GuShiio.com Why should we establish a price settlement mechanism for sustainable development of new energy? In this regard, relevant responsible comrades of the National Development and Reform Commission and the National Energy Administration said when answering reporters ‘questions on deepening the market-oriented reform of new energy feed-in tariffs that enterprises should have reasonable and stable expectations through “more refunds and less compensation”.
Financial Union, February 9, in order to implement the decisions and arrangements of the Third Plenary Session of the 20th CPC Central Committee on promoting price reform in the energy sector, give full play to the decisive role of the market in resource allocation, promote high-quality development of the new energy industry, and promote energy Green and low-carbon transformation, recently the National Development and Reform Commission, The National Energy Administration jointly issued the “Notice on Deepening the Market-oriented Reform of On-grid Tariffs of New Energy and Promoting the High-quality Development of New Energy”(FGG [2025] No. 136). In this regard, the reporter interviewed relevant responsible comrades of the National Development and Reform Commission and the National Energy Administration.
Question: Why should we deepen the market-oriented reform of new energy feed-in tariffs?
Answer: The country attaches great importance to the development of new energy sources such as wind power and solar power generation. Since 2009, a number of supporting policies such as price, finance, and industry have been successively introduced to promote the leapfrog development of the industry. As of the end of 2024, the installed capacity of new energy power generation is approximately 1.41 billion kilowatts, accounting for more than 40% of the country’s total electricity installed capacity, which has exceeded the installed capacity of coal-fired electricity.
With the large-scale development of new energy sources, the fixed price of new energy feed-in tariffs cannot fully reflect market supply and demand, nor does it fairly assume the responsibility of power system regulation. Contradictions have become increasingly prominent. There is an urgent need to deepen the market-oriented reform of new energy feed-in tariffs and better utilize the market mechanism to promote high-quality development of the industry. At present, the cost of new energy development and construction has dropped significantly compared with the earlier period. The rapid development of local power markets and the gradual improvement of rules have also created conditions for new energy to fully participate in the market.
Question: What are the main contents of the reform?
Answer: The overall idea of the reform is to adhere to the market-oriented direction, promote the full entry of new energy on-grid electricity into the market, and form on-grid electricity prices by the market, establish a supporting price settlement mechanism for sustainable development, distinguish between existing and incremental classification policies, and promote the sustainable and healthy development of the industry.
There are three main contents of the reform. The first is to promote the comprehensive formation of new energy feed-in tariffs by the market. In principle, all on-grid electricity from new energy projects enters the electricity market, and on-grid electricity prices are formed through market transactions. The second is to establish a price settlement mechanism to support the sustainable development of new energy sources. After new energy participates in market transactions, it establishes a sustainable development price settlement mechanism in the settlement link, and settles the electricity included in the mechanism according to the mechanism electricity price. The third is to classify and implement policies to distinguish existing and incremental projects. The mechanism electricity prices for existing projects are properly connected with current policies, and the mechanism electricity prices for incremental projects are determined through market-based bidding methods.
Question: Why should we establish a price settlement mechanism for sustainable development of new energy?
Answer: New energy power generation is random, volatile and intermittent. Especially photovoltaic power generation is concentrated at noon. After fully participating in market transactions, the power supply at noon will increase significantly and the price will decrease significantly. There will be almost no power generation output during the high evening peak electricity prices., the actual income earned by new energy may fluctuate significantly, which is not conducive to the sustainable development of new energy. In order to solve this problem, after repeated research, the plan proposes to establish a price settlement mechanism for the sustainable development of new energy while promoting the full participation of new energy in the market. When the market transaction price is lower than the mechanism electricity price, the price difference will be compensated for when the market transaction price is lower than the mechanism electricity price. Deduct the difference when it is higher than the mechanism electricity price. Through this “more refund and less compensation” difference settlement method, enterprises can have reasonable and stable expectations, thereby promoting the stable and healthy development of the industry and helping to achieve the “double carbon” goal. Judging from foreign situations, countries with better development of new energy usually adopt similar practices.
Question: How does reform distinguish between existing and incremental categories and policies?
Answer: New energy has the characteristics of a large proportion of fixed investment costs and a small proportion of variable costs. As technological progress and costs continue to decrease, the operating costs of new and old projects differ greatly. Reform needs to balance the relationship between new and old projects. On the basis of fully listening to opinions and suggestions from all parties, the reform plan proposes to distinguish between stock and increment and implement different policies when implementing the price settlement mechanism for sustainable development of new energy.
Existing projects and incremental projects are divided based on June 1, 2025. Among them, existing projects put into operation before June 1, 2025 will be properly connected with current policies through price difference settlement. For incremental projects put into operation on or after June 1, 2025, the scale of electricity included in the mechanism will be dynamically adjusted based on the completion of new energy development goals specified by the state. The mechanism electricity price will be determined by various localities through market-based bidding. This arrangement of old methods for old projects and new methods for new projects can determine the mechanism electricity price for incremental projects through market-oriented methods while maintaining the smooth operation of existing projects, which is conducive to better playing the role of the market.
Question: What impact does the reform have on end-user electricity prices?
Answer: This reform has no impact on the electricity price level of residents and agricultural users. These users still implement the current catalog sales electricity price policy. For industrial and commercial users, static estimates show that the average electricity price of industrial and commercial users across the country in the first year of implementation of the reform is basically the same as that of the previous year. Regions with loose power supply and demand and low new energy market prices may decline slightly. Subsequent electricity prices for industrial and commercial users will fluctuate with Power supply and demand, new energy development, etc.
Question: What impact will this reform have on the power industry?
Answer: Deepening the market-oriented reform of new energy feed-in tariffs is a major reform measure launched in the power field to implement the spirit of the Third Plenary Session of the 20th Central Committee of the Communist Party of China. It marks a key step in building a new power system in a market-oriented manner and will have a profound impact on the power industry.
First, it is conducive to promoting high-quality development of the new energy industry. The on-grid price of new energy is fully formed by the market, and the implementation of supporting measures for stock increments is conducive to the formation of real market prices, promoting efficient allocation of power resources, and guiding the healthy and orderly development of the new energy industry. Second, it is conducive to promoting the construction of new power systems. After new energy enters the market for trading, it will fairly bear the power system regulation costs, and the value of various power sources in the power system will be more fully reflected, better guide the coordinated development of new energy sources, regulated power sources and power grids, and help build a more efficient and coordinated new power system. Third, it is conducive to accelerating the construction of a unified national power market. After the reform, new energy, like coal and electricity, will enter the power market, and on-grid tariffs will be formed by the market. Electricity market-based transactions will be further expanded. At the same time, local power market rules will be improved accordingly in accordance with national requirements, which can greatly promote the construction of a unified national power market.
Question: How will the country organize and implement the reform plan?
Answer: The National Development and Reform Commission and the National Energy Administration will work with relevant parties to organize the implementation of the plan. The first is to allow local governments to determine the implementation time according to local conditions. Taking into account the different development conditions of new energy and the different power market conditions in different places, each place will formulate specific plans in accordance with national policies and determine its own implementation time, but no later than the end of 2025. The second is to strengthen policy coordination. Guide all localities to strengthen coordination between reform and planning goals, green certificate policies, market construction, and environment optimization during the organization and implementation process, and carefully organize and implement it. The third is to conduct follow-up and evaluation. Guide all localities to closely track market dynamics, carefully assess the impact of reforms, promptly summarize the effectiveness of reforms, and optimize policy implementation. The state will also continuously improve relevant policies and measures in light of the development of new energy.
