Empirical evidence for the edge of a centralized regional market over a cross-province balancing market in allocating electricity resources: A case study of Yunnan in China

Alongside China’s new round of electricity reform, Yunnan has implemented medium- and long-term market reform in the electricity sector since 2015 with little progress seen in establishing an electricity spot market. To this end, this paper attempts to identify the pathway to an electricity spot market for Yunnan through its realities and lessons learned from Europe. As such, on the ground of the status quo of the energy mix, generation features, load structure and profiles, power supply–demand situations, and market progress in the Yunnan electricity system, this paper reviews two classical market frameworks commonly adopted worldwide, from the perspectives of market organizing and the core optimization model broadly used in coordinating system operation and clearing the market. Then the contrast of Yunnan with the European experience is analyzed with respect to the energy mix, generation, transmission, and exchange, as well as the political and economic institutional arrangements, market conditions, and driving forces. Moreover, the Yunnan case study scenarios and likely consequences and benefits under different market frameworks are further analyzed to verify the edge of a centralized optimal-power-flow-based regional market over a decentralized cross-province balancing market, in productively reducing price distortion, allocating resources, maintaining power supply–demand balance at all times, and promoting renewable energy integration across a wider region. Finally, policy suggestions concerning the pathway to an electricity spot market are provided for Yunnan in further deepening its electricity reform.