Differential Analysis of Investment Value Under the 2025 Power Market Reform

According to the

jointly issued by the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) on January 27, 2025, China’s new energy price mechanism officially established a “policy + market” dual-drive model, with as a clear dividing line [8]:

• Old projects (grid-connected before June 1, 2025)
  : Continue to implement the original price mechanism (guaranteed quantity and price, guaranteed quantity and bidding, etc.), with mechanism electricity prices formulated by each province, and some electricity volume still enjoying protective settlement to avoid large price fluctuations [8].
• New projects (grid-connected on or after June 1, 2025)
  : Fully participate in the power market, implement market-oriented electricity prices, and may face price fluctuations and phased low-price risks; the central government requires local governments to propose and implement market pricing plans within the year, and set up balance funds to smooth excessive price fluctuations [8].

The above “new-old division” with June 1 as the boundary has been clearly reported and explained by authoritative English media [8], forming the institutional premise for analyzing the yield differences between new and old projects.

---

1. Old projects: Higher revenue certainty, but significant regional differences

• Yield structure
  : Due to the protection of mechanism electricity prices and a certain proportion of guaranteed settlement, their cash flow predictability is strong, and their valuation is closer to “bond-like assets”.
• Evidence of regional differences
  : International media reports clearly point out that old projects will be compensated according to “existing rules”, but the specific level and guarantee ratio are determined by local governments [8]. Local information also shows that mechanism electricity prices and guarantee ratios in coastal provinces with better consumption are often higher than those in central and western regions. For example:
  • Zhejiang Province: Public market information shows that the mechanism electricity price is about
    0.4153 yuan/kWh
    (higher than many places).
  • Gansu Province: Public market information shows that the mechanism electricity price is about
    0.3078 yuan/kWh
    (significantly lower).
    The price difference between the two places is about
    35%
    , reflecting a significant gradient in grid-connected electricity price levels and settlement weights between regions.
• Valuation implications
  : In coastal areas, load centers, and regions with strong power grids and high consumption capacity (such as Zhejiang, Jiangsu, Guangdong), old projects enjoy higher “protection premiums” and lower curtailment risks, and their intrinsic value (based on discounted cash flow) is significantly higher than that of central and western bases with high consumption pressure.

2. New projects: Competitive electricity prices, increased volatility, and valuation pressure

• Pricing mechanism
  : New projects implement market electricity prices, need to participate in spot and medium-to-long-term transactions, and revenue levels fluctuate sharply with market supply and demand and time-of-use prices; phased “low or even negative price periods” may occur during supply peaks [8].
• Valuation discount
  : Compared with old projects, new projects have greater expected volatility and higher capital costs, usually requiring higher risk premiums and discount rates in valuation.
• Market impact and construction rhythm
  : Reports point out that the June 1 time node may lead to a “rush installation wave”, i.e., developers strive to grid-connect before the deadline to lock in the price protection of old projects [8]. In the short term, the increase in supply may intensify phased price declines in some regions, but in the long term, it helps to guide more reasonable regional and structural layouts through price signals.

3. Industry-level impact

• Still strong new installed capacity
  : According to the guidance of the National Energy Administration, the total installed power generation capacity in China will exceed 3.6 billion kilowatts in 2025, and the new installed capacity of new energy will exceed 200 million kilowatts [8]. This means that even under the background of full marketization, the trend of new energy expansion has not changed, but project-level screening and risk management are more critical.
• Energy storage supporting facilities and risk mitigation
  : To alleviate volatility risks, many places are exploring energy storage subsidies and capacity compensation. For example, places like Anhui Wuhu, Zhejiang Ningbo/Wenzhou give subsidies of
  0.15–0.30 yuan/kWh
  for energy storage charging and discharging, with a subsidy period of 2–3 years [8]. This improves the value realization ability of new projects during peak load periods to a certain extent.

---

1. Reshaping the value of peak shaving and frequency regulation

• With the rapid increase in the proportion of new energy, the system’s demand for flexible regulation resources has surged. Thermal power (especially coal-fired power) is transforming from the traditional “base load power source” to a “regulatory power source”, obtaining incremental revenue by providing auxiliary services such as peak shaving, frequency regulation, and standby [8].
• The establishment and expansion of the auxiliary service market and capacity compensation mechanism enable thermal power units to find hedging and growth points from “service electricity prices” against the background of “declining utilization hours”.

2. Coal-electricity integration and medium-to-long-term value

• Coal-electricity integration enterprises have cost advantages and bargaining power on the upstream fuel side, can smooth profits during coal price fluctuations, and better assume peak shaving and bottom guarantee functions through the coordination of the “fuel-power generation” chain in the power market reform. The market attention to related themes has continued to rise from 2024 to 2025.

3. Capacity approval rhythm and constraints

• Research shows that China’s newly approved coal-fired power installed capacity in the first three quarters of 2025 was about
  41.77GW
  ; if this rhythm continues, the full-year figure may be the second lowest among 2021–2025, and it has declined for two consecutive years [9].
• Regional differences
  : Some provinces with strong demand have approved more (such as Jiangsu and Henan), while the approval volume in Shandong, Guangdong, Anhui and other provinces has decreased significantly [9]. This indicates that while the total new coal-fired power is subject to stricter constraints, the regional layout is tilted towards areas with “structural lack of bottom guarantee capacity”, which is closely linked to local new energy development and system balance needs.

