The recurring extreme weather in recent years continues to pose challenges to power system security and supply. In the context of building a new power system, further reconciling the deep decarbonization and security of supply needs of the power system requires the joint efforts of all stakeholders. Against this backdrop, the Shanghai Institutes for International Studies and the international environmental organization Greenpeace launched a series of articles focusing on low-carbon security solutions for power systems. It aims to provide feasible solutions for achieving power system security by sharing the perspectives and insights of different experienced power practitioners and focusing on the potential roles of different stakeholders.
With the leapfrog development of renewable energy in the past few years, China’s power system will achieve several important milestones in 2023: first, the total installed capacity of wind and solar power will reach 820 million kilowatts at the beginning of the year; second, the total installed capacity of renewable energy will exceed 1.322 billion kilowatts (1322GW) by mid-year, accounting for more than coal power, about half of the total installed capacity (about 49%); third, the cumulative new installations of wind and solar in the first half of the year have exceeded 100 million kilowatts (109GW), accounting for 71% of the total new installations, and contributing more than half of the new power generation (above 54%). By this point, China’s new power system dominated by wind and solar has taken initial shape. According to the International Energy Agency’s definition, China has entered the third stage of power system transformation – the stage where the system operation mode is mainly determined by intermittent renewable energy . When the system is dominated by wind and solar power generation, it will bring higher volatility and randomness, posing some pressure on grid security and stability. How to ensure large-scale grid integration of wind and solar while ensuring power supply security is the main dilemma facing the current power system. In addition, the power system also needs to address various challenges including changes in energy supply and demand structure, continuous growth in peak loads, frequent extreme weather, etc. In the context of carbon peak and carbon neutrality goals, how to resolve the above contradictions at this stage is particularly daunting and complex.
Currently, as the backbone of China’s power structure and “ballast”, coal power faces double pressure of carbon reduction and security of supply. With the rapid increase in wind and solar installations, coal power has encountered the largest construction boom since 2015. According to statistics, in 2022, a total of 90.72 million kilowatts of new projects were approved nationwide, five times the amount approved in 2021. In the first half of 2023, newly approved projects totaled 50.4 million kilowatts, already more than half (about 56%) of the total approved in 2022, and most of these projects were approved through fast-track channels, greatly compressing the timeline from preliminary work to construction. These new projects are aimed at easing power supply security issues such as “power rationing” experienced by many provinces and cities in the past two years. But with the carbon peak and carbon neutrality targets and the sharp decline in industry economic returns and the heightened risk of comprehensive losses, the economic rationality, reasonableness and necessity of large-scale new coal power installations have not been fully demonstrated. As coal transitions from the dominant power source to a supporting and regulating role, there is a view in the industry that new coal power installations do not necessarily mean a significant increase in coal power generation and corresponding carbon dioxide emissions, which is not contradictory to achieving the “dual carbon” goals. In response, a policy brief published by the University of Maryland Center for Global Sustainability this March quantified and analyzed two scenarios for the generation and operation of newly installed coal power capacity. If coal power capacity continues to increase to 1.5 billion kilowatts by 2030, based on the current situation, Scenario 2 is more likely than Scenario 1, but there are still many uncertainties in reality. For example, how to ensure high renewable energy absorption, how new coal power can maintain low-level operation under tremendous economic pressure and sharply increased comprehensive loss risks, and how to reasonably control load growth on the demand side, etc. Therefore, the actual situation has a high probability of falling between the two scenarios. Scenario 2 also needs to pay special attention to the contradiction between existing and incremental coal power. As the transition to a new power system and the advancement of “dual carbon” goals proceed, the overall survival space for coal power is limited, and existing coal power will be most directly affected by the continued expansion of incremental coal power, not new energy. China’s existing coal power units generally have short service lives, advanced technologies, and high efficiencies. They already face tremendous transition pressures. With proper planning, existing units can be phased out in an orderly manner by undergoing ultra-low emission and flexibility retrofits or co-firing with biomass, installing carbon capture and sequestration (CCUS) and other measures. The massive new installations will greatly compress the orderly transformation space of the coal power industry as a whole, causing the economic costs of transformation to multiply.
