The document, an update on last year's version, was released by the Beijing Power Exchange Center, a subsidiary of the State Grid, on Aug. 9 and reposted by the Chongqing Power Exchange Center on Aug. 12. One of the tasks at the Beijing center is to develop and operate a power market across different provinces and regional power grids.
The updated rules clarify the definition of and process for interprovincial green power trading. It also proposed a method to spur participation by companies that do not need a large amount of renewable energy.
The rules only apply to green power trading in the operating area of the State Grid Corp. of China, one of the country's two state-owned power distributors. It runs the grid across all of China, apart from five southern areas: Guangdong, Yunnan, Guizhou and Hainan provinces, and the Guangxi Zhuang autonomous region. These are served by China Southern Power Grid and operate under different rules.
Although the rules refer to interprovincial trading, they actually cover trading between all types of provincial-level regions, which include municipalities like Beijing and autonomous regions like Guangxi.
The news came one day before the State Council, China's cabinet, announced a plan to attract foreign investment and improve the country's business environment, including ordering all levels of government, by coming up with policies to facilitate foreign companies' use and trading of green electricity.
This trade is part of China's mid-to-long-term power market framework, under which suppliers and consumers of electricity have been signing contracts ranging from one month to one year.
China launched its national green power trading market in September 2021 to boost the use of green electricity through a market mechanism. Trading can take place between provincial-level regions and within the same one.
Meeting new demand
The guidance proposed increasing interprovincial green power trading by promoting the aggregation of market entities on platforms to encourage them to take part. A senior power analyst told Caixin that this could help meet new market needs for electricity contracts.
"For some multinational manufacturers in Jiangsu, Zhejiang and Shanghai, although they have a high demand for green power, the annual consumption of each of these companies is not large enough to match the amount of electricity generated by a large solar farm in northwestern China," the analyst said.
For example, a manufacturer in East China's Zhejiang province might consume 5 gigawatt-hours (GWh) of electricity a year, but a typical solar farm in the Xinjiang Uyghur autonomous region can generate more than 30 GWh of electricity a year, the analyst said, making it difficult for the two sides to negotiate contracts on an equal footing.
"If companies like this want to buy green power, it would be better for them to form a group with other companies with similar needs and negotiate as a unit, or to find a power-purchasing agency to buy green electricity from other provinces," she added.
In terms of volume, green power trading in China is currently hampered by several factors, including difficulties in transmitting electricity between provinces due to how China's power grids have been set up. It does not help that much of China's green power is generated far from major consumers.
Compared with the old version, the latest document offers generators and consumers centralized bidding as a new way to trade, in addition to bilateral negotiation and listed transactions. Centralized bidding can be carried out when market participants submit their trading requests, including how much electricity they wish to buy or sell and at what prices, through an online green power trading platform, according to the updated rules. The platform will consider all bids and match potential buyers and sellers by proposing a trading price.
Improving the trading process can help lift trading volume and frequency, said Gong Zhaoyu, a power-trading expert at Envision Digital.
Gong pointed out that under the new guidelines, power users and producers in different provinces can negotiate and trade directly, while provincial-level power exchange centers and the Beijing Power Exchange Center act as go-betweens. "[This] represents policy support for interprovincial green power trading," he added.
Increased trading
There has been an increase in activity on China's national green power trading market. As of June, more than 60 terawatt-hours (TWh) of green electricity had been bought and sold on the market since its launch nearly two years earlier, according to statistics from the Beijing Power Exchange Center.
In the first half of 2023, the center logged 351 deals, with combined trading volume reaching 38.9 TWh, surpassing this year's target by 30%, according to its data.
In comparison, China's overall electricity consumption for the first half of this year was 4,307 TWh, according to data released by the National Energy Administration.
Trading recorded by other provincial power exchange centers has also grown. In Guangdong, 3.6 TWh of green electricity had changed hands this year as of the end of July, more than twice as much as last year. In Zhejiang, green power trading exceeded 2.5 TWh in 2022, a 611% increase from the previous year's figure.
The guidance also offered details on green electricity certificates (GECs), China's domestic renewable energy certificate scheme. Companies can obtain these certificates, each representing 1,000 kilowatt-hours of renewable energy, by purchasing electricity through the green power trading market.
According to the guidance, GECs are verified and handed out by the National Renewable Energy Information Management Center every month to renewable power generators. These certificates are put into a generator's trading account at the Beijing Power Exchange Center. The center then redistributes them to the users who bought green power from the generator after calculating how much each user consumed with the help of provincial power exchange centers.
The price of green electricity in China consists of two parts: the price of "electricity energy" and the environmental premium. The former covers production and operating costs. The latter reflects the value of its environmental attributes.
Some experts suggest the green power trading market should separate the price of "electricity energy" from the environmental premium.
A source from the China Electricity Council, a trade body, told Caixin that the generation and consumption of renewable power usually happen at different times in a mid- to long-term contract because renewable power is intermittent and unstable. Therefore, separating the price of "electricity energy" and the environmental premium of renewable power can reflect the extra cost of balancing the power grid when renewable power is unavailable, according to the source.
