Analysis of the Shift in Investment Logic for Hydropower and Nuclear Power Amidst Power Market Restructuring

On November 13, 2025, Snowball user “Understand Your Thoughts” published an in-depth analysis article [1], pointing out that the top-level design of the power market is undergoing fundamental restructuring. Key changes include the full implementation of the new renewable energy tariff policy and the official launch of the thermal power capacity tariff mechanism. According to the “Notice on Deepening the Market-oriented Reform of Renewable Energy Grid-connected Tariffs to Promote High-quality Development of Renewable Energy” (Fagai Price [2025] No.136) jointly issued by the National Development and Reform Commission and the National Energy Administration, all renewable energy grid-connected electricity will enter the market, and the grid-connected tariff will be determined by the market [2][3]. Meanwhile, the thermal power capacity tariff mechanism provides a full capacity tariff of 330 yuan/kW·year for coal-fired power, which will all rise to above 165 yuan by 2026 [1][2].

Traditional hydropower and nuclear power have long held dominant positions due to their low-cost advantages and调节能力, but now face multiple challenges. After the introduction of the thermal power capacity tariff, hydropower’s capacity tariff has not been recognized or only minimally reflected, so its traditional cost advantage no longer exists [1]. The competitive environment has expanded from a single thermal power opponent to dual competition from thermal power and wind/solar power, with obvious asymmetry. Taking Guangxi as an example, the long-term renewable energy tariff and thermal power tariff are both 0.34 yuan/kWh, but wind/solar power only costs 0.12-0.15 yuan/kWh in spot transactions [1]. This transaction system artificially transfers the peak-shaving costs saved by wind/solar power.

From the latest financial data [0], leading industry enterprises are facing obvious pressure:

• Yangtze Power (600900.SH) Q3 2025: EPS was 1.1522 yuan, up 0.59% year-on-year; ROE was 13.07%, down 4.25% year-on-year
• China Nuclear Power (601985.SH) Q3 2025: EPS was 0.389 yuan, down 17.58% year-on-year; ROE was 7.06%, down 25.64% year-on-year

The data shows that China Nuclear Power’s performance decline is particularly obvious, confirming the impact of policy changes on traditional advantageous power sources.

Power stocks have remained stable over the past five years, and the initial reasons for favoring hydropower and nuclear power included environmental value. However, with the U.S. withdrawal from the Paris Agreement, domestic power rationing occurred, and the strategy for new thermal power installations was adjusted to “establish first, then break”, so the concept of carbon sink basically disappeared from public view [1]. Green Certificates, which reflect environmental value, bring almost no benefits to hydropower, and nuclear power is excluded entirely. This means the foundation of the traditional investment logic based on environmental premiums has动摇.

Power marketization reform has fundamentally changed the competition logic. As the analysis points out, “Power marketization is like a dough that can be kneaded at will: add water when there’s too much flour, add flour when there’s too much hydropower; give some favorable policies when various power sources are losing money, and take some profits when they earn more” [1]. This policy-led profit distribution mechanism means investors need to shift from static cost analysis to dynamic policy gaming, paying close attention to the policy’s regulatory role in industry profit distribution.

With the increase in the proportion of renewable energy, the requirements for system regulation capacity are getting higher. The regulation value of hydropower and nuclear power should be more reflected, but it has not been fully recognized in terms of capacity tariff [1]. This mismatch between value and price leaves room for future policy adjustments, but also increases short-term uncertainty.

1. Policy Uncertainty
   : Provincial power marketization transaction plans for 2026 are about to be released, and the impact of annual long-term agreement ratios and transaction rules on various power sources is highly uncertain [1]
2. Downward Pressure on Tariffs
   : According to the Rocky Mountain Institute, China is expected to add 56-87 million kW of coal-fired power units to the grid in 2025, renewable energy installations are expected to exceed 300 million kW, while electricity consumption growth is expected to remain around 6% [2]
3. Intensified Competition
   : Great Wall Securities research shows that after the implementation of new provincial renewable energy policies in 2025, existing wind and solar power tariffs are expected to decrease by about 0.06 yuan/kWh, and the market competition will become more fierce [1]

1. Policy Adjustment Space
   : With the full entry of renewable energy into the market, the value of various power sources in the power system will be more fully reflected, and the regulation value of hydropower and nuclear power may be better recognized in subsequent policies [3]
2. National Market Unification Opportunity
   : According to the “2025 Energy Work Guidance Opinions”, a preliminary national unified power market will be built by the end of 2025, which may provide a more fair competitive environment for hydropower and nuclear power [4]
3. Technological Progress Dividend
   : The development of energy storage technology may change the competitive landscape and create new value realization methods for power sources with regulation capacity [2]

The restructuring of the power market’s top-level design marks the industry entering a new stage, and the traditional investment logic for hydropower and nuclear power based on cost advantages and environmental premiums needs to be re-examined. In the short term, policy implementation uncertainty and downward tariff pressure will bring challenges; in the medium term, increased power marketization will restructure the industry value distribution mechanism; in the long term, the completion of a national unified power market may provide a more fair competitive platform for various power sources.

Investors need to pay close attention to: 1) Provincial 2026 power marketization transaction rules; 2) Results of the coal power long-term agreement meeting in early December; 3) The pace of renewable energy market entry and tariff change trends; 4) The impact of energy storage technology development on regulation value. During this transition period, dynamic policy analysis capabilities will become a key factor in investment decisions.