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

Abstract

The energy-only-market implemented in China cannot strongly support largescale 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.Unfortunately, under China's current energy-only market, the large-scale expansion of renewable energy can force coal-fired power plants to disorderly retire and weaken system adequacy. Because the large-scale

Could green finance facilitate low-carbon transformation of power generation? Some evidence from China

“…quantitative analysis, showing that carbon trading promotes the clean-up of power supplies in the EU. In addition, Chan et al (2022) reveal that coal-fired power plants get more financing from banks IJCCSM through corporate finance rather than project finance, while Yin et al (2021) predict that China needs RMB 400-700bn to orderly get out of current coal-fired power capacity.…”