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Economic dispatch in the electricity sector in China: potential benefits and challenges ahead

Author

Listed:
  • Hao Chen

    (Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing,China - School of Management and Economics, Beijing Institute of Technology, China - Collaborative Innovation Center of Electric Vehicles in Beijing, China -Bei)

  • Chi Kong Chyong

    (Energy Policy Research Group (EPRG), Cambridge Judge Business School, University of Cambridge)

  • Jia-Ning Kang

    (Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, China- School of Management and Economics, Beijing Institute of Technology, Beijing, China- Collaborative Innovation Center of Electric Vehicles in Beijing, Chi)

  • Yi-Ming Wei

    (Center for Energy and Environmental Policy Research, Beijing Institute of Technology, China- School of Management and Economics, Beijing Institute of Technology, China - Collaborative Innovation Center of Electric Vehicles in Beijing, China - Beijing Ke)

Abstract

Unlike the economic dispatch used in most power systems, electricity system dispatch currently used in China is an equal share approach. This form of dispatch has been criticized for its negative influence on system operations, worsening energy security, environmental sustainability and affordability problems. To contribute to on-going electricity market reform discussions, our study employs an optimization model to quantify the economic dispatch savings in the coal-fired power sector. We offer three major findings. First, the heat rates of coal generators in China in 2014 ranged from 273.91 gce/kWh to 348.38 gce/kWh units and as a result of these large differences among generators in different regions, implementing economic (merit order) dispatch will bring economic and environmental benefits. Second, we identify three major political and economic challenges, which hinder the transition from the current dispatch model, namely (i) current running hours are insufficient for cost recovery, (ii) limited cross-border trading due to electricity over-supply and local protectionism, and (iii) political economy problems from generators of different ownership types. Finally, 5.67% of coal used in power generation could be saved if economic dispatch was employed at the provincial level, the value of which equals 0.05% of Chinese GDP in 2014.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Hao Chen & Chi Kong Chyong & Jia-Ning Kang & Yi-Ming Wei, 2018. "Economic dispatch in the electricity sector in China: potential benefits and challenges ahead," Working Papers EPRG 1819, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg1819
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Economic dispatch; electricity; power markets; energy saving; China; coal; optimization model;
    All these keywords.

    JEL classification:

    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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