IEEE Power & Energy Magazine - November/December 2019 - 104

In March 2015, the State Council issued "Several Opinions on
Further Deepening the Reform of the Electricity System," marking
the start of a new round of market reforms in China.
which facilitates VG integration. This measure is especially
important and effective in the Three North regions, as CHP
generators account for a large part of coal-fired generation. In
Jilin, in Northeast China, more than 80% of coal-fired genera-
tors are CHP.
To encourage retrofitting, market mechanisms were intro-
duced in 2014 in Northeast China to provide incentives for
downward regulation from coal-fired generation. With down-
ward regulation, a concept used in China but unknown in
typical electricity markets, power plants are dispatched up or
down depending on market prices. In China, where a mature
electricity market is developing, conventional generators are
operated based on annually allocated full-load hours, and
downward regulation has historically been classified as a
type of ancillary service and compensated at government-
set prices. There is a defined benchmark level for downward
regulation service, which differs by region and generally is
about 50% of the maximum generation capacity of a gen-
erator. If the generator is called upon to provide downward
regulation service when operating above the benchmark, it is
not compensated for its decreased generation. If the genera-
tor is called upon to provide downward regulation service
when it is operating below the benchmark, however, then its
decreased generation will be compensated. In the so-called
downward regulation ancillary service market in Northeast
China, thermal generators can bid for their capabilities to be
dispatched down, and they will be compensated based on
the clearing price, not on fixed tariffs. The government sets
a floor and a ceiling on tariffs.
During four years of operating the downward regulation
ancillary service market in Northeast China, nearly 40 TWh
of VG that would otherwise have been curtailed were applied
to serve loads. In 2018, while VG accounted for 14.28% of
the total generation, the curtailment rate of VG dropped to
3.9%, the lowest level since 2011 in Northeast China.

Limited but Effective Market-Oriented
Effort on VG Trading
In March 2015, the State Council issued "Several Opinions
on Further Deepening the Reform of the Electricity Sys-
tem," marking the start of a new round of market reforms
in China. The country has explored a series of market-trad-
ing steps to promote VG integration. Since a mature elec-
tricity market has not yet been established, a gap remains
between these practices and the electricity-market mea-
sures of countries with mature markets. But several prac-
tices are emerging.
104

ieee power & energy magazine

Bilateral Trading Between VG Producers and
Electricity Users

Bilateral trading between VG producers and electricity users
permits buying and selling electricity among VG enterprises
and some industrial and commercial power users and com-
panies. Power grid enterprises provide power transmission
and distribution services and only charge the transmission
and distribution tariffs. This reduces the electricity purchase
cost of end users, which was traditionally set by the govern-
ment, and facilitates VG integration. In 2018, 2.7 TWh of
interprovincial VG direct trading and 27.7 TWh of provin-
cial VG direct trading were accommodated within the oper-
ating region of the SGCC.
Transregional Trading of VG

The transregional trading of VG power refers to market-
oriented trading conducted between VG companies from
regions with surplus power generation and power grid enter-
prises in other regions. This trading includes medium/
long-term, day-ahead, and intraday. Day-ahead and intra-
day trading, i.e., spot trading, might be best suited for the
volatile characteristics of wind and solar generation and
could become a crucial supplement to medium/long-term
trading. On 18 August 2017, SGCC launched pilot tran-
sregional spot trading of VG power, effectively promot-
ing transregional integration of VG power. In 2018, there
was 71.8 TWh of transregional trading of VG power in the
operation areas of SGCC, an increase of 45.8% compared
to 2017.
Rights Trading Between VG and Coal-Fired Generation

Power generation rights trading between VG power and con-
ventional thermal power refers to the transfer of generation
contracts from conventional thermal-power enterprises to
VG enterprises. In 2018, trade involving 2 TWh of interpro-
vincial power generation rights was conducted between VG
enterprises in the Northwest and thermal-power enterprises
in Central and East China.

Increasing Transprovincial and Transregional
Transmission Capacity
With wind and solar power generation mostly concentrated
in the Three North regions, long-distance transmission is
needed to integrate the VG with the load centers in Central
and East China. In recent years, ultrahigh-voltage (UHV)
transmission technology has improved transregional trans-
mission capacity and enlarged balancing areas.
november/december 2019
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