In 2015, the new round of China's electric power system reform marked by the No.9 document of the central government of the people's Republic of China put forward the goal and task of deepening the reform of the electric power system in China, focusing on solving the problem of the lack of market mechanism in the electric power industry. Since the implementation of the reform for more than four years, with the opening of power generation and utilization plan, the approval of transmission and distribution price, the opening of power sale business and incremental distribution business, these achievements have made the market entities obtain rich dividends. In 2018, the domestic power market remained in the medium and long-term market, and the spot market entered the pilot stage. Only when the spot market of electric power is fully launched can the value attribute of this special commodity of electric power be brought into full play.
"No spot, no market". Spot electricity is the key reform of direct electricity trading and market pricing. According to the national requirements, "by the end of 2018, the spot trading pilot will be launched; in 2020, the spot trading market will be launched in an all-round way", and the spot market pilot work in the South (starting from Guangdong), Mengxi, Zhejiang, Shanxi, Shandong, Fujian, Sichuan and Gansu has been launched. At present, four of the eight spot pilots have started the trial operation.
On June 1-2, 2019 (the third session) International Power Market Summit co sponsored by visibility technology, energy foundation and China Academy of Electric Power Sciences was held in Beijing. Industry experts and practitioners, around the theme of "development and Prospect of electric power market under spot trading", launched a brilliant and warm discussion.
The conference also invited Professor William W. Hogan, director of the center for power policy research, Kennedy School of political science, Harvard University, to introduce the experience of the United States in the process of power market in his speech "marginal price market of nodes and financial transmission rights in the United States". He said that the successful spot market should be "based on quotation, based on security constraints, based on economic dispatch and node electricity price". Only when the mechanism design of power market is consistent with the physical operation of power system, can the price signal generated be true and transparent. The real and transparent price signals will make it more difficult to use arbitrage in different time scales and different geographical locations, which is more conducive to the supervision and control of market manipulation, and more conducive to market members to avoid risks through other derivative transactions.
Professor Hogan is the main creator of LMP and FTR, and is recognized as the leader of global power market. His design and advocacy in the 1980s led the power reform and marketization in the United States and the world.
After the meeting, we had an exclusive interview with Professor Hogan and exchanged views with him on the theme of the conference, "development and Prospect of power market under spot trading" and some issues in China's power market reform. Professor Hogan highly recognized the attempts of Chinese counterparts, and also put forward some practical suggestions for Chinese power market practitioners and reformers based on the experience of the United States and other leading countries.
The following is the interview record:
Visibility: Good afternoon, Professor Hogan. We are very honored to invite you to the third Electricity Market Summit. Here are some questions for you. The first problem is that at present, almost every province in China has its own electric power trading center, which is building a provincial electric power market system with the spot market as the main body and the financial market as the supplement. Some people also think that China should establish a unified power market and consider market rules. What do you think of these two views? What path do you think China is suitable for?
Professor Hogan: I think it would be a better choice to build a wider power market based on the past experience and various theories around the world. Similarly, it is more advantageous to form a unified and coordinated market operating system. However, people often wonder whether there will be "too big to control" problems. Even with such doubts, I still think there are many advantages in establishing a unified framework in a large region. We can see the expansion of this unified power market in the United States, and Europe also wants to improve the coordination of regional power market. Electricity is very different from other goods. It needs long-distance transmission, so it needs a consistent rule and a unified and coordinated dispatching center.
Visibility: in China, there is a huge difference in energy endowment between the East and the West. The western region is rich in energy, but it consumes less energy. The eastern region has a huge energy demand, but its energy self-sufficiency is very weak. How will this affect the establishment of a unified electricity market.
Professor Hogan: we can compare the difference between the East and the west of China and the PJM area of the United States, although the latter area is slightly smaller. The western part of Pennsylvania generates more electricity, while the eastern part of New Jersey has a very different situation, with a large demand for electricity. There is a lot of electricity trading between these areas. But they are all under the control of a unified and coordinated system.
Visible: the essence of power is a kind of commodity. In China, its commercialization attribute has gradually revealed, but it is far from enough in the power financial market. For example, the New York Stock Exchange will provide a variety of standard futures and options trading contracts, and power industry practitioners will trade a variety of non-standard contracts in the form of OTC, including price difference contracts, weather options, etc. these derivatives are very common in the world. How do you think China should develop its power financial market
