RMI - 0812-MO-power-market-report-EN

2024 China Power Market
Outlook: 10 Key Trends for

Market Players
Report / June 2024

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2024 China Power Market Outlook: 10 Key Trends for Market Players rmi.org /2
Authors and Acknowledgments
Authors
Zihao Chen
Shuo Gao
Yi Jiang
Ting Li
Yujing Liu
Ziyi Liu
Jialin Tian
Kang Wang, Cross-strait Tsinghua Research Institute
Liyue Zhang
Authors listed alphabetically. All authors from RMI unless otherwise noted.
Contacts
Shuo Gao, [email protected]
Copyrights and Citation

Shuo Gao et al., 2024 China Power Market Outlook: 10 Key Trends for Market Players, RMI, 2024,
https://rmi.org/insight/2024-china-power-market-outlook/.
RMI values collaboration and aims to accelerate the energy transition through sharing knowledge and
insights. We therefore allow interested parties to reference, share, and cite our work through the Creative
Commons CC BY-SA 4.0 license. https://creativecommons.org/licenses/by-sa/4.0/.
All images used are from iStock.com unless otherwise noted.
Table of Contents
Executive Summary 5
Energy
1 Twenty-three provinces have initiated the (trial) operation of the power spot market,
and the renewables output shapes the peak-valley pattern of spot prices. 8
2 Time-of-use electricity pricing policy iterates frequently, with spot prices playing
a guiding role. 15
3 The power retail market has made improvements in expanding user coverage,
diversifying retail companies, and conveying wholesale market signals to retail market. 24
Transmission and Distribution

4 T&D tariffs better reflect the costs of grid operations; transmission losses
and system operation fees are now listed explicitly on electricity bills. 28
Capacity Pricing
5 The coal power capacity pricing mechanism is introduced, reconstructing
the electricity price structure of both power generators and consumers,
and supporting the transformation of coal power’s role. 33
Ancillary Services
6 The ancillary services market pricing mechanism is improved and standardized;
renewables and energy storage owners may need market strategy adjustments. 37
Renewables and Energy Storage

7 The market-oriented transactions of renewables are scaling up, bringing challenges
to project profitability in the long run due to price fluctuations. 39
8 As distributed PV grows rapidly in China, developers should closely monitor
grid access and feed-in price policies. 42
9 Independent energy storage expands market participation; the energy market
is still their primary revenue source. 45
10 The green power and green electricity certificate markets continue to expand,
with a relatively relaxed supply–demand relationship in the short term. 49
Endnotes55
Executive Summary
Launched in 2015, the second round of power market reform in China has been underway for more than
nine years. Since 2020, with the announcement of the dual carbon target and the New Power System,i
the power market system has also been designed to support accelerated renewable power development,
promote the low-carbon transformation, and support New Power System construction.
Over the past year, power market reform has made comprehensive progress, and the electricity pricing
system has been further refined and improved. At the national level, multiple components in the electricity
market and pricing system, including transmission and distribution (T&D) tariffs, the power spot market,
power capacity price, and ancillary services markets, have all undergone important updates, favoring
New Power System construction and renewable energy access. These updates profoundly influence
the composition of industrial and commercial (I&C) electricity prices and set a refined price formation
mechanism (see Exhibit 1):
• T&D tariff: The tariff for the 2023–25 period was released. Unlike the bundled T&D tariff in the past, the
transmission loss and system operation fees are separated from the new T&D tariff effective in June 2023.
• Power spot market: The first national-level basic rule for the power spot market was released in late
September 2023, which standardizes the market construction path, rule design, and market operation
requirements across provinces. In December 2023, after five years of trial operation, the Guangdong
and Shanxi power spot markets were the first to enter formal operation, opening a new chapter in the
construction and operation of the power spot market.
• Power capacity price: In November 2023, the coal power capacity price mechanism was established.
Starting in 2024, the revenue of coal-fired units transformed from energy price only to a two-part
mechanism of energy price + capacity price.
• Ancillary services markets: The National Development and Reform Commission (NDRC) and the
National Energy Administration (NEA) issued a notice on electricity ancillary services markets in
February 2024, standardizing the service types, market design, and price ceiling setting for ancillary
services markets across the country.
i The dual carbon target calls for China to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060.
The New Power System has renewable energy as the mainstay.
Exhibit 1 Electricity price structure for I&C users in China in 2024
Price component Price formation method
Feed-in price Based on market transactions between

(on-grid price) generators and consumers
+
Transmission and distribution loss (line loss) fee Loss rate verified by government
Transmission and distribution (T&D) tariff Regulated by government
+
System operation fee
Pumped hydro storage capacity fee

Regulated by government
Coal power capacity fee or based on market,
total expenses shared by consumers
Ancillary services fee
……
+
Governmental funds and surcharges Set by government
Sales price Determined by all components above
RMI Graphic. Source: RMI analysis
RMI has been tracking the process of electricity market reform in China. Last year, with the publication of
the 2023 China Power Outlook: 20 Key Trends for Power Market Players report, we commenced an annual
report series for electricity market participants, aiming to provide phased insights that are both in-depth
and comprehensive. 1 This year, based on the 2023 report, we systematically reviewed the important
progress and trade dynamics over the past year, and looked forward to market development trends in the
next one to three years. Similar to last year’s report, this report also discusses key market trends by market
components.
Additionally, this year we also add trends focusing on specific market participants and specific transaction
types (see Exhibit 2). For background information on the power sector reform and electricity price system
from 2015 to 2022, readers can refer to the corresponding content in the 2023 report. In the context of
accelerating the construction of the New Power System and building a national unified electricity market
system, we hope this report can help market participants better understand the current and future
electricity price system in China, grasp market development trends, and enhance their ability to participate
in electricity market transactions.
Exhibit 2 Ten key trends for power market players
1. Twenty-three provinces have initiated the (trial) operation of

the power spot market, and the renewables output shapes
the peak-valley pattern of spot prices.
Energy 2. Time-of-use electricity pricing policy iterates frequently, with

spot prices playing a guiding role.
3. The power retail market has made improvements in

expanding user coverage, diversifying retail companies, and
communicating wholesale market signals to retail market.
By market
component 4. T&D tariffs better reflect the costs of grid operations;
Transmission and
transmission losses and system operation fees are now listed
distribution
explicitly on electricity bills.
5. The coal power capacity pricing mechanism is introduced,

reconstructing the electricity price structure of both
Capacity pricing
power generators and consumers, and supporting the
transformation of coal power’s role.
6. The ancillary services market pricing mechanism is improved

Ancillary services and standardized; renewables and energy storage owners
may need market strategy adjustments.
7. The market-oriented transactions of renewables are scaling

Renewables up, bringing challenges to project profitability in the long run
due to price fluctuations.
8. As distributed photovoltaics grow rapidly in China, developers

Distributed energy
By market should closely monitor grid access and feed-in price policies.
participants or
transaction type Independent 9. Independent energy storage expands market participation;
energy storage the energy market is still their primary revenue source.
10. The green power and green electricity certificate markets

Green power
continue to expand, with a relatively relaxed supply–demand
trading
relationship in the short term.
RMI Graphic. Source: RMI analysis
Energy
1. Twenty-three provinces have initiated the
(trial) operation of the power spot market, and the
renewables output shapes the peak-valley pattern
of spot prices.
In the third quarter of 2023, the NDRC and the NEA jointly issued the “Basic Rules for the Power Spot
Market (Trial)” and the “Notice on Further Accelerating the Construction of the Power Spot Market” to
further support the implementation and expansion of the power spot market in China.2 This signifies that
the spot market progress in China has moved from subnational pilot trials to a new stage of nationwide
implementation. All provinces and regions in China would now establish or operate the power spot market
following the national rules and guidelines.
Exhibit 3 summarizes the progress of provincial and regional spot markets as of January 2024. At the
provincial level, the Shanxi and Guangdong spot markets had transitioned from trial to official operation by
the end of 2023. Prior to the transition, both provinces’ spot markets had been in continuous trial operation
for more than two years. Additionally, the Shandong, Gansu, and western Inner Mongolia spot markets had
all been in continuous trial operation for more than one year. At the regional and national levels, the State
Grid Interprovincial Spot Market began continuous trial operation from July 1, 2022; and on December
15, 2023, the China Southern Power Grid Regional Spot Market achieved the first full-region short-term
trial operation with dispatch and settlement covering Guangdong, Guangxi, Yunnan, Guizhou, and Hainan
provinces, making it the fastest progressing regional electricity market in China (compared with the Yangtze
River Delta Electricity Market and Beijing-Tianjin-Hebei Electricity Market).
Looking forward to 2024, the Shandong spot market is expected to start official operation, and the spot
markets in provinces and areas such as Jiangsu, Jiangxi, Southern Hebei, and Hubei are expected to
start continuous trial operation. The China Southern Power Grid Regional Spot Market will carry out trial
operations of various durations.
Exhibit 3 Progress overview of spot markets at subnational level across China as of
January 2024
Simulation Trial
Short- Long- Continuous
trial operation Official
term trial term trial trial
without without operation
operation operation operation
dispatch settlement
• Jilin • Qinghai • Henan • Fujian • Shandong • Shanxi

• Hunan • Ningxia • Sichuan • Gansu • Guangdong
• Xinjiang • Chongqing • Zhejiang • West Inner
Mongolia
• Shanghai • Shaanxi • Jiangsu
• Jiangxi • Liaoning
• State Grid
Interprovincial
• China Southern • South Hebei Spot Market
Power Grid
Regional Spot • Anhui
Market • Hubei
Note: The construction of the spot market generally goes through six stages: simulation trial without dispatch or settlement, trial
operation with dispatch but without settlement, short-term trial operation with dispatch and settlement (generally lasts less than a
week), long-term trial operation (generally lasts from two weeks to one month), continuous trial operation (generally lasts more than
one year), and official operation. The blue names are provincial-level spot markets, and the red names are regional and national-
level spot markets. Some subnational spot markets are not considered. Unlike other spot market designs, Sichuan has designed a
hydropower spot market during the wet season and a thermal power spot market during the flat and dry season. Both spot markets
have achieved long-term trial operation.
RMI Graphic. Source: Provincial and regional power exchange centers
Six subnational spot markets had continuous trial operation throughout the year, with the
renewables output shaping the spot price curve. Throughout 2023, Shanxi, Guangdong, Shandong,
Gansu, western Inner Mongolia, and the State Grid Interprovincial spot markets all had continuous
settlement, with the average clearing prices falling in most provinces and regions compared with 2022.
As Exhibit 4 reveals, with the reduction in thermal coal prices, the annual average spot prices in all markets
except for western Inner Mongolia fell compared with 2022, with declines ranging from 3.7% to 23.7%.
Western Inner Mongolia saw its average spot price more than double compared with 2022 because the
medium- to long-term (M2L) market settled at lower prices and the generation side wanted to recover costs
in the spot market. However, due to the risk prevention compensation mechanisms on the demand side,
the final settlement price would still fall within a certain range of the average M2L transaction price.
As for the State Grid Interprovincial Spot Market, the bidding price cap was adjusted from RMB 10/kilowatt-
hour (kWh) in 2022 to RMB 3/kWh in 2023. In addition, the daily average settlement price of the export
node was capped at RMB 1.5/kWh to reduce the pressure of cost allocation on the import side in extreme
situations.3 Thanks to better rainfall conditions in summer and the year-over-year increase in hydropower
generation, there was less stress on supply–demand balance across the country in 2023, resulting in the
average spot price of the State Grid Interprovincial Spot Market dropping significantly by 43.1% compared
with 2022.
Exhibit 4 Overview of key spot price data at the annual level in 2023
332
Shanxi 0 0 347 389 1,500 1,500
Guangdong 0 -1 443 453 563 1,443 1,500
367
Shandong -100 -97 353 394 1,300 1,500
Gansu – East zone 40 40 307 340 428 650 650
307
Gansu – West zone 40 40 280 366 650 650
Western Inner Mongolia 0 0 282 445 620 1,967 5,180

– East zone
Western Inner Mongolia 0 0 282 451 642 1,991 5,180

– West zone
State Grid Interprovincial 0 18 360 632 1,715 3,000
-100 0 100 200 300 400 500 600 1,400 1,500 1,600 1,700 1,800 1,900 5,200
Annual average Lowest price Highest price Coal power benchmark price
Price cap (for bidding or clearing) Price floor (for bidding or clearing) 2022 annual average
RMI Graphic. Source: Lambda
Specifically, at the intraday level, the peak-valley spot price pattern in each province was highly correlated
with the renewables output. As shown in Exhibit 5, the spot price patterns in Shanxi and Shandong both
showed a duck curve. The morning peak occurred before sunrise from 6 to 9 a.m., and the higher evening peak
occurred before and after sunset from 5 to 7 p.m. In between, the spot prices were significantly lower than the
annual average, with the lowest value occurring at the highest photovoltaic (PV) output from 12 to 2 p.m.
In contrast, the lowest price in Guangdong occurred from 4 to 6 a.m. when the load was lowest for the entire
the day. Except for a price valley from 12 to 1 p.m., the daytime electricity price remained above the annual
average. This phenomenon was related to the PV penetration: in 2023, the share of PV in total generation
was only 3.1% in Guangdong, while it was 6.2% and 9.7% in Shanxi and Shandong, respectively. Comparing
the three provinces, Shandong had the highest PV penetration rate, which also led to the largest valley
depth. The average valley price coefficient (average lowest price/annual average price) was as low as 0.5,
and the average peak-valley ratio (average highest price/average lowest price) was as high as 2.7. With the
continued growing PV penetration, the spot price during daytime is expected to further fall.
2024 China Power Market Outlook: 10 Key Trends for Market Players rmi.org / 10
Exhibit 5 Average spot prices per 15 minutes in Shanxi, Shandong, and Guangdong’s day-
ahead markets in 2023 (dotted line is the annual average)
500
450
400
350
Spot price (RMB/MWh)
300
250
200
150
100
50
0
. . . . . . . . . . . . .
.m .m .m .m .m a.m a.m p.m p.m p.m p.m p.m p.m
0a 0a 0a 0a 0a :00 :00 00 00 00 00 00 00
0:0 2:0 4:0 6:0 8:0 10 12 2: 4: 6: 8:
10:
12:
Trading period
Shanxi day-ahead price Shandong day-ahead price Guangdong day-ahead price
RMI Graphic. Source: Dianchacha
We also found that the spot price and bidding volume were strongly correlated (see Exhibit 6). Compared
with the day-ahead price, the real-time price had a similar peak-valley pattern but at a higher range.
The real-time price curve and the real-time bidding volume curve showed a close and positive correlation,
which aligned with the spot market design. When the load is low or the output of prioritized dispatched
units (e.g., interconnection) and zero marginal cost (e.g., renewables) units is high, the bidding volume
for dispatchable units is lower. Because the demand side currently bids only volume without price,
dispatchable units (mainly thermal power) with lower price bids will be cleared first, and the marginal
clearing price of the spot market will decrease accordingly, and vice versa.
Exhibit 6 Average spot prices and average real-time bidding volume per 15 minutes in
Shanxi and Shandong’s day-ahead and real-time markets in 2023
Shanxi
600 32,000
Day-ahead price
550 Real-time price
Real-time bidding volume (Right axis） 30,000

