Document 136 Ends China's Fixed-Price Era for Wind and Solar
On 9 February 2025 China's National Development and Reform Commission and National Energy Administration published a joint notice on deepening the market-based reform of on-grid tariffs for new energy, catalogued as Fagai Jiage [2025] No. 136. The notice requires wind and solar generation to enter the electricity market, with prices formed through trading, and sets up a contract-for-difference style settlement for new projects. Projects connected before 1 June 2025 are treated as existing projects, and those connected afterwards are subject to a competitive mechanism.
The Xinhua summary carried by the State Council's English website describes three pillars. For projects commissioned on or after 1 June 2025, provinces will set annual volumes eligible for a mechanism price, based on their renewable consumption targets and on what users can afford. Projects bid for that mechanism price, generally by technology, with the price set by competition and subject to provincial caps. Existing projects receive a mechanism price linked to current arrangements, giving them a degree of continuity while their output is also exposed to market trading.
The official rationale is that the fixed-pricing approach no longer reflects supply and demand. Xinhua cites wind and solar generation costs now ranging from about 0.2 to 0.3 yuan per kWh, far below early levels, and puts installed wind and solar capacity at 1.41 billion kilowatts at the end of 2024, more than 40 per cent of the national fleet and above coal-fired capacity. NEA deputy head Song Hongkun is quoted as saying that market-based transactions reached 5.08 trillion kWh between January and October 2024, and that the share of market-traded electricity rose from 17 per cent in 2016 to 62 per cent.
Its output is concentrated in the middle of the day, which is when market prices in solar-heavy provinces will fall furthest. Wind generation is spread more evenly across the day and across seasons, and in many northern provinces it is strongest in winter evenings. The near-term consequence will be a sharp installation spike before 1 June, followed by a slower and more provincially uneven market.