Suggestions on China's electricity market management: based on the research on the linkage effects of natural gas price, coal price, and electricity price

In recent years, China's electricity market reform has entered a critical period, which requires a breakthrough in price management. The two electricity price modes of natural gas power generation and coal power generation in Britain are relatively mature and can be used for reference. Based on the diurnal data of UK natural gas, coal and electricity prices from January 2020 to January 2021, this paper builds VAR models respectively to study the linkage effect between British natural gas prices and electricity prices, as well as between British coal prices and electricity prices. The results show that there is a long-term cointegration relation between natural gas price and electricity price, as well as between coal price and electricity price, and the correlations are both positive. According to the analysis of impulse response function, both natural gas price and coal price have positive impact on electricity price. The response speed of electricity price to the change of natural gas price is faster than that of coal price, and the impact period of the change of natural gas price is longer. Therefore, there are mature linkage effects between natural gas price, coal price and electricity price in the UK respectively, which can reflect the market information relatively accurately. On the basis of the comparative analysis of the linkage effects of the two groups, the relevant proposals for China’s reform of power market are put forward.