context: Provincial pilots for spot power markets have been in place since 2017. NDRC (National Development and Reform Commission) and NEA (National Energy Administration) issued basic rules for the spot power market (trial) on 15 Sept 2023, a significant document that sketches the process for implementing Communist Party of China and State Council’s Opinions on further improving the unified national market as well as NDRC and NEA’s Guiding opinions on accelerating the construction of a cohesive national power market system.
In pilot areas, the spot power market has proven that it can enhance resource allocation and facilitate the transition of electric power production from the conventional planning paradigm to a market-driven approach, states a readout from NDRC (National Development and Reform Commission) and NEA (National Energy Administration) on the new basic rules for the power spot market. This transition has bolstered the system's
- capacity to ensure a secure power supply during periods of high demand
- agility to adapt and contribute to system adjustments, particularly in accommodating the growing demands of new energy sources
The ‘Basic Rules’ aims to reinforce oversight in regions where the spot power market has been consistently operational and serve as a blueprint for regions yet to embark on spot power market initiatives.
The rules consist of 129 articles spread across 13 chapters and include an annex that provides explanations of key terms. Essentially, there are four main aspects to these rules
- provide guidance on establishing both inter-provincial and provincial/regional power markets
- establish guidelines for designing the mechanics of the spot power market
- clarify the operational requirements for running the spot power market effectively
- ensure consistency in terminology related to the spot power market, promoting clarity and common understanding within the industry
The rules also incorporate three crucial aspects of institutional design, aligning with the dual carbon goals and the new power system development requirements
- outline key short-term and long-term tasks for the spot power market encompassing areas such as market rule dissemination, technology infrastructure development, entity training, rule dissemination, market analysis and risk management
- the rules also specify the prerequisites and tasks at various stages, including simulated trials, settlement trials and formal operations of the spot power market
- a dedicated chapter on market connection mechanisms, which outlines requirements for consensus-building among parties involved in spot, medium- to long-term transactions, ancillary services and agency power purchases, including elements like time-of-use power, pricing and settlement references
- it also promotes joint clearing for frequency regulation, backup services and the spot market, while exploring market-driven capacity compensation mechanisms
- introduce a risk prevention and control chapter with a mechanism for classifying and managing market risks, clearly defining the roles and responsibilities of relevant departments within the NEA’s dispatch agencies and provincial authorities