Power grid investment increased by 1.1% year-on-year, and the total scale of operation increased steadily

In 2021, the national power grid infrastructure investment will be 495.1 billion yuan, up 1.1% year-on-year. From the data of the past ten years, the proportion of power grid investment showed an overall upward trend during the "Twelfth Five-Year Plan" period, and an overall downward trend during the "thirteenth Five-Year Plan" period. The "14th Five-Year Plan" continued to decline in the beginning of the year.

The total scale of power grid operation increased steadily. In 2021, China will add 243.34 million kVA of power transformation equipment with a capacity of 220 kV or above, 20.46 million kVA more than in the previous year, an increase of 9.2 percent. A total of 32,000 kilometers of 220-kilovolt or above transmission lines were added nationwide, 2,809 kilometers less than in the previous year, or 8% less than in the previous year. The new DC converter capacity was 32 million kilowatts, 20 million kilowatts less than the previous year, down 38.5%. By the end of 2021, the country's 220 kV and above substation equipment capacity totaled 4.94 billion kVA, an increase of 5.0% year-on-year; The circuit length of 220 kV and above transmission lines totaled 840,000 kilometers, an increase of 3.8% year-on-year.

Steady progress has been made in the construction of power transmission channels, and the ability to allocate resources across regions and provinces has been improved. By 2021, two UHV projects will be completed and put into operation across the country. On June 21, Yazhong - Jiangxi ±800 kV UHVDC project was completed and put into operation, becoming the first UHVDC transmission project completed and put into operation during the "14th Five-Year Plan" period. On December 26, the Changchang-Changsha UHV AC project was completed and put into operation, becoming the first UHV AC project in the first year of the "14th Five-Year Plan" of the State Grid. By the end of 2021, a total of 32 UHV lines will be completed and put into operation across the country. Among them, 15 AC UHV, all in the national grid; 17 DC UHV, 13 State grid, 4 Southern power grid.

The service quality of power business qualification license and the service level of "access to power" continue to improve. In 2021, among the "good and bad" evaluations of power business qualification licenses, 13,248 were "very good", accounting for 96.52%, and 446 were "good", accounting for 3.25%, with an overall favorable rate of 99.77%; "General" 22 cases, accounting for 0.16%; "Poor" and "very poor" 9 cases, accounting for 0.07%. Since 2021, the power business environment has been continuously optimized through a series of initiatives nationwide, such as deepening "three zero" (zero door-to-door, zero approval, zero investment) and "three provinces" (labor saving, time saving, and money saving) services. In 2021, it will save more than 65 billion yuan in electricity costs for users.

The fourth power system reform situation and policy

1. The system structure of the electricity market has been gradually improved, and market-based transactions have been growing

China has initially formed a full market system structure covering inter-provincial and intra-provincial spatial scope, covering multi-year, annual, monthly, and intra-month medium and long-term transactions and pre-day and intra-day spot transactions in the time cycle, and covering electric energy, auxiliary services, contracts, renewable energy consumption weights and other trading varieties on the trading targets. At present, the inter-provincial and intra-provincial medium and long-term market has been relatively perfect and normal operation.

According to the data of the China Electricity Union, in 2021, the country's electricity trading centers have organized and completed 3,778.74 billion KWH of market electricity transactions, an increase of 19.3%, accounting for 45.5% of the total social electricity consumption, an increase of 3.3 percentage points. Intra-provincial transactions (medium and long term only) totaled 3,076.03 billion KWH, while inter-provincial transactions (medium and long term and spot) totaled 702.71 billion KWH. The power trading centers in the State grid region have organized and completed 2,917.15 billion KWH of market electricity transactions, accounting for 44.5% of the total social electricity consumption in the region; The power trading centers in the Southern Power Grid region have organized and completed a total of 670.28 billion KWH of market electricity transactions, accounting for 46.6% of the total social electricity consumption in the region.

In terms of market players, the regional power trading platform operated by the State Grid has registered 366,000 market players of various types, an increase of 85% year-on-year; A total of 89,800 entities were registered in the regional power market of Southern Power Grid, an increase of 39.9% year-on-year.

2. China's inter-provincial power trading system has been basically completed

The Implementation Rules of the Beijing Power Trading Center for Inter-Regional and Inter-Provincial Power Medium and Long-term Transactions were officially issued in September 2021 after several rounds of revisions, becoming the operating rules for the implementation of the Basic Rules for Medium and Long-term Power Transactions, providing a basis for market players to participate in inter-regional and inter-provincial power medium and long-term transactions. Detailed rules add monthly (weekly, multi-day) transactions on the basis of annual and monthly transactions.

