Actively Promoting the Establishment of a Market Access Mechanism for New Market Participants

-- An Analysis of the Basic Rules for the Mid- and Long-Term Electricity Market

Recently, the Basic Rules for the Mid- and Long-Term Electricity Market (hereinafter referred to as the “Basic Rules”) were officially released. For the first time, the document clearly defines new market participants and sets out the relevant provisions governing their participation in market transactions, thereby laying a regulatory foundation for improving the market access mechanism. How to further advance the development of a market access mechanism for new market participants under the guidance of the Basic Rules, and to achieve coordinated optimization of various ancillary service resources, has become a key focus in promoting energy transition and power market reform.

1. Practical Exploration and Achievements of New Market Participants in China

(I) Clear Definition of Market Participant Types, Accelerating the Establishment of a Diversified Participation Framework

China’s electricity market has developed a diversified new-market-participant system centered on new energy storage, virtual power plants, distributed energy resources, and integrated source-network-load-storage projects. Under the national unified regulatory framework, various new types of market entities have, through standardized registration and market-access procedures, entered the market legally and in an orderly manner, and now enjoy the same rights as traditional market participants. In practical applications, new-type energy storage has been scaled up and standardized for market entry in several key provinces, including Shandong, Guangdong, Gansu, and Shanxi. Virtual power plants are conducting pilot programs for market-based response and grid regulation in Zhejiang and Shanxi, among other regions. Meanwhile, distributed energy resources are actively exploring pathways—either independently or through aggregation—to participate in green electricity trading markets in provinces such as Zhejiang, Jiangsu, and Hebei. In addition, various source-network-load-storage coordination projects are gradually being integrated into the market-based trading framework. China’s new types of market entities have preliminarily established a participation landscape characterized by diversity and broad coverage.

(II) Diversified and Innovative Participation Mechanisms, Differentiated Development of Regional Characteristic Paths

Under the unified market framework, various provinces and cities, based on their own resource endowments and system needs, have actively explored and established differentiated market participation mechanisms. In the field of new energy storage, provinces have developed three core participation pathways. Shandong and Guangdong participate directly in the spot market as independent entities using a “quantity bidding with price offers” approach. Gansu participates in the spot market under a “quantity bidding without price offers” model, earning arbitrage profits by charging during low-demand periods and discharging during peak demand. Shanxi, meanwhile, allows energy storage operators to choose their preferred method of participating in the spot market. Meanwhile, energy storage projects in Guangdong, Gansu, Shanxi, and Shandong provinces are eligible to participate in the frequency regulation market. Among these initiatives, Guangdong has established a coordination mechanism that links independent energy storage to both the spot market and the regional frequency regulation market, enabling “multi-purpose integration and time-shifting multiplexing.” In the realm of virtual power plants, Guangdong Province categorizes them into load-side and generation-side VPPs based on resource characteristics, enabling their participation in electricity spot market trading, demand response programs, and ancillary services markets. Shanxi Province allows virtual power plants to participate in the electricity mid- and long-term, spot, and ancillary services markets, and provides compensation for their flexibility-adjustment capabilities. In the field of distributed renewable energy, provinces such as Hebei, Jiangsu, and Shanxi have successively authorized distributed energy resources to participate in green power trading either independently or in aggregated forms, thereby realizing the capture of environmental value through market-based mechanisms.

