What is a Sideways Market?

The electricity generation-side electricity market ^[1] refers to the market for electricity generation-side electricity transactions. According to the spirit of national documents and the actual deployment of separation of plant and network and bidding for Internet access, China s power industry will gradually realize the separation of power generation, transmission, distribution, and sales, and realize nationwide interconnection, power transmission from the west to the east, and the establishment of standardized In the orderly power market, market competition mechanisms have been introduced from the provincial and regional grids to the national grid. The existing bidding trading mechanism of the power generation side power market includes two-part power prices, power generation over-base bidding, and CFDs plus the spot market.

According to the spirit of national documents and the actual deployment of separation of plant and network and bidding for Internet access, China s power industry will gradually realize the separation of power generation, transmission, distribution, and sales, and realize nationwide interconnection, transmission of electricity from the west to the east, and establish normative regulations. In the orderly power market, market competition mechanisms have been introduced from the provincial and regional grids to the national grid. At present, China's power system reform has entered the substantive operation stage of "separating power plants and networks." The pace of "transmission of electricity from the west to the east, mutual supply from the north and the south, and national interconnection" has accelerated. It is urgently required to formulate a bidding transaction for the electricity generation side that meets the laws of the market economy Models and specific programs.

(1) Two-part electricity price

The two-unit electricity price, also known as the Hopkinson electricity price, was first proposed by John and Dr. Hopkinson. The two-part price is the price of electricity divided into capacity price and electricity price. The capacity price is determined according to the fixed cost of equipment capacity, and the electricity price is determined according to variable costs (such as fuel, maintenance, etc.) ^[2]

After comparing the above three models, it can be seen that the key problem of the first method (two-part power price) is to solve the problem of determining the unit power price. If the unit capacity electricity price is determined fairly, scientifically, and reasonably, this method can have strong adaptability. The two-unit electricity prices are sorted and listed on the basis of electricity price quotes. On-line settlement electricity prices are linked to the benefits of power generation companies. Therefore, it is prone to "bad competition" and distortion of bidding behaviors. For example, this has happened in the California electricity market. The second method (super-base bidding for power generation) is easier to implement. It is suitable for the transition from a monopoly system to the early stage of power generation bidding. However, with the expansion of power generation bidding, this method exposes its constraints on market competition. The third method (contract difference and spot market) uses long-term difference contracts to solve the problem of capacity costs, thereby increasing the risk of power purchases brought to grid companies due to low market prices ^[3]

1. Determine the capacity price and availability requirements of each generation company (unit) with a capacity contract

The State Council s power system reform plan explicitly proposed that grid-to-grid tariffs consist of the capacity tariffs set by the state and the electricity tariffs generated by market bidding. According to this spirit, in order to enhance the competitiveness of the power generation side power market, to provide accurate market information for generators (or potential generators), simplify market rules and facilitate operation, this paper proposes a capacity contract that determines the capacity electricity price at a fixed cost. + Full power auction + timely market "auction transaction model.

The capacity electricity price is determined by the State Electricity Regulatory Commission based on all (or part of) the fixed cost of the equipment capacity, and each capacity electricity price corresponds to a decreasing capacity capacity each year (see the Confirmation Method of Contract Capacity in the previous section). The payment of the capacity contract is determined by multiplying the capacity electricity price and the corresponding capacity and electricity to ensure that the power generation companies recover the fixed costs.

The capacity and power should be decomposed into each period of the entire financial year. When decomposing, the power grid load distribution, reservoir water supply, power generation distribution of various types of units, and unit overhaul plans are mainly considered. The load curve after power decomposition is the generation company ( As for the available capacity requirements, the power dispatching and trading center evaluates the availability of power generation companies (units) and conducts corresponding rewards and penalties in accordance with market rules.

2 full power bidding

After the capacity contract compensates for nearly the full amount of fixed costs, market competition can actually be regarded as variable costs.