How to ensure the security and stability of power systems with high renewable energy penetration is not only a topic faced by China, but also by many countries today. In Western countries, during the initial transition, the use of more flexible gas turbines achieved multiple goals such as improving grid stability while increasing the proportion of renewables, shutting down old coal power units, and reducing carbon dioxide emissions. But due to China’s relatively scarce natural gas resources, large-scale flexible coal power units have become a stopgap measure. However, whether new coal power is the optimal solution for power supply and flexibility services, and the economic, social, environmental and climate impacts of large-scale new installations still need further systematic demonstration. The rapid large-scale deployment of such capital-intensive, long-life projects will inevitably bring very high lock-in risks, and it is still unclear who will bear these additional costs.
In fact, from the perspective of different technical solutions, coal power does not have an advantage in flexibility compared to gas power, pumped hydro storage and other technologies, especially in terms of rapid ramping, short-term regulation, and start-stop adjustment. Therefore, as the proportion of renewables continues to increase, ensuring grid flexibility and stability requires exploring and large-scale deployment of various technical strategies and capacity resources. Closely bundling coal power with wind and solar will greatly hinder investment, development, application and policy choices for other technical solutions to a large extent. In recent years, China has vigorously promoted the construction of two integrated new power systems – “wind-solar-hydro-thermal-storage” and “source-grid-load-storage”. In the short term, in addition to breaking through major technical and economic barriers, further deepening power system reforms and improving market mechanisms are needed. The main policy measures and technical paths include:
Vigorously develop and apply various energy storage technologies. In addition to pumped hydro storage, which currently dominates, various new energy storage technologies such as electrochemical storage, compressed air, thermal storage, and hydrogen storage have also begun to grow rapidly. Due to the differences in discharge duration and application scenarios of various technologies, the extensive use of diverse energy storage can meet the different needs for grid flexibility regulation at different spatial and temporal scales. Currently, energy storage in China is concentrated on the supply side, mainly as a mandatory supporting facility for wind and solar construction, lacking market means to improve its economic viability over the entire life cycle. The current ancillary services market is still in the exploratory stage. Energy storage is unable to compete with low-bidding coal power for peak shaving. Its scarcity as a capacity resource is also not fully reflected and compensated, thus reducing its enthusiasm for participating in market transactions.
Accelerate inter-provincial and inter-regional power balancing. China’s energy supply and demand are unevenly distributed. Establishing a unified national electricity market can fully stimulate the optimal use of clean, efficient and economical resources. China has the world’s largest power system, but due to the complexity of grid dispatching and operation rules and local administrative factors, inter-provincial barriers to power trading and interconnection are still prominent. At the same time, due to the lack of a sound market mechanism, it is difficult to coordinate regional resources based on economics in the short term and achieve “unified planning nationwide”. Therefore, transitional solutions should be actively explored in the process of establishing and improving a unified national market, such as trying bilateral and multilateral inter-provincial trading. This will alleviate local power supply pressures to some extent.
Give full play to the role of demand-side management and response. With the continuous development and application of technologies such as distributed energy, user-side storage (such as electric vehicles), smart grids, etc., the definition of demand-side will also break through traditional boundaries. Its functions and roles have become more diverse and can play an important role in the new power system. In the short term, it is necessary to further tap the huge potential of the demand side, for example, by better linking and coordinating administrative measures and market mechanisms, enabling the user side to obtain information in a timely manner and actively participate in the market, so as to more fully and effectively allocate electricity usage time, and ultimately play a “peak shaving and valley filling” role in the system.
Clarify the logic and mechanisms of capacity and ancillary services markets, and promote the improvement of a power market system adapted to the proportion of renewables in the power system. How to maximize grid flexibility while ensuring energy security as a prerequisite, and increase the proportion of renewable energy is the key to achieving the dual-carbon goals and building a new power system. An effective power market is an important mechanism to guarantee and improve the flexibility of the power system, and it can provide effective economic incentives for power ancillary services such as peak load shifting. However, the current capacity and ancillary services markets are still immature. This is reflected not only in the lack of incentives from the price mechanism for power sources providing flexibility services, but also in the lack of a full understanding and systematic analysis and forecasting of the economic, social and environmental costs and benefits of various power sources participating in ancillary services, including coal power, gas power, pumped hydro storage, energy storage, etc. This may have a negative impact on the long-term economic benefits of the power industry and affect the realization of the “dual carbon” goals. Therefore, technical and policy research on this issue should be strengthened to clarify the relationship and logic between power development, capacity and ancillary services market efficiency, and renewable energy utilization, and continuously enhance the coordination between power market system construction and energy security and “dual carbon” goals.