500
450
Bidding volume (MW)

28,000
400
350
26,000
300
250
24,000
200
150 22,000
. . . . . . . . . . . . .
.m .m .m .m .m .m .m .m .m .m .m .m .m
:00a :00a :00a :00a :00a :00a :00a :00p :00p :00p :00p :00p :00p
0 2 4 6 8 10 12 2 4 6 8 10 12
Trading period
Shandong
600 44,000
Day-ahead price
550 42,000
Real-time price
500 Real-time bidding volume (Right axis）

40,000
450
Bidding volume (Mw)

38,000
400
36,000
350
34,000
300
32,000
250
200 30,000
150 28,000
. . . . . . . . . . . . .
0a
.m
0a
.m
0a
.m
0a
.m
0a
.m a.m 0 a.m 0 p.m 0 p.m 0 p.m 0 p.m 0 p.m 0 p.m
0:0 2:0 4:0 6:0 8:0 0:00 2:0 2:0 4:0 6:0 8:0 0:0 2:0
1 1 1 1
Trading period
Note: In this report, the bidding volume for supply-side participation is approximately defined as bidding volume = provincial grid load
– interprovincial import − wind power output – solar PV output.
RMI Graphic. Source: Dianchacha
More renewables and more emerging entities will participate in the spot market, and bilateral volume
and price bidding will be further piloted and promoted. Utility-scale renewables, independent energy
storage, virtual power plants, nuclear power, and other entities have made progress in participating in the
spot market. In western Inner Mongolia and Gansu, except for distributed PV and poverty alleviation PV
projects, all other PV and onshore wind have all their generation participated in the M2L transaction and
spot market. In contrast, renewables in Shandong and Shanxi entered the market on a voluntary basis,
and the renewables that entered the market also participated in the spot market with all the generation.
Shandong’s renewables that did not enter the power market (with guaranteed purchase by the grid
at fixed feed-in price) need to have 10% of the generation settle at the spot prices (the 2023 standard).
In Guangdong, all PV and wind power with grid connection at the 220-plus kilovolt (kV) voltage level
participate in the spot market (for details on renewables entering the market, see Trend 7).
Shandong was the first to include independent energy storage stations to bid only volume without price
in the spot market, in February 2022. Other provinces followed Shandong to include independent energy
storage stations in the spot market and ancillary services market (e.g., frequency regulation). In 2023,
Shanxi and Guangdong successfully piloted independent energy storage to participate in the spot market in
a bid volume and price manner (for details on independent energy storage entering the market, see Trend
9). In addition, virtual power plants and nuclear power also made breakthroughs in participating in the spot
market in Shanxi and Shandong, respectively.4
Looking forward, more utility-scale renewables are expected to enter the power market in more provinces
to participate in the spot market with all the generation. Independent energy storage, virtual power plants,
load aggregators, and other emerging market entities will be further promoted to participate in the spot
market with bidding both volume and price. In 2024, it is expected that provinces with more renewables
such as Shandong will take the lead in piloting the participation of distributed renewables in spot markets
to trade their surplus generation.
Spot markets at all administrative levels and various types of electricity markets are better aligned.
In terms of aligning electricity markets at all administrative levels, the State Grid region and the China
Southern Power Grid region have adopted different approaches. During the trial operation of the China
Southern Power Grid Regional Spot Market, the five provinces in the region have a unified market clearing.
Meanwhile, the provincial (e.g., Guangdong) spot market clearing results are used as a backup reference.
The centralized auction and unified clearing approach helps achieve optimal resource allocation across
the entire region. In contrast, the State Grid Interprovincial Spot Market and the provincial spot markets
within the region are complementary. In this approach, the interprovincial spot market clearing results
serve as the boundary conditions for clearing the provincial spot markets, which optimize the remaining
interprovincial transmission capacity and the allocation of available energy across provinces.
In terms of aligning various types of electricity markets, the ability of price discovery in the spot market
is increasingly recognized by market participants and the spot price serves as the price anchor for M2L
transactions. Regulation clearly states that in areas where the spot market operates continuously, an M2L
transaction needs to operate continuously from D − 7 days to D − 2 days (D is the execution day); ancillary
services costs can be attributed to the demand side; and the price cap of the spot market in all regions
should be in line with the demand response compensations. From the perspective of trading strategy, the
buyers and sellers of annual M2L transactions will consider not only the price level of thermal coal, but also
the price level of the recent spot market.
For example, in Guangdong Province, the price of thermal coal was high in 2022, and the average spot price
reached RMB 562.9/megawatt-hour (MWh), which also led to the average price of the 2023 annual M2L
transaction being RMB 553.9/MWh, basically reaching the upper limit of 20% of the coal power benchmark
price (regulated by NDRC).5 In comparison, the annual average spot price in 2023 in Guangdong was only
RMB 443.1/MWh, significantly lower than the annual M2L transaction price. The average (real-time) spot
price in November was RMB 469.5/MWh, and the corresponding average price of the 2024 annual M2L
transaction launched in December fell to RMB 465.6/MWh, higher than the coal power benchmark price by
less than 1%.6 In the monthly and intra-month M2L transactions, the spot price levels of the previous month
and the current month are expected to have a more prominent anchoring effect on M2L transaction prices.
Energy
2. Time-of-use electricity pricing policy iterates
frequently, with spot prices playing a guiding role.
The time-of-use (TOU) electricity pricing better matches between power supply and demand and promotes the
consumption of renewable energy.7 The TOU pricing policy sets the power grid companies’ TOU electricity
purchase prices,ii indirectly affecting the TOU prices of M2L transactions and further influencing the retail
market TOU electricity prices. Currently, 33 provincial power grids have implemented I&C TOU electricity
pricing policies, and 16 of these grids had policy updates within the past year.
Key updates include:
• Sharp peak period extended (see Exhibit 8a). Shandong added 184 hours to its sharp peak periods,
increased deep valley periods by 62 hours, reduced peak periods by 182 hours, and reduced valley
periods by 180 hours. In Anhui, for I&C users with power demand above 315 kilovolt-amperes (kVA), an
additional 248 hours were added to the sharp peak periods.
• More precise segmentation, with 30-minute intervals (see Exhibit 8b). In Liaoning, the peak period
in morning is from 7:30 to 10:30 a.m., and the peak period in midday is from 11:30 a.m. to 12:00 p.m.
Six regions, including Liaoning, have improved their time interval to 30 minutes.
• Exploring deep valley policies on major holidays (see Exhibit 8c). Zhejiang and Jiangsu have
pioneered the implementation of midday deep valley pricing during major holidays such as the Spring
Festival, Labor Day, and National Day. In Zhejiang, the deep valley period during holidays is from 10:00
a.m. to 2:00 p.m., encompassing the original sharp peak, peak, flat, and valley flat periods. Meanwhile, in
Jiangsu, the deep valley period is from 11:00 a.m. to 3:00 p.m., covering the original flat periods.
• Unified floating mechanism for TOU electricity pricing. A national unified method for calculating
peak and valley prices has been established. Prices now float based on time segment ratios, using
the base price during flat periods as a reference (see Exhibit 8d). In January 2024, Zhejiang updated
its TOU electricity pricing policy by specifying floating ratios for large industrial users, transitioning
away from the method of using a fixed absolute value for floating ratio. Following these updates, the
floating ratio method was implemented nationwide to determine peak and valley prices.
• More flexible time segmentation for TOU pricing. In Guangxi, during the peak periods of summer
and winter, power grid companies can flexibly adjust the time segmentation based on power supply
and demand for users’ voltage levels above 35 kV, following filing and public disclosure.
ii TOU electricity pricing policy divides the 24 hours of the day into five time periods: sharp peak, peak, flat, valley, and deep valley.
Power grid companies purchase electricity on behalf of I&C users who do not directly participate in the power market through a
power market transaction.
Exhibit 8 Time segmentation and floating ratios of TOU electricity
pricing policy for I&C users in five provinces
Policy Season/Month User 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24
Winter (December, Industrial and

1 0.3 0.1 0.3 1 2 1.7 1
January, February) commercial users
Shandong
Provincial
Development
and Reform Spring (March to Industrial and
Commission 1 0.3 0.1 0.3 1 2 1.7 1
May) commercial users
Notice on
Matters Related
to Time-of-Use Summer (June to Industrial and
Electricity Pric- 0.3 1 1.7 2 1
August) commercial users
ing Policy for
Industrial and
Commercial
Users (Effective
from January 1,
2024) Autumn
Industrial and
(September to 1 0.3 0.1 0.3 1 1.7 2 1.7 1
commercial users
November)
（a）
Winter (December, Industrial and

1 0.3 0.1 0.3 2 1.7 1
January) commercial users
Shandong Spring (February Industrial and

1 0.3 0.1 0.3 1 1.7 2 1.7 1
Provincial to May) commercial users
Development
and Reform
Commission Summer (June to Industrial and
1 0.3 1 1.7 2 1
Notice on Fur- August) commercial users
ther Optimizing
the Time-of-Use
Electricity Pric-
ing Policy for
Industrial and
Commercial
Users Autumn
(Effective from Industrial and
(September to 1 0.3 0.1 0.3 1 1.7 2 1.7 1
January 2023 to commercial users
November)
December 2023)
Deep Valley Valley Flat Peak Sharp Peak
Continued on next page
Continued from previous page
Industrial and
July, August, commercial users
0.382 1 1.843
September of 100 kVA and
above
Industrial and
(December, commercial users
0.382 1 1.843 0.382
January) of 100 kVA and
above
Industrial and
commercial users
Other months 0.382 1.74 1 1.74 1 0.382
of 100 kVA and
above
Industrial users
subject to the
two-part pricing
Anhui Provincial mechanism for
Development July, August 0.382 1 1.843 2.212 1.843
industrial and
and Reform commercial
Commission electricity at 315
and Anhui kVA and above
Energy Adminis-
Industrial users
tration Notice
subject to the
on Further
two-part pricing
Optimization
mechanism for
of Peak-Valley September 0.382 1 1.843
industrial and
Time-of-Use
commercial
Electricity Pric-
electricity at 315
ing Policy and
kVA and above
Related Matters
(Effective from Industrial users
April 2024) subject to the
two-part pricing
(December, mechanism for
0.382 1 1.843 2.212 1.843 0.382
January) industrial and
commercial
electricity at 315
kVA and above
(a)
Industrial users
subject to the
two-part pricing
mechanism for
Other months 0.382 1.74 1 1.74 1 0.382
industrial and
commercial
electricity at 315
kVA and above
Industrial and
January, July, commercial users
0.412 1 1.813 1 1.813 1 0.412
August, September of 100 kVA and
above
Anhui Provincial
Development
and Reform
Commission
Notice on
Improving the
Peak-Valley
Time-of-Use
Electricity Pric-
ing Policy for Industrial and
Industrial and commercial users
Other months 0.412 1 1.71 1 1.71 1 0.412
Commercial of 100 kVA and
Users (Effective above
from March
2022 to March
2024)
Other seasons 0.5 1 1.5 1 0.5 1 1.5 1 0.5
Liaoning
Provincial
Development
and Reform
Commission
Industrial and
Notice on Fur-
commercial users
（b） ther Improving
Summer and of 100 kVA and
the Time-of-Use
Winter(December, above
Electricity Pric- 1 1.5 1 0.5 1 1.5 1.875 1.5 1 0.5
January, July,
ing Mechanism
August)
(Effective from
September
2023)
Single-part pricing
mechanism, large
industrial users Single-part Pricing Mechanism, Large Industrial
All months below 315 kVA and Users Below 315 kVA And General Industrial Users 1.6719 1 1.6719 1
general industrial Of 100 kVA And Above
users of 100 kVA
and above
Two-part pricing
mechanism, large
industrial users Two-part Pricing Mechanism, Large Industrial Users
All months below 315 kVA and Below 315 kVA And General Industrial Users Of 100 1.7196 1 1.7196 1
general industrial kVA And Above
users of 100 kVA
Jiangsu and above
Provincial
Development
and Reform
Summer (July
Commission
and August, when
Notice on Fur- Large industrial
daily maximum
ther Improving users of 315 kVA Large Industrial Users Of 315 kVA And Above 1.7196 1 2.06352 1 1.7196 2.06352 1.7196 1
（c）
temperatures
the Time-of-Use and above
reach or exceed
Electricity
35°C)
Pricing Policy
(Effective from
July 2023). Winter (December
and January,,
Large Industrial
when minimum
Users Of 315 kVA Large Industrial Users Of 315 kVA And Above 1.7196 2.06352 1 1.7196 2.06352 1.7196 1
temperatures
And Above
reach or fall below
-3°C)
Major holidays
(during Chinese
Large industrial
New Year,
users of 315 kVA 0.65608
International Labor
and above
Day on May 1st,
and National Day
Spring and Autumn

(February to June, Large industrial
0.4 1.65 0.4 1.65 1
September to users
November)
Summer and
Winter (December, Large industrial
0.38 1.65 1.98 0.38 1 1.98 1.65 1
January, July, users
Zhejiang
August)
Provincial De-
velopment and
Reform Com- Major Holidays
mission Notice (Chinese New Large industrial
0.2
on Updating Year, Labor Day, users
the Peak-Valley National Day)
Time-of-Use
Electricity Pric- Spring and Autumn
ing Policy for General industrial
(February to June,
Industrial and and commercial 0.45 1.5 0.45 1.5 1
September to
Commercial users
November)
Users
(Effective from
Summer and
March 2024) General industrial
Winter(December,
and commercial 0.38 1.5 1.65 0.38 1 1.65 1.5 1
January, July,
users
August)
Major Holidays
General industrial
(Chinese New
and commercial 0.2
Year, Labor Day,
users
National Day)
(d)
Summer (July,
August)，Winter Large industrial
(December, users
January)
Zhejiang Large industrial