Under the Pilot Rules for Inter-Provincial Surplus Renewable Energy Power Spot Trading (Trial) issued in July 2017, in terms of inter-provincial spot trading, the National Grid has achieved full coverage of inter-regional surplus renewable energy power spot trading in 2020. On this basis, in November 2021, the State Grid issued the "Inter-Provincial Power Spot Trading Rules (Trial)", and planned to start pilot trading within the scope of the State Grid Company and Inner Mongolia Power Company. The rules not only open the sale of electricity companies, power grid purchasing, power users to participate in the inter-provincial power spot trading, the market scope from the inter-regional inter-provincial expansion to all provinces, but also the market positioning in the implementation of inter-provincial medium - and long-term transactions on the basis of the use of the remaining transmission capacity of the inter-provincial channel, to carry out inter-provincial power spot trading before the day and intra-day energy trading. The realization of the spatial dimension covering most provinces in the country, covering the power trading of a variety of energy sources, has played an important role in the establishment of a complete power market system. Its operation indicates that China's complete and unified inter-provincial power trading system has been basically built.

3. The reform of electricity price liberalization is deepening

We will in an orderly manner lift the on-grid tariff for all coal-fired power generation and the electricity prices for industrial and commercial users. In October 2021, the National Development and Reform Commission issued the Notice on Further Deepening the Market-oriented reform of the on-grid Tariff for coal-fired power generation, which clearly and orderly liberalized the on-grid tariff for all coal-fired power generation, and formed the on-grid tariff within the range of the "benchmark price + fluctuation" through market transactions, and the fluctuation in principle did not exceed 20%, and the spot price of electricity was not subject to the above range limits. All industrial and commercial users should be encouraged to enter the electricity market in an orderly manner, purchase electricity at market prices, and abolish the tariff for sales of industrial and commercial catalogues. Residential and agricultural electricity consumption shall implement the current catalogue sales price policy. For users who have not yet entered the market, all users of 10 kV and above should enter, and for users who have not purchased electricity directly from the power market, power grid enterprises should purchase electricity as agents (The "Notice of the National Development and Reform Commission on Matters related to Enterprise agent power purchase Work" regulates the process of power grid enterprises agent power purchase). In addition, in order to ensure the market-oriented reform of the on-grid electricity price for coal-fired power generation, further liberalize all types of power generation plans and strengthen the connection with the time-of-use tariff policy.

We will improve the tariff mechanism for catalogues. The Notice on Further improving the time-of-use tariff mechanism said that on the basis of maintaining the basic stability of the overall level of sales electricity price, further improve the catalogue time-of-use tariff mechanism, establish the peak tariff mechanism, and improve the seasonal tariff mechanism. According to incomplete statistics, 24 provinces and cities have introduced 25 relevant policies to improve the time-of-use tariff mechanism.

Electricity transmission and distribution prices enter the second regulatory cycle. The "Notice on the Key Work of Reducing Costs in 2021" issued by the National Development and Reform Commission in April 2021 said that the newly approved 2021 transmission and distribution electricity prices and sales electricity prices should be smoothly implemented, and unreasonable increases in electricity prices should be further cleaned up, and the general industrial and commercial electricity prices should be continued to be reduced. Continue to promote the market-oriented reform of electricity, and allow all manufacturing enterprises to participate in market-oriented electricity transactions. On October 14, 2021, the National Development and Reform Commission issued the "Trans-Provincial and Trans-Regional Special Project Transmission Price Pricing Measures", which revised the "Trans-provincial and Trans-regional Special Project Transmission Price Pricing Measures (Trial)" issued in 2017. On the basis of the first regulatory cycle (2017-2019), taking into account the impact of the reduction of electricity prices (electricity bills) in response to the epidemic in 2020, the transmission and distribution prices of the second regulatory cycle of each provincial power grid after approval will be implemented from January 1, 2021. Compared with the first regulatory cycle, the transmission and distribution price of the second regulatory cycle has decreased as a whole, among which, the power price of the five regional power grids in the two-part transmission price has changed from 2 electricity prices in the first cycle to 5 electricity prices in the second cycle, and each regional power grid has its own electricity price. In addition, from December 2, 2021, temporary transmission prices will be implemented for UHVDC projects in Northern Shaanxi - Hubei and Yazhong - Jiangxi.

We will improve the pricing mechanism for pumped storage. In May 2021, the National Development and Reform Commission issued the "Further Improving the Price Formation Mechanism of Pumped storage", which clearly states that it is necessary to adhere to the two-part price policy as the main body, further improve the price formation mechanism of pumped storage, clearly form the electricity price in a competitive way, incorporate the capacity price into the transmission and distribution price recovery, and strengthen the connection with the construction and development of the power market. We will gradually promote pumped storage power plants to enter the market.

