China Sets Cornerstone Rules to Scale Up National Power Trading

(Bloomberg) -- China has set the overarching rules that will govern its long-awaited national electricity market, as it bids to match supply and demand in near real-time across the whole country.

It’s hoped that the market, which is expected to launch by 2025, will solve a variety of problems that have bedeviled the sector. Those include excessive concentration in the hands of giant state-owned grid companies, utilities being forced to sell at a loss when prices fall too quickly, and insufficient take up of renewable power.

Ensuring price stability is a cornerstone of the new rules released on Monday by the National Development and Reform Commission, the government’s top economic planning agency. The regulator will be allowed to step in and establish price bands if the market spikes, volatility becomes too much or it suspects prices are being manipulated. China employs similar controls on energy sources like natural gas and coal.

The unified market will harmonize pilots that have been conducted in several different regional markets, widening access to private generators and new entrants, including suppliers of clean energy.

“It’s a milestone for China’s power market reform,” said Qin Yan, an analyst with Refinitiv. “The basic rules are focused more on the overall guidelines and clarifying key concepts, but it is far from being a comprehensive spot-market rules document. It needs a well-defined and detailed implementation plan,” she said.

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