Resource adequacy under institutional constraints and the low-carbon energy transition in China

Abstract

Resource adequacy of the power sector is coming under increasing stress globally due to rising electricity demand, extreme weather, and growth of variable renewable energy (VRE). Institutionally, many power sectors are transitioning from traditional central planning to some degree of market liberalization, with varied regulatory approaches to ensuring supply security. China's distinct medium- and long-term (MLT) agreement mechanisms are physical and characterized by a high degree of state intervention, with important implications for resource adequacy. This study investigates the power shortages that plagued China from 2020 to 2022, examining their extent, causes, and governmental responses. Quantitative simulations are conducted to analyze retrospectively the underlying institutional and operational factors behind the fall 2021 power crisis in Northeast China, relying on an extensive collection of publicly available datasets, ensuring transparency and reproducibility. The results highlight the rigidity of existing institutional arrangements, including MLT and capped electricity prices, in adapting to a decarbonizing energy system. Looking to 2030, China's post-crisis policy response—particularly the large-scale approval of new coal plants—may not fully resolve the power shortages if rigid institutional constraints on cross-provincial power trading persist. Instead, more flexible market and inter-provincial trading mechanisms can contribute to power sector reliability while managing growing VRE penetration.