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Economic Viability and Regulation Effects of Infrastructure Investments
Economic Viability and Regulation Effects of Infrastructure Investments
Energy Economics
a r t i c l e i n f o a b s t r a c t
Article history: The transition of energy structure to renewable energy is a social and systematic engineering that requires com-
Received 2 August 2019 plex regional power interconnection as a support. Thus, an assessment of the economic viability of infrastructure
Received in revised form 7 May 2020 investments for supporting such transmission expansion is crucial. This study presents a multi-regional power
Accepted 28 July 2020
system optimization model to evaluate the potential economic benefits of infrastructure investments for the na-
Available online 07 August 2020
tional inter-regional electricity network in China under various scenarios in the context of low-carbon transfor-
Keywords:
mation. Key factors influencing economic benefits are analyzed specifically and regulation barriers associated
Economic benefits with inter-regional electricity trade are given particular attention. The results show that approximately 140
Regulation barriers Giga Watt (GW) of infrastructure construction for the inter-regional electricity trade network is economically vi-
Electricity trade able during the planning horizon. These new interconnections would lead to 250–440 billion RMB of economic
Optimization model benefits. Regional electricity trade barriers caused by imperfect market mechanisms have a negative impact on
the economic benefits of transmission infrastructure investments, although they promote scale and utilization ef-
ficiency in the power sector of electricity-importing regions. Improving the national grid coordination mecha-
nism to break the grid isolation between the State Grid Corporation of China and the China Southern Power
Grid is crucial, because a large number of transmission lines connecting these two national-level power grids
are economically viable.
© 2020 Elsevier B.V. All rights reserved.
1. Introduction length of the UHV line, both complete and under construction, totals
32,000 km (CSG, 2017; SGCC, 2017). However, the construction of the
Renewable energy is a key area in achieving low-carbon transforma- inter-regional electricity network is still below expectation due to the
tion. However, China's energy resources and electricity load show re- uncertainty of economic viability and obvious institutional barriers be-
verse distribution, along with a regional imbalance between electricity tween different provinces, although much literatures revealed positive
supply and demand, which has led to serious curtailment issues (Yi results in both economic and environmental aspects (Chen et al.,
et al., 2019). The interconnection of the regional electricity market is 2014; Guo et al., 2016, 2017; Li et al., 2016). As demonstrated by the
considered a secure, sustainable, and cost-effective way to resolve European electricity system, despite clear benefits, interconnection pro-
these issues (Ahmed et al., 2017). Electricity is a relatively peculiar com- jects are difficult to achieve in practice (Dutton and Lockwood, 2017).
modity, as its trade entirely relies on transmission lines. Inter-regional One reason for this difficulty is that the economic benefits of inter-
electricity transmission can facilitate electricity trade and help effi- connection depend on changing network architectures and technology
ciently integrate energy sources. Thus, the rapid expansion of the mixes (Rosellon, 2003). The decision of whether to invest in inter-
inter-regional electricity network is crucial to China's energy landscape regional electricity transmission, and to what extent, needs to be con-
over the next two decades. sidered in the context of the national power transmission network.
Currently, Chinese government is giving a high priority to inter- From a systematic perspective, a transmission line investment may be
regional electricity transmission by ultra-high voltage (UHV) technol- uneconomical, even if a single line investment assessment shows it to
ogy in order to promote renewable energy development (Wang et al., be economically feasible. Meanwhile, the future spatial distribution of
2014). Until 2017, 16 UHV lines had been built by the State Grid Corpo- low-carbon technologies and the fluctuating feature of renewable en-
ration of China (SGCC) and the China Southern Power Grid (CSG); the ergy complicate the assessment of economic benefits.
Regulation barriers also affect the economic benefits of interconnec-
⁎ Corresponding author. tion, including local government protection, inter-provincial barrier and
E-mail address: ybw2018@buaa.edu.cn (B.-W. Yi). isolation of power grid between the SGCC and the CSG. There is no fully
https://doi.org/10.1016/j.eneco.2020.104890
0140-9883/© 2020 Elsevier B.V. All rights reserved.
