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How do support schemes for renewable energy impact
electricity market in China?
Zhaotian Chong
College of Economics & Management
Nanjing University of Aeronautics and Astronautics
40th IAEE International Conference
21 June 2017, Singapore
Backgrounds
Methodology
Results
Part 1
Part 2
Part 3
Backgrounds
1
Energy and Renewable Energy In China
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350000
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450000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Energy Production Energy Consumption
Figure 1 Energy production and consumption from 2006-2015 in China
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10000.00
20000.00
30000.00
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50000.00
60000.00
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2009 2010 2011 2012 2013 2014 2015 2016
hydro thermal nuclear wind photovoltaic
Energy and Renewable Energy In China
Figure 2 Different Energy power generation from 2009-2016 in China
Energy and Renewable Energy In China
AreaAbandoned Wind Power(hundred million kWh)
ProportionAbandoned PV Power
(hundred million kWh)Proportion
Gansu 82 39% 26 31%
Xinjiang 70 32% 18 26%
Jilin 27 32%
Heilongjiang 19 21%
Inner Menggu 91 18%
Ningxia 13 13% 3 7%
Hebei 19 10%
Niaoning 12 10%
Yunnan 3 3%
Shanxi 3 2%
Qinghai 2 3%
Total 339 49
Table 1 The amount of abandoned wind and PV power in 2015
Energy and Renewable Energy In China
AreaAbandoned Wind Power
(hundred million kWh)Proportion
Abandoned PV Power
(hundred million kWh)Proportion
Gansu 104 43% 26 30%
Xinjiang 137 38% 31 32%
Jilin 29 30%
Heilongjiang 20 19%
Neimenggu 124 21%
Ningxia 19 13% 4 7%
Hebei 22 9%
Niaoning 19 13%
Yunnan 6 4%
Shanxi 14 9% 1 7%
Qinghai 8 8%
Total 497 69
Table 2 The amount of abandoned wind and PV power in 2016
To abandon wind and PV
power is widespread
Renewable
energy
Question: How to consume these renewable energy by the greatest
degree with different energy policies in China?
Electricity
market
Energy
policy
Power industry reformation;
Oligopoly market
Too many policies are in
disorder
Problems with Chinese Characteristics
Methodology
2
Support Schemes for renewable energy
PRICE QUANTITY
ANTE Feed-in-tariff Ante-quota
POST Floating premiun Post-quota
Mathematical model is applied here to analyze effects of different
policies.(Green R.,Vasilako N.,2010; Paul Twomey, Karsten Neuhoff, 2010;
Ori Ben-Mashe, oFir D. Rubin, 2015; Iychettira K. K. et al., 2017)
Table 3 Policy elements and policies
Assumptions and Methodology
• Assume that there are two generator firms in the market: conventional generator and wind power generator
• Market price is the inverse function of demand:
o Tp D bD T g w wD Q Q
• Costs: generation costs and penalty of carbon emissions
2( ) (1 )2
F g g gC Q Q u QT gC uQ
Assumptions and Methodology
• Firms’ benefits under FIT :
g g T FpQ C C 𝜋𝑤 = 𝑥𝑄𝑤
• Firms’ benefits under ante-quota :
( ( )) ( )g g w w w w w T Fp Q m Q z m Q C C
𝜋𝑤 = 𝑝 1 −𝑚 𝑄𝑤 + 𝑍𝑤𝑚𝑄𝑤
Assumptions and Methodology
• Firms’ benefits under floating premium :
g g T FpQ C C
• Firms’ benefits under post-quota :
𝜋𝑤 = (𝑝 + 𝜏)𝑄𝑤
( ( )) ( )g g w w w w w T F wp Q n Q z n Q C C snQ
𝜋𝑤 = (𝑠 + 𝑝) 1 − 𝑛 𝑄𝑤 + 𝑍𝑤𝑛𝑄𝑤
Results
3
The difference results from the intermittent
nature of wind power output.
Model under FIT
m and b increases, impact increase.
u increase, impact decreases.
Model under ante-quota
The price of wind power is lower than
the average price in spot market.
Model under floating premium
Model under post-quota
The price of wind power depends on
zw and n.
Results
Policy P* Pw
Feed-in-tariff x
Ante-quota
Floating premium
Post-quota
[ )]( ) (
2 )
o wb u D bQ b u
b u
[ )] [ (1 ) )] (
2 )
o wb u D b b m u Q b u
b u
2[ (1 ) )]
* ( *)2
ww
w
b b m up z p m
b u Q
[ )]( ) (
2 )
o wb u D bQ b u
b u
2[ )]
* τ2
w
w
b b up
b u Q
[ )] [ (1 ) )] (
2 )
o wb u D b b n u Q b u
b u
2[ (1 ) )]
(1 )( * )2
ww
w
b b n un p s z n
b u Q
Results
Results
Generally, the more wind power output, the lower market price. Here we
proved policy can change this phenomenon. The market price depends on the
ratio of renewable energy purchased by conventional GFs.
As carbon emission of conventional generators rise, the impact on wind
power price is decreasing. The level of carbon emission is lower, the impact is
higher. It proves that conventional GFs compensate their costs at the expense
of wind power. Wind generators benefit less than conventional generators.
Thanks for your kind attention!