Incentive

Quantum mechanics

Engineering

Ecology

Biology

Economic system

Market power

China

Economics

Power (physics)

Market economy

Monopoly

Business

Competition (biology)

Demand response

Physics

Renewable energy

Politics

Political science

Economic policy

Electricity market

Industrial organization

Finance

Investment (military)

Electricity

Order (exchange)

Electrical engineering

Energy Policy

China's electricity demand has grown rapidly over only two decades and is currently the largest in the world. This was largely owing to a framework of regulation in which governments regulated prices and quantities, and there was ample incentive for investment. As the growth in electricity demand has slowed and the use of renewable energy has been impeded by integration-related challenges, China has embarked on a new round of power sector reform, with a focus on market construction. Considering four years of market experiments at the provincial level, we review the backgrounds and goals of the reforms, as well as the current progress toward meeting the initial targets. Then, we discuss the key challenges to be overcome to achieve complete implementation of the reforms, with special emphasis on the system of dispatch. We recommend that China's reforms, in order to achieve the goal of market-based competition, must embrace short-term markets, a greater role for independent regulation, compatibility with renewable energy, and inter-provincial coordination.

Power market reform in China: Motivations, progress, and recommendations