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China has successfully completed its first market-driven transmission rights trading transaction, marking a significant milestone toward the flexible transfer of electricity between regions based on market demand. This development signifies a shift towards a market-based approach for allocating transmission capacity, which will better reflect supply and demand dynamics and accurately capture the value of grid resources.
The auction, involving 113 participants from both the supply and demand sides, was facilitated by the Beijing Power Exchange Center, operated under the State Grid Corporation, and the Guangzhou Power Exchange Center, affiliated with China Southern Power Grid. These are the country’s two primary utility companies; the Southern Power Grid serves five southern provinces, while the State Grid covers the remaining regions.
This move represents a key step in the transition toward a market-oriented approach to allocating transmission rights between the two grid operators and the creation of a unified national electricity market. The agreed-upon electricity volume was 21.16 million kilowatt-hours, with 16.07 million KWh classified as renewable energy.
“Infrastructure as a highway, transmission rights are essentially the ‘permissions’ to use that highway,” explained Zeng Zhiyong, a sales expert at Guangdong Power Grid. “Previously, the use of these ‘highways’ — how, by whom, and at what cost — was mainly controlled through administrative planning. Now, we’re auctioning off the remaining ‘passage rights’ to allow market signals to properly indicate scarcity and guide resource allocation.”
While China’s power market has advanced considerably on both the generation and consumption sides, the transmission sector remains heavily planned and has become a bottleneck in transmitting price signals. The primary goal of introducing transmission rights trading is to shift from administratively allocated capacity to a market-driven approach that more accurately reflects real supply and demand.
“Many companies in Guangdong that export goods have to meet international green trade standards, such as the European Union’s Carbon Border Adjustment Mechanism, which creates a strong need for traceable, certified green electricity,” said Zeng. This is a key reason why the initial transaction focused mainly on renewable energy sources.
The trading mechanism enables clean electricity generated from wind and solar farms in eastern China to be delivered directly to users in Guangdong via a ‘point-to-point’ cross-region model, helping businesses comply with global green trade regulations.
Demand among participating companies for green energy was robust, with declared purchase intentions totaling 63.588 million KWh—significantly higher than actual traded amounts, according to Guangdong Power Grid data.
Beyond promoting the use of green electricity, the market-based trading of cross-regional transmission rights could also attract surplus power from neighboring provinces into Guangdong, enhancing the region’s power supply stability during peak periods like summer, stated Zhang Qiaoyu, who leads market analysis at Guangdong Power Control Center’s spot market division.
The 303-kilometer Yunxiao HVDC transmission line, situated between southeastern Fujian Province and southern Guangdong Province, is one of only two interconnections between the main grid operators. It currently serves as the sole infrastructure utilized for the pilot cross-region, market-based transmission rights trading in China.
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