Electricity Market Imbalance, Cross-regional Trade, and Transmission in China

Persistent mismatches between electricity demand and domestic generation should not be viewed solely as an “operational-problem-driven imbalance,” but rather as part of striking a balance that accounts for both short-term operational fluctuations and long-term structural differences in generation availability and costs. This paper examines how structural imbalance shapes cross-regional electricity trade and transmission demand, using theoretical analysis and provincial data from China for 2018–23. We show that structural imbalance can improve supply efficiency by enabling the substitution of low-cost electricity for high-cost generation through interconnectors and by signaling investment needs. China's sustained west–to-east electricity flows illustrate this strategy, generating substantial economic value. Empirically, the imbalance-related demand accounts for roughly half of total inter-provincial and inter-regional transmission. We also find pronounced asymmetry in transmission infrastructure: Cross-regional interconnectors operate well below capacity, whereas demand for cross-provincial transmission exceeds available capacity. These findings highlight the importance of structural imbalance in electricity market design, transmission planning, and the development of a unified national electricity market for deeper renewable integration.