Feasible Paths for Small Hydropower Participation in Electricity Market Trading in Sichuan Province Under Seasonal Inflow Constraints

Abstract

Sichuan Province boasts abundant small hydropower (SHP) resources, but its operational revenue has continued to decline in recent years, facing dual pressures from seasonal inflow constraints and the acceleration of electricity market reform. This paper takes Sichuan's SHP as the research object and systematically analyzes its feasible paths for participating in electricity market trading under seasonal inflow constraints. First, it sorts out the resource distribution and output characteristics of Sichuan's SHP, as well as the main trading varieties and rule systems for SHP. Second, it dissects the main problems under the current model from three dimensions: deviation settlement mechanism, wet-dry price structure, and policy environment changes. Third, it designs three types of trading paths—medium- and long-term (MLT) contracts as the mainstay, incremental participation in spot/grid agency power purchase during the wet season, and contract energy transfer during the dry season—and provides differentiated selection suggestions from three dimensions: installed capacity, regulation capacity, and inflow forecasting. The research shows that the three paths can be used in combination to form a strategic framework of "basic contracts + marginal increments + risk transfer". Run-of-river (ROR) power plants without regulation capacity should focus on using contract transfer to hedge under-generation risks; daily regulation power plants have intraday price spread arbitrage capabilities; annual regulation power plants can achieve strategic arbitrage. A dynamic switching mechanism based on inflow forecasting (increasing contract proportion in wet years and initiating transfer in advance in dry years) helps improve annual revenue stability. This paper provides operable market trading strategy references for Sichuan SHP owners and theoretical basis for policymakers to improve market rules adapted to SHP characteristics.