Trends and Outlook of my country's Electric Power Market in 2023

The wave of power reform is sweeping in, and 2023 is a new round of my countryPower system reformThe 8th year of development.

Over the past 8 years, our countryElectricity MarketThe reform of the industry has begun to show results, the diversified competitive landscape has initially formed, the commodity attributes of electricity have been further revealed, the market's role in optimizing the allocation of resources has been enhanced, and the electricity volume of market-oriented transactions has been greatly increased. In 2023, my country's power reform will accelerate into the deep water zone, and strive to solve the key difficulties of the power market. The national unified power market system will accelerate the construction of the provincial spot market, the provincial spot market will achieve full coverage, and the green electricity and green certificate transactions will be accelerated... In 2023, a new round of provincial power grid transmission and distribution prices may be announced, and more new energy storage will also become market entities, and differentiated services of power sales companies will become the mainstream.

(Source: Polaris Power Sales Grid Author: Rosa)

The construction of a unified national power market system is accelerated

At present, my country is accelerating the construction of a national unified power market system. In January 2022, the "Guiding Opinions on Accelerating the Construction of a National Unified Power Market System" (hereinafter referred to as the Guiding Opinions) was officially released, putting forward specific requirements for improving the multi-level unified power market system, and encouraging the construction of regional power markets in regions that undertake major national regional strategies. The opinions propose that in 2025, my country's unified power market will be initially built, with the national market operating in coordination with the province (autonomous regions, municipalities)/regional markets, and the integrated design of medium- and long-term, spot and auxiliary service markets of electricity. By 2050, the unified power market system will be basically completed, the national market and provinces (autonomous regions, municipalities)/regional markets will be jointly operated, and new energy will fully participate in market transactions.

Now that the guidance has been released for a year, the pace of building a unified national power market is accelerating.

In 2023, all provinces in the State Grid region will accelerate their pace in the construction of a unified power market system. From the 2023 energy-related plans issued by various places, we can see that deepening the reform of the power market and the construction of the unified power market system have been included in one of the key tasks of the year. If Liaoning plans to build a Northeast regional energy trading center, Shanxi will actively participate in the formulation of national electricity spot trading rules and regional power market construction...

In 2023, the southern regional power market will enter the stage of power regulation and trial operation to achieve the optimal allocation of power resources. The southern regional power market will form a unified platform for joint operation between provinces and provinces, and carry out multi-variety, high-frequency cross-regional and cross-provincial power transactions.

A new round of provincial power grid transmission and distribution prices will be announced soon

At present, the pricing of transmission and distribution power in my country's third regulatory cycle has been fully implemented and will be announced this year.

Transmission and distribution price reform is an important part of the new round of electricity reform and a key measure to "control the middle". The purpose is to break the monopoly of the power grid and lay the foundation for the marketization of electricity prices.

Since 2015, in accordance with the decisions and deployments of the CPC Central Committee and the State Council, the National Development and Reform Commission, together with relevant departments, has comprehensively promoted the reform of transmission and distribution price, carried out the first round of transmission and distribution cost supervision and audit, and achieved positive results. Through strict cost supervision and audit, the unrelated and unreasonable expenses that should not be included in the pricing costs of power transmission and distribution have been reduced by approximately 128.4 billion yuan, and the reform dividends are all used to reduce the electricity costs of the real economy. By improving the independent transmission and distribution price system, the degree of marketization of electricity prices has been promoted to significantly increase. The proportion of market-oriented electricity transactions in my country has increased from 14% before the reform to 60.8% in 2022, effectively promoting the rational allocation of power resources.

In 2019, the National Development and Reform Commission organized a new round of power transmission and distribution cost supervision and audits. The scope of supervision and audits includes provincial power grids in 30 provinces except Tibet and five regional power grids in North China, East China, Northeast China, Northwest China, and Central China. The supervision and audit period is from one year after the first supervision and audit cycle to 2018. Among them, the provincial price department where the power grid company is located is entrusted to be responsible for the supervision and audit; the regional power grid cost supervision and audit is entrusted to jointly supervise and audit relevant provincial price departments within the region.

