Optimizing the strategic reserves of coal-fired power units to balance reliability and cost in China's clean energy transition

Jian Zhang, Yuming Huang, Yuanxin Liu, Na Yang and Jiahai Yuan

Utilities Policy, 2025, vol. 96, issue C

Abstract: The strategic reserve mechanism for coal-fired power units provides a viable policy option to address security concerns in the low-carbon transition of the power system. This paper proposes a strategic reserve selection framework combining Monte Carlo simulation and mixed-integer linear programming to identify optimal reserve units by minimizing the cost per unit reduction in expected energy not served, thereby quantifying the economic efficiency of converting units of different capacities such as 300 MW, 600 MW, and 1000 MW and with service ages ranging from 1 to 30 years into strategic reserves. Simulation results for a representative region in East China indicate that converting 1000 MW units at around 20 years of service age yields the best economic benefits. With a renewable penetration rate of 30 %, the minimum strategic reserve cost of a 1000 MW unit is 13,780 CNY/MWh, compared to 15,630 and 26,120 CNY/MWh for 600 MW and 300 MW units, respectively. When the penetration rate increases to 50 %, the minimum cost of 1000 MW, 600 MW, and 300 MW units is reduced by 80.19 %, 77.42 %, and 76.03 %, respectively. Sensitivity analysis shows that increasing reserve margin raises costs, while higher renewable penetration advances the optimal conversion age. Large-capacity units consistently offer superior reduction of expected energy not served, with up to 64.65 % reliability improvement. These findings provide empirical guidance for policymakers in coal-dependent countries, highlighting the cost-effectiveness of prioritizing large, moderately aged units for reserve conversion to balance reliability and economic objectives.

Keywords: Capacity value assessment; Stranded asset mitigation; Renewable penetration impact (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:juipol:v:96:y:2025:i:c:s0957178725001067

DOI: 10.1016/j.jup.2025.101991

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