China is implementing market-oriented reforms for renewable energy pricing to foster a new power system and ensure sustainable development. The policy, detailed in a February notice, requires all renewable power to enter the electricity market, with prices set by market forces. Experts acknowledge that this transition may cause short-term challenges for producers, who previously benefited from protected returns, but it is expected to yield long-term gains by improving sector efficiency.
Addressing Renewable Energy Challenges
The reforms aim to tackle accumulated tensions in China’s renewable energy sector, which has seen rapid growth driven by the country’s green transition commitments. Installed wind and photovoltaic capacity has now surpassed coal-fired power, leading to issues such as temporary overcapacity in manufacturing and difficulties in power consumption and grid integration. The new pricing mechanism includes provisions to refund differences, helping enterprises adapt smoothly and shifting focus from scale expansion to quality improvements and innovation.
Broader Policy Context and Comparisons
This approach aligns with other Chinese policies characterized as short-term pain for long-term gain, such as reforms in healthcare and property sectors that require balancing multiple stakeholder interests. For instance, the development of China’s new-energy vehicle industry faced initial skepticism over a decade ago but now leads globally, demonstrating how sustained efforts can overcome early obstacles. Similarly, the 10-year fishing ban in the Yangtze River basin has improved ecological conditions and supported employment transitions for former fishers, highlighting the benefits of long-term planning.
Renewable Energy Growth and Future Outlook
Recent data from the National Energy Administration shows significant expansion in China’s renewable energy capacity. By the end of August 2025, total installed power generation capacity reached 3.69 billion kilowatts, an 18% year-on-year increase. Solar power capacity grew by 48.5% to 1.12 billion kilowatts, while wind power capacity rose by 22.1% to 580 million kilowatts. This growth underscores the sector’s potential, with reforms expected to enhance resource allocation and competitiveness through measures like energy storage deployment and demand diversification.
Chinese policymakers emphasize long-term vision in initiatives such as the Xiong’an New Area development and carbon neutrality efforts, advocating for persistent action to achieve tangible results. By prioritizing sustainable development and market mechanisms, China aims to navigate the complexities of its energy transition while supporting economic and environmental goals.