In September 2020, the National Development and Reform Commission issued the "Notice on the Approval of Provincial Power Grid Transmission and Distribution Prices from 2020 to 2022", announcing the transmission and distribution price tables of 33 provincial power grids, which will be implemented from January 1, 2021. This is the second regulatory cycle of provincial power grid transmission and distribution prices, marking the basic improvement of my country's transmission and distribution price supervision system. Compared with the first regulatory cycle, the approval of transmission and distribution prices in the second regulatory cycle has made important breakthroughs in many aspects, manifested as "one comprehensive and three firsts", that is, the comprehensive improvement of pricing rules, standardized pricing procedures, and achieved strict pricing according to the mechanism; for the first time, the one-time full coverage of the transmission and distribution prices of all provincial power grids and regional power grids was achieved, the theoretical transmission and distribution prices of voltage grades were approved for the first time, and the "grid-to-grid" transmission price was included in the provincial power grid review price for the first time. The transmission and distribution price verification in the second regulatory cycle has been made, and the price reduction space has been actively used to further streamline the relationship between the transmission and distribution price and the catalog sales price, creating better conditions for expanding the scale of market-oriented transactions; it has further optimized the transmission and distribution price structure, narrowed cross-subsidies, laying the foundation for the next step of improvement of relevant policies; it has further solved some historical problems and eased the electricity price contradictions in many provinces; it has further achieved a steady decline in the transmission and distribution price level, and most provinces have focused on reducing the transmission and distribution prices in large industries. At the same time, taking into account the actual situation of the provinces that transmit power, a reasonable transmission price of transmit power will be formulated, which will effectively promote the optimal allocation of power resources on a larger scale.

In May 2022, the National Development and Reform Commission deployed on-site review of the cost supervision and audit of the third regulatory cycle of power transmission and distribution pricing. The scope of the cost supervision and audit of the third regulatory cycle includes 33 provincial power grids and 6 regional power grids, and the supervision and audit period is from 2019 to 2021.

Although the latest round of national provincial transmission and distribution prices is still to be released, some regions have already issued trial transmission and distribution prices. The Development and Reform Commission of the Xinjiang Production and Construction Corps has used the Eighth Division Corps as a pilot and issued the "Notice of the Corps Development and Reform Commission on the Approval of the Power Grid Transmission and Distribution Price (Trial) of the Eighth Division Power Grid from 2022 to 2025" (Primary Development and Reform Price Regulations [2022] No. 174).

How to supervise and review the transmission and distribution prices of the third regulatory cycle that the industry is more concerned about? The National Development and Reform Commission issued the "Guiding Opinions on Accelerating the Construction of a National Unified Power Market System" in 2022, "Strengthen the supervision of power grid transmission and distribution licensing revenue, promote the separate accounting of power transmission and distribution business and power purchase and sales business of power grid enterprises, and properly handle policy-based cross-subsidies. Improve the flexibility of the cross-provincial and cross-regional transmission price mechanism, and explore the charging of transmission fees by means of the optimal path combination of cross-provincial and cross-regional transactions." It can be seen that the separate accounting of power transmission and distribution business of power grid enterprises and power purchase and sales business will become a general trend, and further divest the competitive and non-competitive businesses of power grid enterprises.

Full coverage of provincial spot market

In 2023, my country's provincial spot market is expected to achieve full coverage. This is mainly reflected in the fact that the first batch of pilot projects have entered the long-term settlement trial operation one after another, the second batch of pilot projects have successively carried out simulated trial operation, and non-pilot areas have also issued spot plans one after another.

As one of the important layouts for building a national unified power market system, the pilot of the power spot market is being accelerated. The first batch of electric spot pilot projects in the south (starting from Guangdong), western Meng, Zhejiang, Shanxi, Shandong, Fujian, Sichuan and Gansu were finalized in 2017 and launched a full simulation trial operation at the end of June 2019. Since then, it has successively promoted continuous settlement by week, month, quarter and year.

The second batch of spot markets were announced in April 2021, and six provinces and cities including Shanghai, Jiangsu, Anhui, Liaoning, Henan and Hubei were included. At present, the spot pilot provinces represented by the first and second batches have successfully completed the settlement trial operation of different time dimensions from daily, weekly to monthly and multiple complex scenarios, with the maximum continuous operation time exceeding 500 days.

