China Advances Renewables Marketization by 5 Years, Targeting 30% Electrification

创建于04.07
Starting May 31, 2025, the electricity prices for newly commissioned renewable energy projects in China will be entirely determined by competitive bidding, with government subsidies being completely phased out. 
Key Policy Elements
  • Full Market Integration: 
  • Subsidy Elimination: 
  • Dual-Track Mechanism: 
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Four Key Q&As:
1. Why Is Renewables Full Marketization Five Years Ahead of Schedule?
  • Capacity Milestone: 
  • Cost Competitiveness: 
  • Structural Shift: 
  • Rising Demand: 
  • Market Readiness:  
2. How Does Renewables Market Integration Differ from the 2021 Coal Power Market Reform?
  • Renewable energy market integration is more aggressive than the coal power reform, adopting a dual-track system of "market-based pricing + price difference settlement" instead of coal power's "benchmark pricing + floating adjustments." The price-difference settlement mechanism applies only to a portion of renewable electricity output and will be phased out over time, making pricing fully market-driven.
 
3. How Will This Impact Renewable Project Revenues?
Previous Model: Power price = coal power benchmark price (stable returns)
New Model: Power price = market bidding ± price difference settlement (higher volatility)
Break-even Analysis: A 10MW solar PV power plant needs a price above 0.26 yuan/kWh to sustain an internal rate of return (IRR) above 8%, but spot and long-term electricity prices in many regions have already fallen below 0.15 yuan/kWh.
Mechanism Tariffs: The new price settlement mechanism is crucial for stabilizing project revenues. If mechanism tariffs closely match coal power benchmarks, which are normally between 0.25 and 0.49 yuan/kWh, the investment risks will be significantly reduced. However, it remains unclear how the tariffs would be adjusted in different regions.
 
4. Who Stands to Gain?
For power generators:
  • Digital Leaders:  
  • Low-Cost Producers: 
  • Flexible Operators:  
For industrial power users:
  • The full market integration of renewable electricity will drive faster innovation and cost optimization in renewable generation. While short-term price swings may occur, long-term power prices are expected to decline, making electricity more competitive against fossil fuels. This shift will accelerate electrification. By the end of 2024, electricity accounted for about 28% of China's end-use energy consumption, with projections to reach 30% in 2025.