Provincial Other seasons
users
Development
and Reform
Commission
Notice on Fur-
ther Improving
Our Province’s
Time-of-Use
Electricity
Pricing Policy
(Effective from General industrial
October 2021 All months and commercial
to February users
2024).
RMI Graphic. Source: Provincial Development and Reform Commissions
In provinces where the spot market has a continuous trial operational, the intraday spot price
fluctuations have become an important reference for updating the TOU electricity pricing policy
for the following year. The TOU electricity pricing policy dynamically integrates price signals from the
spot market, thereby better informing users of the value of power within the day. Taking Shandong as an
example (see Exhibit 9), the TOU electricity pricing policy for 2024 has adjusted the peak and valley periods
for winter, spring, and summer based on the period distribution in 2023. The adjustments in the deep valley
and sharp peak periods clearly reflect the fluctuation in the spot price curve:
• For deep valley adjustment, in the winter of 2024, the 11:00 a.m. to 12:00 p.m. time slot will be adjusted
from valley to deep valley. This update aligns with the intraday fluctuations of the winter 2023 spot
prices and their trend compared with the previous year. In the January 2023 spot market, the average
price between 11:00 a.m. and 12:00 p.m. was 14% lower than during the 10:00 to 11:00 a.m. slot, setting
the intraday lowest price at 0.56 times the month’s average price (the lowest average spot price for any
time slot in January was 0.4 times the monthly average).
• For the sharp peak adjustment, the 5:00 to 6:00 p.m. time slot in the spring and summer of 2024 will be
shifted from peak to sharp peak. The spot transaction prices from July 2023 indicate that the average
spot price between 5:00 and 6:00 p.m. was 9.7% higher than from 4:00 to 5:00 p.m., reaching a peak.
The price was 93% of the highest price recorded for any intraday time slot, thus falling into the sharp
peak price category.
Exhibit 9 TOU electricity pricing time segment for Shandong Province in 2023 and 2024 and
spot prices for 2023
Implementation
Season Month 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24
year
December,
2024 January,
February
Winter
December,
2023
January
March,
2024
April, May
Spring
February,
2023 March, April,
May
June,
2024
July, August
Summer
June,
2023
July, August
September,
2024 October,
November
Autumn
September,
2023 October,
November
2023 average spot time-of-use price for

typical months in each season
Note: Spot prices for 2023 represent typical monthly spot prices for each season, with January for winter, April for spring, July for
autumn, and October for fall.
RMI Graphic. Source: Shandong Provincial Development and Reform Commission, Dianchacha
However, periods within certain regions exhibit inconsistencies between fluctuations in spot prices
and TOU pricing policy. For example, in Shandong during the summer (see Exhibit 9), the 12:00 to 6:00
a.m. period is designated as valley, yet the average hourly spot prices during this time were higher than
those during the flat period of 8:00 a.m. to 1:00 p.m. Furthermore, Exhibits 10 and 11 show that spot prices
in Gansu-East zone display strong seasonal variations, which are not yet reflected in the current TOU
electricity pricing policy.
For instance, during the summer months of July and August in Gansu-East zonal spot market, peak prices
typically occurred in the afternoon (12:00–5:00 p.m.) and evening (6:00–11:00 p.m.), whereas in winter
peak prices were concentrated in the early morning (7:00–9:00 a.m.) and evening (5:00–11:00 p.m.). The
implemented TOU pricing policy closely aligns with the winter spot price trends but deviates notably during
the summer. Power users should closely monitor such discrepancies between TOU policy pricing
and spot prices because these periods are likely to become focal points for future updates in TOU
electricity pricing policies.
Exhibit 10 Time segmentation and floating ratios for TOU electricity pricing in Gansu Province
Province Month User 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24
Industrial
Gansu All months and 1 1.5 0.5 1.5 1
commercial
users
RMI Graphic. Source: Gansu Provincial Development and Reform Commission
Exhibit 11 Average spot TOU prices in Gansu-East for 2023
600
500
400
RMB/MWh
300
200
100
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
January July August December
RMI Graphic. Source: Lambda
There are significant differences in defining the basis price for TOU floating across provinces. A
unified guidance for the basis price definition is expected to be announced. Currently, the definition
for the basis price for TOU pricing varies across provinces. In the pilot provinces with continuous operation
of spot markets, as illustrated in Exhibit 12, the basis for floating TOU electricity price includes more than
just market purchase prices by grid companies. In Anhui, Henan, Guangdong, Sichuan, Zhejiang, Jiangsu,
and Liaoning, the T&D tariffs are included in price floating. In Zhejiang and Jiangsu, government funds and
surcharges are included in the floating. In addition, there is no unified definition regarding whether the
costs of transmission losses and system operations should be included or not.
As a result, power users should pay attention not only to the peak and valley ratios set by the TOU policy
but also to the boundary of the TOU price floating basis within their respective provinces. When the
floating ratio of user-side electricity prices is at a similar level, a smaller floating basis allows for a
greater range in price fluctuations, which benefits storage players looking to capitalize on peak and
valley price differences and recoup investment costs. With the goal of building a unified national
power market, normative guidance concerning the basis price for TOU floating may be issued at the
national level to clarify the boundary and further standardize the electricity pricing system.
Exhibit 12 TOU electricity price floating basis in pilot provinces for spot markets
Basis for TOU electricity price floating
Market transaction
Cost of transmission Transmission and Governmental funds
Province price/grid agency System operation costs
losses distribution tariffs and surcharges
purchase price
✓[Excluding basic
Anhui ✓
power fees]
✓[Excluding basic
Guangdong ✓ ✓ ✓
power fees]
Henan
✓[Excluding basic
(Draft for ✓
power fees]
Comments）
Hubei ✓ ✓
✓[Excluding basic
Jiangsu ✓ ✓ ✓ ✓
power fees]
✓[Excluding basic
Liaoning ✓ ✓
power fees]
Mengxi ✓
Shandong ✓ ✓ ✓
✓(Historical deviation
Shanxi electricity fee discounts
do not fluctuate)
✓[Excluding basic
Sichuan ✓
power fees]
✓[Excluding basic
Zhejiang ✓ ✓ ✓ ✓
power fees]
Note: Shandong’s unique capacity compensation electricity pricing is also included in the floating basis, whereas Shanghai, Fujian,
and Gansu have not made clear regulations on the composition.
RMI Graphic. Source: Provincial Development and Reform Commissions, Polaris Power Grid
Energy
3. The power retail market has made
improvements in expanding user coverage,
diversifying retail companies, and conveying
wholesale market signals to retail market.
Market-based electricity transaction volume continued to grow in 2023, with 30% of the volume
purchased by grid companies.iii According to the NEA, the national market-based electricity transaction
volume reached 5,700 terawatt-hours (TWh), a 7.9% year-over-year increase.8 The volume of power
purchased by grid companies accounted for about 30.6% of total volume, and almost all I&C users whose
voltage level is below 10 kV are purchasing electricity from grid companies.
In October 2023, Guangdong Province issued the “Implementation Plan for the Pilot of Market-based
Trading Participation by Low-Voltage Industrial and Commercial Users in the Guangdong Electricity
Market,” initiating a pilot in Shenzhen that allows low-voltage I&C users to directly purchase electricity from
the wholesale market or through power retail companies other than grid companies.9 This pilot lays the
foundation for more open options to I&C users, which promotes healthy development of the retail market.
Participating in the retail market, instead of the wholesale market, is the main way for I&C users to
engage in market-based electricity transactions for the remaining 70% of total volume not purchased by
grid companies. Taking Guangdong Province, which ranked first in electricity consumption in 2023, as an
example, a total of 39,243 users directly participated in the Guangdong power market in 2023, but only four
users participated in the wholesale market.10 During Guangdong’s 2024 annual electricity transaction, only
one user participated.11
Provinces took opposite actions on user access to power in the wholesale market in 2023. Several provinces
have set entry criteria: Guangdong and Qinghai set 10 gigawatt-hours (GWh) and Fujian sets 5 GWh annual
electricity consumption as the criteria for users to enter the wholesale market. However, Sichuan and
Xinjiang provinces have removed the thresholds in their 2024 power market trading schemes, reducing the
restrictions on power users to directly trade in the wholesale market.
The provincial power retail markets were improved in 2023, and 17 provinces and cities (Guangdong,
Jiangsu, Zhejiang, Hebei, Xinjiang, Sichuan, Anhui, Fujian, Shanxi, Yunnan, Shaanxi, Hunan, Gansu, Tianjin,
Qinghai, Jilin, and Hainan) issued or updated managing regulations related to retail markets or retail
companies in 2023. These documents clarified the rights and obligations of users and retail companies, as
well as the trading process of the retail transaction organization. Templates for retail contracts and retail
packages were standardized and provided by officials. Moreover, governments developed online retail
transaction platforms for users to keep records and proceed with contracts efficiently.
iii Grid companies act as purchasing agents on behalf of users (all residential and agricultural users and some I&C users)
to purchase electricity from wholesale markets. The purchase volume is accounted for in the market-based electricity
transaction.
Power retail packages include fixed-price, price-linkage, price pass-through, and proportional-split
packages. Fixed-price packages set a fixed settlement price, which effectively eliminates price risk for
customers. Price-linkage packages directly link package price to the average market price (either based
on the wholesale market price or the grid companies’ purchase price). Price pass-through packages
have prices linked to a retail company’s average settlement price from wholesale market transactions.
Proportional-split packages enable retail companies and users to share profits and risks. Moreover, some
provinces have proposed specific retail packages for green power, including the green power volume and
relevant green premium.
• Fixed-price packages are currently the primary choice of users because they mitigate the risk of
electricity price fluctuations. For example, in Guangdong Province, more than 98% of power users,
which also covered over 98% of electricity volume, opted for a fixed + market-linked price retail
contract type in the 2023 and 2024 power retail markets.12 The electricity traded based on market-
linked price in 2023 and 2024 constituted 10.6% and 10.8% of total electricity traded in the retail
market, where the required minimal portion was 10%, indicating that users had no desire to buy
electricity based on market-linked price beyond government regulation.
• The reference prices in price-linkage packages include annual and monthly M2L prices, average spot
market price, and monthly grid companies’ purchased price. Both price-linkage packages and price
pass-through packages normally include a service fee to cover the retail company’s costs besides
electricity energy price.
• Some provinces, such as Guangdong and Shanghai, provide options for users to link the retail contract
price to the coal price. However, from the results of Guangdong’s retail contract transactions, few users
opted for coal price linkage (no users in 2023 and 0.03% of users in 2024), indicating that most power
users still preferred fixed electricity prices.
• To reduce the fluctuation risk of electricity purchase prices for users in the retail market, two
mechanisms were established, including price limits and price risk alerts. Guangdong Province
directly set upper and lower price limits for the fixed-price portion in the power retail market in
2023, aligning these limits with those in the annual transaction of the power wholesale market.
Moreover, Yunnan Province chose to use 1.2 times the benchmark electricity price for coal-fired
power as the upper price limit, and Zhejiang Province set the optional price cap based on 80% of the
annual average wholesale transaction price + 20% of the monthly average wholesale transaction
price. Furthermore, Jiangsu Province is an example of setting risk warning thresholds for key price
parameters in retail packages.
• Deviation assessments were usually optional in retail contracts, and some provinces encouraged
retail companies to exempt low-voltage retail users. For example, Zhejiang Province encourages
retail companies not to perform deviation assessments for retail users below 35 kV. This province also
stipulates that the deviation assessment fees retail companies collected from users should not exceed
the deviation costs of retail companies in the wholesale market.
• Retail packages apply TOU electricity pricing by two methods: one is to directly agree on flat period
prices, with other periods floating according to specified peak-to-valley ratios (such as Guangdong
Province); the other is to agree on prices for different periods separately (such as Shaanxi Province).
Independent retail companies were the majority, accounting for about 85%. However, generation-
integrated retail companies had the highest participation rate compared with independent retail companies
and grid-integrated retail companies.iv With the phase out of companies not engaged in substantive
business, the participation rate of independent retail companies increased from 32% in 2021 to 54% in
2023.13 Exhibits 13 and 14 display power retail transaction in the Guangdong electricity market:
• Generation-integrated retail companies covered around 60% of retail electricity volume with only
about 30% of retail users. Generation-integrated companies have the advantage of power supply,
which enables them to offer lower electricity prices and more stable power supply to power
users. As a result, the share of retail electricity by generation-integrated retail companies continuously
increased in 2021–23. Moreover, the retail transaction results in Guangdong showed that generation-
integrated retail companies offered the lowest electricity prices to their users, with the prices in 2022
and 2023 being RMB 19/MWh and RMB 8/MWh lower than the market average, respectively. With the
lowest management costs because of the economies of scale from servicing large users, generation-
integrated retail companies also had the lowest per-unit profits among all types, with the profits in
2022 and 2023 being RMB 7/MWh and RMB 4/MWh lower than the market average, respectively.
• Independent retail companies cater to about 60% of retail power users, especially small and
medium-sized users, enhancing the diversity of the retail market. The per-unit electricity prices
and profits of independent retail companies are higher than the market average, with per-unit prices
in 2022 and 2023 being RMB 26/MWh and RMB 14/MWh higher than the market average, respectively,
and profits being RMB 11/MWh and RMB 7/MWh higher, respectively. Independent retail companies
emphasize developing their core competencies in trading capabilities or service abilities, and usually
require higher returns than generation-integrated retail companies.
Exhibit 13 Market share of different types of retail companies in the Guangdong

electricity market
The number of retail Participation rate Share of retail volume (TWh) Share of the number of retail users
companies
294 299 314 27,219 37,807 39,416
500 1.0 100% 100%
454
28%
400 0.8 33%
40%
49%
57%
313 64%
300 284 0.6
200 0.4 63%