At present, 20 provincial power grids have been launched in the State Grid Business Area. The southern regional power spot market has successfully carried out power adjustment trial operation. Overall, in the provincial spot market, Guangdong, Fujian, Shanxi and Gansu have been continuously trial operation for more than one year; the second batch of spot pilot projects have completed the simulated trial operation of the power spot market, among which Jiangsu completed the settlement trial operation and Anhui completed the power adjustment trial operation; non-pilot areas have fully launched the construction of the power spot market, and are studying and improving the operation rules and preparing for the construction of a technical support system.

Entering 2023, the continuous settlement trial operation in Guangdong, Shanxi and other places is still in progress, and more provincial spot pilot projects will enter the long-term settlement trial operation this year. As more and more provinces enter the trial operation of long-term settlement, it can be foreseen that spot trading products are becoming more and more abundant and transaction frequency is increasing, and the transaction challenges faced by thermal power/new energy companies, power sales companies and large users are becoming increasingly greater.

At the same time, the trial operation of continuous settlement of spot trading between provinces will continue in 2023. According to the "Notice on Continuing the Trial Operation of continuous settlement of spot trading between provinces" issued by the Beijing Electric Power Trading Center, it is planned to continue the trial operation of continuous settlement from January 1, 2023, and the trial operation of continuous settlement of spot markets will continue to implement the "Inter-Provincial Electric Power Spot Trading Rules (Trial)". Market entities shall declare spot trading between provinces on the next day of each working day, spot trading between provinces on the next day of the next day after Friday, and holidays shall be carried out according to actual conditions. Market entities shall conduct inter-provincial daily spot trading on the day of daily declaration.

Green Electric Green Certificate Transactions are Accelerated

In the past two years, new energy market trading has ushered in more favorable benefits. In the "Guiding Opinions on Accelerating the Construction of a National Unified Power Market System", it was mentioned that by 2030, new energy will fully participate in market trading. It can be seen that new energy has entered the power market in full swing.

According to data released by the National Energy Administration, my country's renewable energy has shown a good trend of fast development, good operating quality, high utilization level and strong industrial competitiveness. In 2022, the new installed capacity of wind power and photovoltaic power generation nationwide exceeded 120 million kilowatts, a record high, driving the installed capacity of renewable energy exceeding 1.2 billion kilowatts. The new installed capacity of renewable energy in the whole year was 152 million kilowatts, accounting for 76.2% of the new installed capacity of power generation in the country, and has become the main body of new installed capacity in my country.

In 2022, my country's wind power and photovoltaic power generation exceeded 1 trillion kilowatt-hours for the first time, reaching 1.19 trillion kilowatt-hours. As the proportion of new energy power generation continues to increase, high-quality development needs to pay more attention to consumption. Under my country's "dual carbon" strategic goal, the transformation and upgrading of the energy structure has become a general trend. In addition, policies and regulations related to green energy have been introduced one after another, and the development of green power has been accelerated comprehensively. Beijing Electric Power Trading Center predicts that the trading mechanism of green electricity and green certificates will be further improved in 2023, and the transaction scale will be made new breakthroughs. It is expected that the country will complete green electricity transactions in 2023 and more than 50 billion kilowatt-hours and more than 5 million green certificate transactions.

Data from the National Energy Administration shows that in 2022, the total installed capacity of renewable energy in the country exceeded 1.2 billion kilowatts, and the installed capacity of hydropower, wind power, solar power generation and biomass power generation all rank first in the world. Among them, the installed capacity of wind power was about 370 million kilowatts, an increase of 11.2% year-on-year; the installed capacity of solar power generation was about 390 million kilowatts, an increase of 28.1% year-on-year.

The market-oriented proportion of new energy has steadily increased. From 2020 to 2022, the market-oriented trading electricity volume of new energy will be 131.78 billion kWh, 213.657 billion kWh and 346.494 billion kWh, respectively, accounting for 24.13%, 28.28% and 38.42% of the trading electricity volume of new energy respectively. During the same period, the market-oriented transaction prices of new energy also increased year by year. In the past three years, the market-oriented trading prices of photovoltaics in the State Grid operating area have been 0.141 yuan/kWh, 0.221 yuan/kWh, and 0.235 yuan/kWh respectively.