2 J.-H. Xu et al. / Energy Economics 91 (2020) 104890
competitive national electricity market in China. Inter-provincial elec- long-term investment decision framework based on China's re-
tricity trade is primarily dominated by local governments who have source endowment and power grid structure. It allows for examining
the authority to determine the trading price and volume. Many prov- the impacts of various investment options for electricity generation
inces have instituted restrictions on external electricity to protect the and transmission, as well as the effects of various electricity dispatch
local power generation companies. In addition, the isolation of power decisions and network topologies. Second, the economic viability of
grid between the CSG and the SGCC hampers economically viable infra- infrastructure investments for inter-regional electricity transmis-
structure investments. These two national power grid companies man- sion network is specifically evaluated from a systematic perspective.
age regional power grid construction and are more concerned with the Two types of regulation effects are added into the model to reflect
planning of their own jurisdictions.1 The lack of a national coordination the impact of non-economic factors on interconnections. Finally,
mechanism for the power grid means almost no electricity trade hap- several cases are analyzed to evaluate the investment risks and ex-
pens between CSG and SGCC, which seriously affects the rationality of amine the sensitivity of the model to various assumptions. This
inter-regional electricity transmission patterns. study answers two questions: (1) what is the economically viable
Generally speaking, grid investment is highly capital-intensive, usually scale of investment in China's inter-regional transmission network
costing several billion USD, and once built, it creates a “lock-in” effect on and how will it change with the evolution of network structure?
the power grid topology for decades, as highlighted by Huppmann and And (2) what is the impact of regulation barriers due to imperfect
Egerer (2015), and Chao and Wilson (2020). With the deepening of market mechanism on the economic viability of transmission line in-
China's electricity market reform, value-based transmission expansion vestments and inter-regional electricity exchange patterns? Based
mechanism will be gradually formed. Thus, an assessment of the potential on the answers, policy recommendations are provided for govern-
economic benefits of the national electricity interconnection under mar- ment to optimize China's mid-term and long-term inter-regional
ket competition is crucial prior to making investment decisions. Such an power grid development.
assessment can also help us understand the economic feasibility of This paper is organized as follows. Section 2 provides a description of
China's low-carbon transformation and recognize the coordination be- the detailed modeling. Datasets and scenario designs are presented in
tween electricity network expansion and national low-carbon transfor- Section 3. Section 4 shows the economic benefits of infrastructure in-
mation strategy (Su and Ang, 2017). vestments for the inter-regional power network, and discusses the re-
Many studies have concentrated on the economic benefits of invest- lated regulation effects. Section 5 summarizes the findings and offers
ment in electric power industry at both the generation side (Li et al., recommendations.
2015; Pan et al., 2019) and the demand side (Hu et al., 2011; Yuan
et al., 2014), while few studies have focused on the transmission side. 2. Methodology
Timilsina and Toman (2016) quantified the benefits of cross-border
electricity trade in South Asia through an optimization model. Li et al. 2.1. Economic viability and regulation effects
(2016) investigated the impact of inter-regional electricity grid on the
energy transformation in China. Li and Chang (2015) established a sys- A stylized two-node electricity trade system is presented first as a ref-
temic approach in evaluating the electricity infrastructure investment in erence for our empirical analysis (see Fig. 1). Two regions (A and B) are
Association of Southeast Asian Nations (ASEAN) and found that there is characterized by long run marginal cost curves (MCA and MCB) and de-
still room for improvement in the current Greater Mekong Sub-region mands (DA and DB). To simplify, we assume that the long run marginal
program. cost of each region is monotonically increasing, but the cost in region B
For methodology, vast literatures used the power generation expan- is clearly higher than that in region A. The price elasticity of demand is as-
sion planning (GEP) model to analyze the power generation and trans- sumed to be zero, and the electricity transmission cost is assumed to be z
mission investment planning (Gujba et al., 2010; Yuan et al., 2014; $/MW. The horizontal axis represents electricity supply or demand in
Chang and Li, 2015; Cheng et al., 2015b; Hanson et al., 2016). However, MW, while the vertical axis represents marginal cost in $/MW.
