Assessing China’s provincial electricity spot market pilot operations: Lessons from Guangdong province

Yang Liu, Zhigao Jiang and Bowei Guo

Energy Policy, 2022, vol. 164, issue C

Abstract: Aiming at improving the efficiency of power generation, China announced its plan to reform the electricity wholesale market. A focal point of the wholesale market reform is to introduce a stable and reliable electricity spot market. Using Guangdong’s spot market pilot operations as a case study, this article is the first to use rich ex-post market data to assess the efficacy of China's electricity spot market. To investigate the stability of the spot market, we estimate the relationship between prices and demand. We find the electricity supply curve is much steeper when demand approaches the capacity limit, suggesting the need to invest more thermal capacity to stabilize spot market prices (SMPs). To investigate the reliability of the spot market, we first estimate the market distortion caused by a price floor on SMPs, and we then examine whether local market power exists. The price floor on SMPs resulted in a welfare transfer from consumers to producers, the monetary value of which equals to 1.3% of the tradable value of the day-ahead market. We also find evidence of local market power in the east of Guangdong, suggesting the need to invest in more power lines connecting the west to the east.

Keywords: China power market reform; Market distortion; Local market power; Electricity spot market (search for similar items in EconPapers)
JEL-codes: D61 Q41 Q48 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:164:y:2022:i:c:s0301421522001422

DOI: 10.1016/j.enpol.2022.112917

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