The traditional power industry generally adopts a vertically integrated monopoly operation of generation, transmission, distribution, and sales. Power plants, transmission grids, and distribution networks belong to the same monopoly power company. The power industry has operated in this way for more than 100 years, and has made outstanding contributions to the development and growth of the power industry. Since the 1990s, the world's power industry has undergone tremendous changes. Britain, the United States, Chile, Argentina, Australia, New Zealand, Norway, Sweden, Germany, Japan, Singapore, Thailand and other countries have carried out power reforms to varying degrees. . The fundamental objectives of the reforms are to lift monopoly, introduce competition mechanisms to improve the production efficiency and service quality of the power industry, and open up diversified investment in the power industry to meet the needs of growing power investment. ^[2]

The construction of the power market on the power generation side is a key link in the reform of the power system. It is a difficult point and a key point. Conceptually, the electricity market refers to the mechanisms under which the power generation, transmission, distribution, sales, and users interact under the supervision of the government and jointly determine electricity prices, capacity, and services. The electricity market includes the electricity generation-side electricity market and the electricity distribution-side electricity market. The power generation-side power market refers to the mechanism under which the power generation and transmission links interact under the government's supervision and jointly determine the on-grid electricity price, electricity and services. The power market on the distribution side refers to the mechanism under which the power distribution and users interact and jointly determine the sales price, power and services under government supervision. ^[2]

1Construction history

In February 2003, the SERC decided that the Northeast should be used as a pilot. In June 2003, the SERC issued the Opinions on the Establishment of the Northeast Regional Electricity Market. On January 15, 2004, a part of the electricity competition simulation operation of the single price was started. On April 27, 2004, the Development and Reform Commission stopped the competition simulation operation of this model. On June 19, 2004, the annual and monthly bidding simulation operation of full power plus two electricity prices was conducted; on December 13, 2004, the trial operation was officially launched, and on December 22, the two rounds of annual bidding for 2005 were completed. Transaction ^[1]

In June 2003, the SERC issued the Notice on the Pilot Work of the East China Electricity Market (Dianjian Market [2003] No. 13), and the pilot work of the East China Electricity Market was launched. In November 2003, the SERC issued the East China Electricity Market Pilot Program (Dianjian Market [2003] No. 42), which provided a framework and blueprint for the construction of the East China Electricity Market. On May 18, 2004, the East China Power Market officially entered the monthly bidding simulation operation. In August 2005, the day-to-day market rules were compiled. In October, the East China Electric Power Market began a comprehensive simulation operation. On April 3, 2006, it entered the trial operation phase 702.

1Construction history

In March 2004, the State Electricity Regulatory Commission officially started the construction of the southern power market. In April of that year, the SERC held the first meeting of the Southern Power Market Construction Leading Group in Guangzhou, which clarified the guiding ideology, construction goals, and construction principles of Southern Power Market Construction. In December of the same year, the State Electricity Regulatory Commission issued the "Southern Electricity Market Construction Plan", and in May 2005, the "Southern Electricity Market Operation Rules" and other supporting documents were formed. In November 2005, the southern power market was simulated and operated ^[2] .

2 Market Features

The southern regional power market has the following characteristics:

.Single system electricity price, some electricity competition

The southern region's power market implements a single system of electricity prices and a partial power competition model. The total competitive power is tentatively set to 15% of the annual approved planned power of participating power plants, of which annual competitive power accounts for 40% of the total competitive power and monthly competitive power accounts for the competitive power 60% of the total.

Buying and Selling Bilateral Trading Market Model

There are 14 power plants and 4 grid companies competing for the sale. Guangdong, Guangxi, Yunnan, Guizhou four provinces (regions) power grid companies all participate in market competition as the main purchasers of electricity (Hainan power grid companies will also enter the competitive market after networking).

. For the first time, a separate system for trading institutions and dispatching institutions in the electricity market was selected.

. Overall consideration of provincial (regional) government agreement power and competition power to maintain a good situation of power transmission from the west to the east.

Introduce market transaction related parameters such as transmission costs and transmission losses in the bidding order. Start with partial power trading, focus on the establishment of market mechanisms, and ensure a smooth transition from planned power to market trading power.