they are difficult to incorporate the intermittent and seasonal features If the difference between MCA and MCB is greater than z, this means
of renewable energy, which are typically addressed by hourly-based that the additional transmission capacity is economically viable. In this
unit commitment (UC) models (Delarue et al., 2009; Weigt et al., situation, region A will produce more electricity and transfer it to region
2013; Davidson et al., 2016; Holladay and LaRiviere, 2017). These fea- B at a lower marginal cost. The optimal transmission capacity is u MW,
tures of renewable energy will require thermal power units to adapt, which is determined at the point where the difference in marginal
leading to additional costs related to power dispatch, which will further cost between region A and B is equal to the transmission cost. The equi-
impact the economic benefits of electricity exchange (Weijde and librium electricity supply volumes are DA + u in region A and DB−u in
Hobbs, 2012). Few studies, generally focusing on the European power region B, respectively. Electricity trade generates net cost savings,
system, have integrated short-term power dispatch decisions into a which are the economic benefits of transmission investment, and are
long-term GEP framework to evaluate the economic benefits of regional depicted as the two gray shaded areas in the left part of Fig. 1.
power interconnections (Koltsaklis and Georgiadis, 2015; Abrell and The regulation effects mentioned in Section 1 are mainly reflected in
Rausch, 2016; Scholz et al., 2017; Allard et al., 2020). the constraints on transmission capacity between regions. If the limited
The existing literatures show important findings regarding the en- capacity u* is less than the optimal capacity u, the electricity transfer
ergy and environmental impacts of electricity interconnections in volumes and the economic benefits brought by this transfer will change.
China; however, an obvious study gap exists in quantitatively estimat- The new equilibrium electricity supply volumes are DA + u* in region A
ing the potential economic benefits of inter-regional electricity inter- and DB−u* in region B, respectively. The economic benefit losses (BL)
connection under value-based transmission expansion mechanism. are depicted as the two orange shaded areas in the right part of Fig. 1,
Moreover, the impact of the regulation barriers related to inter- which are calculated by Eq. (1).
regional electricity trade on the economy of transmission investment Z Z
DB −u DA þu
is often overlooked. BL ¼ MC B − MC A −z ðu−uÞ ð1Þ
This study first presents a Chinese multi-regional power system op- DB −u DA þu
timization model to simulate the expansion of both power generation
and transmission. It integrates short-term power dispatch into the The purpose of this simple example is to illustrate the economic viabil-
ity and regulation effects of inter-regional electricity transmission invest-
1
CSG includes the Northeast power grid, North power grid, Northwest power grid, East ment. However, there are multiple nodes in reality, which makes the
power grid, and Central power grid, while SGCC includes the Southern power grid. above assessment more complicated. Inter-regional transmission network
J.-H. Xu et al. / Energy Economics 91 (2020) 104890 3
structure will change regional marginal cost, and further affect the eco- of power transmission lines, and the hourly start-up and shut-down ca-
nomic viability and corresponding benefits of electricity transmission pacities of fossil-based technologies. The main outputs consist of the
investment. Therefore, it is necessary to comprehensively evaluate the macro evolution pathway and micro utilization efficiency of both
economic benefits and regulation effects of inter-regional electricity trans- power generation and transmission technologies. In addition, indirect
mission from a holistic viewpoint. economic factors, such as environmental benefits and economy-wide
impacts, are not considered in the cost function.
2.2. Model description
min C X G ; X Tr ; P; PT; SU; SD ð2Þ
From Section 2.1, we find that the differences between regional long
run marginal cost and corresponding transmission cost are the most More explanations for parameters and variables, and detailed math-
important factors in examining the economic viability of transmission ematical equations, including objective function and constraints, are
investments. However, the accounting of these costs is not simply due presented in Appendix A.
to the natural characteristics of electricity generation and transmission.
