Opportunity for inter-regional integration of electricity markets: the case of Shandong and Shanghai in East China

In this paper, the opportunity for the inter-regional integration of the electricity market in East China is analysed on the basis of strategies for the future expansion of the electricity generation system. We assume that during its first stage, the operational breakthrough of the electricity sector reform in China will be to achieve an economic dispatch of the generating plants. On the basis of this assumed goal a multi-region model is proposed to appraise the potential benefits of an integrated inter-regional electricity market. This model includes: propositions on design and operation of the market, electricity demand forecasting, least-cost generating system expansion. As case study, three strategies of electricity supply are assessed in two provinces: Shandong and Shanghai in East China. While Shandong is a potential electricity exporter due to availability of primary energy resources, Shanghai is an electricity importer. The strategies include: autarkical expansion of each regional system, import/export only for minimizing operation costs, integration of the system expansion for minimizing total costs including operation and investment costs. One of the findings is that building up an inter-regional integrated electricity market is profitable for both the Shanghai and Shandong regions compared with the two other strategies, if the future regulation makes it possible to insure an economic dispatch of the generating power plants.