China will replace its feed-in Tariff (FIT) system with a fully market-driven model for sustainable energy in June 2025, which means that wind and solar projects are moved to competitive bids and market transactions. The reform is intended to improve competition, but increases uncertainty about future returns for investors.
China’s National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) have issued a guideline to speed up market-based prices for renewable energy, including wind and solar energy.
The reform will revise how energy from these sources is priced and traded, with important implications for developers and investors.
From 1 June 2025, all electricity of renewable energy projects must be sold by market transactions, to replace the current feed-in tariff system with market-driven prices.
Projects can submit bids for prices and output or accept the prevailing market rate.
For projects that have been commissioned by June 2025 for June 2025, the transition follows a price differentiation mechanism, whereby the grid connection prices are tailored to current policy. New projects that start after the deadline will have adjusted power purchase agreements based on local objectives for renewable energy grant, with prices set by competing bidding.
The NDRC and NEA held a press conference with the three most important components of the policy:
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Full market prices: Renewable energy will mainly be sold by market transactions, with prices determined by supply and demand.
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Sustainable mechanism for price appeal: A system ensures long -term price stability for projects for renewable energy.
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Differentiated treatment for existing and new projects: Existing projects will retain prices under current policy, while new projects will shift to market -based rates.
The prices of renewable energy from China have evolved by several phases.
Between 2014 and 2017, PV projects operated under fixed pricing rates and regional subsidies, which guarantees stable returns and attract investments.
Assembly subsidy costs have led to a shift in 2018 to competing bids, whereby winning bidders insured subsidies insured at significantly lower rates, intensify market competition and encourage developers to save the costs.
By 2020, falling solar costs were able to reach some renewable projects ‘gridparity’, in accordance with coal-fired energy prices. This led to national price standardization and incentives for the market for electricity market. However, fluctuating income has encouraged the further government intervention, including Green Certificate Trading, to support wrestling projects.
The newest reform marks the biggest shift in the prices for renewable energy since 2018. Industrial analysts say that although the policy is in accordance with broader market -based reforms, the scale has exceeded expectations.
An important care is uncertainty about how provincial governments will implement market mechanism. Prices after June 2025 remain unpredictable, although analysts expect prices to fall. This uncertainty can cause an increase in project installations for the deadline, but the likely process of the market after that point is still unclear.
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