China's pilot program for renewable power trading draws large volumes on Day 1

China launched its pilot program for green electricity trading between consumers and generation companies Sept. 7, jointly managed by the two state-owned power grids, State Grid and China Southern Power Grid, the latter said in a statement Sept. 8.

This pilot scheme will allow Chinese consumers to purchase renewables-based electricity directly from power generation utilities for the first time, based on market-oriented systems, allowing them to bypass government-owned power grids which were previously the only ones authorized to sell renewables-based electricity.

The move underscores the pace of China's power sector reforms and the breaking down of traditional hierarchies in the transmission and distribution system that are needed for the rapid growth of renewables and the decarbonization of the county's power sector.

The pilot scheme was launched with the approval of China's top economic planner National Development and Reform Commission (NDRC) and National Energy Administration (NEA), China Southern Power Grid said.

It said in southern China, the region managed by the company, 910 million kWh of renewables-based electricity were traded by 40 companies in the first day, out of which 300 million kWh and 610 million kWh was from wind energy and solar energy respectively.

State Grid disclosed on late Sept. 7, that in the regions under its management, 222 companies agreed to trade around 10 billion kWh of renewables-based electricity.

This means that total traded volumes were around 10.9 billion kWh and the total number of first-day participants were 262.

The traded price of renewables-based electricity was Yuan 27 ($4.18) per megawatt higher than the market average for green electricity, China Southern Power Grid said.

The power grids said participating companies included CGN New Energy, Guangdong Energy Group, Guangxi Guiguan Electric Power, Guangdong Grid Energy & Investment Company, Global Data Solutions Ltd, and technology giant Tencent.

According to NDRC's arrangement, two power exchange centers in Beijing and Guangzhou will jointly support the nationwide green electricity trading. The Beijing Power Exchange Center is partly owned by State Grid, while China Southern Power Grid has a 66.7% share in Guangzhou Power Exchange Center.

Green power

Usually, China's two state-owned power grids purchase electricity on a large scale from various renewable power generation projects under a guaranteed purchase scheme.

Under this scheme, an annual target was assigned by the central government for the production of renewable energy that must be utilized by the two power grids.

It was time for China to start market-based trading of green electricity given that the groundwork had been completed in many provinces, two exchange centers had established trading platforms, and technologies such as blockchain had matured to track the life cycle of each kilowatt of green electricity traded, NDRC said Sept. 7 on its website.

"The time is ripe" not only from the regulatory, infrastructure and technology perspectives, but also the demand and supply perspectives, it said.

NDRC said nationwide green electricity trading will start with wind and solar, and gradually expand to other renewable sources, adding that many companies were interested despite higher prices and the market size was expected to grow.