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China is shifting its power system flexibility from coal retrofits to clean alternatives like battery energy storage. While coal retrofits are nearing exhaustion by 2027, the document argues that market reforms and updated dispatch practices are essential to prevent a reliance on new coal capacity and to meet 2030 emission goals.

The report utilizes the REPO and E3ME-FTT:Power models to project China's power sector transition. Both models predict the eventual dominance of wind and solar power, though they differ on the specific technology mix and cost trajectories. The analysis emphasizes that market-based pricing and a robust Emission Trading System (ETS) are critical for supporting carbon neutrality goals, while highlighting the essential role of large-scale energy storage and carbon capture technologies to maintain system stability and reach net-zero emissions.

The report argues that rate-regulated utilities use 'self-commitment' to bypass market merit order, running coal plants that are objectively uneconomic and passing the resulting losses to captive customers through state fuel-cost-recovery processes. Using PLEXOS modeling for the MISO region in 2018, the authors find that this practice cost customers $350 million and suppressed regional market clearing prices by 2.4%. The report identifies Cleco and DTE Energy as significant contributors to these distortions and recommends that state regulators disallow the recovery of imprudent, above-market costs to incentivize efficient dispatch.

The document examines the challenges RTOs face as the U.S. grid shifts from large central generators to variable renewables and distributed energy resources (DERs). It argues that 'flexibility'—the ability to respond to changes in supply and demand across various timeframes—is essential for reliability and cost minimization. The authors recommend eliminating self-scheduling for all generators and imports, preserving negative pricing, and improving the coordination between natural gas and electricity markets. It also suggests creating technology-neutral products that value specific capabilities, such as ramping and frequency response, and highlights successful examples like MISO's Dispatchable Intermittent Resource category and CAISO's Flexi-Ramp product.