Published on: February 14, 2025 / update from: 14th February 2025 - Author: Konrad Wolfenstein
Solar-tsunami in China and China's energy shock: What the new price reform for your industry means-Image: Xpert.digital
The effects of market -oriented pricing for renewable energies in China on industry and trade
From fixed prices at market prices: China's path to an efficient energy future
The People's Republic of China, the largest energy consumer and at the same time the largest issuer of greenhouse gases worldwide, is in a decisive phase of its energy transition. In view of the increasing global pressure to combat climate change and the need to ensure its own energy supply security, China has made massive efforts in recent years to advance the expansion of renewable energies. A central component of this transformation is the introduction of a market-oriented pricing for renewable energies, a fundamental reform that will have profound effects on the Chinese economy and in particular on industrial and commercial sectors.
This realignment of energy policy marks a paradigm shift. So far, the promotion of renewable energies in China has primarily been based on fixed feed-in tariffs (feed-in Taiffs, Fits). This system guaranteed producers of renewable energies over a fixed period of time a fixed price per kilowatt hour of electricity, regardless of the actual market conditions. While these fits undoubtedly played an important role in the initial phase of the expansion of renewable energies to boost investments and establish technologies, they also brought disadvantages over time. Among other things, they led to inefficient resource allocation, since prices did not reflect the actual costs and the value of the energy. In addition, the Fits increasingly stressed the state budget and led to distortions in the competition between different energy sources.
The changeover to a market -oriented pricing that has now been initiated is intended to fix these weaknesses of the previous system and create a more competitive and sustainable energy market. In essence, this means that the prices for renewable energies should be determined more by supply and demand and are based on the actual market prices. This reform is complex and complex and is implemented in phases, with the provincial governments playing a decisive role in the specific design and implementation. The effects of this reform are far-reaching and affect not only the energy producers themselves, but also the entire value chain and in particular the energy-intensive industrial and commercial sectors, which make up a significant part of the Chinese power consumption.
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Short -term effects (up to about 1 year after the introduction, from June 2025)
In the immediate transition phase, which begins with the planned introduction in June 2025, the effects of the new pricing will initially be moderate. An immediate and drastic change in electricity prices is unlikely. On the one hand, this is due to the fact that many existing projects in the area of renewable energies still operate under the old feed -in tariffs and usually run these contracts over a longer period of time. On the other hand, the changeover will gradually take place to ensure a smooth transition and to avoid abrupt price shocks that could destabilize the economy.
Nevertheless, there are certain adjustment effects in the first few months and the first year after the introduction. Companies, in particular energy -intensive companies, will familiarize themselves with the new market mechanisms and align their energy strategies accordingly. This can lead to a slight increase in electricity prices at short notice, since companies may have to accept additional costs for adapting to the new system, for example to optimize their energy train or for the conclusion of new contracts. However, this initial price volatility should be considered temporarily and over time when the market stabilizes and the companies have adapted to the new conditions.
Another short -term effect could be an increase in project installations in the area of renewable energies by June 2025. Investors who still want to benefit from the guaranteed feed -in tariffs could try to complete projects before this time in order to secure the more attractive conditions. This “run” on the old tariffs could lead to an investment boost at short notice, which, however, should flatten again after the cut -off date if the new market mechanisms work completely. At the same time, the changeover could also lead to a certain uncertainty among investors at short notice, since future returns are less predictable under the new market conditions than under the system of fixed feed -in tariffs. This uncertainty could be reflected in a temporary slowdown in investment work until the framework conditions have clarified and the investors understood and accepted the new rules of the game.
Medium-term effects (approx. 2-5 years after introduction)
In the medium -term perspective, about two to five years after the introduction of market -oriented pricing, the effects will be clearer and more positive for industry and business. The majority of analysts and experts expect a decline in electricity prices in this phase. This price decline is favored by several factors:
Increased competitiveness of renewable energies
The market -oriented pricing sets incentives for producers of renewable energies, reducing their costs and increasing their efficiency. The competitive pressure is displaced less efficient and more expensive systems from the market, while innovative and inexpensive technologies are promoted. This leads to a continuous reduction in production costs for renewable energies, especially in the areas of solar and wind energy, in which China is already taking a global leadership role and benefits from massive scale effects.