Since 2023, the documents and related meetings issued by my country have made arrangements for green electricity and green certificate transactions:

On February 15, 2023, the National Development and Reform Commission, the Ministry of Finance, and the National Energy Administration jointly issued the "Notice on Matters Related to Participate in Green Power Transactions in Green Power Transactions by Green Power Projects Enjoying Subsidies by the Central Government", which clearly states that green power projects enjoying national renewable energy subsidies will participate in Green Power Transactions and better realize the environmental value of green power.

The document stipulates that green electricity that enjoys national renewable energy subsidies, the premium income higher than the benchmark coal-fired power price implemented by the project when participating in green electricity transactions is offset by the national renewable energy subsidies or belongs to the state; if the power generation enterprise gives up the subsidies, the entire income from participating in green electricity transactions belongs to the power generation enterprise. Green Power acquired by the state can participate in green electricity transactions or green certificate transactions in a unified manner. The premium income generated by green electricity transactions and the corresponding green certificate transaction income will equally offset the national renewable energy subsidy or belong to the state. Green electricity priority redemption subsidies that enjoy national renewable energy subsidies and participate in green electricity transactions. This means that more green electricity will participate in market-oriented transactions in the future, and the scale of green electricity transactions will show a geometric increase.

New energy storage has become a market entity

In the context of "dual carbon", with the large-scale access of new energy into the power grid, the power system also faces multiple challenges such as power balance, safe and stable system, and efficient utilization of new energy. Energy storage supports large-scale grid connection of photoelectric and wind power with its flexible regulation capabilities, and is regarded as a necessary link in the new power system.

With the continuous introduction of energy storage incentive policies, the position of the new independent market entity in energy storage has gradually become clear. The so-called new energy storage refers to an independent energy storage entity that uses physical energy storage, electrochemical energy storage, electromagnetic energy storage, phase change energy storage and other emerging energy storage technologies except pumped energy storage. It has technical conditions such as independent measurement and control. It can be monitored and dispatched by the power grid, comply with relevant standards and specifications and the guidelines of this specification, and has legal personality. New energy storage on the power generation side, user side, and grid side can all participate in market transactions. The new energy storage has the advantages of fast response, flexible configuration and short construction cycle. It can play a role in peak, peak shaving, frequency regulation, hill climbing, and black start in power operation. It is an important part of building a new power system. In this regard, the two departments required in the "Notice on Further Promoting New Energy Storage Participation in the Power Market and Scheduling Application" that new energy storage can participate in the power market as independent energy storage, encourage the construction of new energy storage and joint participation in the power market with their affiliated power sources, and accelerate the promotion of independent energy storage participation in the power market to cooperate with the power market to coordinate the power grid peak shaving..., providing a variety of possibilities for energy storage to participate in the power market.

In June 2022, the National Development and Reform Commission and nine other departments issued the "Notice on Issuing the 14th Five-Year Plan for Renewable Energy Development". The position of the independent market entity of new energy storage has been clarified, and the trading mechanism and technical standards for energy storage to participate in various power markets have been improved.

In December 2022, the State Grid Business Zone "Guidelines for Registration of New Energy Storage Subjects" was issued, which are applicable to the business management of new energy storage subjects in the State Grid Business Zone. This is the first time that power trading institutions have unified from the implementation level, and have clearly defined new energy storage as a registration type independent of power generation companies, power sales companies and users. This means that new energy storage has become the norm for participating in the power market.

With the policy level opening up the energy storage business model, energy storage operators can participate in the electricity spot market transactions and expand their profit margins through peak and valley price spreads and other methods.

At present, the income from independent energy storage power stations mainly comes from three aspects: spot market electricity energy transaction income, capacity market compensation income, and capacity leasing market rental income. The National Development and Reform Commission and the National Energy Administration's "Notice on Further Promoting the Participation in the Power Market and Dispatching Application of New Energy Storage" pointed out that if an independent energy storage power station sends electricity to the power grid, its corresponding charging capacity will not bear the transmission and distribution price, government funds and surcharges. Taking Shandong Province as an example, Shandong's new energy storage participates in the market, participates in spot transactions as an independent entity, and obtains electricity price difference income through charging and discharging; on the other hand, it comes from capacity electricity charges: in the spot market, the system is provided with available capacity as a power generation, and capacity fees or compensation are charged.

