Sustaining a high-renewable electricity generation portfolio has proved to be difficult due to grid flexibility constraints. We utilize the abrupt decline in electricity demand due to the COVID-19 lockdown in China as a policy experiment to study the role of ancillary service markets (ASMs) in promoting intermittent renewable energy integration. Our results reveal that provinces with ASMs sustained a significantly higher generation of intermittent renewable energy during the COVID-19 demand shock, which amounts to 9.7 percent of average monthly intermittent renewable energy generation during the shock. A back-of-envelope analysis further shows that annual carbon emission offset from establishing ASMs in all provinces of China could amount to 13 to 17 percent of annual carbon emissions from Britain in the near future when renewable energy penetration continues to go up.
BartonJ. P.InfieldD. G.2004. “Energy Storage and Its Use with Intermittent Renewable Energy.”IEEE Transactions on Energy Conversion19 (2): 441–8.
2.
BorensteinS.2012. “The Private and Public Economics of Renewable Electricity Generation.”Journal of Economic Perspectives26 (1): 67–92.
3.
BowenE.LacombeD. J.2017. “Spatial Dependence in State Renewable Policy: Effects of Renewable Portfolio Standards on Renewable Generation within NERC Regions.”The Energy Journal38 (3): 177–193.
4.
BrienenR. J.PhillipsO. L.FeldpauschT. R.GloorE.BakerT. R.LloydJ.Lopez-GonzalezG., et al2015. “Long-Term Decline of the Amazon Carbon Sink.”Nature519 (7543): 344–348.
5.
BushnellJ. B.WolframC.2005. “Ownership Change, Incentives and Plant Efficiency: The Divestiture of US Electric Generation Plants.”Center for the Study of Energy Markets37 (4): 799–815.
6.
CalelR.DechezleprêtreA.2016. “Environmental Policy and Directed Technological Change: Evidence from the European Carbon Market.”Review of Economics and Statistics98 (1): 173–91.
7.
CallawayB.Sant’AnnaP. H.2021. “Difference-in-Differences with Multiple Time Periods.”Journal of Econometrics225 (2): 200–30.
8.
CallawayD. S.FowlieM.McCormickG.2018. “Location, Location, Location: The Variable Value of Renewable Energy and Demand-Side Efficiency Resources.”Journal of the Association of Environmental and Resource Economists5 (1): 39–75.
9.
CaoJ.HoM. S.MaR.TengF.2021. “When Carbon Emission Trading Meets a Regulated Industry: Evidence from the Electricity Sector of China.”Journal of Public Economics200: 104470.
10.
ChenH.CuiJ.SongF.JiangZ.2022. “Evaluating the Impacts of Reforming and Integrating China’s Electricity Sector.”Energy Economics108: 105912.
11.
ChuY.2021. “Vertical Separation of Transmission Control and Regional Production Efficiency in the Electricity Industry.”The Energy Journal42 (1): 197–228.
12.
CicalaS.2015. “When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation.”American Economic Review105 (1): 411–44.
13.
ColmerJ.MartinR.MuûlsM.WagnerU. J.2022. “Does Pricing Carbon Mitigate Climate Change? Firm-Level Evidence from the European Union Emissions Trading Scheme.” CEPR Discussion Papers16982.
14.
CuiJ.WangC.ZhangJ.ZhengY.2021. “The Effectiveness of China’s Regional Carbon Market Pilots in Reducing Firm Emissions.”Proceedings of the National Academy of Sciences118 (52): e2109912118.
15.
CullenJ. A.ReynoldsS. S.2023. “Market Dynamics and Investment in the Electricity Sector.”International Journal of Industrial Organization89: 102954.
16.
DavidsonM. R.Pérez-ArriagaI.2020. “Avoiding Pitfalls in China’s Electricity Sector Reforms.”The Energy Journal41 (3): 119–41.
17.
DavisL. W.WolframC.2012. “Deregulation, Consolidation, and Efficiency: Evidence from US Nuclear Power.”American Economic Journal: Applied Economics4 (4): 194–225.
18.
DouglasS.2006. “Measuring Gains from Regional Dispatch: Coal-Fired Power Plant Utilization and Market Reforms.”The Energy Journal27 (1): 119–38.