61%
45% 58%
38%
100 0.2
34%
7% 5% 2% 9% 6% 3%
0 0
2021 2022 2023 2021 2022 2023 2021 2022 2023
Generation-integrated Independent Grid-integrated Generation-integrated Independent Grid-integrated
RMI Graphic. Source: Guangdong Power Exchange Center
iv Participation rate: the number of retail companies that participate in power market divided by the total number
of retail companies.
Exhibit 14 Per-unit prices and profits of different types of retail companies in the
Guangdong electricity market
Per-unit price
RMB/MWh
620
610 Grid-integrated
600 Independent
590
Average
580 Generation-
570 integrated
560
550
540
0
2022 2023
Per-unit profit
RMB/MWh
24
22
20
18 Independent
16
14 Grid-integrated
12
Average
10
8
Generation-
6 integrated
4
2
0
2022 2023
Based on the pilot of low-voltage I&C users participating in electricity market transactions in Guangdong
Province, it is expected that more pilots will be conducted in various regions to expand the coverage
of I&C users to participate in the power market. The scope of grid companies’ purchased electricity will
therefore be expected to narrow down.
Participation in the retail market will remain the primary method for users to engage in the power
market. The diversification trend of retail companies will remain, but all types of retail companies need
to provide more specialized, refined services, as well as expanding value-added services to generate
more revenue streams.
In terms of the user selection of retail packages, it is expected that the proportion of market-linked
pricing will gradually increase. Fluctuations in wholesale market prices will effectively transmit to end-
users, guiding their electricity usage behaviors. Moreover, as the construction of spot markets progresses,
spot market trading prices will be more frequently considered in price-linkage packages, better leveraging
the price discovery function of the spot market.
Transmission and Distribution
4. T&D tariffs better reflect the costs of grid
operations; transmission losses and system
operation fees are now listed explicitly on
electricity bills.
The T&D tariffs are revised to align more closely with price-following mechanisms, refine power
user classifications, and introduce a voltage-level basic power fee for the first time.v On May 15, 2023,
the NDRC issued the “Notice on the Third Supervision Cycle of Provincial Power Grid T&D Tariffs” (Third
Cycle Notice) for the 2023–25 period.14 The tariff adjustments better reflect grid operation costs and more
effectively distribute those costs to end-users.
In previous cycles, I&C electricity pricing comprised only feed-in price and T&D tariffs, with the latter
category lacking a detailed breakdown of the electricity bills, and was perceived as accounting for
transmission losses and system operation fees. The Third Cycle Notice clarifies that T&D tariffs should only
reflect the cost of T&D services. I&C electricity pricing now includes feed-in price, transmission losses, T&D
tariffs, system operation fees, government-related funds, and surcharges. For the first time, transmission
losses and system operation fees are explicitly itemized on electricity bills. Transmission losses represent
the monetary value of energy lost during power transmission, whereas system operation fees cover various
costs such as pumped storage capacity prices, coal power capacity prices, and ancillary services cost.
The power user categories are reclassified from the previous four categories (residential, agricultural
production, large industry, and general I&C) into three categories: residential, agricultural production, and
I&C. I&C users of the same voltage level will now be subject to the same pricing scheme. Previously, general
I&C users and large industrial users had differing cross subsidies embedded in their T&D tariffs, leading
to price discrepancies for users within the same voltage level. The new standards consolidate general I&C
and large industrial users into a single I&C category with unified cross subsidies, significantly enhancing
transparency and fairness within the pricing structure.
I&C users can choose to implement the fixed or the two-part electricity price,vi according to their voltage
level and power demand. The Third Cycle Notice stipulates that users with a power demand of 100 kVA and
below shall implement the fixed price; those with a power demand between 100 and 315 kVA can choose
the fixed price or the two-part electricity price; and those with a power demand of 315 kVA and above shall
implement the two-part electricity price.
v The basic power fee is exclusively applicable to industrial users. It is a capacity charge of the transformer capacity claimed
by the industrial users.
vi With the fixed electricity price, users pay a fixed price (RMB/kWh) based on their electricity consumption. The price is
generally higher than the same category in the two-part pricing because it takes into account the basic power fee. With
the two-part electricity price, users pay the electricity price (RMB/kWh) and the basic power fee. The basic power fee can
be either the power capacity fee or the power usage price, per the user’s choice. The power capacity fee (RMB/kW/month)
measures the maximum rated capacity of the transformer the user requests. The power usage price (RMB/kVA/month)
measures the actual power usage of the user.
Within the basic power fee of the two-part electricity price, the power usage fee is uniformly set at 1.6 times
the power capacity fee in the current adjustment cycle. This marks a notable increase in the ratio of power
usage fee to power capacity fee across all provincial power grids when compared with the second cycle
(see Exhibit 15). This adjustment widens the price difference between power usage fee and power capacity
fees, providing a direct incentive for users to make rational choices on either plan. It is also beneficial to the
grid’s existing and future planning for transformer capacity because the users’ choice would better match
their production schedules and power load curves.
Exhibit 15 Ratio of power usage price to power capacity fee in the second cycle
Zhejiang
Yunnan
Xinjiang
Tianjin
Sichuan
Shanxi
Shanghai (Industrial)
Shanghai (General I&C)
Shandong
Ratio of power usage price to power capacity fee: 1.6

Shaanxi
Qinghai
Ningxia
Liaoning
Jilin
Jibei
Jiangxi
Jiangsu
Inner Mongolia West
Inner Mongolia East
Hunan
Hubei
Henan
Heilongjiang
Hebei
Hainan (Industrial)
Hainan (General I&C)
Guizhou
Guangxi
Guangdong
Gansu
Fujian
Chongqing
Beijing
Anhui
0.0 0.5 1.0 1.5
Ratio (power usage price/power capacity fee)
RMI Graphic. Source: NDRC
In the previous cycles, the basic power fee was not distinguished by voltage level. Users below 10 kV or
above 220 kV paid the same rate, which limited the fee’s ability to reflect the varying costs of T&D services
at different voltage levels. Now, the basic power fee is differentiated according to the voltage level. On
average, basic power fees for lower voltage levels are roughly 14% higher than those for high voltage levels
(see Exhibit 16). This adjustment enables emerging market players such as distribution grid expanders and
load aggregators to utilize the price gap among different voltage levels in both the electricity prices and the
basic power fee, which encourages private capital to enter the distribution businesses.
Exhibit 16 Power capacity fee overview in selected provinces
Guangdong Jiangsu Shandong Shanxi

Power Capacity Fee (RMB/kW/month)
30
20
10
0
）
）
0
35
35
35
35
20
20
20
20
22
11
22
11
22
11
22
11
10（
10（
10（
10（
≥
≥
1～
1～
1～
1～
Voltage Level (kV)
In addition, the two-part electricity price introduces an incentive mechanism for I&C users: users who
efficiently utilize their requested transformer capacity (when their monthly electricity consumption per
kVA reaches 260 kWh or more) are rewarded with a 10% discount on their monthly power usage price. Such
a mechanism better distributes the transformer capacity costs to users of different voltage levels and of
different utilization. The change will affect I&C users’ strategy for choosing the power capacity fee or the
power usage price to set the basic power fee. Users who previously found it more cost-effective to choose
the power capacity fee may find the power usage price a better option now.
Listing system operation costs as a separate category is one of the highlights of the third cycle
adjustment, bringing enhanced transparency to the pricing structure. Within the system operation
costs, the capacity fee of pumped storage power stations is a key focus. The NDRC released the annual
capacity fees for each operational pumped storage power stations during 2023–25.15 The cost recovery
mechanism for pumped storage power stations becomes clear: fixed costs (e.g., construction) are recovered
through the capacity fee, whereas operating costs and profits are derived from the price difference between
charging and discharging.
The average capacity fee for the 48 pumped storage power stations (see Exhibit 17) that are currently
operational or planned for operation by the end of 2025 is RMB 507.61/kW. The average installed capacity
of these stations is 1.14 gigawatts (GW). Twenty-two stations have a capacity fee above the average. The
Xianghongdian Station in Anhui Province has the highest capacity fee at RMB 823.34/kW with an installed
capacity of 80 megawatts (MW). Conversely, the Panjiakou Power Station in Hebei Province has the lowest
capacity electricity fee at RMB 289.73/kW with an installed capacity of 270 MW. Among these 48 stations, the
most common installed capacity is 1.2 GW, with 21 stations falling into this category.
Exhibit 17 Provincial Pumped-Storage capacity and capacity fees overview
Province
800
Liaoning
Jilin
Heilongjiang
Inner Mongolia
Beijing
600
Hebei
Shanxi
Capacity Price (RMB/kW)
Shandong
Jiangsu
Anhui
400
Zhejiang
Fujian
Henan
Hubei
Hunan
200
Jiangxi
Shaanxi
Xinjiang
Chongqing
Guangdong
0
Hainan
0 500 1,000 1,500 2,000 3,000 3,500 4,000 4,500 5,000 5,500 6,000
Pumped-Storage Cumulative Capacity(GW)
Looking at each province and region (except Jiangsu and Zhejiang), the total annual capacity fee for
pumped storage power stations is expected to remain flat or increase between 2023 and 2025 (see Exhibit
18). By 2025, we estimate that the pumped storage capacity fee passed on to I&C users within system
operation fees will range between RMB 0.03/kWh and RMB 0.04/kWh. Within the State Grid’s operating area,
provinces in Northeast and East China tend to have higher pumped storage capacity fees. As a result, the
passed-through cost to I&C users in these regions is expected to be around RMB 0.008–0.01/kWh.
Exhibit 18 Annual capacity fees for pumped storage
4
3
2
Capacity Fees (billion RMB） 1
0
Northeast Inner Mongolia West North Northwest
Liaoning Heilongjiang Inner Mongolia West Beijing Hebei Shandong Shaanxi Ningxia Xinjiang
Jilin Tianjin Jibei Gansu
Inner Mongolia East Shanxi Qinghai
4
3
2
1
0
Central East Southwest South
Henan Shanghai Anhui Fujian Chongqing Guangdong
Hubei Jiangxi Jiangsu Zhejiang Hainan
Hunan
2023 2024 2025
The pumped storage capacity fee paid by I&C users also fluctuates monthly. This monthly price exhibits an
inverse relationship with the overall level of I&C electricity consumption (see Exhibit 19). In other words,
when the monthly I&C electricity consumption is high, the pumped storage capacity fee tends to be lower,
and vice versa.
Exhibit 19 Monthly I&C electricity consumption vs. pumped storage capacity fee in selected
provinces
Jiangsu Liaoning
60
Pumped-Storage Capacity Price (cent/kWh)

0.75
I&C Electricity Consumption (TWh)
40 0.50
20 0.25
Shandong Shanxi
60
0.75
40 0.50
20 0.25
Ju 023
Se gu 23
23
N obe 23
De be 23
Fe ary 3
ua 024
ch 4
24
Ju 023
Se gu 23
23
N obe 23
De be 23
Fe ary 3
ua 024
ch 4
24
02
02
ar 02
02
02
ar 02
20
em 20
0
em 20
20
Au y 20
em t 20
0
em 20
20
2
O er 2
ce r 2
Ja er 2
O er 2
ce r 2
Ja er 2
2
ne
ly
st
ry
ne
ry
s
l
b
b
Ju
Ju
nu
nu
m
m
Au
br
br
ct
ct
M
M
pt
pt
ov
ov
Month
I&C Electricity Consumption Pumped-Storage Capacity Price
RMI Graphic. Source: State Grid, China Electricity Council (CEC)
Capacity Pricing
5. The coal power capacity pricing mechanism
is introduced, reconstructing the electricity
price structure of both power generators and
consumers, and supporting the transformation
of coal power’s role.
On November 8, 2023, the NDRC and the NEA jointly issued the “Notice on Establishing a Coal Power
Capacity Pricing Mechanism,” stating that starting on January 1, 2024, a capacity fee mechanism
is effective for utilities’ coal-fired electricity-generating units (EGUs), and the resulting coal power
capacity fee will be included in the system operating expenses and will be shared by I&C users based on the
monthly electricity consumption.16
The coal power capacity fee mechanism ensures coal power assets a guaranteed income that is
independent of utilization hours, and aims to support the transformation of coal power’s role. The
current coal power capacity tariff is cost-oriented, determined by the fixed cost of the coal power unit and
the cost recovery ratio set by the province.vii The fixed cost adopts a standardized value at RMB 330/kW/year
(y). The cost recovery ratio is determined based on the renewable energy and power system transformation
progress in provincial power grids. For 2024–25 (see Exhibit 20), this ratio is generally set at 30% (i.e., RMB
100/kW/y) in most provinces, and some provinces and regions with a higher proportion of renewable energy
are set at 50% (i.e., RMB 165/kW/y).17
The coal power capacity tariff level, or the fixed cost recovery ratio, is related to the production and
consumption of renewable energy in the provincial grid. Six of the seven provincial grids with the tariff
at RMB 165/kW/y are also among the top seven provinces with the highest renewable power consumption
weight responsibility.viii Sichuan, Yunnan, and Qinghai need to reach 70%, while Hunan, Guangxi, and
Chongqing all exceed 40% (see Exhibit 21a). The only exception is Henan: although its consumption
responsibility is not among the top, its coal power fleet has been transformed rapidly. Data shows that
Henan’s thermal power utilization hour is only higher than those of Xizang and the three northeastern
provinces (see Exhibit 21c) and is about 20% lower than the national average.
vii We differentiated power capacity prices into two categories to their corresponding entity, where “tariff” would be applied to
generators and “fee” to consumers.
viii The provincial renewable power consumption weight responsibility is set by the NDRC to assign each province a target
percentage of its electricity consumption that must come from renewable sources based on the renewable resource status
quo in each province.
Exhibit 20 Coal power capacity tariff and coal power capacity fee in each province
Paid to generators Charged to consumers Charged to consumers

2024–25 coal power capacity January 2024 coal power February 2024 coal power
Provincial grid
tariff (RMB/kW/y) capacity fee (RMB/kWh) capacity fee (RMB/kWh)
Beijing 100 0.009581 0.013798
Tianjin 100 0.0123 0.0172
Hebei North 100 0.0147 0.0221
Hebei South 100 0.0195 0.0271
Shanxi 100 0.014274 0.015273
Shandong 100 0.0190 0.0225
Western Inner Mongolia 100 0.0139 0.0137
Eastern Inner Mongolia 100 0.011651 0.012280
Liaoning 100 0.011421 0.003450
Jilin 100 0.02176 0.032494
Heilongjiang 100 0.016000 0.016000
Shanghai 100 0.0142 0.0173
Jiangsu 100 0.0158 0.0225
Zhejiang 100 0.0140 0.0255
Anhui 100 0.0210 0.0205
Fujian 100 0.0161 0.0212
Jiangxi 100 0.01608 0.01881
Henan 165 0.036775 0.037298
Hubei 100 0.0180 0.0254
Hunan 165 0.03708 0.04862
Chongqing 165 0.028621 0.034697
Sichuan 165 0.0075 0.0090
Shaanxi 100 0.0197 0.0216
Xinjiang 100 0.015108 0.017263
Qinghai 165 0.004676 0.004634
Ningxia 100 0.0124 0.0137
Gansu 100 0.012279 0.013358
Shenzhen 100 — —
Guangdong 100 — —
Yunnan 165 — 0.006006
Hainan 100 — —
Guizhou 100 — —
Guangxi 165 0.0230 0.028021
RMI Graphic. Source: NDRC, provincial power grid companies, BJX.com.cn
Exhibit 21 Coal power capacity fee and related influencing factors
(a) Renewable Power Consumption Weight Responsibility in 2023
Henan Chongqing Guangxi Hunan Yunnan Qinghai Sichuan
0.2 0.3 0.4 0.5 0.6 0.7
(b) Thermal Power Generation Ratio in 2022