Displacement of coal stream
Since renewable energies are becoming increasingly competitive due to the cost reductions, they can increasingly displace cabbage flow from the network. Coal power plants, which still make up the largest proportion of electricity generation in China, are usually more expensive and more environmentally harmful than modern systems for renewable energies. The more renewable energies are fed into the network, the lower the demand for coal current and the more coal -fired power plants are under economic pressure. This displacement effect leads to falling average electricity prices on the Internet, since cheaper renewable energies make up a larger proportion of the energy mix.
More efficient network infrastructure and energy storage
The integration of large amounts of renewable energies requires modernization and expansion of the network infrastructure and the use of energy storage technologies. The market -oriented pricing can create incentives for investments in these areas, since it better reflects the value of flexibility and system services. A more intelligent and more flexible power grid, combined with large -scale energy storage, can better compensate for the fluctuations in the production of renewable energies and increase the network stability. This in turn contributes to a more reliable and cost -effective energy supply.
Reduction of electricity waste (curtailment)
In the past, there have always been considerable amounts of electricity from renewable energies in China, which could not be fed into the network and were thus "wasted" (so -called curtailment). This was among other things due to network bottlenecks, a lack of flexibility of the network and an inadequate coordination between supply and demand. Market-oriented pricing can help reduce this problem by setting incentives for better network planning, expanding storage capacity and developing flexible load management systems. A reduction in the curtailment means that more produced electricity from renewable energies can actually be used, which lowers the total cost per kilowatt hour.
The expected decline in electricity prices in the medium period will have a positive effect on the cost structure of industry and business. In particular, energy-intensive industries, such as steel, aluminum, chemical and cement industry that have high power consumption, will benefit from the falling prices. This can strengthen your competitiveness on the national and international market and reduce your production costs. Lower electricity prices are also an important cost factor for the production as a whole, the service sector and retail, which can have a positive effect on their profitability and willingness to invest.
Long -term effects (from about 5 years after introduction)
In the long term, from about five years after the introduction of market -oriented pricing and beyond, the structural changes in the Chinese energy sector will become even more visible. The reform is expected to lead to a fundamental transformation of the energy system, which is characterized by the following characteristics:
More efficient resource allocation
The market -oriented pricing will lead to a significantly more efficient allocation of resources in the energy sector. Prices that are determined by supply and demand send clear signals to investors and consumers. They reflect the actual costs of energy generation, transmission and distribution as well as the value of flexibility and reliability. This means that investments are steered in the most cost -effective and efficient technologies and projects and that energy consumers receive incentives to optimize their energy consumption and implement energy efficiency measures. Overall, this will lead to a reduction in the total costs of the energy system and an increase in economic efficiency.
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More stable and cheaper energy supply
The reform aims to strengthen the demand for renewable energies in the long term and to continuously increase the proportion of renewable energies in the EnergyMix. A diversified and decentralized energy supply based on renewable energies is less susceptible to price shocks and geopolitical risks than a system that is strongly dependent on fossil fuels. In addition, renewable energies, in particular solar and wind energy, are associated with very low limit costs in operation, since they do not incur any fuel costs. The higher the proportion of renewable energies in the energy mix, the more stable and in the long term the energy supply overall becomes more cost -effective. This contributes to China's energy security and strengthens the competitiveness of the Chinese economy.
Innovation and technology leadership
The competitive pressure that arises from market -oriented pricing will speed up innovations in the field of renewable energies and energy technologies. Companies will be forced to invest in research and development in order to reduce their costs, increase their efficiency and develop new products and services. China has already taken on a global leadership role in many areas of renewable energies, such as solar and wind energy as well as battery technology. The market -oriented pricing can continue to consolidate this position and make China a global innovation center for green technologies. This opens up new growth opportunities for Chinese companies and strengthens the country's technological sovereignty.