The short-term features of electricity must be considered, such as real- 2.3. Model characteristics
time matching, ramping, and renewable energy fluctuations, although
this study focuses more on the long-term investments. In addition, the Future inter-regional electricity flow patterns depend on many fac-
structure of inter-regional power network also affects the tradeoff be- tors, including regional resource endowments, power demand changes,
tween each kind of cost. renewable energy development, and the evolution of power generation
Therefore, this study uses a multi-regional power system technologies. These dynamic changes in electricity flows significantly
optimization model to examine the Chinese power sector, integrating affect the economic benefits of infrastructure investments for electricity
short-term power dispatch into the long-term investment decision networks. Our model reflects such factors.
framework. An illustrative structure of this model is presented in
Fig. 2. At the macro level, it simulates the yearly investment decisions 2.3.1. Cross-regional heterogeneity
for both power generation and transmission technologies. At the One of the main advantages of our model is its ability to describe
micro level, it simulates the hourly power dispatch, including ramping cross-regional heterogeneity. Unlike the stylized two-node model pre-
limits and start-up decisions, to reflect the intermittent and seasonal sented in Section 2.1, our model divides China into 10 regions as pre-
characteristics of renewable energy. sented in Table 1, and each region is assumed to be a node. Considering
This model is a large-scale linear programming solved by the CPLEX the power transmission between nodes, the power supply and demand
algorithm based on GAMS software. The objective function of this opti- of each node match in real time on the hourly dimension, as shown in
mization problem is to minimize the total system costs during the plan- Eq. (A.17). Kirchhoff's current law is respected, while the voltage law is
ning horizon, as shown in Eq. (2). The decision variables include the not included.
yearly new built capacity, and hourly power output of power generation To clearly define which transmission lines are included in the scope
technologies, the yearly new built capacity, and hourly power transfer of this study, we must first explain the regional divisions. China's power
Table 1
Regional division in this study.
Regional symbol Provinces, municipalities and autonomous regions included Regional power grids Jurisdiction
Northeast Liaoning, Jilin, Heilongjiang, East Inner Mongolia Northeast power grid SGCC
North Beijing, Tianjin, Hebei, Shandong North power grid SGCC
Jinmengxi Shanxi, West Inner Mongolia North power grid SGCC
Northwest Gansu, Qinghai, Ningxia, Shaanxi Northwest power grid SGCC
Xinjiang Xinjiang Northwest power grid SGCC
East Zhejiang, Shanghai, Jiangsu, Fujian, Anhui East power grid SGCC
Center Hubei, Hunan, Jiangxi, Chongqing, Henan Central power grid SGCC
Sichuan Sichuan Central power grid SGCC
South Guangxi, Yunnan, Guizhou Southern power grid CSG
Guangdong Guangdong Southern power grid CSG
grid consists of six parts, the North, Northeast, Northwest, East, Central, detailed mathematical equations about the dynamic change of
and Southern power grids. The first five regional power grids are technology capacity are presented in Appendix A.
governed by SGCC, while the last is controlled by CSG. The resource en-
dowments in various provinces within one grid vary widely. Thus, this
study further divides the six power grids into 10 regions according to re- 3. Data and scenarios
source endowment and geographical position (see Table 1).