19.
EdmundsC.Martín-MartínezS.BrowellJ.Gómez-LázaroE.GallowayS.2019. “On the Participation of Wind Energy in Response and Reserve Markets in Great Britain and Spain.”Renewable and Sustainable Energy Reviews115: 109360.
20.
FabrizioK. R.RoseN. L.WolframC. D.2007. “Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on US Electric Generation Efficiency.”American Economic Review97 (4): 1250–77.
21.
FellH.KaffineD. T.2018. “The Fall of Coal: Joint Impacts of Fuel Prices and Renewables on Generation and Emissions.”American Economic Journal: Economic Policy10 (2): 90–116.
FowlieM.GreenstoneM.WolframC.2018. “Do Energy Efficiency Investments Deliver? Evidence from the Weatherization Assistance Program.”The Quarterly Journal of Economics133 (3): 1597–644.
24.
FowlieM.ReguantM.RyanS. P.2016. “Market-Based Emissions Regulation and Industry Dynamics.”Journal of Political Economy124 (1): 249–302.
25.
GentzkowM.2006. “Television and Voter Turnout.”The Quarterly Journal of Economics121 (3): 931–72.
26.
Godoy-GonzalezD.GilE.Gutierrez-AlcarazG.2020. “Ramping Ancillary Service for Cost-Based Electricity Markets with High Penetration of Variable Renewable Energy.”Energy Economics85: 104556.
27.
GollinD.HansenC. W.WingenderA. M.2021. “Two Blades of Grass: The Impact of the Green Revolution.”Journal of Political Economy129 (8): 2344–84.
28.
Goodman-BaconA.2021. “Difference-in-Differences with Variation in Treatment Timing.”Journal of Econometrics225 (2): 254–77.
29.
GowrisankaranG.ReynoldsS. S.SamanoM.2016. “Intermittency and the Value of Renewable Energy.”Journal of Political Economy124 (4): 1187–234.
30.
GrafC.QuagliaF.WolakF. A.2021. “(Machine) Learning from the COVID-19 Lockdown about Electricity Market Performance with a Large Share of Renewables.”Journal of Environmental Economics and Management105: 102398.
31.
GreenstoneM.NathI.2020. “Do Renewable Portfolio Standards Deliver Cost-Effective Carbon Abatement?” Becker-Friedman Institute Working Paper.
32.
GuoH.DavidsonM. R.ChenQ.ZhangD.JiangN.XiaQ.KangC.ZhangX.2020. “Power Market Reform in China: Motivations, Progress, and Recommendations.”Energy Policy145: 111717.
33.
HakimiS. M.Moghaddas-TafreshiS.2014. “Optimal Planning of a Smart Microgrid Including Demand Response and Intermittent Renewable Energy Resources.”IEEE Transactions on Smart grid5 (6): 2889–900.
34.
HuJ.YanQ.KahrlF.LiuX.WangP.LinJ.2021. “Evaluating the Ancillary Services Market for Large-Scale Renewable Energy Integration in China’s Northeastern Power Grid.”Utilities Policy69: 101179.
35.
HuismanR.KyritsisE.StetC.2022. “Fat Tails Due to Variable Renewables and Insufficient Flexibility: Evidence from Germany.”The Energy Journal43 (5): 231–47.
36.
KhannaM.ZilbermanD.2001. “Adoption of Energy Efficient Technologies and Carbon Abatement: The Electricity Generating Sector in India.”Energy Economics23 (6): 637–58.
37.
KimJ. H.KahrlF.MillsA.WiserR.MontañésC. C.GormanW.2022. “Variable Renewable Energy Participation in US Ancillary Services Markets: Economic Evaluation and Key Issues.” Paper presented at the 2022 IEEE 49th Photovoltaics Specialists Conference (PVSC).
38.
KumarT. B.SinghA.2021. “Ancillary Services in the Indian Power Sector–A Look at Recent Developments and Prospects.”Energy Policy149: 112020.
39.
LaRiviereJ.LyuX.2022. “Transmission Constraints, Intermittent Renewables and Welfare.”Journal of Environmental Economics and Management112: 102618.