(III) The scale of market participation continues to expand, and the effectiveness of system regulation is enhanced

New types of market participants are steadily increasing their involvement in the electricity market, and their operational models are becoming more mature. In terms of market size, the number of newly registered entities has been steadily increasing. In 2024, Zhejiang Province has registered 145 new market participants on its electricity trading platform, making them an important component of the market ecosystem. Meanwhile, new energy storage is experiencing large-scale development in provinces such as Shandong and Gansu. Specifically, Gansu Province has deployed 4.42 GW/11.53 GWh of new energy storage capacity, while Shandong has successfully facilitated the participation of 34 independent energy storage power stations in the electricity market. In terms of system regulation, the regulatory potential of various new types of market participants has been fully harnessed, and regulatory effectiveness is steadily becoming more evident. For example, Zhejiang Province has innovatively established a market-based response mechanism for new types of power consumers. During the peak summer period in 2025, the province achieved a daily maximum load adjustment of 924,000 kilowatts and a cumulative adjustment of approximately 10 million kilowatt-hours. This effectively alleviated the pressure on grid balance caused by high-temperature weather and significantly enhanced the power system’s balancing capability and operational resilience.

2. The Important Role of the Basic Rules in Guiding New Market Participants to Enter the Market

(I) Clarifying the Market Definition for Transactions by New Market Participants

For the first time at the national level, the market status and boundaries of rights and responsibilities of new market participants have been established, providing a basis for the standardized entry of various regulatory resources into the market. First, clarify the market definition for new market participants. New types of market participants refer to various resources in the distribution segment that possess both power and energy regulation capabilities, as well as characteristics of new technologies and novel operational models. These are categorized into two main types: single-technology entities comprising distributed generation sources and adjustable loads, and resource-aggregation entities that include virtual power plants (load aggregators) and smart microgrids. Second, clarify the market rights of new types of market entities. New market participants are entitled to enter into medium- and long-term trading contracts, receive fair transmission and distribution services as well as grid access, and obtain information on distributed energy resources available for contracting. These rights are enshrined in regulations that fully safeguard the fairness of new market participants’ engagement in market competition. Third, clarify the market obligations of new types of market entities. New market entities are obligated to fulfill mid- and long-term trading contracts, submit settlement collateral, and comply with information disclosure requirements. Meanwhile, resource aggregation entities are tasked with executing retail contracts, meeting renewable energy consumption targets, and fulfilling consumer obligations. These provisions provide targeted guidance for the entry of new market entities into the electricity market.

(II) Optimizing the Trading Mechanism of New-Type Entities Engaged in Resource Aggregation

Based on the operational characteristics of resource aggregation entities, standardize the methods by which distributed resources participate in market transactions. First, define the method for determining transaction reporting limits for entities engaged in resource aggregation. The transaction reporting limits for virtual power plants and load aggregators shall be determined based on risk-mitigation capabilities, such as the total value of registered assets, the amount of performance guarantees, and the historical electricity consumption levels of the users they represent or aggregate. This approach enables new market participants to optimize their reporting limits, thereby enhancing their ability to control trading costs and manage risks, and facilitating the steady advancement of market transactions involving these new entities. Second, we will improve the signing of master contracts for resource aggregation entities. Distributed energy resources can enter into aggregation service agreements with new market entities specializing in resource aggregation, thereby participating in the electricity mid- and long-term markets. This approach has broadened collaboration between these new entities and a wide range of distributed resources, while also enhancing the incentive for distributed resources to participate in the electricity market through aggregation. Third, we will improve the settlement mechanisms for resource-aggregation entities. New types of resource aggregation entities and distributed energy resources shall be settled separately at the electricity energy prices specified in the aggregation service agreement. It has enhanced the fairness of market price mechanisms for new types of resource aggregation entities and distributed resources, thereby providing institutional safeguards for the sustainable participation of resource aggregation entities in the electricity market.

(III) Promoting the Participation of Distributed New Energy in Green Electricity Trading

It clarifies the pathways and requirements for distributed new energy to participate in green electricity trading, thereby facilitating the market-based realization of its green environmental value. On the one hand, renewable energy generation projects such as distributed wind power and distributed photovoltaic power generation can participate in green electricity trading during the early stages of power market development, underscoring the importance of distributed generation in green electricity markets and effectively encouraging the participation of distributed new energy sources in the power market. On the other hand, virtual power plants can aggregate distributed renewable energy resources to participate in green electricity trading. To this end, they should establish aggregation service agreements with these resources in advance and, when submitting trade bids, link the entire volume of green electricity being offered to each individual distributed renewable energy project. The diverse mechanisms for distributed renewable energy to participate in green electricity trading have been clarified, providing robust safeguards for its large-scale market participation.

