Comments Off on Practical Power Sector Reforms To Boost Reliability, Reduce Risk and Accelerate Carbon Peaking
In 2020, the Chinese government announced its twin intent to peak carbon emissions before 2030 and achieve carbon neutrality before 2060. Since establishing these landmark objectives, often referred to as the “dual carbon targets,” China has set in place a 1+N policy framework and issued high-level directives regarding the power sector. These directives focus on “speeding up the development of the new electric power system” and “optimizing clean energy generation.”
In 2022, RAP released an initial version of this paper, presenting recommendations for power sector reforms to support and complement the 1+N directives. The recommendations are founded on our global team’s analysis of the feasibility of various measures in the power sector in other parts of the world and on our understanding of Chinese policies and institutions, including decades of discussion and collaboration with government authorities and partners. Our recommendations offer practical ways to follow these principles and build on China’s world-leading renewable energy investment — while containing costs and accelerating progress toward the dual carbon targets.
This updated version addresses recent policy statements which imply a perceived trade-off between 1) an optimized new electric power system based on clean energy and 2) other goals such as power sector reliability and energy security. The experience of other countries — and of various pilot reforms in China — suggests, in contrast, that power sector reforms, such as those recommended, can enhance energy security and power sector reliability while also advancing China’s efforts towards the dual carbon targets.
Comments Off on Better, faster, stronger: A look into further electricity market reforms
The European energy crisis was not caused by the electricity market. But it sure made people pay closer-than-usual attention to its design. That is not a bad thing. The electricity market becomes ever more important as large swaths of the economy further electrify. The electricity market therefore needs to be fit-for-purpose. In this briefing, RAP lays out how the electricity market can deliver better, faster and stronger for the energy transition and the people living it.
Any follow-up to the crisis should aim to speed up the replacement of fossil fuels with renewables, demand-side flexibility, storage and energy efficiency. The focus of market reform induced by this crisis should be to elevate the demand side on par with supply-side resources and improve hedging in the market to alleviate the remainder of the ongoing crisis and prepare for the next. This requires boosting a new portfolio of longer-term market features to share risks and benefit consumers.
Here, RAP discusses the following advances in market design:
Short-term markets see location and scarcity
Forward markets allocate risks
Contracts for Difference are carefully designed and procured
Infrastructure planning and operation integrates sectors
Windfall profit taxation as the exception
Capacity remuneration mechanisms fit for flexibility
Comments Off on Comment on NEA’s latest draft policy “Electricity Spot Market Basic Rules”
As part of the ongoing effort to establish a unified national electricity spot market, in December, China’s National Energy Administration (NEA) issued two draft policy documents, “Electricity Spot Market Basic Rules” and “Measures for the Supervision of the Electricity Spot Markets”. These policies propose standardized national spot market rules and market monitoring procedures. This standardization has the potential to provide common ground upon which provinces implement their version of spot market rules. More broadly, the spot market effort has the potential to help support integration of renewable energy.
Sharing the ongoing development of electricity markets challenges and opportunities worldwide, authors Max Dupuy and Chi Gao provided comments to NEA on the two documents, suggesting four practical improvements:
Further specifying the detailed implementation of market monitoring and cost survey procedures to prevent market abuse.
Canceling price ceiling and floor in spot markets to allow better price signals to support system flexibility.
Cautioning against capacity payments, which could exacerbate overbuilding of coal-fired generation capacity.
Dissolving interprovincial barriers to renewable integration and encouraging the establishment of truly unified multi-province dispatch regions.
Comments Off on Discom Business Models Require Changes to Promote Distributed Energy Resources
In this third part of our distributed energy resources (DER) in India series, we look at changes to the current distribution company (discom) business models. These models can overcome the financial disincentives DERs often face. Instead, discoms can embrace and promote DERs to improve system efficiency, increase consumer savings, and address climate change goals.
This short paper discusses the reasons the current discom model should change and how regulators should listen to concerns many discoms have when it comes to the changes associated with promoting DERs.
The paper also discusses the steps regulators can take when it comes to transforming the current discom business model, including:
Require discoms to evaluate non-wires alternatives to meet system needs where practical and cost effective
Require discoms to create distribution system platforms
Require discoms to modify tariff design to send unbundled granular price signals to facilitate DERs
Require discoms to develop DER programs
Develop a process to effectuate changes to the discom business model
Comments Off on Electricity market reform, beyond the gas crisis
In the past, power market reform happened to increase efficiency, to reduce greenhouse gas emissions, or to improve reliability and security of supply. Today in Europe, the desire to further change the market stems from the ongoing energy crisis. As the European Union introduces a new round of electricity market reforms, RAP explores where new market regulation would usefully tackle the root causes of the ongoing energy crisis, meet consumer needs and help Europe move away from fossil fuels.
The current energy crisis is a gas crisis. It is a nightmarish scenario stemming from the Russian invasion of Ukraine and the resulting supply disruption of cheap pipeline gas, converging with decommissioning of nuclear capacity and low hydro output. Hedging strategies by energy suppliers and consumers fell short and unprecedented wholesale market prices for fossil gas made consumer gas and electricity bills explode.
Strategies must therefore improve hedging in the market if Europe is to mitigate the energy crisis – and prepare for the next. To this end, RAP recommends replacing the role of fossil gas with renewables, demand-side flexibility and energy efficiency. More precisely, this requires:
Recognising and promoting demand-side resources as a vital system resource.
Building out more solar and wind, and doing so better and faster.
Protecting basic consumer needs better than in the past.
For policymakers weighing whether to implement these actions, the authors explain the various considerations.
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