The long-term impact of carbon emission trading and renewable energy support policy on China's power sector under the context of electricity marketed reform: an analysis based on system dynamics

Abstract

Abstract China's power industry is currently undergoing a significant transition driven by the imperative of dual-carbon goal. To facilitate the successful transition of this sector, the government has implemented a series of targeted policies and reforms. These measures primarily encompass carbon emission trading (CET), renewable energy support policy, and electricity marketed reforms. The profound implications of these policies for China's power industry warrant investigation. To address this, this study constructs a comprehensive system dynamics model that delineates the intricate interplay between CET, renewable energy support policy, and electricity market reforms. Simulation results show that: (1) Under marketed on-grid price, electricity price exhibit a transient decline followed by a gradual ascent, peaking around 2045. This price trajectory stems from augmented power generation costs prompted by the imperative of carbon emission reduction and power sector transition. This finding diverges from some earlier studies suggesting a steep decline in electricity price following the adoption of marketed on-grid price. (2) CET can promote carbon reduction in power sector. Under the aegis of CET, carbon peaking within the sector is slated for realization by 2030. However, the introduction of renewable energy support policy yields some adverse effects on CET through price pass-through mechanisms. Yet, in parallel, it facilitates a notable enhancement in the overall proportion of renewable energy in end-use energy consumption. (3) A comparative evaluation of feed-in tariffs (FIT) and renewable portfolio standards (RPS) unveils distinct suitability profiles. FIT proves optimally aligned with the initial stages of renewable energy's pre-development and early expansion. In contrast, RPS manifests as an optimal choice post-technological maturation, concurrently alleviating the governmental financial load. (4) The context of marketed on-grid price augments the cost-effectiveness of carbon capture and storage (CCS). This incentivizes thermal power plants to embrace low-carbon technologies, fostering a conducive milieu for curtailing carbon emission. Based on these results, a number of policy implications are provided for the long-term development of China's power sector.