Yunnan Qinghai Sichuan Guangxi Hunan Chongqing Henan
0.25 0.50 0.75
(c) Coal Power Utilization in 2022 (hours)
Yunnan Henan Guangxi Qinghai Hunan Sichuan Chonqing
3,000 3,500 4,000 4,500 5,000
(d) Coal Capacity Fee as of January 2024 (RMB/kWh)

Qinghai Sichuan Guangxi Chongqing Henan Hunan
0.01 0.02 0.03

(e) Coal Capacity Fee Ratio as of January 2024
Qinghai Sichuan Guangxi Chongqing Hunan Henan
0.025 0.050 0.075
RMI Graphic. Source: NDRC, CEC, provincial power grid companies, BJX.com.cn
On the consumption side, starting in 2024, the coal power capacity fee will be part of the system operating
fee and will be paid per kWh. All I&C users jointly share the coal power capacity fees of the provincial grid by
month based on their monthly electricity consumption (see Exhibit 20).
At least 28 provincial grids have disclosed the coal power capacity fee for January 2024. The nationwide
average level is RMB 0.017/kWh. Hunan, Henan, Chongqing, Jilin, and Guangxi are among the highest,
with Hunan and Henan exceeding twice the national average. Qinghai, Sichuan, Beijing, Liaoning, and
eastern Inner Mongolia are among the lowest, with Qinghai and Sichuan below 50% of the average.
The coal power capacity fee generally accounts for 3.0%–5.0% of the end-user price. Out of the 28
provincial grids, 16 fall into this range. There are four provincial grids that fall into the range of 2.0%–3.0%,
and four that fall into the range of 5.0%–6.0%. For the rest, Henan and Hunan are above 8.0%, while Qinghai
and Sichuan are only roughly 1.6%.
The coal power capacity fee level charged to the user is related to the coal power capacity tariff paid to the
generator. Among the seven provinces with a higher coal power capacity tariff, Hunan, Henan, Chongqing,
and Guangxi also have a significantly higher capacity fee level on the user side. However, other provinces
with a higher tariff (i.e., Qinghai, Sichuan, and Yunnan) yield the lowest fee level (see Exhibits 21d and e).
The power generation mix of a provincial grid can explain this phenomenon: among the 33 provincial grids
that implement coal power capacity tariffs, the proportion of thermal power generation in total power
generation is generally close to or higher than 50%, except for Qinghai, Sichuan, and Yunnan. In fact, the
proportion of these three provinces is only about 10% to 20% (see Exhibit 21b). The low proportion of the
generation mix also means that installed coal power capacity accounts for a significantly low share in these
three provinces. Therefore, even if the tariff per kW capacity on the power generation side is relatively high,
the coal power capacity fee charged per kWh to power users is still at the lowest level in the country.
The current coal power capacity pricing mechanism has had a spillover effect on the capacity
pricing for other market members such as natural gas units and energy storage. In terms of natural
gas units, Guangdong Province, which previously adopted a per-kWh price, also introduced a natural gas
power capacity tariff in January 2024. The tariff level is the same as that of coal power, both at RMB 100/
kW/y. In terms of energy storage, Hebei Province established a temporary support policy in 2024, and
independent energy storage power stations can receive a capacity price of up to RMB 100/kW/y.
For the coal power capacity tariff and pumped hydro storage capacity tariff, as well as the gas power
capacity tariff that had been implemented in some provinces in 2023 (such as Shanghai and Jiangsu),
the calculation is based on fixed costs. The tariff level either reflects a partial or full recovery of either a
standard fixed cost (e.g., coal power) or the unit-specific fixed cost (e.g., pumped hydro storage).
However, both the aforementioned Guangdong gas power and Hebei energy storage capacity tariff are
clearly benchmarking to the coal power capacity price level. This shows a new practice for capacity
tariff: technologies with similar capability in providing system adequacy will have similar capacity
price structure and revenue model.
For the price outlook, in the short term (one to two years), the coal power capacity tariff will remain at the
current level. In the medium term (three to five years), in accordance with the policy, the tariff will likely
increase by RMB 65/kW/y. In terms of the fee charged to end-users, because the growth of I&C electricity
consumption is likely to be less than the tariff adjustment, the coal power capacity fee paid in RMB/kWh
may slightly increase in the medium term. In the long term, because the purpose of the capacity pricing
mechanism is to ensure system adequacy, the capacity pricing mechanism is likely to cover more types
of power generation and energy storage technologies. At the same time, similar to the ancillary services
markets, integrating various power supply-side capacity pricing mechanisms and achieving market-
oriented development will be a long-term trend.
Ancillary Services
6. The ancillary services market pricing
mechanism is improved and standardized;
renewables and energy storage owners may
need market strategy adjustments.
To support the increasing renewables penetration, solving challenges of reduced synchronous inertia,
reduced frequency stability, and increased fluctuations in renewables output has become more urgent.
In the past few years, China has been promoting ancillary service varieties that are crucial to the power
grid, expanding the participant pool of the ancillary services market, and establishing a more equitable
cost-sharing and compensation mechanism. On February 8, 2024, the NDRC and the NEA issued the “Notice
on Establishing and Improving the Electric Power Ancillary Services Market Price Mechanism” (Ancillary
Services Notice), unifying the ancillary services market at the national level for the first time.18 The notable
changes and improvements include the following.
The Ancillary Services Notice clarifies the connection between peak regulation service and the spot
market. Since the late 2010s, peak regulation service has gradually become the most mature and most
widely adopted ancillary service in China; in fact, many provinces only have the peak regulation service in
their ancillary services markets. Its function is to measure the price difference of electricity in different time
periods when the spot market is not in place. The Ancillary Services Notice proposed that in areas where
the power spot market operates continuously, the peak regulation market or markets for similar functions
will no longer be applicable; in areas where the power spot market does not operate continuously, when
the spot market does not operate, the units providing the peak regulation service (excluding wind and PV;
hydropower units are encouraged to participate) bid the volume and price in the peak regulation market.
The Ancillary Services Notice outlines the pricing calculation methods and price ceilings for three
major ancillary services:
• Peak regulation: Coal power has been the major flexibility provider in China, significantly lowering
output to make way for renewable power generation, and receives compensation payment from the
renewables. As more renewables have entered the grid in recent years, many provinces have continued to
increase the compensation standards, with the price ceiling sitting in the range of RMB 0.1–3.5/kWh and
the higher end surpassing the renewables’ per-kWh revenue. This means renewables are seeing negative
revenue to avoid curtailment in some provinces. The Ancillary Services Notice stipulates that the peak
regulation price should not be higher than the feed-in price of local nonsubsidized renewable projects.
• Frequency regulation: For many years, the lack of technological neutrality and inconsistent
pricing standards was widely observed in different provinces’ ancillary services market design.
The Ancillary Services Notice clarifies that the calculation for the frequency regulation fee should
be consistent across all technologies and defines how the reference unit should be selected
and how the parameters are calculated. In principle, the upper limit of the frequency regulation
clearing price does not exceed RMB 0.015/kW, which is not much different from the price ceiling
currently implemented in most provinces.
• Reserve: Compared with peak regulation and frequency regulation, which have already been operated
in many provinces, reserve started later in China’s power market reforms. The Ancillary Services Notice
plays more of a role in unifying and standardizing the market price mechanism in advance. It clarifies
that the reserve fee is the product of the clearing price, the bid-winning capacity, and the bid-winning
time. The price limit shall not exceed the local energy market price. Currently, Hunan, Zhejiang, and
the Northeast region have price ceilings in the range of RMB 0.04–0.2/kWh, which are all lower than the
local energy market price.
The Ancillary Services Notice also clarifies the service cost-sharing mechanism. In areas where the spot
market does not operate continuously, the ancillary services costs will continue to be shared among the
EGUs, especially the non-dispatchable ones. In areas where the spot market operates continuously, the cost
will be shared by both the consumption side and part of the supply side (EGUs that are not participating in
the power market) and the sharing ratio is determined by provincial governments. At the same time, the
Ancillary Services Notice also clarifies that the clearing price, bid-winning unit, and bid-winning capacity
need to be determined through market competition, and no subsequent adjustment will be allowed.
Looking forward, the Ancillary Services Notice marks that the ancillary services market will gradually
transition from a regulated compensation mechanism to a market-based pricing mechanism.
The overall cost scale will be reduced, and the market entities’ burden on ancillary services costs will be
fairer and more reasonable. We expect two types of market entities to face the greatest impacts from the
Ancillary Services Notice in the short term:
• On-grid renewables will pay less in the ancillary market in some provinces. The Ancillary Services
Notice clearly stipulates that the theoretical price ceiling of peak regulation services is the feed-in price of
the parity renewable projects, which benchmarks to the coal power reference price in most provinces. In
this case, renewables’ cost to avoid curtailment will no longer be higher than what they can receive from
selling generation to the grid. But at the same time, renewables will face higher price uncertainties in the
energy market (see the next trend about renewables participating in the energy market).
• Energy storage income in the ancillary services market could be reduced and should be prepared
for the spot market. Where the spot market is continually operating and the regulated price range is
further released to reflect the time value of electricity, energy storage assets are ready to secure such
revenues. Where the spot market is not yet in continual operation, energy storage will earn less in peak
regulation services in some provinces. In addition, according to international experience, the supply
of frequency regulation services usually grows faster than demand, mostly due to the rapid growth of
energy storage and dispatchable generators. Therefore, the frequency regulation service market could
be saturated soon, causing prices to fall.
7. The market-oriented transactions of
renewables are scaling up, bringing challenges to
project profitability in the long run due to price
fluctuations.
The market-oriented transaction volume and share of renewable generation continued to expand,
reaching 684.5 TWh and 47.3% in 2023.19 The volume of market-oriented transactions of renewable
generation was 346.5 TWh in 2022, accounting for 38.4% of total renewable generation.20
The types of power market that renewable projects usually participate in are intra-provincial M2L market,
intra-provincial spot market, and interprovincial market; the intra-provincial M2L market is the major
one. Because the progress of the power spot market varies among regions, renewable projects are mainly
engaging in the intra-provincial spot market in regions where the spot market is in official operation or
continuous trial operation, such as Shanxi, Guangdong, Shandong, Inner Mongolia, and Gansu. The surplus
generation of renewable projects in the intra-provincial market can participate in the interprovincial
market, mainly through M2L transactions instead of spot transactions due to the immaturity of the
interprovincial spot market.
Some regions have imposed restrictions on the market transaction volume of renewable projects. As
with coal-fired projects, renewable projects should comply with the minimum proportion of a signed
M2L contract, which is usually 80% of generation the previous year. However, provinces like Jiangsu have
imposed upper limits on the annual and monthly transaction volumes for renewable projects, considering
the uncertainty in generation. In terms of interprovincial transactions, provinces with rich renewable
resources, like western Inner Mongolia, require that the share of interprovincial transactions for renewable
projects should not exceed a certain level, which is the central government’s requirement for local
renewable consumption share.
In March 2024, the NDRC revised the full guarantee purchase system for renewable projects, clarifying
the two parts of renewable projects’ generation: guarantee purchase volume and market transaction
volume. For the guarantee purchase part, renewable projects could guarantee the selling price and volume,
which are uncertain and depend on the market transaction results for the market transaction part.
In 2023 and 2024, the guarantee purchase part of renewable projects kept narrowing down, and a
greater share of renewable generation had to participate in power market, bringing uncertainty to
the revenue of renewable projects. For example, in western Inner Mongolia, the government’s announced
equivalent utilization hours of wind and solar PV projects continued to decrease in 2022–24. The utilization
hours of the guarantee purchase part of wind projects in western Inner Mongolia were 1,100 in 2022, 550 in
2023, and 300 in 2022; and of solar PV projects they were 900 in 2022, 450 in 2023, and 250 in 2022.
While promoting renewables participating in the power market, some provinces still provide subsidy
mechanisms for the renewable generation excess to the guarantee purchase portion. These mechanisms
ensure reasonable returns for renewable projects by enabling part of renewable generation to be purchased
at a fixed price, which is usually the coal power benchmark price or below. For example, to incentivize the
construction and operation of renewable projects, Yunnan provided subsidies for certain parts of wind and
solar PV generation, which could be purchased at the coal power benchmark price in Yunnan. However, the
proportion of subsidized generation continues to decrease (see Exhibit 22).
Exhibit 22 The proportion of subsidized renewable generation in Yunnan
January 1, 2021,
Full capacity grid- August 1 through January 1 through July 1 through
through July 31,
connected time December 31, 2023 June 30, 2024 December 31, 2024
2023
Solar PV 100% 80% 65% 55%
Wind 60% 50% 45%
RMI Graphic. Source: Yunnan Development and Reform Commission
Renewable projects should adhere to TOU policy while participating in the power market; however, some
provinces released separate peak-valley floating ratios for renewable projects to reduce the impact on
project revenue. For example, Qinghai and Ningxia, two provinces with a high penetration of renewables,
provided a lower downward adjustment ratio during valley hours for renewable projects compared with
other types of power projects (see Exhibit 23). Qinghai’s off-peak period is from 11:00 a.m. to 4:00 p.m.,
and Ningxia’s off-peak period is from 9:00 a.m. to 5:00 p.m. The separate TOU policy avoids excessively low
electricity prices for renewable projects in the daytime, thus safeguarding project revenue.
Exhibit 23 TOU policies for power projects in Qinghai and Ningxia in 2024
Solar PV: Others:

Qinghai Peak-upward ≥63% Peak-upward ≥63%
Valley-downward ≥20% Valley-downward ≥65%
Renewable projects: Coal power projects:

