China News Service, February 8. According to the website of the National Development and Reform Commission, the National Development and Reform Commission and the National Energy Administration recently issued the "Notice on Establishing and Improving the Market Price Mechanism for Ancillary Electricity Services." The notice proposes to adapt to the development needs of new power systems and continue to promote the construction of the power auxiliary service market. Strengthen the overall coordination and connection between the power auxiliary service market, the mid- to long-term market, and the spot market, scientifically determine the market demand for auxiliary services, rationally set up paid auxiliary service varieties, and standardize market rules such as auxiliary service pricing. In accordance with the overall principle of "whoever serves, who benefits, whoever benefits, who bears the burden", we will continue to improve the price formation mechanism for auxiliary services, promote the standardized and orderly transmission and sharing of auxiliary service costs, and fully mobilize flexible adjustment resources to actively participate in system adjustment. Strengthen policy coordination and support, and standardize the working mechanism for price management of ancillary services.

The full text of the notice is as follows:

National Development and Reform Commission and National Energy Administration

Notice on establishing and improving the market price mechanism for electric auxiliary services

　　Development and Reform Commissions and Energy Administrations of all provinces, autonomous regions, municipalities directly under the Central Government, Xinjiang Production and Construction Corps, all dispatched offices of the National Energy Administration, State Grid Co., Ltd., China Southern Power Grid Co., Ltd., Inner Mongolia Electric Power (Group) Co., Ltd., China Nuclear Industry Group Co., Ltd. Company, China Huaneng Group Co., Ltd., China Datang Group Co., Ltd., China Huadian Group Co., Ltd., State Power Investment Group Co., Ltd., China Three Gorges Group Co., Ltd., State Energy Investment Group Co., Ltd., State Development Investment Group Co., Ltd., China Resources (Group) Co., Ltd., China General Nuclear Power Group Co., Ltd.:

　　The electric power ancillary service market is an important part of the electric power market system. In recent years, various regions have promoted the construction of the power ancillary service market and established ancillary service market mechanisms such as peak shaving, frequency regulation, and backup, which have played a positive role in ensuring power quality, safe and stable operation of the power system, and promoting the consumption of new energy. In order to implement the decisions and arrangements of the Party Central Committee and the State Council on deepening the reform of the electric power system and accelerating the construction of a new electric power system, further improving the electric power price formation mechanism, enhancing the comprehensive adjustment capabilities of the electric power system, and promoting clean energy consumption and green and low-carbon transformation, we are now establishing and improving The market price mechanism for electric ancillary services is notified as follows.

1. General idea

　　To adapt to the development needs of new power systems, continue to promote the construction of the power auxiliary service market. Strengthen the overall coordination and connection between the power auxiliary service market, the mid- to long-term market, and the spot market, scientifically determine the market demand for auxiliary services, rationally set up paid auxiliary service varieties, and standardize market rules such as auxiliary service pricing. In accordance with the overall principle of "whoever serves, who benefits, whoever benefits, who bears the burden", we will continue to improve the price formation mechanism for auxiliary services, promote the standardized and orderly transmission and sharing of auxiliary service costs, and fully mobilize flexible adjustment resources to actively participate in system adjustment. Strengthen policy coordination and support, and standardize the working mechanism for price management of ancillary services.

2. Optimize peak-shaving ancillary service transactions and pricing mechanisms

(1) Improve the peaking market trading mechanism.

In areas where the electricity spot market continues to operate, spot market rules should be improved, market price limits should be appropriately relaxed, and peak shaving functions should be implemented. Markets with similar functions such as peak shaving and peak shaving capacity will no longer operate. In areas where the electricity spot market does not operate continuously, in principle, wind power and photovoltaic generating units will not be the main providers of peak shaving services. Research will be conducted to timely promote hydropower units to participate in paid peak shaving. During the period when the spot market is not operating, other units will independently declare their output and time periods according to the rules during the period when the spot market is not operating. Price, clearing price and winning bid for peaking output will be determined through market competition. Transactions such as regional peak shaving and regional reserve where electric energy exchange exists should be converted into electric energy transactions in a timely manner.

(2) Reasonably determine the price limit for peak shaving services.

All localities coordinate factors such as peaking demand, regulatory resource costs, and new energy consumption, and reasonably determine the upper limit of peaking service prices in accordance with the principle that the consumption cost of new energy projects is not higher than the value of power generation. In principle, the upper limit of peaking service prices is not higher than On-grid electricity prices for local affordable new energy projects.

3. Improve frequency modulation ancillary service trading and pricing mechanisms

　　(3) Standardize the FM market trading mechanism. In principle, the frequency regulation market adopts a single price mechanism based on frequency regulation mileage. Each unit independently declares frequency modulation capacity and price in accordance with the rules, and determines the clearing price and winning bid for frequency modulation capacity through market competition. The frequency regulation fee is calculated based on the product of the clearing price, frequency regulation mileage and performance coefficient.

(4) Reasonably determine the price limit for frequency modulation services.

The frequency regulation performance coefficient is determined by the product or weighted average of three sub-parameters: regulation rate, regulation accuracy and response time. The sub-parameters are converted based on the design parameters corresponding to the main engine of the local coal power unit with the best performance (excluding combined thermal storage unit). . In principle, the maximum performance coefficient shall not exceed 2, and the upper limit of frequency modulation mileage clearing price shall not exceed 0.015 yuan per kilowatt.

4. Improve the transaction and pricing mechanism of standby ancillary services

(5) Standardize the backup market trading mechanism.