Contribution to climate goals and sustainability
The promotion of renewable energies through market -oriented pricing is an essential component of Chinese climate policy. By expanding renewable energies and reducing fossil fuels on the EnergyMix, China can significantly reduce its greenhouse gas emissions and achieve its national and international climate goals. This not only contributes to the global struggle against climate change, but also improves air quality in the Chinese cities, reduces the dependence on energy imports and creates new jobs in promising industries. Sustainable energy supply is an important factor for the long -term economic and social development of China.
Industry -specific effects
The effects of the new pricing will be different depending on the industry. Some industries will be more affected than others, and some will benefit more than others. Here is a more detailed view of the industry -specific effects:
Renewable energy sector (solar, wind power, etc.)
The sector of renewable energies itself will of course be most directly affected by the new pricing. However, there are significant differences between the individual technologies and value creation levels within this sector.
Solar industry
The solar industry in China faces major challenges and opportunities. China has built up massive overcapacity in the production of solar modules, which has led to a drop in prices and intensive competition. The prices for solar cells have dropped drastically in recent years and especially last year. The market -oriented pricing will strengthen this trend because it further fueled the competition and puts the margins of the manufacturers under pressure. At the same time, the reform also opens up new opportunities for innovative and cost -efficient solar companies. Companies that are able to reduce their production costs, improve their technologies and concentrate on margin -strong segments such as integrated solar solutions for buildings or special applications will be able to benefit from the reform. Smaller and less efficient producers, on the other hand, could come under pressure and possibly disappear from the market, which could lead to a consolidation of the solar industry.
Wind turbine
Similar to the solar industry, the wind turbine industry in China is faced with a structural change. In the area of offshore wind energy in particular, there are still considerable growth potential, but also technological and economic challenges. The market -oriented pricing will also tighten the competition in the wind power industry and set incentives for cost reductions and efficiency increases. Companies that are able to develop innovative and reliable wind turbines that work efficiently even under difficult conditions (e.g. offshore, at high heights) and can implement the projects at competitive prices will be successful in the long term. There could also be consolidation in the wind power industry, since smaller and less competitive actors come under pressure.
Battery preparation
The battery industry is a key sector for the energy transition, since batteries play a central role in storing renewable energies and electromobility. The Chinese battery industry has experienced enormous growth in recent years and is now globally leading. However, there is also intensive competition and a drop in prices in the battery sector. For example, Catl, the Chinese world market leader for batteries, forecast a further halving of prices this year. The market -oriented pricing in the energy sector will further increase the price pressure in the battery industry, as it increases the demand for inexpensive energy storage solutions. Companies that are able to produce innovative and powerful batteries at competitive prices and that concentrate on promising areas of application such as stationary memory for the power grid or batteries for electric vehicles will be able to benefit from the reform.
Energy -intensive industries
As already mentioned, energy -intensive industries are expected to be among the main profitors of the new pricing. Falling electricity prices reduce your operating costs and improve your competitiveness. This applies in particular to industries such as steel, aluminum, cement, chemistry, paper and glass. These industries are usually very export -oriented and are in global competition. Lower energy costs can give you an important competitive advantage and strengthen your position on the world market. In addition, lower energy costs can create incentives for investments in energy -efficient technologies and processes in these industries, which can lead to further cost reductions and environmental loads.
Cabbage
The cabbage industry is expected to be under pressure under the new pricing. Since renewable energies are becoming increasingly cost -effective and more competitive, the demand for coal current decreases. Coal -fired power plants are increasingly unprofitable and could be replaced by the market in the long term. This presents the cabbage industry with major challenges, especially in regions that depend heavily on coal production and electricity. It is expected that the cabbage industry will have to go through a structural change in the coming years, which can go hand in hand with job losses and economic upheavals in the affected regions. The Chinese government will have to take measures to make this structural change socially acceptable and to create alternative employment opportunities for the employees of the cabbage industry.