Ningxia Peak-upward ≥30% Peak-upward ≥50%
Valley-downward ≥30% Valley-downward ≥50%
RMI Graphic. Source: Qinghai Energy Administration, Ningxia Development and Reform Commission
With the power spot market moving forward, the rules for renewable projects participating in it have been
refined. In most regions, renewable projects should bid both volume and price in the spot market. In terms
of participation scope, western Inner Mongolia and Gansu require all utility-scale wind and solar projects to
participate in the spot market. However, in Shanxi and Shandong, participation is voluntary. In Guangdong,
all wind and solar projects that connect to the grid at 220 kV or above should participate in the spot market.
Looking ahead, the proportion of renewables participating in the power market is expected to further
increase, and the guarantee purchased part will decline. Although the M2L market is the main market for
renewable projects, the rules and pilot tests for renewable projects in the spot market and interprovincial
market will continue to be enhanced.
With deeper engagement in the power spot market, renewable projects will be expected to face more
price fluctuations, increasing the risk for project revenue. However, reasonable project returns are
necessary to develop renewable projects and achieve higher penetration of renewables in the power
system. Therefore, it is important that a supporting mechanism is created to ensure renewable project
profitability in the power market. The M2L contract will continue to play a significant role in guaranteeing
the revenue from renewable projects in the short term.
8. As distributed PV grows rapidly in China,
developers should closely monitor grid access
and feed-in price policies.
Distributed PV systems are gaining popularity due to their proximity to end-users and the higher revenue
potential of the self-generation and self-consumption model.ix Also, distributed PV projects offer advantages
such as ease of installation and simplified registration procedures, contributing to their rapid growth in
recent years. In 2023, newly installed distributed PV capacity reached 96.3 GW, accounting for 44.5% of the
total newly installed PV capacity for the year.21 Cumulative installed capacity exceeded 250 GW, representing
41.8% of the total cumulative PV installed capacity.
Nationwide, three provinces — Henan, Jiangsu, and Shandong — saw newly installed distributed PV
capacity surpass 10 GW in 2023, while five other provinces and regions recorded newly installed capacity
exceeding 5 GW (see Exhibit 24). However, large-scale integration of distributed PV systems into the grid
can pose significant challenges; various regions have begun implementing measures to regulate their
development. Market investors should closely monitor policy changes related to distributed PV systems in
different regions and carefully assess the investment risks associated with these projects.
Exhibit 24 Overview of PV projects by province in 2023
Cumulative installed capacity in 2023 (GW) Newly added capacity in 2023 (GW)
Province Growth Growth

Utility scale Distributed Total Utility scale compared Distributed compared Total
with 2022 with 2022
Henan 6.37 30.94 37.31 0.09 1.37% 13.89 81.53% 13.98

Jiangsu 11.56 27.72 39.28 2.03 21.24% 12.17 78.26% 14.20
Shandong 15.94 40.99 56.93 3.44 27.53% 10.79 35.71% 14.23
Anhui 12.86 19.37 32.23 2.22 20.88% 8.47 77.67% 10.69
Zhejiang 6.67 26.90 33.57 0.54 8.75% 7.64 39.68% 8.18
Hebei 30.24 23.93 54.16 10.30 51.64% 5.31 28.55% 15.61
Jiangxi 9.81 10.12 19.93 2.86 41.14% 5.05 99.74% 7.91
Hunan 3.99 8.53 12.52 1.13 39.54% 5.03 143.72% 6.16
Fujian 0.44 8.30 8.75 0.05 12.65% 4.05 95.01% 4.10
Hubei 17.49 7.38 24.87 7.74 79.29% 3.98 117.02% 11.72
Shanxi 18.24 6.66 24.90 5.67 45.11% 2.28 51.90% 7.95
Liaoning 5.21 4.36 9.58 1.40 36.76% 2.17 98.90% 3.57

ix The self-generation and self-consumption model avoids T&D tariffs for distributed renewable
owners given the power flow is off grid, and therefore has higher revenue potential.
Shaanxi 18.26 4.66 22.92 6.32 52.94% 1.44 44.61% 7.76
Tianjin 2.99 1.90 4.90 1.77 145.83% 0.91 92.49% 2.69
Shanghai 0.40 2.50 2.89 0.16 65.79% 0.79 46.07% 0.95
Heilongjiang 3.96 1.69 5.65 0.29 7.96% 0.60 55. 72% 0.90
Chongqing 0.88 0.72 1.60 0.34 62.08% 0.57 375.50% 0.90
Ningxia 20.12 1.25 21.37 5.20 34.86% 0.33 35.61% 5.53
Jilin 3.40 1.20 4.60 0.46 15.45% 0.28 30.05% 0.73
Gansu 24.15 1.04 25.19 11.04 84.21% 0.18 21.61% 11.22
Sichuan 5.23 0.51 5.74 3.50 202.21% 0.18 52.86% 3.67
Beijing 0.05 1.03 1.08 0.00 0. 00% 0.13 14.53% 0.13
Qinghai 25.21 0.19 25.40 7.15 39.63% 0.04 22.48% 7.19
Tibet 2.52 0.05 2.57 0.76 42.98% 0.03 131.36% 0.79
Xinjiang 28.78 0.18 28.96 14.37 99.79% −0.09 −33.16% 14.28
RMI Graphic. Source: NEA
The rapid expansion of distributed PV is significantly altering the net load curve. Due to the inherent
intermittency of solar power generation and the self-generation and self-consumption model offsetting
net load, distributed PV systems can cause a steep decline in net load during morning and midday when
demand is typically lower. This trend is particularly evident in regions like Shandong, Hebei, and Henan,
where the rapid development of these systems is transforming the net load curve from a duck curve
(evening peak, daytime trough) to a more extreme canyon curve with even deeper daytime troughs. This
shift poses significant challenges to the flexibility of the power system because it needs to adapt to these
substantial fluctuations in supply.
Furthermore, if a high proportion of distributed PV systems feeds all generated power back into the grid, the
power flow direction on the distribution side may reverse, posing significant challenges to the stability of the grid.
To address the challenges raised by more distributed PV connecting to the grid, various regions are
gradually implementing policies to regulate their development. These measures include restricting the
rapid expansion of distributed PV systems in areas with connection constraints and adjusting the range for
peak and valley electricity prices to optimize distributed PV development using price mechanisms.
Distributed PV should be regulated according to the grid’s capability in managing power flow
fluctuations. In June 2023, Shandong, Heilongjiang, Henan, Zhejiang, Guangdong, and Fujian conducted
pilot programs to assess the grid capacity for accommodating distributed PV access.22 According to the
assessment results, except for Zhejiang, the five other provinces have certain constraints in accommodating
distributed PV. Among the five provinces with constraints, Henan, Shandong, and Heilongjiang have
all suspended or restricted new distributed PVs’ access to grid. In addition, more and more regions
and counties are reporting that the grid’s capability for new distributed PV is very limited. Besides the
aforementioned six provinces, Liaoning, Guangxi, Hebei, and Hubei have also released assessments of their
grid capacity for accommodating distributed PVs. Statistics show that over 200 areas (including counties,
cities, and districts) nationwide have no space for accommodating new distributed PVs.
Therefore, the development of distributed PV systems faces significant uncertainty. Some PV investors are
shifting from a positive outlook to a more cautious stance. To improve PV grid integration capabilities, many
regions are asking PV projects to bundle with energy storage, with increasing requirements for storage capacity
and durations. Although requiring distributed PV to be equipped with energy storage opens additional space for
the domestic energy storage market, it also increases the up-front burden for distributed PV projects.
Peak and valley electricity price adjustments are unfavorable to distributed PV development.
The growth of distributed PV has exacerbated the duck curve. Traditional peak and valley pricing
structures no longer accurately reflect the power balancing costs. In response, PV-abundant provinces like
Shandong and Hubei have begun adjusting peak and valley electricity pricing using price mechanisms to
guide distributed PV development.
Shandong is progressively adjusting its peak and valley pricing periods according to spot market prices.
The latest pricing structure assigns the 10:00 a.m. to 4:00 p.m. period as the valley or deep valley period,
matching the time when PV generation peaks. This change significantly reduces the revenue of distributed
PV. Other provinces with spot markets are likely to adopt similar adjustments or directly implement spot
market prices on the retail side. Investors should closely monitor the risks associated with distributed PV as
pricing structure changes.
At the same time, Henan, Hebei, and Shandong have introduced policies requiring distributed PV to
participate in peak regulation services and be included as a market entity in the ancillary services market.
In May 2022, the NEA’s Henan Supervision Office required on-grid distributed wind power and distributed
PV systems with the voltage level of 10 (or 6 kV depending on the model) kV or above in the province to
be included as market entities and participate in the peak regulation ancillary services market.23 The
ancillary service fee is shared among all market entities. In Hebei and Shandong, to cope with insufficient
peaking capacity during the Spring Festival, distributed PV systems would be requested to participate in
peak regulation services. It is expected that, in the future, non-spot market provinces and regions will have
more stringent requirements for distributed PV to share ancillary services costs and/or participate in peak
regulation services.
Market-based mechanisms are deemed essential to break through the barriers hindering the development
of distributed PV systems. In line with this strategy, Hunan Province has taken the lead in issuing the “Notice
on Further Standardizing the Development and Construction of Distributed Photovoltaics” in June 2023,
requiring all distributed PV systems with 10 kV or above to enter the power market by the end of 2023.24 The
goal is to have all on-grid distributed PV across all voltage levels included in the power market by the end of
the 14th Five-Year Plan period.
I&C distributed PV systems typically operate under a self-generation, self-consumption, and surplus on-grid
model.x Currently, most distributed PV systems do not directly participate in the power market, but their actual
settlement prices are already affected by it. For the self-generation portion of electricity, one of the common
pricing methods is users getting a discount on the price of electricity purchased through the grid agent.
Therefore, after I&C users enter the power market, especially in the spot market, the spot price curve affects the
grid agent’s purchase price of electricity, which in turn affects the actual settlement price of the self-generated
portion of electricity. For the portion of surplus on-grid, the local coal-based benchmark price is usually used
for settlement. However, looking forward, with the accelerated development of distributed PV (including
residential and I&C) in recent years and the rapid increase in the amount of surplus on-grid, it is expected that
the on-grid portion will be settled according to the spot market price curve or directly by the market.
x I&C distributed PV systems refer to systems owned by I&C users that provide power generation to the owners first, and then
any surplus power is traded in the power market. Surplus on-grid refers to any surplus energy generated by the distributed
PV system that will go through the grid to the power market for sale.
9. Independent energy storage expands market
participation; the energy market is still their
primary revenue source.
In recent years, more novel energy storage systems have emerged as independent entities instead of
being integrated into wind or solar projects or owned and operated by the grid.xi Many provinces are
exploring rules and mechanisms for independent energy storage to participate in the local power market.
Inner Mongolia, Shanxi, Shandong, Xinjiang, and other provinces and regions are exploring diversified
approaches for independent energy storage.
Inner Mongolia: Energy Market + Capacity Compensation
Inner Mongolia issued the “Inner Mongolia Autonomous Region Independent Novel Energy Storage Project
Implementation Rules (Interim)” (Implementation Rules) in 2023, which clarified details of entering the
power market for grid-side and independent energy storage systems.25 The main sources of income for
market entities include energy market trading and capacity fee.
Independent energy storage systems participate in the energy market and ancillary services market as
both buyers and sellers. During discharge, they are like power plants (sellers), and during charging, they
are users (buyers). The Inner Mongolia power grid is divided into two parts, and the progress of its power
market is inconsistent. The western Inner Mongolia grid has established a spot market, and independent
energy storage systems can obtain income by participating in the spot market and the ancillary services
market. The eastern Inner Mongolia grid has not yet established a spot market. Independent energy storage
obtains income by utilizing the price gap between peak and valley prices during the day, and providing
peaking, frequency regulation, and rotating inertia services according to the relevant requirements of the
Northeastern Regional Power Ancillary Services Management Regulation.
The Implementation Rules establish capacity fee for independent energy storage in Inner Mongolia. Grid-
side independent energy storage systems that are part of the pilot projects can earn capacity compensation
based on discharged energy for up to 10 years, with a temporary price cap of RMB 0.35/kWh. This
compensation can change if a capacity market or capacity-related pricing policies are introduced. Power-
side independent energy storage can generate income through capacity sales or leasing agreements with
renewable enterprises, with rental prices guided by the compensation standard for grid-side projects.
xi Independent energy storage can be a stand-alone power source or on the grid side, as long as it is registered independently
in the market.
Shanxi: Spot Market + Frequency Regulation Services
Shanxi is one of the most progressive provinces in spot market operation, and has spot market rules allowing
independent energy storage to participate through bidding on both quantity and price or just quantity. Only
day-ahead market participation is permitted for now, with real-time market access planned. And because the
peak regulation services are merging in the spot market, there would not be a separate market for them.
In response to the rapid growth of renewable energy, Shanxi has established the country’s first paid
primary frequency regulation market. Independent energy storage can participate in this market to
obtain compensation by providing primary frequency regulation capabilities beyond their basic market
obligations. The market demand is set at 10% of the predicted maximum output of renewables plants
within the day. Market participants submit bids for both quantity and price, with a price range of RMB
5–10/MW.26 Prices are merit ordered based on comprehensive performance indicators (e.g., response time,
response rate, and response accuracy). Frequency regulation revenue is calculated based on the regulation
mileage.xii Storage systems’ charge and discharge losses associated with the primary frequency regulation
are compensated at the real-time spot average price for the current month.
Although Shanxi does not mandate compulsory energy storage for renewables projects, the province has
yet to establish clear policies regarding the leasing of novel energy storage. However, the Shanxi Provincial
Power Market Trading Guidelines in 2023 proposed exploring and implementing a capacity leasing or capacity
compensation mechanism for novel energy storage, indicating a potential trend toward these approaches.27
Guangdong: M2L Market + Spot Market + Ancillary Services Market
To facilitate the growth of novel energy storage, in 2023, the Guangdong Provincial Development and
Reform Commission and Energy Administration implemented a variety of measures, including encouraging
participation in power market trading and mandating compulsory storage for renewables projects. As per
the phased mandates, offshore wind power projects added after 2022 and utility-scale PV and onshore
utility-scale wind projects added after July 1, 2023, must be equipped with novel energy storage with a
capacity of no less than 10% of the generation capacity and a minimum discharging duration at rated
capacity of one hour.
Like Inner Mongolia and Shaanxi, independent energy storage systems in Guangdong engage in the M2L,
spot, and ancillary services markets. In the spot market, they submit bids with quantity and charging/
discharging prices linked to TOU pricing at the corresponding node. Following the Southern Regional
Ancillary Service Market Rules, they also submit quantity and price bids to partake in ancillary services
markets to provide regional frequency regulation and cross-provincial reserve services.
Power-side energy storage systems, jointly with power generation enterprises, participate in the energy
and ancillary services markets. Their trading mode is similar to that of grid-side energy storage. User-side
energy storage systems, jointly with power users, participate in the electricity energy and demand response
markets. They engage in wholesale (M2L, spot) or retail electricity energy trading, aiming to reduce
electricity costs by utilizing peak-valley price differences to flatten the peak and fill the valley. Additionally,
user-side energy storage, jointly with power users, participates in trading products such as day-ahead
demand response, receiving demand response revenue based on the market clearing price and effective
response capacity.
xii Defined as the absolute change in automated generation control set points between four-second intervals.
Xinjiang: Energy Market + Capacity Compensation + Peak Regulation Services Market
In May 2023, the Xinjiang Development and Reform Commission issued the “Notice on Establishing a
Supporting Policy Suite for the Development of Novel Energy Storage,” establishing market participation
guidelines for novel energy storage in the energy market, capacity compensation (or capacity leasing),
and peak regulation services. Independent novel energy storage in Xinjiang can participate in all or a
portion of its capacity in the M2L energy market or ancillary services markets. When discharging to the
grid, independent energy storage acts as a power generation market entity and executes TOU on-grid
prices; when charging, it is treated as a power user and executes peak and valley prices in M2L TOU market
contracts with power generation enterprises. After the spot market is established, the charging and
discharging prices of independent energy storage will be settled according to the spot market prices.
Xinjiang implements a capacity compensation policy for on-grid independent energy storaage. However,
the compensation is less than that in Inner Mongolia and decreases rapidly each year. Before the end of
2025, the compensation standard will be calculated based on the cumulative discharge energy. In 2023,
it was temporarily set at RMB 0.2/kWh, and it will decrease by 20% each year starting in 2024 (i.e., the
compensation standard for 2024 is RMB 0.16/kWh and for 2025 it is RMB 0.128/kWh). The compensation
funds will be temporarily shared by all I&C users.
Independent energy storage systems are supported to recover their construction costs by selling or leasing
their capacity for peaking and other shared services in Xinjiang. However, the corresponding capacity will
no longer receive capacity compensation. The NDRC releases an annual reference price for capacity leasing
(the provisional reference price for 2023 is RMB 300/kW/y). Renewable enterprises and shared energy
storage project enterprises sign long-term leasing agreements or contracts of not less than 10 years based
on the annual reference price.
In Xinjiang, if independent energy storage systems charge according to dispatching instructions to avoid
or reduce grid-wide wind and solar curtailment, they will receive compensation for their peak regulation
service. The compensation standard is RMB 0.55/kWh per their charged energy during the peak regulation
service. This energy can then be discharged to the grid if needed at RMB 0.25/kWh. The energy storage will
no longer receive capacity compensation if participating in peak regulation service. Grid companies will
prioritize energy storage facilities to provide the peak regulation service given the same performance rating
among all available sources.
The energy market will be the most important revenue source for independent energy storage, while
the ancillary services market and capacity compensation hold uncertainties. Independent energy
storage generates revenue primarily through participation in energy markets (M2L and spot), capacity
leasing to renewables or receiving capacity compensation, and providing ancillary services. We expect the
trend to be as follows:
1. The importance of the energy market is growing. As the spot market expands rapidly and price caps
are relaxed, independent energy storage participation in the spot market to capture price gap gains
is becoming more certain. Consequently, the spot market is set to become the most crucial revenue
source for independent energy storage.
2. The revenue from the ancillary services market will be limited. On February 8, 2024, the NDRC and
NEA issued the “Notice on Establishing Market Price Mechanisms for Power Ancillary Services,” which
requests provinces or regions with continuous spot market operation to delist peak regulation service
in the ancillary services market. For places that still have peak regulation services, the service price
should not exceed the on-grid price of price parity renewables projects. For frequency regulation
services, the maximum price for cleared frequency regulation mileage is capped at RMB 0.015/kW.
The revenue from the peak regulation service and the frequency regulation service is expected to
gradually decline.
3. Capacity compensation has yet to be established nationally. Although current provincial policies
recognize the value of independent energy storage through capacity compensation or renewable
leasing capacity arrangements, a specific capacity fee mechanism tailored to novel energy storage
has yet to be established. This is partly due to concerns regarding the inherent safety of lithium-ion
batteries, the dominant technology in novel energy storage. Additionally, the prevalent two-hour
system configuration falls short of meeting the capacity requirements of the power system, and issues
such as lithium battery capacity degradation and relatively shorter lifespan have raised concerns.
However, the overarching framework outlined in the “Notice on Establishing a Coal Power Capacity
Pricing Mechanism” emphasizes the gradual implementation of a two-part pricing mechanism
that effectively reflects the value of both electricity and capacity from various sources. Given the
advantages of novel energy storage in terms of response performance and zero-carbon attributes
compared with coal power, it is anticipated that a capacity pricing mechanism will be introduced to
cover novel energy storage systems once a standardized safety protocol emerges and the systems
exhibit stable long-duration capability. This transition, however, will necessitate time for technological
breakthrough.
10. The green power and green electricity
certificate markets continue to expand, with a
relatively relaxed supply–demand relationship in
the short term.
In 2023, the green power trading and green electricity certificate (GEC) markets maintained rapid
expansion. The national green power trading volume reached 68.5 billion kWh in 2023, marking a 278%
year-over-year increase. Specifically, the State Grid region recorded a trading volume of 61.1 billion kWh,
showing a 327% year-over-year growth.28 From January to July 2023, 26.17 million GECs were traded,
marking a 170% increase over with 2022 (see Exhibit 25).29 In terms of price, the average green premium
of green power in the State Grid region was RMB 0.065/kWh in 2023; in the Southern Grid region, green
power prices were RMB 0.0185/kWh higher than the average price of coal power.30 The average price for
nonsubsidized GECs from January to July 2023 was RMB 42.4, slightly up from the RMB 38 average in 2022.31
However, starting in August 2023, the price of nonsubsidized GECs decreased by RMB 9–10 compared with
the preceding seven months.32
Exhibit 25 Green power trading and GEC trading volume, 2021–23
Green power trading volume GEC trading volume

