The introduction of a spot market mechanism in China would allow for more efficient power plant dispatch based on actual cost of generation.
The spot market pilot is most likely to be started in the Beijing-Tianjin-Hebei region, according to an issuance of the National Energy Administration. As of now, only long-term physical trades for power delivery of one month up to one year can be conducted on a provincial level. In addition, different trading mechanisms are in place for different provinces, rendering a very fragmented environment for market participants.
The introduction of a spot market pilot by 2018 should thus serve as a field for learning and gathering experience, while regular spot markets are to be opened in 2020. According to the National Energy Administration, 30 percent of the industrial power consumption should be procured by the newly established trading platforms by 2018, while in 2020 this share should rise to 100 percent.
Some points that still deserve more deliberation and effort are the alignment of different trading mechanism across Chinese provinces, the build-up of knowledge on power market design and trading, in order to prepare the generators, as well as the traders and retail companies for this new system of power procurement.