In the future, more provinces will have clear market position and policy support for energy storage, promoting fair participation in the power market for new energy storage, and participating in the power market will become the norm.

Opportunities and challenges coexist in the power sales market

In the power sales market in 2023, opportunities and challenges coexist.

On December 23, 2022, the National Development and Reform Commission issued the "Notice on Further Improving the Agency Power Purchase of Power Grid Enterprises", which mentioned that the agency power purchase system should be gradually optimized. All localities should adapt to the development process of the local power market, encourage and support industrial and commercial users with 10 kV and above to directly participate in the power market, and gradually narrow the scope of agent power purchase users. With the improvement of the system, all orders of millions of industrial and commercial power users will be promoted to enter the market.

At present, there are two main types of customers in power sales companies: one is large industrial users, which uses a large electricity consumption, which helps the control deviation of power sales companies. The other type is small and medium-sized users. The user size is small, but the number of users is small, which can help power sales companies achieve load-side aggregation.

According to relevant data, about 60% of small and medium-sized power users have not yet fully entered the market and use electricity by power grid companies agents to purchase electricity; the electricity volume has exceeded 2 trillion kWh. This is a huge market opportunity for power sales companies, and small and medium-sized power users may become the main customer group of power sales companies in the future. There are the following pain points for small and medium-sized power users to participate in the market: a pair of power market policies cannot complete transactions independently. Second, the amount of electricity used by oneself is small and the market bargaining power is low.

With the deepening of the reform of the power sales side, under the future price-oriented model, power sales companies will no longer be the "intermediary" role that only earns price differences, and differentiated services of power sales companies will become the mainstream. With the continuous advancement of market-oriented reform, the cost pressure on the supply side will inevitably be transmitted to the user side. At a time when the power sales market is becoming increasingly fierce and the price difference space is transparent, a homogeneous profit model will be difficult to maintain. In addition, the growing diverse demand of power users has also forced power sales companies to open up new businesses as soon as possible to provide customers with accurate services. For example, load aggregation, virtual power plant construction, green power trading, comprehensive energy services, etc. will become new growth points for efficiency.

Power supply and demand forecast: overall tight balance

In 2023, my country's power supply and demand will generally show a tight balance, and the power supply and demand will be tight during peak electricity consumption in some areas. It is expected that the growth rate of electricity consumption in the whole society will be around 6%.

[In the next three years, more than 70% of global electricity demand growth will come from China, India and Southeast Asian countries. As the world's largest electricity consumer, China accounts for 31% of global electricity demand in 2022. The International Energy Agency expects that China's electricity demand will increase by 5.2% annually from 2023 to 2025. 】

——International Energy Agency's "2023 Electricity Market Report"

[In 2023, my country's economic operation is expected to rebound overall, driving the growth rate of electricity consumption demand to increase compared with 2022. Under normal climate conditions, it is estimated that the national electricity consumption of the whole society will be 9.15 trillion kilowatt-hours in 2023, an increase of about 6% over 2022. 】

——China Electric Power United "2023 National Electric Power Supply and Demand Situation Analysis and Forecast Report"

In recent years, the electricity consumption of our country's entire society has been increasing year by year. In 2022, my country's total electricity consumption was 8.64 trillion kilowatt-hours, an increase of 3.6% year-on-year. In the past eight years from 2015 to 2022, my country's total electricity consumption has increased by 308.72 billion kWh, close to the national and social electricity consumption in 2007 (the total electricity consumption in 2007 was 324.58 billion kWh).

According to the forecast of China Electric Power Union, it is expected that the national power supply and demand will be generally balanced in 2023, and the power supply and demand in some areas will be tight during peak electricity consumption. During the peak summer, the power supply and demand situation in East China, Central China and South China is relatively tight; the power supply and demand in North China, Northeast China and Northwest China are basically balanced. During the peak winter period, the supply and demand of electricity in East China, central China, southern China and Northwest regions are tight; the supply and demand of electricity in North China are tightly balanced; the supply and demand of electricity in Northeast China are basically balanced.

