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China Could Learn from UK’s 27 Years of Electricity Market Liberalization Reform

Saturday, September 3, 2016

On September 3rd, the 1st UK-China Energy Expert Dialogue was held in Beijing. This meeting is jointly hosted by the North China Electric Power University, Beijing CCUS Centre, University College London, and the University of Edinburgh. Professor at North China Electric Power University and Senior Scientist at Australia global CCS Research Institute Qianguo Lin presided over the meeting topics of “What can China learn from UK’s 27 years of Electricity Market Liberalization Reform”.

The participants of this meeting included the Head of Renewable Energy and Energy Transition at UK Embassy in Beijing Mr. Christian Romig, Professor at University College London and UK electricity and gas regulatory commission chief consultant Dr. Michael Grubb, former Chair of Energy and Climate Change Committee of UK Parliament and former State Minister of Environment Mr. Tim Yeo, Director of Research Centre for Energy System Analysis in NDRC Energy Research Institute Mr. Fuqiu Zhou, Professor at Guanghua Management School at Peking University Dr. Ming Lei, Officer at Climate Change and Energy Section in British Embassy Beijing Ms Tingting Tan, and many well-known professors at the North China Electric Power University.          

There was huge difference between electricity market and conventional consumer markets, and also between various kinds of power generation technologies. The goals of electricity market could include stable supply, energy security, environmental protection, low carbon emission and affordability. The meeting mainly discussed the necessity to reform China's electricity market. Experts in energy market discussed several challenges and explored the experience of the UK electricity market reform that could be transferred to China.          

The Head of Renewable Energy and Energy Transition at UK Embassy in Beijing Mr. Christian Romig said that the current state of the electric power industry in China has been oversupply. Power supply enterprises were mostly state-owned. The quantitative pricing model secured profit of power producers even in oversupply situation and encouraged them to continue their production.          

However, the situation in Britain was just the opposite. Professor at University College London and the Chief Consultant at UK Electricity and Gas Regulatory Commission Dr. Michael Grubb shared reform lessons and experience of UK electricity market; he said that Britain would wait until 2017 when the modified ROC system eventually switches to contract for difference (CfDs) policy. CfDs would set the price for electricity production and ensure the minimum payment.

Mr Tim Yeo, the former Minister of Environment Department and former Chair of Energy and Climate Change Committee of UK Parliament, shared critical policy changes in UK’s electricity market history. However, he did not believe that these decisions can be simply copied in China's market under specific national conditions. Chaired by Professor at North China Electric Power University Prof. Jun Dong, several experts discussed the application of the three principles that are followed by the British government in China: environmental protection, costs reduction and energy security. Mr Tim Yeo said these three principles must be followed at the same time to ensure a perfect electricity market. If he had to choose, continuous and secure energy supply would be more important than the other two. His remark was endorsed by other experts, and Mr Yeo also believed that China should strengthen its investment in improving energy efficiency. (UK-China (Guangdong) CCUS Centre)

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