Over the past decade, China’s electricity sector has undergone a major transformation, shifting from a centrally planned system to a market-driven model.
Source: People’s Daily
Over the past decade, China’s electricity sector has undergone a major transformation, shifting from a centrally planned system to a market-driven model. Since the release of the Opinions on Further Deepening Power Sector Reform in March 2015, the country has accelerated the development of a unified national power market, gradually establishing a mechanism where prices are largely determined by market forces. According to the latest data from the National Energy Administration (NEA), market-based electricity transactions surged from 1.1 trillion kilowatt-hours (kWh) in 2016 to 6.2 trillion kWh in 2024, raising their share of total electricity consumption from 17% to 63%. Cross-province and cross-regional electricity trading also saw rapid growth, reaching 1.4 trillion kWh in 2024, more than ten times the volume recorded in 2016.
China has established a multi-tiered power market system, efficiently linking provincial, regional, and inter-provincial markets while integrating mid-to-long-term contracts, spot trading, and ancillary services. An NEA official described this as a major step forward, noting that China’s power spot market has grown from non-existent to a key component of the system since the reform began.
A flexible market-based pricing mechanism has also emerged, allowing electricity prices to rise and fall based on supply and demand. At the same time, a diverse and competitive market structure is taking shape. As of early 2024, the number of registered market participants had skyrocketed from 42,000 in 2016 to 816,000.
The NEA official highlighted that the ongoing power market reform has delivered tangible benefits, helping to ensure stable supply, support the clean energy transition, and keep electricity prices in check.
Mid-to-long-term contracts now account for over 90% of market-based electricity transactions, providing a key stabilizing force. During the summer peak demand period in 2024, when electricity consumption significantly exceeded previous years, cross-regional transmission capacity hit a record 142 million kW, ensuring reliable power supply for economic and social development.
By 2024, China’s installed renewable energy capacity had reached 1.45 billion kW, accounting for 43% of total generation capacity. More than 50% of renewable electricity was integrated into the grid through market-based transactions. Meanwhile, green certificate and green power trading volumes surged to 446 billion kWh, a 364% increase year-on-year, with about one-quarter of renewable energy generation monetizing its environmental value through green power trading.
Amid global energy price volatility and supply chain disruptions, China has kept electricity costs largely stable by refining its pricing mechanism and expanding market-based trading. As a result, average residential and industrial electricity prices in China stand at just 32% and 39%, respectively, of the average levels across 50 major global economies, keeping the country among the most affordable energy markets worldwide.
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