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China, with a heavy dependence on coal power, has announced a clear goal of carbon neutrality by 2060. Electrification of final energy use and high penetration of renewable energy are essential to achieve this. The resulting growth of intermittent renewables and changes in demand curve profiles require greater flexibility in the power system for real-time balancing – greater ability of generators and consumers to ramp up and down. However, the plan and market system with regulated prices makes this challenging. We discuss the options to improve flexibility, including 1) increasing supply-side flexibility, through retrofitting existing power plants to boost their responsiveness; 2) promoting flexibility from power grids, through building an efficient power grid with inter-provincial and inter-regional transmission capacity to balance spatial mismatch, given that China has a vast territory; 3) encouraging demand flexibility, through demand-response measures to enable demand shifting over time and space to address fluctuations in renewable energy generation; and 4) providing flexibility from energy storage. We consider policies to achieve this, in particular, power market reforms to unlock the flexibility potential of these sources. Regulated electricity prices and lack of auxiliary services markets are major obstacles and we discuss how markets in other countries provide lessons in providing incentives for a more flexible system. • Carbon neutrality requires electrification and intermittent renewables. • Discuss options to improve flexibility in power system with high renewables. • Attention to technology and market policies in system with regulated prices and quotas. • Exploring how markets in other countries may provide lessons for China. [ABSTRACT FROM AUTHOR]

China, with a heavy dependence on coal power, has announced a clear goal of carbon neutrality by 2060. Electrification of final energy use and high penetration of renewable energy are essential to achieve this. The resulting growth of intermittent renewables and changes in demand curve profiles require greater flexibility in the power system for real-time balancing – greater ability of generators and consumers to ramp up and down. However, the plan and market system with regulated prices makes this challenging. We discuss the options to improve flexibility, including 1) increasing supply-side flexibility, through retrofitting existing power plants to boost their responsiveness; 2) promoting flexibility from power grids, through building an efficient power grid with inter-provincial and inter-regional transmission capacity to balance spatial mismatch, given that China has a vast territory; 3) encouraging demand flexibility, through demand-response measures to enable demand shifting over time and space to address fluctuations in renewable energy generation; and 4) providing flexibility from energy storage. We consider policies to achieve this, in particular, power market reforms to unlock the flexibility potential of these sources. Regulated electricity prices and lack of auxiliary services markets are major obstacles and we discuss how markets in other countries provide lessons in providing incentives for a more flexible system. • Carbon neutrality requires electrification and intermittent renewables. • Discuss options to improve flexibility in power system with high renewables. • Attention to technology and market policies in system with regulated prices and quotas. • Exploring how markets in other countries may provide lessons for China. [ABSTRACT FROM AUTHOR]

China receives great global attention for its energy consumption. To implement effective and fair policies to save energy, it is critical to understand what drives China's energy consumption and regional disparities. Most of previous studies failed to include indirect factors embodied in the inter-sectoral and regional input-output flows. Therefore, a hybrid structural decomposition analysis is conducted to explore drivers of energy consumption and regional disparities. The results present: (1) energy, directly or indirectly, is flowing from coastal regions to Northwest, Southwest and Central China. (2) The growth of residents' income to contribution of energy consumption is by 106.7% and 169.8% during 2002–2007 and 2007–2012, respectively. Meanwhile, the positive impact of income on energy consumption is larger in urban than rural areas, and the structure effect has a significantly negative impact on energy consumption in Northwest and Southwest regions. (3) By factors, the substitution effect non-energy to energy inputs in industry sector might bring more energy consumption. By sectors, the technological advancement of the non-industry sectors decreases energy consumption by 31.7% and 174.6% during 2002–2007 and 2007–2012, respectively. Technological advancement of industry sectors plays the most important role in increasing energy consumption across China. [Display omitted] • Developing a hybrid structural decomposition analysis to capture drivers of energy consumption and regional disparities. • Income effect is more important than structure effect to explain increase of energy consumption. • The impacts of technical progress on energy consumption vary by regions, factors and sectors. • The industry and income effect contribute most to the increase in the energy consumption. [ABSTRACT FROM AUTHOR]