---

1. Provinces with high consumption and strong load

• Characteristics
  : Coastal economically developed areas, load centers, strong power grids, strong external power receiving capacity, and relatively perfect demand-side response mechanisms.
• Investment implications
  :
  • Old new energy projects
    : High mechanism electricity prices, high guarantee ratios, low curtailment rates, stable cash flow, and small valuation discounts.
  • Thermal power and regulatory power sources
    : Strong demand for peak shaving and frequency regulation, and more attractive auxiliary service and capacity compensation mechanisms.
• Example targets and signals
  (not investment advice):
  • Yangtze Power (600900.SS)
    : Mainly hydropower, but as the core force for system regulation and stability, its low volatility attribute gives it higher valuation tolerance in the market-oriented environment [0].
  • Zhejiang Energy Power (600023.SS)
    : Against the background of Zhejiang’s load center and strong consumption capacity, if the existing new energy projects have old project components, they will enjoy relatively higher mechanism electricity prices and lower curtailment risks; its thermal power assets also have regional advantages in the peak shaving and auxiliary service markets [0].

2. Central and western base provinces with high consumption pressure

• Characteristics
  : Abundant wind and solar resources, concentrated installed capacity, but limited local consumption, bottlenecks in external transmission channels and load matching, and relatively higher risks of seasonal and midday wind/solar curtailment.
• Investment implications
  :
  • New energy
    : New projects face more obvious dual uncertainties of price and consumption; cross-provincial transactions, energy storage supporting facilities, green power premiums, and long-term power purchase agreements (PPA) coverage need to be focused on; valuation should fully reflect the uncertainty of electricity prices and consumption.
  • Thermal power
    : The value of peak shaving is strengthened, but the risk of declining utilization hours is also accumulating. Coal-electricity integration, participation in auxiliary services, and cross-provincial external transmission are key value drivers.
• Example targets and signals
  :
  • Gansu Electric Investment (000791.SZ)
    : The mechanism electricity price for old projects in Gansu is about
    0.3078 yuan/kWh
    , significantly lower than that in provinces like Zhejiang [0]. Against the background of deepening marketization and coexisting consumption pressure, the yield volatility of new projects increases, and valuation is more sensitive to risk discounts.
  • Inner Mongolia Huadian (600863.SS)
    : Significant regional resource advantages, but need to resolve local consumption bottlenecks through cross-regional transmission and auxiliary service mechanisms; coal-electricity integration and flexibility transformation are key supports for valuation [0].

3. Coal-electricity integration and “electricity-coal” synergy targets

• In an environment of dual uncertainties of coal price fluctuations and market electricity price fluctuations, vertically integrated enterprises have cost-side stability and power generation-side flexibility. Such targets can still maintain relatively stable cash flow during the period of declining utilization hours, and have stronger bargaining power in the auxiliary service market.

---

• Prioritize old projects/existing assets in high-consumption provinces
  : In coastal areas, load centers, and regions with strong power grids, mechanism electricity prices and guarantee ratios are higher, cash flow predictability is stronger, and valuation volatility is smaller.
• Carefully evaluate the economics and risk hedging of new projects
  : For new projects in central and western bases, focus on their cross-provincial transaction capabilities, energy storage supporting facilities, green power premiums, and long-term power purchase agreement (PPA) coverage; valuation should fully reflect the uncertainty of electricity prices and consumption.

• Attach importance to coal-electricity integration and auxiliary service capabilities
  : Targets with upstream coal synergy, flexibility transformation, and participation in the auxiliary service market have more medium-to-long-term value.
• Pay attention to regional market structure and policy rhythm
  : Among the tightening of approval, declining utilization hours, and market electricity price fluctuations, select assets in regions with “strong structural bottom guarantee demand”.

• Policy implementation rhythm and local differences
  : There are differences in the progress and intensity of provinces in implementing the “June 1 new-old division” and formulating mechanism electricity prices, guarantee ratios, auxiliary services, and capacity compensation. It is necessary to track local details and market transaction results.
• Market electricity price fluctuations and extreme periods
  : New projects are fully exposed to market price fluctuations, and “zero or even negative electricity prices” may occur in extreme periods, which will have a nonlinear impact on the revenue curve.
• System cost and terminal transmission mechanism
  : Although the official clearly states that the prices of industrial and commercial users will “not change much” in the first year, and the prices of residents and agriculture are not affected [8], the final transmission mechanism of system cost increases (regulatory resources, power grids, and energy storage) still needs to be observed in the long term.
• Macro and demand-side uncertainties
  : Economic growth, changes in electricity consumption structure, and demand-side response capabilities will affect the electricity price center and fluctuation structure, thereby affecting the medium-to-long-term revenue assumptions of all power source types.

---

• [0] Jinling API Data
• [8] Yahoo Finance — “China Takes Big Step in Letting Market Decide Clean Power Prices”, clearly taking June 1, 2025 as the boundary, old projects are compensated according to current rules, new projects are implemented under more unfavorable terms, and involve local government formulation of market pricing, balance funds, and terminal user price impacts [https://finance.yahoo.com/news/china-takes-big-step-letting-060522648.html]; ICIS — “INSIGHT: China new energy storage capacity to surge by 2030”, providing key data such as the
  Notice on Deepening the Market-oriented Reform of New Energy Grid-connected Electricity Prices and Promoting High-quality Development of New Energy
  on January 27, 2025, national new energy storage installed capacity data, energy storage subsidy ranges (0.15–0.30 yuan/kWh) in places like Zhejiang, and new energy installed capacity exceeding 200 million kilowatts in 2025 [https://www.icis.com/explore/resources/news/2025/04/14/11092303/insight-china-new-energy-storage-capacity-to-surge-by-2030/].
• [9] Asian Business Review — “China’s new coal power approvals decline in 9M”, providing data such as China’s newly approved coal-fired power installed capacity of 41.77GW in the first three quarters of 2025, declining for two consecutive years, and the approval situation in Jiangsu, Henan, Shandong, Guangdong, Anhui and other provinces [https://asianbusinessreview.com/news/chinas-new-coal-power-approvals-decline-in-9m].