Wang Zhixuan: To achieve carbon neutrality, beware of "Gray Rhino" and "Black Swan"

On September 22 and December 12 this year, President Xi Jinping announced to the world twice: China will scale up its national determined contribution, strive to peak carbon dioxide emissions by 2030, and achieve carbon neutrality by 2060. By 2030, China will lower its carbon dioxide emissions per unit of GDP by over 65 percent from the 2005 level, increase the share of non-fossil fuels in primary energy consumption to around 25 percent, increase the forest stock volume by 6 billion cubic meters from the 2005 level, and bring its total installed capacity of wind and solar power to over 1.2 billion kilowatts. The two announcements made by President Xi indicate that China’s “National Determined Contributions” (NDC) pledged to further increase (hereinafter referred to as “30-60 target”).

In the transition of energy and power industry, preventing the "Grey Rhino" incident with a high probability and a huge impact and the "Black Swan" incident with a small probability and high risk is also necessary to achieve the "30-60 target".

Risks cannot be ignored after the large-scale application of new energy

As the government, industries, and enterprises attach great importance to the prevention of security risks in the supply of coal, oil, gas, electricity and other energy sources and the risks from energy price fluctuations, the largest power system in the world has not yet seen major energy and power security problem.

Under the "30-60 target", renewable energy will enter the energy power system on a large scale and in a large proportion, which makes the nature of energy security issues in a new major change.

After the large-scale application of new energy, as far as the whole country is concerned, the increase of the proportion of independent energy supply can gradually reduce the various risks brought by the large degree of external dependence on energy; as far as the local conditions are concerned, it will also reduce the risk of energy shortage in some regions under the traditional energy allocation mode.

However, another risk has increased significantly. The risk is mainly composed of two types of situations. The first type is the risk caused by a high probability event, that is, the "Gray Rhino" incident. The volatility, instability and randomness of wind power, photovoltaic and other new energy generation have an impact on the security and stability of power system. The second type of situation is huge energy security risk caused by a small probability natural phenomenon, that is, the "Black Swan" incident. For example, large-area, long-lasting cloudy, rainy, and windy days will cause major power outage risks to the power system with photovoltaic and wind power as the main body.

Understandings of the "Black Swan" incident needs to be improved

Regarding the "Gray Rhino" incident, the power industry, especially the power grid, has a high degree of awareness, and there are many countermeasures, although it is still in the initial stage of solving the problem.

However, the understanding of the "Black Swan" incident in all aspects is far from enough, and the country's institutional and strategic correspondence is almost blank. The serious power shortage caused by the traditional power shortage mainly restricts economic development. For a large proportion of renewable energy power generation, although the "Black Swan" incident is a small probability incident, once it occurs, it will be very destructive to the economy, society and daily life.

There are four main reasons for the lack of understanding of the "Black Swan" incident:

First, the traditional energy security risk prevention matches the traditional energy and power development model. For example, the traditional power supply security system is based on the "source following load" model based on coal-fired power, hydropower, gas power, and nuclear power. The security and stability of the "source" supply determines the power system security.

Second, although renewable energy power generation has developed rapidly in the past decade, it still accounts for only a small proportion. The renewable energy installed capacity accounts for about 20% in the total, but the share of renewable power generation in total power consumption accounts for less than 10%. The power system still relies on coal-fired power as the main body, and coal-fired power plays an important role in ensuring the security of the power grid. From the decline of the utilization hours of coal-fired power units in recent years, it is also obvious that coal-fired power still plays a supporting role in the security of the power grid.

Third, although the natural conditions of the "Black Swan" incident occurred, it did not cause a significant impact. In some areas, it is like a sword hanging high, but the whole society is not aware of the approach of the "Black Swan".

Fourth, decision-makers, power systems, new energy enterprises, and other different entities still have their understanding of the "Black Swan" incident at the technical level, which is considered to be a technical problem of the power system or even the power grid. For new energy and power security risk caused by large areas and long-term weather, it is impossible to prevent it by the power system and grid companies alone. 

To keep the bottom line of energy and power security, the role of policy is irreplaceable

Facing the "30-60 target", how to maintain the bottom line of energy and power security in the process of achieving the target, the role of policy is irreplaceable.

First of all, it is necessary to clarify the responsibilities of the government and market entities in ensuring the safety of energy and power. Responsibility is the "bulls-eye" of the policy, and only when the responsibility is clear can precise policy be implemented.

There is no substitute for the government's responsibility for the century-old task of ensuring energy and power safety and preventing major disasters. The government's responsibility is mainly reflected in the formulation of security risk prevention strategies and plans, and it is also reflected in all important links of energy and power development.

The second is to improve the electricity price policy based on the attributes of energy commodities. The process of achieving the "30-60 target" is bound to be the process of energy and power transition guided by electricity prices.

The various risk control costs in the energy and power transition are the costs of the energy transition, and they must eventually be transmitted to the end power users. For the power sources connected to the power grid, it is not correct to only calculate the cost of electricity at the generation end and to measure whether it is "affordable" or not, which is disadvantageous to prevent the risk in the power industry transition. The reform of electricity price policy should be gradually improved based on the attributes of electric energy commodities, and cross-subsidies should be improved. The government should attach great importance to the cost transmission of system support and risk prevention.

Third, it is necessary to carry out in-depth study on the role of the power grid in the transition of energy and power and risk prevention, and roll out relevant policies. The role of the "30-60 target" for the power grid should be reassessed, and the power grid pattern should be restructured.

The current framework design of the power system reform mainly regards the power grid as the "intermediate" link of the power system, as just a transmission channel. This understanding requires major adjustments in the transition of energy and power industry. The large-scale access of renewable energy, the large-scale application of various energy storage, the connection of distributed micro-grids and the backbone grid, the charging of huge amount of electric vehicles, the allocation of power resources between regions based on maintaining the stability of the power system and preventing risks, all make the function and role of power grid change greatly. Accordingly, the reform of the power system should meet the requirements of the development of productivity, so that the power grid can play a greater role in the transition of energy and power industry.

Finally, on the policy positioning in the "14th Five-Year Plan". Essential changes have taken place between the traditional five-year plan and today's five-year plan. Under the market mechanism, what kind of policy orientation will have what kind of results.

The focus of the "14th Five-Year Plan" should be to put forward the guiding ideology and basic principles, an indicator system consistent with objectives, define the bottom line and boundaries of key elements (such as risk prevention), and give the expected quantitative range of planning indicators within the boundaries, clarify major science and technology projects and demonstration projects supported by the country (government), and propose policy frameworks and even specific policies.

"The nature does not speak but the four seasons fade away, the earth does not speak but all things live." In the process of actively promoting the transition of energy and power industry, we should not violate the objective laws of the transition. On the one hand, we should be full of confidence in the "30-60 target" and the future technological development; on the other hand, we should also consider systematically and be down-to-earth to prevent the "Gray Rhino" and "Black Swan" incidents in the transition of energy and power industry.