New Berkeley Lab study assesses the operational impact of high renewable penetration on China’s electric grid

April 4, 2022

We are pleased to announce that the Electricity Market and Policy Department has just published a paper, Large balancing areas and dispersed renewable investment enhance grid flexibility in a renewable-dominant power system in China. We found that larger balancing areas and more locally based renewable investment could provide significant benefits in system flexibility and reducing renewable curtailment and coal generation, while retrofitting coal power plants offers only marginal benefits.

Executive Summary

Renewable energy is poised to play a major role in helping to achieve China’s carbon neutrality goal by 2060. However, reliability and flexibility are a big concern of a renewable-dominant power system, which also undergoes considerable debate within China. Various strategies to enhance flexibility are under discussion to ensure the reliability of such a system, but no detailed quantitative analysis has been reported yet. Our work fills this critical gap by assessing the impact and effectiveness of different approaches and providing insight into accelerating China’s renewable energy development.

In this analysis, we combined the advantages of a capacity expansion model, SWITCH-China, with a production simulation model, PLEXOS, and analyzed flexibility options under different scenarios of a renewable-dominant power system in China. We developed four scenarios for this study. The business-as-usual (BAU) scenario assumes the continuation of current policies and moderate cost decreases in future renewable costs. A low-cost renewables scenario (RE) assumes that a rapid decrease in costs for renewables and storage will continue. Two carbon constraints scenarios—C50 and C80—cap carbon emissions at 50% and 80%, respectively, lower than the 2015 level, by 2030. We also examined different grid operations and dispatch strategies for three factors: coal power-plant flexibility, balancing area, and transmission constraints.

The study resulted in a number of key findings:

  1. Retrofitting coal power plants for more flexible operation offers marginal improvements in renewable energy utilization, and the current provincial balancing model is inadequate to solve the renewable integration challenge.
  2. A larger balancing area offers direct flexibility benefits: regional balancing could reduce the renewable curtailment rate by 5%–7% compared with a provincial balancing strategy, while national balancing could further reduce the curtailment rate by 11%–21%.
  3. Investing in renewable energy in a more geographically distributed fashion can achieve additional reductions in both curtailment and coal generation: even under the provincial balancing scenario, reductions in the curtailment rate (4%–10%) and in coal generation (6%–9%) can be achieved with a high hurdle rate compared with a no transmission hurdle rate. These benefits are comparable with those from establishing regional balancing areas.
  4. Combining larger balancing areas and more locally based renewable investment could have the greatest impact. As shown in Figure 1, with regional balancing and more local renewable development, curtailment rates in 2030 drop to 2%, 13%, and 26% under the RE, C50, and C80 scenarios, respectively.
  5. These operational strategies that enhance system reliability would also reduce the average wholesale costs of electricity. Under the RE scenario, adopting a regional balancing strategy could reduce the average cost by 5.1%, and with national balancing, by 6.1%.

These results suggest that, to meet its 2060 carbon neutrality goal, China should accelerate its power system reform, allowing regional markets and enlarging operation balancing areas. Leaving this system operation challenge (as well as resource planning) unresolved would seriously hinder renewable development. Furthermore, wholesale market development should allow price signals to play a larger role in affecting power demand and supply. Moreover, the current planning approaches need to evolve, incorporating these trends to allow for more diversity in China’s infrastructure portfolio, enhancing system resilience and local political support in Chinese provinces.

These market and institutional reforms are well articulated both in the recent US-China Joint Declaration (article 9) during COP 26 and latest policy directives from Chinese government agencies.

Figure 1. China national annual generation with two transmission cost settings under different balancing strategies

We appreciate the support of the William and Flora Hewlett Foundation, the Growald Family Fund, the Energy Foundation China, and the MJS Foundation in making this work possible. We thank Yuan Jiahai, Hu Junfeng, Fritz Karhl, Robert Weisenmiller, Yuan Jing, Max Dupuy, Jianhui Wang, Chris Marnay, and James Hyungkwan Kim for providing valuable comments. 

 

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