The East China Grid (ECG)—comprising Shanghai, Jiangsu, Zhejiang, Anhui, and Fujian—is one of the most economically dynamic regions in China and has one of the highest electricity demands. Amid increasingly frequent extreme weather events and structural growth in electricity demand, ensuring resource adequacy (RA) while balancing cost-effectiveness and carbon neutrality goals has become a central challenge for power system transformation in the region.
A joint report conducted by the University of California, San Diego, the Regulatory Assistance Project (RAP), Draworld Environment Research Center, and and a research team led by Professor Wu Libo at Fudan University finds that optimizing regional resource coordination and strengthening the deployment and utilization of flexible resources—such as energy storage and demand response—can effectively enhance power system reliability and stability, while reducing the need for new coal-fired capacity. Using an hourly unit commitment and economic dispatch (UCED) model, the study simulates ECG’s operations in 2030 under different combinations of RA-related policy levers, with the aim to identify cost-effective pathways to ensure reliable electricity supply.
Simulation Framework and Scenario Design
The study applies a province-level UCED model to simulate ECG summer operations in 2030 at hourly resolution.
Four key RA-related policy levers are evaluated, forming 16 scenario combinations:
- Economic interprovincial and interregional dispatch (EcoTx)
Comparing dispatch under rigid medium- and long-term (MLT) contract constraints versus flexible regional economic dispatch. - Enhanced demand response (EhDR)
Evaluating the impact of adding an additional demand response capacity equivalent to 5% of peak load over 2025 baseline. - Expanded energy storage (EpdS)
Assessing system performance with increased battery storage deployment. - Build new coal (BNC)
Comparing coal capacity at 2025 level against a scenario incorporating the full pipeline of planned, approved, and under-construction coal units.
To evaluate system performance under extreme conditions, the study introduces two stress dimensions:
- Weather stress (W2): 50% reduction in wind and solar availability
- Load stress (L2): demand growth concentrated in peak hours
This combined policy + stress-testing framework enables assessment of both system cost and reliability under compounded stress conditions.
Key Findings
The analysis of summer 2030 scenarios shows that institutional and market reforms have a greater impact on reliability than additional capacity expansion.
1. Economic dispatch is the most effective policy lever for improving reliability
Simulation results show that economic interprovincial and interregional dispatch (EcoTx) delivers the largest reduction in non-served energy (NSE). When transmission flows are dispatched economically, the ECG can achieve minimal or zero NSE under most conditions—without adding new coal capacity.
By contrast, dispatch constrained by MLT contracts significantly limits system flexibility and increases adequacy risks during peak stress conditions.
2. Flexible resources can substitute for new coal capacity
Comparative scenarios show that, with improved regional coordination and deployment of flexible resources (DR and storage), the ECG can meet 2030 RA requirements without building new coal capacity.
In contrast, expanding coal capacity increases system costs and may crowd out other flexible resources, raising variable renewable energy (VRE) curtailment rates in provinces such as Shanghai and Anhui.
3. Storage and demand response are critical for managing the duck curve
With large-scale solar deployment, the ECG is expected to exhibit a pronounced duck curve by 2030.
During the critical evening ramp—when demand rises and solar output declines—energy storage and demand response provide more effective peak-shaving and system balancing than new coal capacity, supporting system reliability and improving renewable integration.
Policy Recommendations
Based on these findings, the report proposes the following key policy recommendations:
- Create a transparent rolling resource adequacy assessment process
Develop a standardized, model-based RA framework with explicit reliability metrics and stress testing. Implement a capacity accreditation framework to accurately quantify the reliability contributions of storage, demand response, and other flexible resources under system stress conditions. - Establish a unified ECG-wide spot market and economic dispatch
Improve coordination between provincial and interprovincial market clearing to enable region-wide joint dispatch optimization. Expand interprovincial spot trading and reduce barriers to cross-provincial resource allocation. Relax price caps to allow scarcity pricing signals, incentivizing flexible resource participation. - Reform coal-specific compensation mechanisms
Accelerate liberalization of coal power pricing and reduce administrative requirements tied to MLT contracts quantity. Transition from coal-specific capacity payments to a technology-neutral, competitive capacity mechanism based on RA needs and open to all resource types. - Improve incentives for virtual power plants (VPPs) and demand response
Recognize VPPs as key flexibility providers and enable its participation in energy, capacity, and ancillary service markets. Enhance retail price signals (e.g., time-of-use pricing reforms) to reflect system costs and incentivize load flexibility. - Rationalize the policy framework for battery storage
Shift from administrative deployment requirements toward market-driven investment signals. Strengthen spot market price signals and promote dynamic retail pricing mechanisms (e.g., real time pricing, critical peak pricing) to encourage efficient storage operation. Ensure storage resources receive fair compensation in capacity mechanisms alongside conventional generation.