Abstract:
The urgent challenge posed by climate change has catalyzed global efforts to transition towards sustainable energy sources, with wind power emerging as a pivotal component. However, the rapid expansion of renewable energy sources has raised concerns about electric system reliability, given their intermittent and hard-to-forecast nature. China has provided incentives that promoted the rapid expansion of wind. However, the structure of some incentives led to the phenomenon of end-year rushes to install wind power before incentives expire. Leveraging panel data from China's provinces, we empirically estimate the impact of these installation rushes on electric reliability. We find significant adverse effects, with a one-standard-deviation increase in installation rush corresponding to a 0.767% decrease in the reliability rate and a 39.6-min increase in annual outage duration. Notably, urban areas and the northwestern grid are particularly vulnerable to the disruptions caused by year-end installation rushes. In the urban areas of the northwestern grid, we identify the potential for substantial improvements in the lower bound of the reliability rate, from 98.86% to 99.37%, or a reduction in outage duration from 11.65 h to 7.16 h. These findings show the importance of structuring incentives properly and the importance of improvements in grid infrastructure and management in the transition to a low-carbon world.