800 1.40% 3,000 90%
1.21% 82% 80%
700 1.20% 2,500
600 70%
1.00%
2,000 60%
100 million kWh
500
+278% 0.80% +170%
50%
10,000
400 1,500
0.60% 2，617 40%
300 685
1,000 30%
0.34% 0.40%
200 0.23% 20%
0.20% 500 969
100 181 10%
87 62
0 0.00% 0 0%
2021 2022 2023 2021 2022 2023
National green % of green power trading # of GEC % of GEC traded

power trading volume to the national traded through green power
volume power market volume trading
RMI Graphic. Source: CEC, China Renewable Energy Engineering Institute
The updated green power trading rules further clarify the pricing mechanism for green power. In
August 2023, the Beijing Power Exchange Center released the “Implementation Rules for Green Power
Trading of Beijing Power Exchange Center (Revised Draft)” (the Revised Draft).33 The Revised Draft
requires that “market participants should separately list the energy price and the green premium of
green power.”xiii Under the bilateral negotiation and listed trading methods, market participants need
to specify both the energy price and the green premium as well as the overall transaction price of green
power. In the centralized auction mode, market participants declare the overall transaction price, and
the green premium is determined based on the average price of GECs, with the remaining part being the
energy price. Additionally, the Revised Draft for the first time clarifies that the electric energy and the
environmental value need to be settled separately.
The significance of GECs has been further enhanced, solidifying their role as the exclusive
embodiment of the environmental value of green power. In August 2023, the NDRC, the Ministry of
Finance, and the NEA jointly issued the “Notice on Fully Covering Green Electricity Certificates to Promote
Renewable Energy Electricity Consumption” (Document No. 1044).34 Document No. 1044 expands the
eligible technology for GEC issuance from onshore wind power and utility-scale solar PV to all wind power
(including distributed wind and offshore wind), solar power (including distributed solar PV and solar
thermal power), conventional hydropower, biomass power, geothermal power, and ocean energy, among
other documented renewable energy generation projects. It introduces a centralized auction method,
strengthens the role and status of GECs, and clarifies that GECs are the sole proof of the environmental
attributes of green power and the only validation for the production and consumption of green power. In
September 2023, the “Notice on Matters Related to the Issuance of Green Electricity Certificates” specified
that the issuing agency of GECs would be changed to the Power Business Qualification Management Center
of the NEA, further enhancing the authority of GECs.35
The latest provincial green power trading schemes generally reflect the new requirements set out in the
Revised Draft. Currently, bilateral negotiation is the main mode of green power trading, with regions
such as North Hebei, Shaanxi, Sichuan, Jiangsu, Fujian, and Guangxi currently only conducting bilateral
negotiations. Some areas (such as Tianjin, Zhejiang, Anhui, Guangdong, and Guizhou) also conduct
listed trading and centralized auction. In the Beijing Power Exchange Center region (State Grid territory),
for example, Tianjin, Shaanxi, Jiangsu, and Anhui all require that the bilateral negotiation mode must
separately specify the overall transaction price, the energy price, and the green premium.
Unlike the requirements in the State Grid territory, the latest trading schemes in the Southern Grid
territory primarily focus on declaring the green premium. For example, Guangdong requires that only
the green premium needs to be declared in both bilateral negotiation and centralized auction, and the
energy price can be executed according to the agreed price or according to the respective existing pricing
mechanisms; in Guangxi, both buyers and sellers in bilateral negotiations only need to declare the green
premium, and the energy price in principle is the weighted average price of monthly (weekly) trading plans
for each time segment of coal-fired power plants (excluding contract power transfer transactions).
Besides the wholesale market, power users can also participate in green power trading through the
retail market or subscription-based transactions. Regardless of the method of participation, under the
current rules, the overall transaction price of green power trading generally consists of two parts:
the energy price and the green premium. These are commonly referenced against the price of coal
power and the price of GECs, respectively.
xiii The overall transaction price of green power = energy price (embodies the value of electric energy) + green premium
(embodies the value of environmental value).
In the retail market, power users purchase green power through retailers. The retailer purchases green
power in the same way as the wholesale market’s power users, as explained earlier. However, the retail
prices may vary from the prices the retailer obtained in the wholesale market, depending on the regional
rules and the retail packages. For example, Zhejiang requires that the green premium sold by retailers must
be consistent with that in the wholesale market, but there is flexibility in the agreement on the energy price;
whereas in Guangdong, power users can choose different retail packages and negotiate separately with
retailers on the energy price and green premium.
Subscription-based transactions are currently only conducted in the Southern Grid territory. In this mode,
nonmarket power users can negotiate the green premium with the renewables owners, while the energy
price is defaulted to the grid companies’ purchase price.
In 2023, a series of green power trading and GEC policies and rules were iterated, establishing the
foundation for the development of the green power market for the foreseeable future. Considering the
current trends in both energy price and green premium, the overall transaction price of green power
trading is expected to remain stable with a slight downward trend in the short term.
The energy price is expected to decrease to some extent in the short term, primarily due to the decline
in coal power trading prices and the separation of coal power capacity compensation. Currently, coal power
still dominates the market, and green power energy prices are primarily anchored to coal power trading
prices. Guangdong (see Exhibit 26) illustrates how green power energy prices fluctuate with thermal power
trading prices, showing parallel trends from 2022 to 2024. As the thermal power trading prices approach
the coal power benchmark price in 2024, the price gap between green power and thermal power trading
narrowed in 2024.
Against the backdrop of declining thermal coal prices nationally, the results of 2024 annual M2L trading
in multiple regions show a trend of decreasing prices for coal power. Consequently, we anticipate a
corresponding decline in green power energy prices.
Additionally, after incorporating the capacity compensation into the system operation costs, the coal power
price settled in the market reflects only the price of electric energy. Thus, the coal power price will decrease
compared with when capacity compensation was not separated. This decline will drive down the energy
price of green power.
Exhibit 26 Comparison of average annual trading price in Guangdong from 2022 to 2024
Energy price of green power vs. coal power price
560
550
540
530
520
RMB/MWh
510
500
490
480
470
460
2022 2023 2024
Avg. energy price of annual green power trading Avg. price of annual coal power trading
The green premium is expected to fluctuate within a relatively stable range. Due to the linkage of the green
premium with carbon markets and energy consumption assessment, regulatory authorities anticipate
a reasonable fluctuation range. Maintaining the green premium within a stable range also facilitates the
integration of various markets and reflects consistency in environmental attributes. Some provinces with
a strong demand for green power, such as Zhejiang and Guangdong (see Exhibit 27), have set limits on the
range of the green premium:
Exhibit 27 Setting limits on environmental values in selected provinces for 2024
Document Limits on green premium

Guangdong “Notice on Relevant Matters of Power Market 0 ≤ green premium ≤ RMB 50/MWh
Transactions in 2024 by the Guangdong Energy
Administration and South China Energy Regulatory
Bureau of National Energy Administration”
Guangxi “2024 Guangxi Green Power Trading Green premium ≥ 0
Implementation Plan”
Zhejiang “Operational Rules for Market-based Trading of RMB 10/MWh ≤ green premium ≤
Green Power and Green Electricity Certificates in RMB 30/MWh
Zhejiang (Trial)”
Tianjin “Tianjin Green Power Trading Work Plan (2024 Green premium ≤ RMB 50/MWh,
Revised Edition)” and ≠ 0
Anhui “Anhui 2024 Green Power Trading Implementation Green premium > 0
Plan”
RMI Graphic. Source: Guangdong Energy Administration, South China Energy Regulatory Bureau of NEA,
provincial power exchange centers
Within the fluctuation range, power users’ bargaining power regarding the green premium is expected
to increase. While the fluctuation direction of the green premium currently lacks a clear indication, a
significant short-term increase in supply will bolster power users’ bargaining power regarding the green
premium. This surge in supply stems from both the increase in green power and GECs, which serve as the
benchmark for pricing the green premium of green power.
• Green power supply: The southeastern coastal provinces with a high demand for green power are
expanding their green power supply by promoting interprovincial transactions and the entry of
distributed projects into the market.
• Interprovincial transactions: In the absence of local nonsubsidized solar and wind projects, Shanghai
relies solely on interprovincial transactions to meet its green power demand. With the increase in
interprovincial supply, Shanghai’s 2024 green power trading volume has already doubled that of the
entire year of 2023.36 Similarly, Jiangsu’s green power supply is also in an abundant state in 2024.
Relevant retailers believe that interprovincial transactions have greatly supplemented Jiangsu’s green
power supply.
• Distributed projects market entry: Guangdong, Jiangsu, and Zhejiang all issued documents to guide
distributed projects participating in green power trading.xiv Zhejiang, which had already aggregated
distributed projects to participate in green power trading in 2022, greatly alleviated the limited supply
of green power from the local utility-scale projects (see Exhibit 28). The increase in green power supply
will alleviate the previously tight balance between supply and demand, shifting the market from a
state of supply shortage to a more balanced state in the short term. The change in the supply–demand
relationship will enhance the bargaining power of power users over the green premium.
Exhibit 28 Proportion of solar PV and wind power installed capacity in Zhejiang as of the
end of 2023
Wind
15%
Utility-scale
solar PV
Distributed 17%
solar PV
68%
Note: The majority of wind in this exhibit is utility-scale wind projects.

