Orderly retire China's coal-fired power capacity via capacity payments to support renewable energy expansion

Guangzhi Yin; Bo Li; Natalie Fedorova; Patricia Hidalgo-Gonzalez; Daniel M Kammen; Maosheng Duan

doi:10.1016/j.isci.2021.103287

Orderly retire China's coal-fired power capacity via capacity payments to support renewable energy expansion

iScience. 2021 Oct 15;24(11):103287. doi: 10.1016/j.isci.2021.103287. eCollection 2021 Nov 19.

Authors

Guangzhi Yin^{1

2}, Bo Li^{3

2}, Natalie Fedorova², Patricia Hidalgo-Gonzalez^{4

2}, Daniel M Kammen^{2

5}, Maosheng Duan¹

Affiliations

¹ Institute of Energy, Environment and Economy, Tsinghua University, Beijing 100084, China.
² Renewable and Appropriate Energy Laboratory, Energy and Resources Group, University of California, Berkeley, CA 74720, USA.
³ State Key Laboratory of Power Transmission Equipment & System Security and New Technology, School of Electrical Engineering, Chongqing University, Chongqing 400044, China.
⁴ Department of Mechanical and Aerospace Engineering, University of California, San Diego, La Jolla, CA 92093-0411, USA.
⁵ Goldman School of Public Policy, University of California, Berkeley, CA 74720, USA.

Abstract

The energy-only-market implemented in China cannot strongly support large-scale renewable energy expansion because the renewable energy expansion may disorderly phase out non-renewable power capacity. However, non-renewable power capacity, particularly the coal-fired power capacity in China, can provide vital power system adequacy needed by renewable energy expansion. We introduce capacity payments to orderly retire current coal-fired power capacity by transforming some of it into reserve capacity in order to support renewable energy expansion. Using generation and transmission expansion results from the SWITCH-China model, this paper proposes an orderly retirement path based on the assumption of implementing capacity payments. Our results show that roughly 100-200 gigawatts (GW) of coal-fired power capacity can continue to serve through 2050, and most of it is used as reserve capacity. Capacity payments of 400-700 billion yuan are needed to achieve this retirement path, and a higher adequacy requirement needs higher payments.

Keywords: Energy engineering; Energy flexibility; Energy policy; Energy resources; Energy systems.