A policy framework for sustainable electricity market development

Abstract

This thesis points out that Electricity market development (EMD) emerges to be a significant concern following a shift of paradigm from the design of EMD aiming for considering energy as key commodity and service to deliver a sustainable low-carbon generation future. Hence, a feasible regulatory regime is needed to shape and constrain the decisions related to prices, returns and other variables in order to promote credibility with investors in the meantime of delivering greater efficiency for the economy as a whole. Improved policies and more effective investment framework are required in sustainable EMD for attracting private capitals. By means of deep investigation into China's electricity transmission and distribution section, its technical and economic characteristics are identified. The findings indicate that the hasty separation of the transmission and distribution segments is technically applicable but not economically viable for realizing a competitive distribution market which would be premature when the country's distribution networks, especially those in rural areas, are still underdeveloped. With this in mind, the political issues concerning China's power industry are studied in this project. Scheme of Control in Hong Kong is further discussed. A roadmap shows how the interest of different stakeholders can be balanced by instituting appropriate regulatory authorities and associated legal framework. The feasible options of EMD are set to illustrate the interaction of the policy instruments, the market regulation and the sustainable investment environment. EMD requires setting up appropriate policies and building a more effective investment environment to attract continuous provision of supporting resources. The economic benefits and costs have to be realized systematically and in a wide perspective including technical, operational and financial dimensions. A macroscopic analysis on the prevailing policy and potential of wind power development in China is then employed. It starts by analyzing the characteristics of wind power resources and pin-pointing the relationship between the regulatory policies and various economic, taxation, legal and grid integration attributes of wind power development. Then it follows by analyzing the status quo and capabilities of the wind power manufacturing industry in China including its operational efficiency and grid integration standards. The economic and environmental benefits are estimated by referring to the associated costing analysis in respect of the major contributing factors such as manufacturing, operational and financial factors. Results of the benefits analysis indicate that the use of the wind power generation helps to save a significant equivalent amount of standard coal consumption and effectively reduce the emission. Subsequently, the thesis suggests that the energy policy of a sustainable electricity market development (SEMD) is set to ensure the energy needs of the community be met; to maintain the safe, reliable, efficient energy at reasonable prices; to minimize the environmental impact of energy production and use; and to promote the efficient use and conservation of energy. It involves a wide range of complex and interrelated technical, economic and regulatory issues. A dynamic decision making model has been developed to cope with the requirements of the multimarket trading policy framework. Fuzzy Differential Evolution (FDE) algorithm is employed to solve the multi-period stochastic optimization problem and obtain the optimum results for each time interval. Comparisons between different market scenarios demonstrate the economic and environmental positive influences of the policy framework to the society. Policies defining the three interactive markets can accurately reflect the intended goals such as decreasing emissions, promoting renewables, and keeping electricity cost at a reasonable level. Considering all the goals and requirements, it is necessary for China to refine its blueprint of electricity market development by fine tuning the originally market-oriented reform momentum in China's 12th five-year plan. This policy framework aims at designing appropriate policy instruments which caters for this purpose. Referring to this framework it discusses how China pinpoints her policies and strategies of reform to meet these requirements and achieve these goals of the 12th five-year plan. Comments drawn from corresponding international experiences are provided to illustrate how China is going to secure a sustainable energy future. In summary, the following original contributions of this thesis are achieved: - Establish a SEMD-SRRM policy framework and validate it as an effective decision making platform for electricity market reform; - Derive and implement a sustainable electricity market scenario by optimizing wind power investment in China; and Derive and implement feasible policy options for sustaining electricity market development.