Regional Mechanism Electricity Price Differences and Power Industry Investment Value Analysis
Eastern coastal provinces (Jiangsu, Shanghai, Guangdong, Zhejiang) generally have mechanism electricity prices at or above 0.36 CNY/kWh, reflecting the “high-level” status of their non-technical costs (e.g., collocated energy storage, green certificates, flexibility markets) and supply-demand structure; central provinces (such as Anhui) maintain a medium-to-high level; while southwest regions and Guangxi have relatively low prices due to resource endowments and abundant power supply. This differentiation of “east-high-west-low, coastal higher than inland” is a manifestation of refined adjustments to regional resources, demand, and policy orientation in market-oriented reforms, meaning that each province is greatly influenced by power source structure, power transmission and distribution capacity, and the promotion degree of electricity trading mechanisms in electricity price formation.
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Differences in Marginal Returns and Capital Returns:Mechanism electricity prices in eastern regions with higher prices provide better marginal returns for power generation and sales enterprises, especially for projects with new energy + energy storage/peak-shaving capabilities, which can obtain high-price segment revenues in the spot market and ancillary services to improve IRR. In contrast, lower prices in central and western regions mean lower end revenues for conventional power sources (especially hydropower and thermal power), which need to enhance profitability through scale effects, non-electricity businesses, or output mechanisms.
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Policy Risks and Regulatory Flexibility:High-price regions are often accompanied by strict price suppression supervision and enhanced user protection, meaning limited upside space for prices; while low-price regions still have room for improvement in price discovery and capacity recovery, with potential spread regression opportunities brought by policy adjustments. Investors should judge future price flexibility based on the reform progress of each province (e.g., continuous settlement, official operation of spot markets).
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Layout of Electricity and New Energy:Provinces with high mechanism electricity prices are more likely to form a new energy consumption environment with “price spreads”, which helps flexible resources such as energy storage and demand response to gain revenues, thereby increasing the valuation of related companies; low-price regions need to rely on transmission channels (e.g., ultra-high voltage) and green certificate transactions to strengthen profitability.
| Region | Investment Focus | Risks and Countermeasures |
|---|---|---|
Eastern Coastal (Jiangsu/Zhejiang/Shanghai/Guangdong) |
Prioritize new energy + energy storage integrated enterprises and electricity sales companies with spot settlement participation capabilities; pay attention to the share of collocated energy storage/ancillary service revenues. | Limited upside of electricity prices, policies tend to suppress “price arbitrage”; need to pay attention to regulatory policies and changes in inverter/energy storage costs. |
Central (Anhui) |
Allocate power generation groups with gradient complementarity of thermal power and new energy, as well as peak-shaving/frequency-modulation assets actively participating in inter-provincial spot markets. | Need to evaluate local supply-demand balance and power consumption recovery to prevent price suppression due to overcapacity. |
Southwest and Guangxi |
Seize the “low-price bearing + export” pattern; select state-owned/central enterprises with cross-regional power transmission capabilities (e.g., ultra-high voltage) to participate in green hydrogen and hydropower exports. | Pay attention to the national capacity price scheme that balances coal power transition, as well as environmental and water resource policies. |
- “Resource Clearance” Effect in Low-Price Regions: Due to low labor costs and electricity prices, manufacturing industries and data centers tend to concentrate here, which can drive up the elasticity of power demand in the long term, and is a breakthrough for the expansion of service-oriented businesses of power distribution and sales companies.
- Reform Stage Reflected by Electricity Price Spreads: The maturity of provincial spot markets varies; mature markets are more likely to promote time-of-use electricity prices and demand response. Investors should focus on provinces driven by both “market entry + spot” (e.g., Jiangsu, Guangdong) for the long-term value enhancement of grid companies and electricity sales companies.
- M&A/Linkage Opportunities: High-price regions have high capital return rates; central and western regions can achieve “arbitrage” and resource sharing through cross-regional M&A or power transmission linkage.
Differences in mechanism electricity prices reflect multi-dimensional differences in local supply-demand structures, policy goals, and reform rhythms. Investments should combine price levels, spot market maturity, and cross-regional power transmission capacity to build a regional portfolio of “coastal high-price enhancement type + inland low-price bearing type”. At the same time, by focusing on non-electricity revenues such as collocated energy storage, demand response, and capacity mechanisms, capture structural opportunities in the power industry amid deepening marketization. It is recommended to regularly review inter-provincial electricity prices, spot settlement spreads, and policy orientations based on existing data, and adjust configurations dynamically.
Insights are generated using AI models and historical data for informational purposes only. They do not constitute investment advice or recommendations. Past performance is not indicative of future results.