Analysis: China’s New Electricity Spot Market Rules Lay Groundwork for Unified Standard

The publication of the rules is a ‘landmark’ move in the country’s efforts to build a nationwide power market, one expert tells Caixin

Staff inspect equipment in a substation in Zhangjiakou, Hebei on Aug. 18. Photo: VCG

China has published its first national rules for electricity spot markets as the country continues its drive toward the use of renewable energy and building a national power market.

The trial rules, issued on Monday by the National Development and Reform Commission (NDRC), China’s top economic planner, and the National Energy Administration (NEA), clarify how electricity spot markets should be operated and managed and lay out a plan for their future development.

The move is a “landmark event” in the country’s electricity market development, Zheng Ying, a guest researcher at the Sichuan Energy Internet Research Institute, Tsinghua University, told Caixin.

“[This] shows that China’s power spot markets are moving away from the pilot stage towards a new phase where they will be developed and implemented on a national level with unified rules and standards,” she said.

Although China has been piloting provincial electricity spot markets since 2017, there had been no nationwide standards to guide their operation before Monday’s release of the new “basic rules”, which are set to take effect on Oct. 15.

Mid-to long- term vs. spot markets

Beijing’s need to build and improve electricity spot markets is tied to the country’s distinctive power market development.

A power spot market is a market where electricity is sold and purchased in a short time frame, usually for immediate, same-day or next-day delivery, at prices determined by supply and demand.

Unlike most countries that saw their electricity spot markets develop first — followed by a medium- to long -term markets as a hedge against spot risks — China’s electricity market began with the development of the latter, according to a Sept. 11 analysis published on China Dialogue, a website run by the nonprofit environmental group of the same name.