Electricity transfer needs to be based on transmission lines, includ- 3.1. Data inputs
ing historical lines as well as new lines decided by this model. Inter-
regional network connection is assumed to adopt ultra-high voltage The volume of data needed for this kind of model is substantial.
direct current (UHVDC) technology (Yi et al., 2016). The ultra-high volt- The key datasets include power demand profiles, generation mix of
age alternating current (UHVAC) is excluded because its advantages in technologies, economic parameters for both power generation and
building a larger synchronous power grid are beyond the scope of our transmission technologies, and meteorological data for renewable
model. The investment of UHVDC consists of fixed costs and variable energy. The description of these data categories and their sources
costs, as shown in Eq. (A.7). Heterogeneity and transmission congestion are presented in the Supplementary material (Cheng et al., 2015a,
within one node are also beyond the scope of this study. 2015b; CEPYEB, 2015; IEA, 2018; Kalnay et al., 1996; Koltsaklis
and Georgiadis, 2015; Lai and Hong, 2007; Li et al., 2016; Lv et al.,
2013; Shu et al., 2005; Tang and Dong, 2012; Wei et al., 2010; Yi
2.3.2. Time step and time coverage et al., 2016, 2017; Zhu and Genton, 2012).
Another advantage of our model relates to time step and time Based on the regional division, we collect information on all existing
coverage. 2 Temporal resolution is a key characteristic. Bottom-up inter-regional power transmission lines through 2017 (see Fig. 3). The
models have a relatively high temporal resolution, generally focus- total transmission capacity is 179 GW. The UHV line is the main carrier
ing on hourly equilibrium.3 However, due to computational limita- of inter-regional power due to its low loss rate and long-distance poten-
tions, large-scale electricity system models adopt the typical day tial (Hui et al., 2017). Jinmengxi is the most important electricity-
method to reduce temporal resolution and coverage (Lienert and exporting region, followed by the Northwest, South, and Sichuan. The
Lochner, 2012; Koltsaklis and Georgiadis, 2015; Merrick, 2016). North, East, and Guangdong are the primary electricity-importing re-
Our model considers six typical days of 24 one-hour periods. Thus, gions. The Jinmengxi-North, Sichuan-East, and South-Guangdong trans-
a one-year period consists of 144 temporal steps. The planning hori- mission patterns play a significant role in the transfer of electricity.
zon is 2015–2030.
The connection between the macro temporal level and micro tem-
poral level is reflected in capacity constraints. The power generation ex-
pansion module determines the available capacity for technologies at
the beginning of each year. The power dispatch and transmission for
each temporal step during 1 year are limited by this available capacity.
Specifically, the capacity constraint for power dispatch is shown in
Eq. (A.16). For renewable energy technologies, the available capacity
depends not only on the installed capacity in this year, but also on the
hourly capacity factor. For fossil fuel technologies, the capacity factor
does not need to be considered. The capacity constraint for power trans-
mission at each hour is shown in Eq. (A.18).
2
Time coverage is the number of time steps covered in each model run (Pfluger, 2014).
3
Bottom-up models are characterized by detailed technology representation. Technol-
ogy adoption is considered a rational decision-making process (Fleiter, 2011). Our model Fig. 3. Existing inter-regional power transmission network until 2017. Sources: Yi et al.
belongs to this category. (2016); CSG (2017); SGCC (2017).
J.-H. Xu et al. / Energy Economics 91 (2020) 104890 5
Four scenarios, namely REF, BAU, ETB, and FRC, are constructed to Scenario Total system Total costs in the Net cost Percentage
assess the regulation effects of infrastructure investments for inter- costs (Billion REF scenario savings of savings
regional electricity network (see Table 2). Two types of regulation RMB) (Billion RMB) (Billion (%)
RMB)
effects are considered in this study. The first is the inter-regional elec-
tricity trade barrier caused by the imperfect electricity market mecha- BAU 29,790.5 30,146.1 355.6 1.18
ETB 29,820.0 30,146.1 326.1 1.08
nism in China. The second is the lack of a national coordination
FRC 29,514.0 30,146.1 632.1 2.10
mechanism for the power grid, leading to grid isolation between CSG
and SGCC.
