Coping with power crises under decarbonization: The case of China

Ensuring that electricity systems maintain reliable power supplies is critical to sustaining political support for the low -carbon energy transition. Therefore, it is crucial to analyze the recent electricity disruptions in China and evaluate the government's response. Since 2020, China has faced three unprecedented power outage affecting multiple provinces for weeks. This study investigates the interplay of various factors contributing to China's power crisis and examines the government's policies aimed at addressing immediate issues while advancing broader reforms. Key policy measures involve adjusting the electricity market to allow greater price fluctuations for coal-fired electricity and opening the wholesale market to industrial and commercial users. While this reform is expected to boost market competitiveness, the present market structure falls short of what is likely needed to ensure that power sector dispatch, pricing, and investment can work together to ensure reliable electricity supply in the context of China's transition towards carbon neutrality. To create an advanced, resilient, and flexible renewable energy grid, more intricate reforms across the electricity system, market, regulatory framework, and institutions will be essential.