Analysis of Provincial Electricity Price Differentiation Impact on New Energy Power Investment & Valuation

Based on the latest market data, China’s provincial mechanism electricity prices show significant differentiation characteristics. Jiangsu Province’s electricity price of 0.36 yuan/kWh is relatively low nationwide, while developed regions like Shanghai, Guangdong, and Zhejiang have relatively higher electricity prices.

From the chart, we can see:

• Shanghai has the highest electricity price
  (0.52 yuan/kWh),
  Guangxi the lowest
  (0.32 yuan/kWh)
• The standard deviation of electricity prices reaches 0.07 yuan/kWh
  , indicating significant regional differences
• The average electricity price is 0.418 yuan/kWh
  , with industrial provinces represented by Jiangsu having lower prices

Assuming the new energy power generation cost is 0.25 yuan/kWh, the investment return rates of various provinces and cities show significant differences:

• Shanghai
  : 108% investment return rate
• Guangdong
  : 80% investment return rate
• Zhejiang
  : 92% investment return rate
• Jiangsu
  : 44% investment return rate
• Anhui
  : 52% investment return rate
• Guangxi
  : 28% investment return rate

From the data of listed companies, the new energy industry shows strong overall performance:

• CATL (300750.SZ)
  : Up 46.63% year-to-date, with a market capitalization of 1.67 trillion yuan [0]
• Goldwind Technology (002202.SZ)
  : Up 63.74% year-to-date, with a P/E ratio of 25.84 times [0]

Developed regions (Shanghai, Guangdong, Zhejiang) are due to:

• Strong industrial electricity demand
• Strong residential consumption capacity
• High grid upgrade costs
  resulting in relatively higher electricity prices

According to the latest policies, China is promoting power marketization reform, and the “Energy Law” implemented on January 1, 2025, has established a comprehensive energy legal framework [1]. The reform progress varies across provinces:

• Higher marketization level in economically developed regions
• Differences in grid-connection policies for new energy projects
• Different maturity levels of power trading mechanisms

Provinces differ in new energy installed capacity and power generation share, which affects marginal power generation costs and electricity price formation mechanisms.

Electricity prices directly affect new energy projects in the following aspects:

• Operating revenue
  : Electricity price × Power generation
• Free cash flow
  : Operating revenue - Operating costs - Capital expenditures
• Discount rate
  : Differences in regional risk premiums

Investors tend to:

• High electricity price regions
  : Prioritize layout, such as the Yangtze River Delta and Pearl River Delta
• Policy-supported regions
  : Focus on new energy subsidies and preferential policies
• Resource-endowed regions
  : Areas with abundant wind and solar resources and moderate electricity prices

Valuation differences of new energy enterprises in different regions:

• Enterprises in high electricity price regions
  : Enjoy valuation premiums
• Enterprises in low-cost regions
  : Obvious operational efficiency advantages
• Enterprises with comprehensive advantages
  : Leading in multiple dimensions such as technology, cost, and policy

1. Regional priority strategy
   : Focus on high electricity price regions such as Shanghai, Guangdong, and Zhejiang
2. Technology upgrade opportunities
   : Reduce power generation costs through technological innovation to increase profit margins
3. Capture policy dividends
   : Seize the window period of new energy policies in various regions

1. Electricity price fluctuation risk
   : Electricity price volatility may increase after marketization reform
2. Policy adjustment risk
   : Subsidy policies in various regions may be adjusted
3. Technology iteration risk
   : Equipment depreciation risk caused by rapid iteration of new energy technologies

With the in-depth advancement of power marketization reform, electricity price differentiation may:

• Short-term fluctuations
  : Larger fluctuations may occur during the reform transition period
• Long-term stabilization
  : Electricity prices will tend to be rational after the market mechanism matures
• Structural optimization
  : Promote optimal allocation of new energy resources and healthy development of the industry

[0] Gilin API Data
[1] Yahoo Finance - “China’s Richest Regions Cut Electricity Prices to Protect Industries” (https://finance.yahoo.com/news/china-richest-regions-cut-electricity-234702875.html)
[2] Yahoo Finance - “China Takes Big Step in Letting Market Decide Clean Power Prices” (https://finance.yahoo.com/news/china-takes-big-step-letting-060522648.html)