Network infrastructure and energy storage
The sectors network infrastructure and energy storage are becoming increasingly important in the course of the energy transition and market -oriented pricing. A modern and flexible power grid and large -scale energy storage are essential to compensate for the fluctuations in the production of renewable energies and to ensure network stability. The market -oriented pricing can create incentives for investments in these areas, since it better reflects the value of flexibility and system services. Companies that are able to develop and implement innovative network technologies and energy storage solutions will be able to benefit from the reform. This applies to state network operators and private companies that work in the areas of network management, smart grids and energy stores.
Technology sector
The technology sector as a whole will also benefit from the energy transition and market -oriented pricing. Companies that invest in renewable energies, energy efficiency, smart grid technologies, energy storage and other green technologies will benefit from the new market conditions. Lower energy costs reduce your operating costs and improve your competitiveness. In addition, the energy transition creates new business opportunities in the areas of software development, data analysis, artificial intelligence and digital services for the energy sector. China has the potential to take on a global leadership role in these areas and to open up new growth markets.
Effects on investments in renewable energies
The market -oriented pricing will also have a significant impact on investments in the sector of renewable energies. The changeover of fixed feed -in tariffs to market -oriented prices is fundamentally changing the framework conditions for investments.
Short -term effects
As already mentioned, an investment thrust before the deadline in June 2025 can be expected, since investors still want to benefit from the existing feed -in tariffs. At the same time, the changeover could lead to uncertainties in investors at short notice, since future returns are more difficult to predict. This uncertainty could be reflected in a temporary slowdown in investment activity.
Long -term effects
In the long term, however, market -oriented pricing is expected to lead to more sustainable and efficient investment activity in the area of renewable energies. Competition pressure will force companies to optimize their efficiency, reduce costs and to develop innovative technologies and processes. This will promote investments in research and development, new production facilities and in innovative business models. At the same time, the reform will lead to consolidation of the market, since smaller and less competitive producers come under pressure. Investors will focus more on cost -efficient projects in order to be able to exist in the competitive market environment.
Incentives and collateral
In order to ensure investment security and cushioning extreme price fluctuations, China plans to introduce a sustainable price equalization mechanism. Details of this mechanism are not yet fully known, but it should ensure long -term price stability and provide investors planning security. In addition, prices for new projects are determined by competitive tenders. This system is intended to ensure that the prices for renewable energies are competitive and that investors receive incentives to implement efficient and inexpensive projects.
Sectoral differences
The effects on investments will be different depending on the sector. The solar industry, which is affected by overcapacities and falling prices, could be particularly under pressure. Investments in new solar module production capacities could decrease, while investments in innovative solar cell technologies and in margin -strong segments may increase. The wind turbine industry will also experience adjustments, especially in the area of offshore wind energy, where the investment costs are high and the project risks are larger. In contrast, investments in network infrastructure, energy storage and smart grid technologies are likely to increase, since these areas are essential for the integration of large amounts of renewable energies.
Market -oriented prices: The key to the sustainable energy transition in China
The introduction of market -oriented pricing for renewable energies in China is a far -reaching reform that has the potential to fundamentally change the Chinese energy sector and to accelerate the country's energy transition. While adaptation effects and uncertainties can occur at short notice, industry and business will benefit from falling electricity prices, more stable energy supply and more efficient resource allocation in the long term. The reform will tighten the competition in the energy sector, promote innovations and advance China on the way to a sustainable and climate -friendly economy. The exact effects will depend on the concrete implementation by the provincial governments and the adaptability of the companies. It is crucial that the government creates a clear and reliable regulatory framework, guarantees investment security and at the same time promotes competition and efficiency in the energy sector. If this succeeds, market -oriented pricing can become a success model for other countries that also strive for an energy transition to renewable energies.
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