The era of "fidget power purchase" is coming in full swing

my country's electricity market is divided into electricity wholesale market and electricity retail market. In the electricity wholesale market, bilateral negotiation transactions are generally carried out, the seller is a power generation company, the buyer is a power sales company, and the power user is a large power user. In the power retail market, the seller is an e-commerce company, while the buyer is a small and medium-sized power user.

As an important part of the power market, the power retail market is a bridge connecting power sales companies and retail users. Since the new round of market-oriented reform of electricity prices, the development of the power market has pressed the acceleration button. Before the market-oriented reform of electricity prices, only 40% of industrial and commercial users in my country entered the power market for trading. After the market-oriented reform of electricity prices, all industrial and commercial users entered the market. The pressure on the standardized operation of the power retail market is also increasing, and online transactions are imminent as a convenient trading method.

The online retail market is the "last mile" of power market-oriented reform. Users and power sales companies buy and sell electricity on e-commerce platforms like daily online shopping, which can greatly reduce the cost of power sales companies to acquire customers and effectively crack the "hard threshold" for small and medium-sized enterprises to enter the market.

At present, many places have opened the power retail market, and the era of "fingertip electricity sales" has arrived in full swing.

Yunnan Province was the first province to implement the power retail market. In December 2020, Yunnan built the country's first one-stop power retail transaction "Lai Taodian" platform. Driven by the "Lai Taodian" model, the market-oriented electricity purchase and sale entities in Yunnan Province exceeded 170,000 in 2021. At present, small and medium-sized enterprises in Yunnan can complete power retail transactions in only three steps: one is to complete market-oriented registration through the PC or mobile terminal of "LaitaoDian" according to the guidelines; the other is to select the appropriate package from the standard package and customized package provided by "LaitaoDian" after the registration is completed; the third is to confirm the power quantity, price and the content of the agreement, you can place an order to complete the purchase of power with one click.

In December 2022, Shanxi will start trial operation of the online power retail market. Online retail platforms are like online malls, where power users can choose packages that suit them on the platform to achieve efficient connection between the purchase and sale of electricity. The online retail transaction process of Shanxi Electric Power is: virtual shop management of power sales companies, preparation of retail packages, on- and off-shelf retail packages, and confirmation of orders by retail users. When choosing a retail user package, low-voltage and 5G users who do not have the conditions for time-sharing measurement cannot choose a retail package with time-sharing attribute; except for users who do not implement peak and valley electricity prices stipulated by the state, non-war new transaction retail users participating in the spot market need to choose a retail package with time-sharing attribute.

Guangdong launched the power market retail platform in September 2022, and organized the public beta of the Guangdong power market retail platform from September 19 to 30. The applicable users of Guangdong Electric Power Retail Platform are industrial and commercial power users across the province (currently, industrial and commercial users above the 10 kV level are temporarily relaxed). Guangdong Electric Power Retail Platform separates the power purchase end, power sales end and platform end in the front, middle and backend, which can provide users with one-stop online services, break the traditional power trading model, crack down on hot and difficult issues in retail market transactions, prices, risk management, etc., and lead millions of market entities into the era of intelligent digitalization of power purchase and sale.

Zhejiang launched the province's unified digital power sales platform - Zhejiang Power Retail Trading Platform on September 2, 2022. The platform can obtain market information with one click, filter power sales companies with one click, compare price-based power purchase packages with one click, customize personalized needs with one click, and sign contracts with retail users with one click. In the future, the market-oriented electricity purchase and sales entities in Zhejiang Province are expected to exceed 300,000.

On February 27, 2023, Shandong Electric Power Trading Center issued the "Notice on Carrying out the Trial Operation of Retail Transactions of E-Trade APP", which will start the Trial Operation of Retail Transactions of E-Trade APP from March 6, 2023. Electric power users in Shandong Province who participate in the retail market in March can participate in the trial operation of the e-trading APP retail. There are two types of contract signing methods: on-site package and off-site bilateral.

With its convenient and transparent transaction methods, the online power retail market will help promote all industrial and commercial users to enter the market, and will become a new model of the power retail market and will be launched in many places across the country on a large scale in the future.

(The above content is excerpted from the "2022 Electric Power Sales Industry Annual Report")