Events

Li Jianglong, Postdoctoral Fellow, Harvard-China Project; Professor, School of Economics and Finance, Xi'an Jiaotong University, will give a talk as part of the Harvard-China Project Seminar Series. 

Abstract: Electricity markets in China were largely segmented with little electricity interconnection. However, the recent surge in renewable energy deployment may have created additional impulses to interprovincial electricity trade, aiming at providing insurance by reciprocal load smoothing and/or matching unevenly distributed electricity demand and supply. In previous literature, the network nature and non-random zero flows of electricity trade have been widely ignored, and the causality between renewable energy and electricity trade has not been well identified yet. By developing a two-stage estimation approach with spatial dependence, we show how renewable energy affects bilateral electricity trade among provinces, and thus changes the integration of electricity markets. We found that adjacent provinces may gain benefits from electricity trade by providing reliability and redundancy for each other, but local protectionism for self-supply could result in a decreased amount of electricity trade. It is a different story for long distance ultra-high-voltage transmission because faraway provinces cannot share back-up capacity. The incentives may come from the central government to match the over-supply and unmet-demand across geography, and from grids to seek the electricity price gaps among regions. We anticipate to provide insights on how electricity trade pattern is formed and influenced, as well as to better understand the gains and losses of electricity trade.