In March 2016 a team of MIT Joint Program researchers published a study in PLOS One that found a high risk of severe water stress in Asia by 2050. An MIT News article on that study led to several stories in media outlets, from CNBC to Voice of America. Since that study was published, the same research team has been working to assess the extent to which climate mitigation and adaptation practices could reduce the future risk of water stress in a region that’s home to 60 percent of the world’s population. Reducing that risk could both save lives and help ensure sustainable growth in the area.

In a paper accepted by Environmental Research Letters, the team focused on the impact of climate change on the risk of water stress in Southern and Eastern Asia (SEA) by midcentury, and how climate mitigation could lower that risk.

Using models that link climate, hydrology, socio-economics and water management, they produced large ensemble projections of future water supplies and use in response to scenarios of climate change and socioeconomic growth by midcentury. These large ensembles were needed in order to capture all plausible outcomes in the regional and global patterns of future climate and socio-economic change. The researchers examined the most likely outcomes of these projections as well as what could occur at the extremes (low-probability cases). They found that while population and economic growth contributes to increased risk of water stress (water-use near or exceeding supply) across the region, unconstrained climate change enhances that risk in China and reduces it in India. They also noted that in the most extreme cases, climate change results in a severe increase in water stress in both nations, where annual freshwater use would routinely exceed supply.   

To evaluate the potential benefit of climate mitigation on water-stress risk throughout the SEA region, the research team considered a large-ensemble scenario under a modest reduction in greenhouse gas emissions (comparable to the current COP21 international agreement). They found that the avoided climate changes eliminate the likelihood of the extreme outcomes described above. Furthermore, the researchers projected that the policy would reduce the additional population (since the year 2000) in the SEA region under threat of facing at least heavily water-stressed conditions from climate change and socioeconomic growth from 200 million to 140 million—a 30-percent decrease.  

Yet even with mitigation, the researchers estimated that there’s a 50 percent chance that 100 million people across the SEA region will experience a 50 percent increase in water stress and a 10 percent chance they will experience a doubling of water stress by 2050. The team maintained that to address these unavoidable risks, SEA nations will ultimately need to implement widespread adaptive measures. And that will be the subject of the researchers’ next study.

China’s rapid economic growth—largely industrial, energy-intensive, and reliant on coal—has generated environmental, public health, and governance challenges. While China now leads the world in renewable energy deployment, curtailment (waste) of wind and solar is high and increasing, generating much discussion on the relative contributions of technical inflexibilities and incomplete institutional reforms on integration outcomes. These integration challenges directly affect China’s ability to meet long-term environmental and economic objectives. A second, related challenge emerges from how wind integration interacts with China’s reinvigoration in 2015 of a three-decade-old process to establish competitive electricity markets. A “standard liberalization prescription” for electricity markets exists internationally, though Chinese policy-makers ignore or underemphasize many of its elements in current reforms, and some scholars question its general viability in emerging economies. This dissertation examines these interrelated phenomena by analyzing the contributions of diverse causes of wind curtailment, assessing whether current experiments will lead to efficient and politically viable electricity markets, and offering prescriptions on when and how to use markets to address renewable energy integration challenges.

To examine fundamentals of the technical system and the impacts of institutional incentives on system outcomes, this dissertation develops a multi-method approach that iterates between engineering models and qualitative case studies of the system operation decision-making process (Chapter 2). These are necessary to capture, respectively, production functions inclusive of physical constraints and costs, and incentive structures of formally specified as well as de facto institutions. Interviews conducted over 2013-2016 with key stakeholders in four case provinces/regions with significant wind development inform tracing of the processes of grid and market operations (Chapter 3). A mixed-integer unit commitment and economic dispatch optimization is formulated and, based on the case studies, further tailored by adding several institutions of China’s partially-liberalized system (Chapter 4). The model generates a reference picture of three of the systems as well as quantitative contributions of relevant institutions (Chapter 5). Insights from qualitative and quantitative approaches are combined iteratively for more parsimonious findings (Chapter 6).

This dissertation disentangles the causes of curtailment, focusing on the directional and relative contributions of institutions, technical issues, and potential interactive effects. Wind curtailment is found to be closely tied to engineering constraints, such as must-run combined heat and power (CHP) in northern winters. However, institutional causes—inflexibilities in both scheduling and inter-provincial trading—have a larger impact on curtailment rates. Technical parameters that are currently set administratively at the provincial level (e.g., coal generator minimum outputs) are a third and important leading cause under certain conditions.

To assess the impact of China’s broader reform of the electricity system on wind curtailment, this dissertation examines in detail “marketizing” experiments. In principle, spot markets for electricity naturally prioritize wind, with near zero marginal cost, thereby contributing to low curtailment. However, China has not yet created a spot market and this dissertation finds that its implementation of other electricity markets in practice operates far from ideal. Market designs follow a similar pattern of relying on dual-track prices and out-of-market parameters, which, in the case of electricity, leave several key institutional causes of inefficiency and curtailment untouched. Compared to other sectors with successful marketization occurring when markets “grow out of the plan,” all of the major electricity experiments examined show deficiencies in their ability to transition to an efficient market and to cost-effectively integrate wind energy.

Although China’s setting is institutionally very different, results support implementation of many elements of standard electricity market prescriptions: prioritize regional (inter-provincial) markets, eliminate conflicts of interest in dispatch, and create a consistent central policy on “transition costs” of reducing central planning. Important for China, though overlooked in standard prescriptions: markets are enhanced by clarifying the connection between dispatch and exchange settlement. As is well established, power system efficiency is expected to achieve greatest gains with a short-term merit order dispatch and primarily financial market instruments, though some workable near-term deviations for the Chinese context are proposed. Ambiguous property rights related to generation plans have helped accelerate reforms, but also delay more effective markets from evolving. China shares similarities with the large class of emerging economies undergoing electricity market restructuring, for which this suggests research efforts should disaggregate planning from scheduling institutions, analyze the range of legacy sub-national trade barriers, and prioritize finding “second-best” liberalization options fit to country context in the form and order of institutional reforms.