40.
LiS.ZhangS.Andrews-SpeedP.2019. “Using Diverse Market-Based Approaches to Integrate Renewable Energy: Experiences from China.”Energy Policy125: 330–7.
41.
LinJ.KahrlF.YuanJ.LiuX.ZhangW.2019. “Challenges and Strategies for Electricity Market Transition in China.”Energy Policy133: 110899.
42.
LiuJ.2019. “China’s Renewable Energy Law and Policy: A Critical Review.”Renewable and Sustainable Energy Reviews99: 212–19.
43.
LiuS.BieZ.LinJ.WangX.2018. “Curtailment of Renewable Energy in Northwest China and Market-Based Solutions.”Energy Policy123: 494–502.
44.
LiuY.JiangZ.GuoB.2022. “Assessing China’s Provincial Electricity Spot Market Pilot Operations: Lessons from Guangdong Province.”Energy Policy164: 112917.
45.
MansurE. T. 2007. “Upstream Competition and Vertical Integration in Electricity Markets.”The Journal of Law and Economics50 (1): 125–56.
46.
MohamedM. A.EltamalyA. M.FarhH. M.AlolahA. I.2015. “Energy Management and Renewable Energy Integration in Smart Grid System.” Paper presented at the 2015 IEEE international conference on smart energy grid engineering (SEGE).
47.
NewberyD.PollittM. G.RitzR. A.StrielkowskiW.2018. “Market Design for a High-Renewables European Electricity System.”Renewable and Sustainable Energy Reviews91: 695–707.
48.
NovanK.2015. “Valuing the Wind: Renewable Energy Policies and Air Pollution Avoided.”American Economic Journal: Economic Policy7 (3): 291–326.
49.
PollittM. G.AnayaK. L.2020. “Competition in Markets for Ancillary Services? The Implications of Rising Distributed Generation.”The Energy Journal41 (SI1): 5–31.
50.
PollittM. G.2020. Reforming the Chinese Electricity Supply Sector: Lessons From Global Experience. London: Palgrave Macmillan.
51.
QiY.DongW.DongC.HuangC.2019. “Understanding Institutional Barriers for Wind Curtailment in China.”Renewable and Sustainable Energy Reviews105: 476–86.
52.
RoodmanD.NielsenM. Ø.MacKinnonJ. G.WebbM. D.2019. “Fast and Wild: Bootstrap Inference in Stata Using boottest.”The Stata Journal19 (1): 4–60.
53.
SongF.BiD.WeiC.2019. “Market Segmentation and Wind Curtailment: An Empirical Analysis.”Energy Policy132: 831–838.
54.
State Council. 2015. “Opinions of the CPC Central Committee and the State Council on Further Deepening the Reform of the Electric Power System (ZhongFa [2015] No.9).”https://www.china5e.com/news/news-901570-1.html
55.
SuW.WangJ.RohJ.2013. “Stochastic Energy Scheduling in Microgrids with Intermittent Renewable Energy Resources.”IEEE Transactions on Smart grid5 (4): 1876–83.
56.
TianX.SohngenB.BakerJ.OhrelS.FawcettA. A.2018. “Will US Forests Continue to Be a Carbon Sink?”Land Economics94 (1): 97–113.
57.
UptonG. B.SnyderB. F.2017. “Funding Renewable Energy: An Analysis of Renewable Portfolio Standards.”Energy Economics66: 205–16.
58.
WangQ.ChenX.2012. “China’s Electricity Market-Oriented Reform: From an Absolute to a Relative Monopoly.”Energy Policy51: 143–148.
59.
WangP.LiM.2019. “Scenario Analysis in the Electric Power Industry Under the Implementation of the Electricity Market Reform and a Carbon Policy in China.” Energies12(11): 2152.
60.
XiaF.LuX.SongF.2020. “The Role of Feed-in Tariff in the Curtailment of Wind Power in China.”Energy Economics86: 104661.
61.
YinJ.YanQ.LeiK.BaležentisT.StreimikieneD.2019. “Economic and Efficiency Analysis of China Electricity Market Reform Using Computable General Equilibrium Model.”Sustainability11 (2): 350.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
