China has deployed wind and solar energy at an unprecedented scale, supporting 42% annual growth in wind capacity over the last decade and establishing the world’s largest solar fleet almost entirely in the last four years. However, rapid growth and changes in the generation mix have led to substantial waste (curtailment) of these renewable resources, increasing costs and environmental impacts from its predominantly coal-fired power fleet. Multiple technical and political causes have been identified—ranging from inadequate transmission infrastructure to legacy government production planning—but there has been little quantification of their respective impacts on curtailment that would help prioritize policy solutions. Concurrently, China has recently accelerated electricity market restructuring, aiming to diminish the role of government in the sector. International experiences indicate that appropriately designed markets can positively impact renewable energy integration, but that benefits depend significantly on the details of new institutions, not simply that markets are engaged. This study tailors a unit commitment optimization, a common power systems engineering model with significant technical detail, to incorporate findings from qualitative interviews (2014-2016) of key grid and government stakeholders in three cases in northern China in order to examine underlying causes of curtailment and potential impacts of reforms. Results demonstrate why the Chinese government’s preferred policy choice—medium-term bilateral contracts—will likely fall short of addressing curtailment, and highlights interactive effects of conflicts relating to inter-jurisdictional trading not previously discussed in the literature.

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