Advertisement
China's first provincial solar auction under a new pricing mechanism has drawn attention after bids in Shandong settled at 225 yuan (USD 31.58) per MWh, levels that analysts say may challenge project viability. The new system replaces guaranteed coal-linked returns with competitive bidding, raising concerns for developers in provinces with weaker power demand. Analysts believe while coastal provinces may still attract new investments, oversupply in regions like Shandong highlights risks for returns despite government efforts to introduce market-driven pricing.
China's first solar auction under its reformed renewable energy pricing system has raised concerns for developers after clearing prices came in lower than expected. The auction, held in Shandong province, was seen as a test case for the new nationwide model of competitive bidding. Advertisement
The Ministry of Energy had introduced the new framework earlier this year to phase out guaranteed returns that were previously tied to coal benchmarks. Under the revised approach, grid operators now allocate renewable projects through auctions, selecting bids from lowest to highest until the provincial target is reached. Developers are compensated if market prices fall below the auction strike price, but they no longer receive the fixed guaranteed rates that once shielded them from market volatility.
In Shandong, where solar development has been particularly strong, the auction closed at 225 yuan (USD 31.58) per megawatt hour (MWh). Bids were allowed between 123 yuan and 350 yuan per MWh, according to reports from the provincial grid operator. Analysts tracking the outcome said that at these levels, investors would find it difficult to achieve sustainable returns, especially in provinces already saturated with solar supply.
Industry observers noted that several of the participating projects were already built and were under pressure to secure fixed rates, even if it meant lower margins. Developers chose the stability of the auction system over Shandong's spot power market, where average prices had recently fallen to about 116 yuan per MWh due to surplus solar generation in the region.
The Shandong auction has raised questions about how other provinces will respond as China rolls out similar bidding rounds nationwide. Analysts expect regions with strong demand growth along the coast to offer slightly better returns, but regions with excess renewable capacity could continue to see depressed prices.
China remains the world's largest developer of renewable energy, and this shift to market-based pricing is part of broader reforms aimed at balancing investment certainty with long-term cost efficiency. However, the outcome in Shandong shows the challenges of maintaining investor interest while lowering consumer power costs.
Source: Reuters
5th Jun, 2025
25th May, 2023
11th May, 2023
27th Apr, 2023
Advertisement
Facebook
Whatsapp