The REF (Reference) scenario is intended as a benchmark, in which
no new transmission line is developed during the planning horizon. 4. Results and discussion
The capacity of the inter-regional transmission network in this scenario
has been shown in Fig. 3. 4.1. Economic efficiency
In the BAU (Business As Usual) scenario, the future transmission net-
work is determined endogenously by the model, but we assume the 4.1.1. Total system cost savings
separation of the power grid between CSG and SGCC exists; therefore, Table 3 presents the total system costs for each scenario over the
no new transmission line is developed to connect CSG and SGCC during planning horizon. The comparisons between each scenario reveal
the planning horizon. Regional electricity trade barriers are not consid- three key findings. First, infrastructure development of inter-regional
ered in this scenario. Inter-regional electricity flow is unrestricted as power transmission produces economic benefits, as the net savings to
long as there is sufficient transmission capacity. total system costs are positive. Such development would produce
Based on the BAU scenario, we further consider regional electricity 355.6, 326.1, and 632.1 billion RMB in net savings in the BAU, ETB, and
trade barriers in the ETB (Electricity Trade Barriers) scenario, aiming FRC scenarios, respectively, or approximately 1.18%, 1.08%, and 2.10%
to identify their impact on the economic benefits of electricity intercon- of total electricity supply costs.4 Second, net savings in the ETB scenario
nections. In this study, trade barriers are modeled as the maximum per- are 8.3% lower than in the BAU scenario, indicating regional electricity
centage of regional annual power demand that can be met by electricity trade barriers do limit the economic benefits of transmission infrastruc-
trade with other regions (λpip) referring to Li and Chang (2015), as ture investment. Third, net savings in the BAU scenario are much lower
shown in Eq. (3). More explanations for parameters and variables are than the FRC scenario, which shows there is room for improvement to
presented in Appendix A. Based on the net imported electricity of the the current interconnections.
North region (including Beijing, Tianjin, Hebei, and Shandong) in
2015, the maximum percentage is assumed to be 20%. This region has 4.1.2. Cost decomposition
a large number of lines that connect with other regions, which reflects The cumulative changes in various types of costs, resulting from
the actual proportion of inter-regional electricity trade (CEPYEB, 2016). inter-regional electricity cooperation and trade, relative to the REF sce-
nario, are depicted in Fig. 4. The total cost savings are primarily due to
X TI X
P i;t;h −P TO
i;t;h ≤ Di;t;h λpip ð3Þ savings in investment, O&M, and fuel costs of power generation,
h h which fall by 192.0, 247.5, and 153.2 billion RMB, respectively, in the
BAU scenario. At the same time, there is a net increase in investment
The FRC (Full Regional Connections) scenario considers full regional and O&M costs for the expansion of power transmission, but the abso-
connections with unrestricted electricity flow. New transmission lines lute amount is less than the total savings. Regional electricity trade in-
are developed to link CSG and SGCC during the planning horizon. A creases electricity generation in resource-rich areas such as the
comparison between the FRC and BAU scenarios demonstrates how Northwest and Jinmengxi, resulting in savings. On the one hand, the ca-
the lack of national coordination mechanisms for the power grid affects pacity factor of renewable energy in these regions is higher, which re-
future electricity trade patterns. duces the investment cost to achieve the same renewable energy
In addition to economic considerations, inter-regional electricity target. On the other hand, lower coal prices in resource-rich areas result
trade should promote the consumption of renewable energy. A high in lower fuel costs for the entire power system.
proportion of renewable energy will be integrated into the power sector The investment costs for power transmission in the ETB and BAU
over the next decade, which will necessitate significant transmission in- scenarios are 104.6 and 84.5 billion RMB lower than the FRC scenario,
frastructure expansions and upgrades. In order to simulate these new indicating that incomplete regional interconnections and electricity
flow patterns, two policy targets are assumed in our model under all trade barriers hinder investment in the inter-regional electricity net-
scenarios. The first, which incorporates the U.S.-China Joint Announce- work. For this reason, the savings in investment and fuel costs of
ment on Climate Change, assumes that the share of non-fossil energy power generation produced by inter-regional electricity trade decrease
in total primary energy will exceed 20% in 2030 (Duan et al., 2018), as significantly in the ETB and BAU scenarios.
shown in Eq. (A.20). The second sets the share of non-hydro renewable
energy in power generation above 17% in 2030, relying on the numbers 4.2. Inter-regional electricity trade pattern
used by Yi et al. (2017), as shown in Eq. (A.19).