3. Suggestions for Further Promoting the Establishment of Market Access Mechanisms for New Types of Market Participants

(I) Promote the Participation of New-Type Resources in System Regulation

Clarify the technical requirements and standardized access mechanisms for new market participants to engage in flexible regulation markets, and strengthen the cultivation of these new participants. On the one hand, it is necessary to establish performance evaluation standards for flexible regulation markets—such as demand response, frequency regulation, and reserve capacity—by new market participants, clearly defining and refining technical requirements and准入 criteria for various markets. This will help to improve and perfect core technical standards related to response speed, duration, communication protocols, and metering accuracy. On the other hand, tailored professional training should be provided for different types of new market participants to enhance their understanding of ancillary services regulations and their ability to participate in system regulation, thereby helping them grasp the market participation procedures and access mechanisms.

(II) Forming Reasonable Market Price Signals

Facilitating the effective connection between the medium- and long-term markets and the spot market with the participation of new market entities, and reasonably guiding the peak-valley price spread in the spot market. On the one hand, a unified mid- and long-term time-of-use electricity pricing mechanism reflects power supply–demand dynamics across different time horizons, thereby effectively aligning mid- and long-term bilateral transactions with spot market trading. Reasonable time-of-use electricity prices should be determined through market competition to ensure that new market participants can secure long-term, stable revenues after entering the market. On the other hand, in some provinces the current spot market peak-to-valley price spread is relatively narrow, making it difficult for new market participants to cover their ancillary service costs. Improve the monitoring and guidance mechanism for peak–valley price differentials. By taking into account the peak–valley price spreads in the spot market clearing prices as well as the investment and operational costs of new market participants, rationally define the range of peak–valley price differentials to ensure that these participants’ overall revenues after entering the market can support sustainable operations.

(III) Expanding Income Channels for New Market Entities

Broaden diversified, multi-timescale market income channels for new market entities in the electricity market. Promote the participation of new market players in the mid- and long-term markets, the spot market, and the ancillary services market, with product offerings spanning annual, monthly, and intra-monthly delivery periods. Support distributed renewable energy resources, energy storage, and adjustable loads in capturing revenue across multiple markets and product types, thereby broadening revenue streams for these new market participants. Diversify ancillary services trading products by incorporating fast-response services such as spinning reserve and ramp-rate control into the trading framework, thereby fully leveraging the technological advantages of new market participants—namely their rapid response times and high regulation accuracy. Meanwhile, a market-based compensation mechanism based on performance should be established. Compensation will be tiered according to regulation performance, ensuring that higher-quality services are remunerated at higher rates, thereby incentivizing new types of market participants to provide high-quality, efficient ancillary services.

(IV) Refining the Classification of Aggregated New Entities

Promote tiered management of aggregated new entities based on their operational characteristics and regulation capabilities, and improve the registration access and aggregation relationship management mechanisms. Based on differences in operational characteristics and regulation capabilities, aggregated new entities are classified into three categories: controllable, regulable, and responsive. Corresponding technical specifications and operational management standards should be established and improved to clearly define their specific requirements regarding grid connection, metering, communication, and security. Systematically organize and clarify the hierarchical relationships among aggregation entities; define the functional boundaries and respective rights and responsibilities among aggregators, aggregation units, and aggregated resources; promote the establishment of a multi-tiered, graded registration and market-access mechanism for resources; guide all levels of participants to engage in market access in a standardized manner; and leverage the power trading platform to achieve unified management and dynamic maintenance of aggregation relationships, thereby laying an institutional foundation for the standardized development of new types of market participants.

(Ding Yi, Vice Dean of the College of Electrical Engineering, Zhejiang University)