In principle, the reserve market adopts a single price mechanism based on the winning bid capacity and time. The demand for reserve capacity is determined by the power dispatching agency based on system safety and economic requirements and actual conditions. Each unit declares reserve capacity and price according to rules, and the clearing price, bid capacity and time are determined through market competition. The reserve fee is calculated based on the product of the clearing price, bid-winning capacity, and bid-winning time. If the actual reserve capacity is lower than the bid-winning capacity, the settlement will be based on the actual reserve capacity.

(6) Reasonably determine the upper limit of the backup service price.

Factors such as the opportunity cost of providing backup services (losses due to reserving backup capacity and not generating electricity) should be comprehensively considered, and the upper limit of the price of the backup service should be reasonably determined. In principle, the upper limit of the price of the backup service should not exceed the upper limit of the local electric energy market price.

5. Standardize price transmission of ancillary services

(7) Reasonably determine the needs for auxiliary services.

All localities should aim to ensure the safe and stable operation of the power system and scientifically calculate and determine auxiliary service needs in accordance with the principles of standardization and transparency. We can explore and develop auxiliary service mechanisms such as ramping based on local actual conditions, determine the clearing price, winning unit and winning capacity through market competition, and reasonably arrange the price ceiling. Methods such as adjusting the settlement formula afterwards shall not be used to determine the scale and price standards of auxiliary services. Power grid enterprises should strengthen refined management and improve economic dispatch levels.

(8) Improve the transmission mechanism for auxiliary service fees.

All localities should standardize the management of ancillary service fees. The ancillary service costs borne by the user side should be the losses caused by the failure to generate electricity due to the provision of ancillary services that cannot be compensated by the electric energy market. In areas where the electricity spot market does not operate continuously, in principle, auxiliary service fees will not be transferred to the user side. In areas where the electricity spot market operates continuously, the frequency regulation and backup auxiliary service fees that meet the above requirements (excluding the electricity fees incurred in the provision of auxiliary services) shall, in principle, be shared by the user's electricity consumption and the on-grid electricity that does not participate in the electricity energy market transaction. Sharing, the sharing ratio is determined by the provincial price authorities. Other ancillary service costs that need to be borne by the operating entity shall be submitted for approval according to procedures.

(9) Standardize the settlement of auxiliary service fees.

The ancillary service fees borne by users are included in the system operating costs and are settled together with the electricity bill. Areas where the electricity spot market operates continuously adopt the "daily clearing and monthly settlement" model. The compensation, apportionment and assessment fees for each type of auxiliary services should be calculated separately and listed separately in the settlement form.

6. Strengthen policy support

(10) Promote all types of business entities to participate fairly in the ancillary service market.

When localities determine the access conditions for participating in the ancillary service market in accordance with relevant national regulations, they should implement fair access and should not designate specific entities or make discriminatory provisions for specific entities. Business entities that have obtained capacity electricity fees should participate in the ancillary service market quotation. Business entities with both power generation and electricity consumption identities will participate in the ancillary service market as power generation entities and electricity consumption entities respectively when discharging and charging (consuming) electricity, and they will be equally subject to various assessments.

(11) Strengthen the overall coordination and connection between the ancillary service market, the medium- and long-term market, and the spot market.

All localities must coordinate the formulation of rules for the ancillary service market, the mid- to long-term market, and the spot market, accelerate the construction of the ancillary service market, and realize the standardized and efficient operation of the ancillary service market such as frequency modulation and backup as soon as possible to meet the system security needs of large-scale new energy grid connection. In areas where the spot market operates continuously, joint clearing of the ancillary service market and the spot market will be promoted. The electricity generated in the process of providing ancillary services shall be settled according to the spot market price or medium and long-term trading rules.

(12) Improve the working mechanism for price management of auxiliary services.

The National Development and Reform Commission and the National Energy Administration will strengthen top-level design and work guidance and formulate policies related to ancillary service prices; the power ancillary service market rules will be formulated separately by the National Energy Administration and the National Development and Reform Commission. In accordance with relevant national regulations, the dispatched offices of the National Energy Administration, together with the provincial price authorities, propose implementation plans for auxiliary service types, demand determination mechanisms, price mechanisms, market price limit standards, cost guidance methods and other implementation plans within their jurisdiction, and solicit local energy, power operation and other departments. After submitting the opinions, they will be reported to the National Energy Administration and implemented with the approval of the National Development and Reform Commission.

　　All localities should follow the requirements of this notice, systematically sort out the operation and charging situation of the ancillary service market, and promptly improve the price policy and transaction rules of ancillary services. The price mechanism and level of ancillary services should be re-clarified according to the procedures within six months after the issuance of this notice.

(13) Strengthen market monitoring, supervision and inspection.

All localities should strengthen the tracking and monitoring of the operation of the electric power auxiliary service market and the price mechanism, and timely assess the use of auxiliary service funds and policy implementation; strengthen policy interpretation to help business entities better understand and implement it. Power grid enterprises in various regions regularly report the prices, fees, key pricing parameters, income and sharing of various entities, etc. of paid ancillary service transactions to the National Development and Reform Commission (Price Department), the National Energy Administration (Market Supervision Department) and the local National Energy Administration dispatched agencies and provincial price authorities, and simultaneously disclose it to relevant business entities. Provincial price authorities should strengthen electricity price management, do a good job in auxiliary service price calculations, impact analysis and other work, and report in a timely manner. The National Development and Reform Commission, together with the National Energy Administration and other departments, will strengthen market supervision and inspection, promptly correct and standardize ancillary service price policies and transaction rules that are not in compliance with relevant national regulations, urge and guide various localities to improve mechanisms, and promote the formation of reasonable ancillary service prices.

　　This notice will be implemented from March 1, 2024. If the relevant provisions of the current policy are inconsistent with this notice, the provisions of this notice shall prevail.

National Development and Reform Commission

National Energy Board

February 7, 2024