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Electricity Market Reforms for Energy Transition: Lessons from China

Author

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  • Yuk-shing Cheng

    (Department of Accountancy, Economics and Finance, Centre for Sustainable Development Studies, Hong Kong Baptist University, Kowloon Tong, Hong Kong)

  • Man-kit Chung

    (Department of Accountancy, Economics and Finance, Centre for Sustainable Development Studies, Hong Kong Baptist University, Kowloon Tong, Hong Kong)

  • Kam-pui Tsang

    (Department of Economics, KU Leuven, 3000 Leuven, Belgium)

Abstract

In response to the rising importance of the climate agenda, many countries have restructured their electricity markets to facilitate the utilization of renewable energy. China is an interesting case because it has expanded its utilization of wind and solar energy with unmatched speed. This review starts with an analysis of the 2002 reforms that uncoupled electricity production from transmission. The investigation covers the period leading up to the 2022 proposal, which aimed to build a nationally integrated electricity market. The analysis suggests that a careful alignment of incentives for key market players to produce and consume renewable energy is vital during the process of energy transition. The introduction of feed-in tariffs in 2009 for wind energy, which were subsequently extended to solar energy, stimulated a high growth in installed capacity. However, a high electricity curtailment rate resulted. Since 2018, the Chinese government has resorted to curtailment caps and renewable portfolio standards to increase the utilization of renewable electricity. After the announcement of the “dual carbon goals” in 2020, the Chinese government launched a series of reforms that aimed to nurture growth in the green electricity market and the formation of a nationally integrated electricity market. The removal of interregional trade barriers is a key element of China’s current electricity market reforms and will be crucial to determining whether China can achieve its climate goals.

Suggested Citation

  • Yuk-shing Cheng & Man-kit Chung & Kam-pui Tsang, 2023. "Electricity Market Reforms for Energy Transition: Lessons from China," Energies, MDPI, vol. 16(2), pages 1-16, January.
    • Handle: RePEc:gam:jeners:v:16:y:2023:i:2:p:905-:d:1034388
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