4. Implement the "six contracts" for medium and long-term transactions, and introduce the green power trading plan

The "six signature" work requirements include six aspects of "full signature", "long signature", "time period signature", "meeting signature", "standardized signature" and "electronic signature", aiming to comprehensively deepen the reform of the electricity market and build a more perfect and orderly market system and market structure. According to the data of China Electric Power Union, in 2021, the total amount of medium and long-term power direct transactions in the national electricity market will be 3,040.46 billion KWH, an increase of 22.8%. Among them, the total amount of direct electricity transaction in the province is 2,851.45 billion KWH, and the total amount of direct electricity transaction (external received) between the provinces is 189 billion KWH, accounting for 93.8% and 6.2% of the medium and long-term direct electricity transaction in the national electricity market, respectively. In addition, Guangzhou Power Trading Center has taken the lead in the country to complete the 2022 power medium and long-term contract signing work in December, the transaction volume reached 242.3 billion KWH (landing end), a record high, more than the average power supply scale of the past three years, the participation rate of market players reached 100%, and for the first time, all "network to network" and "point to network" transactions were signed in full. It has also locked in advance the trans-provincial power supply arrangement for the southern region in 2022, of which the power supply from the west to the east reaches 230.8 billion KWH.

The "green power trading pilot work plan" says that green power trading will set up independent green power trading varieties under the existing medium - and long-term trading framework. The market players involved in green power trading, mainly wind power and photovoltaic power generation, have gradually expanded to other renewable energy sources such as hydropower, green power trading prioritizes fully market-oriented green power, further reflecting the green attribute and value of energy. Data from the China Electricity Union show that 630 million KWH of green power will be traded in the province in 2021.

5. The second batch of spot power pilot is progressing steadily, and Guangdong will open a trial operation of annual settlement in 2022

On the basis that the first batch of 8 pilot power spot markets in the province have completed at least one month of continuous settlement trial operation, Gansu, Fujian, Zhejiang, Sichuan, Shanxi and Guangdong have started continuous settlement trial operation. Shandong has launched five power spot market settlement trial runs, and entered the long-cycle continuous settlement trial run from January 1, 2022; In principle, the Southern power spot market (starting from Guangdong) will enter the annual continuous settlement trial operation from January 1, 2022.

The second batch of power spot pilot launched. In April 2021, the "Notice on Further Doing a good Job in the Pilot Work of the construction of the Power Spot Market" selected Liaoning, Shanghai, Jiangsu, Anhui, Henan and Hubei as the second batch of spot pilots. In addition, the construction of spot market in Shanghai, Jiangsu and Anhui should strengthen the overall planning and coordination with the Yangtze River Delta regional market; We will support pilot projects for a regional electricity market in the South, and accelerate research on specific plans for the construction of a spot electricity market in the Beijing-Tianjin-Hebei region and a regional electricity market in the Yangtze River Delta. The Jiangsu Energy Regulatory Office has discussed the "Jiangsu Power Spot Trading Rules (Draft for Comments)" in November.

In addition, a new mechanism for the participation of renewable energy in the market has emerged in the Guangdong spot market rules. In December, the Guangdong Provincial Energy Bureau issued the "Southern (starting from Guangdong) Power spot Market Implementation Plan" (draft for comments), proposing the establishment of a "medium - and long-term + spot + auxiliary services" power market system, introducing market-oriented users with renewable energy power consumption demand, through the sale of electricity companies and centralized wind power, photovoltaic and biomass and other renewable power generation enterprises to carry out transactions. When conditions are ripe, research and development of renewable energy electricity to participate in spot market trading.

6. Continue to promote the reform of the electricity sales side

The National Development and Reform Commission and the National Energy Administration issued the "Measures for the Administration of Electricity Sales Companies" to replace the "Measures for the Administration of Access and Exit of Electricity Sales Companies" that have been implemented for 5 years. The new version of the management measures clarifies the registration conditions, registration procedures and related rights and obligations of the electricity sales company, totaling 9 chapters and 46 articles. It has three highlights, one is that the registration conditions and registration procedures are more targeted, the second is to pay more attention to the dynamic management and risk management of the electricity sales company, the third is to start the guaranteed electricity sales service, and connect the power grid enterprise agent purchase mechanism.

In terms of incremental power distribution business reform, the National Development and Reform Commission and the National Energy Administration approved five batches of 459 incremental power distribution business reform pilot projects. According to the "White Paper on Incremental Distribution Development Research in 2021" jointly issued by the distribution Research Center of China Energy Research Society and the National Energy Development Strategy Research Institute of North China Electric Power University, 292 pilots have completed the distribution network planning, 300 pilots have identified owners, 240 pilot owner units have passed industrial and commercial registration, and 224 pilots have announced their share ratios. A total of 220 pilots determined the scope of power supply, of which 85 were in the first batch, 50 in the second batch, 53 in the third batch, 29 in the fourth batch and 3 in the fifth batch. A total of 185 pilots obtained electricity business licenses (power supply category).

7. The introduction of the new "two Rules" promotes the continuous improvement of the operating rules

Six regional power grids and 30 provincial power grids across the country have launched power auxiliary service markets, achieving full coverage of all regional and provincial auxiliary service markets, and the basic establishment of a power auxiliary service market system. In the process of coping with power shortages in 2021, power assistance services have played an active role. The country tapped peak load capacity of about 90 million kilowatts through the auxiliary service market, and added about 80 billion kilowatt-hours of clean energy electricity.