RMI Graphic. Source: NEA, Xinhua News Agency
xiv Guangdong issued the “Guangdong Province Renewable Energy Trading Rules (Trial)” in 2023, allowing distributed projects
to participate in green power trading as individuals. Jiangsu’s “Guidelines on Market Registration and Entry Work for
Distributed Wind and Solar PV” was the first to provide clear guidance for distributed projects to participate in intra-month
green power trading. Zhejiang clarified in the “Zhejiang Green Power Trading and Transmission and Distribution Service
Contract (Model Text, 2024 Edition)” that distributed power projects could be represented by retailers to participate in the
wholesale market.
• In terms of the supply of GECs: Influenced by the Revised Draft and documents from some provinces,
market participants often reference the price of GECs when setting the green premium. Following
the issuance of Document No. 1044 in August 2023, the scope of GEC issuance was expanded beyond
onshore wind and utility-scale solar PV to include offshore wind, distributed solar PV, biomass, and
other documented renewable energy generation projects. Based on the cumulative installed capacity
of renewable energy by the end of 2023, the installable capacity eligible for GECs in just wind and solar
PV increased from 760 million kW to 1.05 billion kW. This policy iteration led to market expectations
of an increase in GEC supply, and the anticipated change in the supply–demand relationship caused a
significant drop in GEC prices in August 2023.
• Subsequently, in February 2024, the “Notice on Strengthening the Integration of Green Electricity
Certificates with Energy Conservation and Carbon Reduction Policies to Promote Non-Fossil Energy
Consumption” was issued.37 It mandates that by the end of June 2024, all utility-scale renewable
energy generation projects in the country should be fully documented, and the scale of documented
distributed projects should be further increased. It also stipulates that “Interprovincial trading of GECs
should not be restricted.” These requirements are expected to greatly accelerate the mass issuance
of GECs and increase the willingness of interprovincial GEC trading, significantly increasing the GEC
supply in the short term. With the further increase in supply, GEC prices may correspondingly decrease.
Because the green premium is pegged to GEC prices, the decline in GEC prices will enhance the
bargaining power of power users when negotiating the green premium.
Endnotes
1 Yujing Liu et al., 2023 China Power Outlook: 20 Key Trends for Power Market Players, RMI, 2023,
https://rmi.org/insight/2023-china-power-outlook-key-trends-for-power-market-players/.
2 “Basic Rules of the Power Spot Market (Trial)” , National Development and Reform Commission,
National Energy Administration, 2023, https://www.ndrc.gov.cn/xxgk/zcfb/ghxwj/202309/
t20230915_1360625.html; and “Notice on Further Accelerating the Construction of the Power Spot
Market”, Office of the National Development and Reform Commission, Comprehensive Department
of the National Energy Administration, 2023, https://www.ndrc.gov.cn/xxgk/zcfb/tz/202311/
t20231101_1361704.html.
3 “Notice on Implementing and Optimizing the Trading Price Mechanism of the Interprovincial Power
Spot Market” , National Electric Power Dispatching Control Center, Beijing Electric Power Trading
Center, 2023, https://m.bjx.com.cn/mnews/20230713/1319301.shtml.
4 “How Virtual Power Plants Operate Normally under the Spot Mode,” 2023 National Virtual Power Plant
and Future Development Summit, Nandou, 2023, https://m.bjx.com.cn/mnews/20230825/1328190.
shtml; and “Notice on Clarifying the Participation of Haiyang Nuclear Power Units 1 and 2 in Market
Transactions”, Shandong Provincial Development and Reform Commission, Shandong Energy
Bureau, National Energy Administration Shandong Supervision Office, 2023, https://m.bjx.com.cn/
mnews/20231030/1339809.shtml.
5 “Notice on the Results of the 2023 Annual Transaction and Renewable Energy Annual Transaction of the
Guangdong Electricity Market”, Guangdong Electric Power Trading Center, 2022, https://news.bjx.com.
cn/html/20221223/1278259.shtml.
6 “Notice on the Results of the 2024 Annual Transaction and Annual Green Electricity Transaction of the
Guangdong Electricity Market”, Guangdong Electric Power Trading Center, 2023, https://news.bjx.com.
cn/html/20231225/1351889.shtml.
7 “Notice on Further Improving the Time-of-Use Electricity Pricing Mechanism”, National Development and
Reform Commission, 2021, https://www.ndrc.gov.cn/xxgk/zcfb/tz/202107/t20210729_1292067.html.
8 “Liu Gang: The National Power Market Traded 5700 TWh in 2023, a Year-on-Year Increase of 7.9%”,
National Energy Administration, 2024, https://www.nea.gov.cn/2024-01/25/c_1310761959.htm.
9 “Implementation Plan for the Pilot of Market-based Trading Participation by Low-Voltage Industrial
and Commercial Users in the Guangdong Electricity Market”, Guangdong Power Exchange Center, 2023,
https://pm.gd.csg.cn/portal/#/home/informationNotice/detail?id=10467&noticeTypeId=31.
10 Guangdong Power Market 2023 Annual Report, Guangdong Power Exchange Center, 2024, https://
pm.gd.csg.cn/portal/#/home/informationNotice/detail?id=13679&noticeTypeId=29.
11 “Notice on the 2024 Annual M2L Trading and Annual Green Power Trading Results of Guangdong
Power Market”, Guangdong Power Exchange Center, 2023, https://news.bjx.com.cn/
html/20231225/1351889.shtml.
12 “Notice on the 2023 Retail Transactions and Contract Signing of Guangdong Power Market”,
Guangdong Power Exchange Center, 2023, https://pm.gd.csg.cn/portal/#/home/informationNotice/
detail?id=9225&noticeTypeId=31; and “Notice on the 2024 Retail Transactions and Contract Signing
of the Guangdong Power Market”, Guangdong Power Exchange Center, 2024, https://pm.gd.csg.cn/
portal/#/home/informationNotice/detail?id=13407&noticeTypeId=31.
13 Guangdong Power Market 2021 Annual Report, Guangdong Power Exchange Center, 2022, https://
pm.gd.csg.cn/portal/#/home/informationNotice/detail?id=7683&noticeTypeId=29.
14 “Notice on the Third Supervision Cycle of Provincial Power Grid T&D Tariffs”, National Development
and Reform Commission, National Energy Administration, 2023, https://www.ndrc.gov.cn/xwdt/
tzgg/202305/t20230515_1355748.html.
15 “Notice on the Capacity Pricing of Pumped Hydro Storage Plants”, National Development and Reform
Commission, National Energy Administration, 2023, https://www.ndrc.gov.cn/xwdt/tzgg/202305/
t20230515_1355745.html.
16 “Notice on Establishing a Coal Power Capacity Pricing Mechanism”, National Development and Reform
Commission, National Energy Administration, 2023, https://www.ndrc.gov.cn/xxgk/zcfb/tz/202311/
t20231110_1361897.html.
17 “Notice on Establishing a Coal Power Capacity Pricing Mechanism”, National Development and Reform
Commission, National Energy Administration, 2023, https://www.ndrc.gov.cn/xxgk/zcfb/tz/202311/
t20231110_1361897.html.
18 “Notice on Establishing and Improving the Electric Power Ancillary Services Market Price Mechanism”,
National Development and Reform Commission, National Energy Administration, 2024, https://www.
gov.cn/zhengce/zhengceku/202402/content_6931026.htm.
19 “Liu Gang: The National Power Market Traded 5700 TWh in 2023, a Year-on-Year Increase of 7.9%”,
National Energy Administration, 2024, https://www.nea.gov.cn/2024-01/25/c_1310761959.htm.
20 “China’s Green Power and Green Certificate Trading Scale Has Steadily Expanded”, People’s Daily, 2023,
https://www.gov.cn/govweb/lianbo/bumen/202311/content_6915764.htm.
21 Solar Photovoltaics Development Overview in 2023, National Energy Administration, 2024, https://www.
nea.gov.cn/2024-02/28/c_1310765696.htm.
22 “Notice on Issuing the Implementation Plan for the Pilot Project of Evaluating Distributed Photovoltaics
Grid Access Capacity and Improvement Measures”，National Energy Administration, 2023,
http://zfxxgk.nea.gov.cn/2023-06/01/c_1310726992.htm.
23 “Notice on Further Improving the Trading Rules for the Henan Electricity Peak Regulation Service
Market (Draft for Comments)”，Henan Provincial Energy Supervision Bureau, 2022, https://henb.nea.
gov.cn/dtyw/tzgg/202401/t20240109_226670.html.
24 “Notice on Further Standardizing the Development and Construction of Distributed Photovoltaics in the
Province”,Hunan Provincial Development and Reform Commission.
25 “Inner Mongolia Autonomous Region Independent Novel Energy Storage Project Implementation Rules
(Interim)”, Inner Mongolia Autonomous Region Energy Bureau, 2023，https://www.nmgsme.cn/policy/
policydetail/12359.
26 “Shanxi Electric Power Primary Frequency Regulation Market Trading Rules Interpretation”, Shanxi
Energy Regulatory Office of National Energy Administration, 2024, https://sxb.nea.gov.cn/xxgk/
zcjd/202401/t20240119_227437.html.
27 Shanxi Provincial Power Market Trading Guidelines in 2023, Shanxi Provincial Energy Administration,
2022, https://zwgk.sxxz.gov.cn/szfgzbm/smtgyj/bmwj_3852/202212/t20221221_3825014.shtml.
28 “Solar PV & Green Power & GEC Trading Status and Outlook,” CPIA Conference, Beijing Power Exchange
Center, 2024.
29 “The Issuance and Trading Volume of Green Electricity Certificates in China Have Significantly Increased,
Leading to a Notable Acceleration in the Promotion of Green Power”, CCTV, 2023，https://news.cctv.
com/2023/09/09/ARTIUGjmRna8Z1yFBOjlvRcs230909.shtml; and“China Issued 20.6 Million GECs in
2022”, CPNN, 2023, https://cpnn.com.cn/news/nytt/202302/t20230214_1584028.html.
30 “Observation | The Vitality of Green Power Trading Awaits Further Release”, China Electric Power News,
2024, https://www.cpnn.com.cn/news/zngc/202401/t20240117_1669725.html.
31 The Continuous Improvement of the Green Electricity Certificate System Holds Promise for
Benefiting Renewable Operators, Topsperity Securities, 2023, https://pdf.dfcfw.com/pdf/
H3_AP202308041593319732_1.pdf?1691177332000.pdf; and China Green Electricity Certificates
Development Report, China Renewable Energy Engineering Institute, 2023, https://m.bjx.com.cn/
mnews/20230926/1334272.shtml.
32 Exponential Growth! Domestic Green Power and Green Electricity Certificate Trading Gaining Momentum,
Jiemian, 2023, https://www.stcn.com/article/detail/967120.html.
33 “Implementation Rules for Green Power Trading of Beijing Power Exchange Center (Revised Draft),”
Beijing Power Exchange Center, 2023, http://北京电力交易中心.com/html/main/col132/2023-
12/08/20231208142412966966157_1.html.
34 “Notice on Fully Covering Green Electricity Certificates to Promote Renewable Energy Electricity
Consumption”, National Development and Reform Commission, Ministry of Finance, National Energy
Administration, 2023, https://www.ndrc.gov.cn/xwdt/tzgg/202308/t20230803_1359093.html.
35 “Notice on Matters Related to the Issuance of Green Electricity Certificates,” National Energy
Administration, 2023, http://www.cnste.org/html/zixun/2023/1009/11480.html.
36 “In 2024, the Volume of Interprovincial Green Power Trading in Shanghai Surpassed 4 Billion Kilowatt-
hours, Reaching a Record High”, China News, 2024, https://www.chinanews.com.cn/cj/2024/02-
05/10159320.shtml.
37 “Notice on Strengthening the Integration of Green Electricity Certificates with Energy Conservation and
Carbon Reduction Policies to Promote Non-Fossil Energy Consumption”, National Development and
Reform Commission, National Bureau of Statistics, National Energy Administration, 2024, https://www.
gov.cn/zhengce/zhengceku/202402/content_6929877.htm.
Shuo Gao et al., 2024 China Power Market Outlook: 10 Key Trends for Market Players, RMI, 2024,
https://rmi.org/insight/2024-china-power-market-outlook/.
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2024 China Power Market

Outlook: 10 Key Trends for

Report / June 2024

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Transmission and Distribution

Renewables and Energy Storage

Price component Price formation method

Feed-in price Based on market transactions between

Transmission and distribution (T&D) tariff Regulated by government

Pumped hydro storage capacity fee

Governmental funds and surcharges Set by government

Sales price Determined by all components above

RMI Graphic. Source: RMI analysis

1. Twenty-three provinces have initiated the (trial) operation of

Energy 2. Time-of-use electricity pricing policy iterates frequently, with

3. The power retail market has made improvements in

5. The coal power capacity pricing mechanism is introduced,

6. The ancillary services market pricing mechanism is improved

7. The market-oriented transactions of renewables are scaling

8. As distributed photovoltaics grow rapidly in China, developers

10. The green power and green electricity certificate markets

RMI Graphic. Source: RMI analysis

• Jilin • Qinghai • Henan • Fujian • Shandong • Shanxi

Guangdong 0 -1 443 453 563 1,443 1,500

Gansu – East zone 40 40 307 340 428 650 650

Western Inner Mongolia 0 0 282 445 620 1,967 5,180

Western Inner Mongolia 0 0 282 451 642 1,991 5,180

State Grid Interprovincial 0 18 360 632 1,715 3,000

RMI Graphic. Source: Lambda

Shanxi day-ahead price Shandong day-ahead price Guangdong day-ahead price

RMI Graphic. Source: Dianchacha

Real-time bidding volume (Right axis） 30,000

Bidding volume (MW)

500 Real-time bidding volume (Right axis）

Bidding volume (Mw)

Key updates include:

Winter (December, Industrial and

Winter (December, Industrial and

Shandong Spring (February Industrial and

Deep Valley Valley Flat Peak Sharp Peak

Continued on next page

Deep Valley Valley Flat Peak Sharp Peak

Continued on next page

Other seasons 0.5 1 1.5 1 0.5 1 1.5 1 0.5

Deep Valley Valley Flat Peak Sharp Peak

Continued on next page

Spring and Autumn

Zhejiang Large industrial

Deep Valley Valley Flat Peak Sharp Peak

RMI Graphic. Source: Provincial Development and Reform Commissions

2023 average spot time-of-use price for

Deep Valley Valley Flat Peak Sharp Peak

RMI Graphic. Source: Gansu Provincial Development and Reform Commission

Exhibit 11 Average spot TOU prices in Gansu-East for 2023

January July August December

RMI Graphic. Source: Lambda

Basis for TOU electricity price floating

Exhibit 13 Market share of different types of retail companies in the Guangdong

200 0.4 63%