context: The National Development and Reform Commission and the National Energy Administration issued a notice to deepen market-based reforms for new energy grid-connected tariffs. Existing (stock) and new (incremental) projects will be treated differently. Residential and agricultural tariffs will remain unchanged, while industrial and commercial prices are expected to stay roughly stable.
The changes in new energy pricing policy will stimulate investments in flexible resources like energy storage, virtual power plants and demand-side response, argues Yang Ying 杨迎 and Zhong Haiwang 钟海旺 Tsinghua Sichuan Energy Internet Research Institute and Tsinghua University Energy Internet Innovation Research Institute. These investments are critical to resolving the 'flexibility dilemma' faced by modern power systems, as incomplete market participation could hinder the development of necessary ancillary services.
The policy introduces a settlement mechanism for renewable energy pricing that functions much like a contract for difference. This mechanism is a 'non-market insurance', says Chen Dayu 陈大宇 Huaneng Group Energy Research Institute vice president. He notes that it eases concerns about market competition by helping enterprises maintain stable revenue expectations
- if market prices fall below a predetermined floor price, the system provides a compensatory adjustment
- if prices exceed the higher level, the excess is deducted
Yang and Zhong explain that this approach shifts the revenue models from a fixed tariff structure toward one where earnings are determined by both market prices and settlement adjustments. This dual system reduces reliance on subsidies while providing greater stability for new energy companies.
By factoring in additional market earnings—such as income from green certificate trading—the effective floor for spot market prices could be lowered, and in some instances, new energy projects might even bid at negative prices. Yang and Zhong compare this to practices in European markets, where negative prices signal oversupply, thereby promoting competitiveness and the development of flexibility resources.
Chen explains that when all new energy enters the market, about 80 percent of installed capacity, power output, and electricity consumption will be market-driven, forming the 'three 80s' that lay a solid foundation for market integration.
Yang and Zhong stress that companies must optimise trading strategies and invest in innovation to transition from policy-driven support to a robust, market-driven environment.