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Optimal flexible power deployment strategies in China considering the emission trading system

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  • Liu, Zhiwei
  • Lin, Boqiang

Abstract

The rapid expansion of renewable energy sources (RES) in China has heightened the need for flexible power solutions to mitigate the intermittency of wind and photovoltaic generation. Two promising clean options are battery energy storage systems (BESS) coupled with RES and coal power retrofitted with carbon capture and storage (CCS). This study develops an optimization model to determine the cost-effective deployment of flexible power sources under China's Emission Trading System (ETS), evaluating trade-offs among energy security, transition efficiency, and system costs. The analysis reveals that (1) while BESS offers near-term economic advantages, CCS-equipped flexible coal power becomes increasingly competitive as RES penetration grows. (2) ETS plays a pivotal role in shaping deployment strategies, (3) Sensitivity analysis shows that cost variations in BESS and CCS can affect the optimal deployment strategy of flexible power sources. The results suggest that existing coal units should be retained in the near term to meet flexibility needs under the ETS, with the focus shifting to BESS in the medium term and to Coal power with CCS in the long term. Well-designed ETS mechanisms can reduce transition costs and improve efficiency, while technological advances may enhance the long-term viability of BESS.

Suggested Citation

  • Liu, Zhiwei & Lin, Boqiang, 2026. "Optimal flexible power deployment strategies in China considering the emission trading system," Energy Economics, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:eneeco:v:153:y:2026:i:c:s0140988325009296
    DOI: 10.1016/j.eneco.2025.109099
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