4.2.1. Inter-regional transmission capacity
Table 2 Fig. 5 shows the inter-regional power transmission infrastructure ca-
Scenarios for inter-regional electricity system. pacity through 2030 under different scenarios. It reveals that 141.1 GW
Scenario Transmission network Connection between CSG Electricity trade of interconnection is economically viable during the planning horizon
expansion and SGCC barriers under the BAU scenario. This transmission network primarily consists of
REF N N N
the lines connecting Jinmengxi-East, Jinmengxi-Center, Northwest-
BAU Y N N Center, Sichuan-East, Sichuan-Center, Xinjiang-Center, and Northeast-
ETB Y N Y North. The comparison, shown in Fig. 5, reveals three differences between
FRC Y Y N
4
Notes: “Y” represents yes, while “N” represents no. All costs in this study are 2014 constant price.
6 J.-H. Xu et al. / Energy Economics 91 (2020) 104890
the historical network and the future pattern of infrastructure construc- GW during the planning horizon, which is 20.3 GW less than the BAU sce-
tion. First, there will be few new transmission lines connecting to the nario. This reduction is primarily due to the lines connecting Jinmengxi-
North or Guangdong regions. Second, the interconnections from the Center, Northwest-East, Northwest-Center, and Xinjiang-Center.
Northwest and Jinmengxi regions to other regions will increase signifi- The economically viable transmission capacity under the FRC sce-
cantly. Third, a large number of transmission lines will be connected to nario is 166.7 GW during the planning horizon, which is 25.6 GW
the Center region. more than the BAU scenario. The connection between CSG and SGCC
Electricity trade barriers limit the economic benefits of electricity in- suggests a large number of transmission lines will be built from the
terconnection, leading to a reduction in total inter-regional transmission Northwest, Jinmengxi, and Sichuan regions to Guangdong rather than
capacity. The economically viable capacity in the ETB scenario is 120.8 the East and Center regions. This is because the marginal generation
Fig. 6. Inter-regional electricity flows in 2030 (TWh). Notes: Red numbers represent the electricity transfer amount of individual transmission line and blue numbers represent the regional
net electricity transfer amount.
cost in Guangdong is higher than other regions. At the same time, no Northwest, Jinmengxi, and Xinjiang. The transfer of hydropower by the
new transmission line will be built within CSG due to the interconnec- Sichuan and South regions is not affected. Restricted electricity flows
tion between SGCC and Guangdong. also lead to a lower utilization rate of existing transmission lines. For ex-
ample, electricity exports from the Northwest and Xinjiang come from
4.2.2. Inter-regional electricity flow both renewable energy and thermal power, which makes the annual uti-
Fig. 6 shows the inter-regional electricity flows in 2030 under different lization rate of lines connecting Xinjiang-Center and Northwest-Center
scenarios. There is a significant increase in net electricity flows under the relatively high, reaching more than 60% in the BAU scenario, while it
BAU scenario, reaching 1282 TWh in 2030, 1.73 times as much as under falls to approximately 50% in the ETB scenario.
