and, with varying degrees of thoroughness, minimize emissions. Moving toward this typical international approach has been difficult, in part, due to the way generators get paid in China—compensation is based on a fixed tariff per kWh and an administratively-specified number of operating hours. This creates strong incentives for generators to oppose reductions in operating hours that might come from dispatch reform.
As the Economist put it last year, “China is developing clean sources of energy; the problem is getting them used.” China has had huge success in investing in growing numbers of wind turbines and, more recently, rapidly expanding solar capacity. Integrating these new, often variable resources requires a more flexible power system. China’s current approach to dispatch, however, represents a major source of inflexibility and has led to significant curtailment of renewable energy. It is also by no means the only source of rigidity. Integration of large amounts of renewable energy is a complex and multi-faceted challenge that many countries will continue to face. These topics will become increasingly important as China looks toward a future in which renewables make up the lion’s share of power sector resources.
China’s New Push for Power Sector Reform
The new announcement on green dispatch can be viewed as an important boost for China’s power sector reform effort, launched by the State Council and Central Committee of the Communist Party in March. The government’s public “guidance” on power sector reform includes many promising aspects, including statements regarding:
- Dispatch reform and renewable integration, including in the new Air Law, finalized earlier this month;
- Improved power sector planning; and
- Revamped regulation of the grid companies and improved demand-side management.
There will be major challenges in working out the details and moving ahead with implementation in all of these areas. In that sense, this week’s announcement of renewed commitment from the top leadership to dispatch reform is very good news. RAP has ongoing efforts to offer input to this process, building on our global knowledge base and our 15 years of history working on these issues in China.