the REF scenario. The significant difference in various regional net electric- There is little change in the total amount of electricity trade between
ity transfer amounts reflects the future electricity trade pattern. The the FRC and BAU scenarios, although the economically viable capacity in
electricity-exporting regions are Jinmengxi, Northwest, Sichuan, South, the FRC scenario is higher. However, the pattern of electricity trade does
and Xinjiang, while the electricity-importing regions are East, Center, change. The Northwest, Jinmengxi, and Sichuan grids will export a por-
North, and Guangdong. Especially in the Center region, net electricity im- tion of electricity to the Guangdong region rather than the Center and
ports under the BAU scenario are approximately 5.5 times higher than East. The net electricity import to Guangdong under full regional con-
the REF scenario. Meanwhile, power supply and demand in the Northeast nection increases by 206 TWh in 2030. In other words, the connection
are almost balanced, with only a small amount of electricity being trans- between CSG and SGCC has no significant effect on electricity exports
ferred to the North region. The direction of electricity flow could change by the resource-rich areas, but affects electricity imports by the
hourly between certain regions, depending on the difference in marginal resource-poor areas. The utilization rate of the transmission lines from
generation costs. SGCC to Guangdong is mostly above 50%, and the utilization rate of in-
Net inter-regional electricity flows under the ETB scenario reach 1080 ternal lines of CSG has not been reduced. The main affected lines are
TWh in 2030, which is 15.8% less than the BAU scenario. The Center region Sichuan-East and Sichuan-Center. Due to the high share of hydropower
is the most heavily affected by electricity trade barriers, followed by the in Sichuan, the utilization rate of its export lines is relatively low, which
East region. The reduction in import demand in these two regions causes is close to 50% in the BAU scenario, but reduces to approximately 40% in
a decrease in electricity exports by certain resource-rich areas such as the the FRC scenario.
8 J.-H. Xu et al. / Energy Economics 91 (2020) 104890
Table 4
Results under different discount rates.
Table 5
Results under different electricity import proportion.
Maximum proportion of electricity import 10% 15% 20% (ETB) 25% 100% (BAU)
Table 6
Results under different coal prices.
A.2. Constraints
Author contributions
This model is subject to the following constraints.
All authors conceived the research. Bo-Wen Yi constructed the
model; Jin-Hua Xu provided the data; Ying Fan performed the analysis; X
t
Z Gi;n;t ¼ X Gi;n;t 0 ðA:9Þ
Bo-Wen Yi wrote the paper; All authors contributed to the interpreta-
t 0 ¼t−T n þ1
tion of the findings.
X
t
Z Tr
i; j;t ¼ X Tr
i; j;t 0 ðA:10Þ
Declaration of Competing Interest
t 0 ¼t−Tþ1
The authors declared that we do not have any commercial or asso- X Gi;n;t ≤ X Max ðA:11Þ
i;n
ciative interest that represents a conflict of interest in connection with
the work submitted.
U i;n;t;h ¼ U i;n;t;h−1 þ SU i;n;t;h −SDi;n;t;h ðA:12Þ
!
XX X
t
X G ; X Tr ; U; SU; SD; P; PT ≥ 0 ∀i; n; t; h ðA:21Þ
C Inv
t ¼ cInv
n;t 0 X Gi;n;t 0 ∂n ðA:2Þ
i n t 0 ¼t−T n þ1
Eqs. (A.9) and (A.10) show the calculations of the total capacity for
XX each power generation and transmission technology. Eq. (A.11) limits
C O&M
t ¼ Z Gi;n;t cO&M
n;t ðA:3Þ
i n the annual construction speed of power generation technology.
Eq. (A.12) represents the dynamics of commitment states for fossil
XXX
C Fuel ¼ P i;n;t;h en pFuel ðA:4Þ fuel technologies. Eq. (A.13) is the maximum and minimum power out-
t i;n;t
i n h put constraints for the committed capacities. Eqs. (A.14) and (A.15) are
XXX the ramping up and ramping down constraints for fossil fuel technolo-
C Startup
t ¼ SU i;n;t;h cStartup
n ðA:5Þ gies. Eq. (A.16) limits the available capacity at each hour, which is a con-
i n h nection between the power dispatch module and the power generation
expansion module. Eq. (A.17) shows the real-time matching of power
supply and demand considering inter-regional power interconnections.
Eq. (A.18) limits the available transmission capacity at each hour.
J.-H. Xu et al. / Energy Economics 91 (2020) 104890 11
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