Investment decisions for new energy projects will face a lull!

Following the release of the new energy pricing reform plan on February 9, widespread discussion ensued. We can see that the National Development and Reform Commission's policy only sets a broad framework: projects connected to the grid after June 1 will use "mechanistic power generation" and "mechanistic pricing" to replace the original pricing policies of each province! However, how will the "mechanistic price" be determined? What is the investment payback period? These crucial issues, key to project profitability, are under the control of provincial energy authorities.

Before these details affecting core project returns are determined, companies cannot make investment decisions. Therefore, after the release of the new energy pricing reform plan, If the provincial details are not released promptly, the market will experience a period of investment decision-making stagnation, which will be particularly evident for household photovoltaic projects. ！

I. Impact of the New Policy on Various Projects and Feasibility of Rush Installation

1. Impact on Different Types of New Energy Projects
 

The new pricing policy has a completely different impact on different types of new energy projects! After the "new and old separation," all projects are subject to one policy; however, the old policies for old projects differ significantly!

In the Summary of 14 Regions' 2025 New Energy Project Market Entry Rules! article, the current new energy pricing policies of 14 regions are introduced, which are the old policies implemented for old projects ，as shown in the table below.

Table: Principles of 14 Regions' Participation in Electricity Trading for New Energy Projects in 2025

From the table above, we can see that

1) For the same type of project, there are significant policy differences between provinces!

Taking centralized ground-mounted photovoltaic power stations as an example, old projects in Zhejiang Province implement: 90% guaranteed volume and price, 10% spot trading;
 

Old projects in Ningxia Hui Autonomous Region implement: 156 hours of guaranteed volume and price, and the remaining electricity (estimated to exceed 1300 hours) is fully subject to market transactions;

After June 1, the electricity in Zhejiang and Ningxia will all be subject to 100% market transactions.
The difference between new and old projects in Ningxia lies in the proportion of market transactions, which changes from "approximately 90%" to 100%, with minimal impact;

The difference between new and old projects in Zhejiang lies in the proportion of market transactions, which changes from "10%" to 100%, a significant change, and naturally a significant impact.

 

2) Within the same province, there are significant policy differences between different types of projects! Taking centralized ground-mounted photovoltaic power stations vs. distributed photovoltaic projects as an example, centralized photovoltaic: In most provinces, the proportion of market-traded electricity exceeds 50% (the national expected proportion in 2024 exceeds 50%)
Distributed photovoltaic: Except for Shandong and Hebei, other provinces basically purchase at 100% desulfurized coal-fired power prices!

Therefore, distributed photovoltaic projects will receive a significant shock.

3) The impact differs significantly depending on the grid connection method!

Taking household photovoltaic vs. commercial distributed photovoltaic projects as an example, after May 1, household photovoltaic projects can still be fully grid-connected, but commercial projects must adopt a "primarily self-use, supplementary grid connection" approach.
For commercial projects, the price of the "self-use" electricity depends on the electricity price of the electricity user, and is not significantly affected by the policy; the "grid-connected" electricity participates in spot trading. If 80% or even 90% of the electricity can be self-used, then the remaining 10%~20% of the electricity participating in spot trading will have a minimal impact on revenue. Currently, the market for household photovoltaic projects is mainly "non-natural person households," and basically adopts a full grid-connection method. From the previous 100% desulfurized coal-fired power price purchase to the current 100% market transaction, it is the most severely impacted. 4) Summary In summary, the degree to which new energy projects in different provinces, different project types, and different grid connection methods are affected by the pricing policy varies, and therefore, the necessity and urgency of rush installation also vary greatly. At the same time, the difficulty of rush grid connection varies greatly for different types of projects. This is summarized in the table below. For centralized wind power and photovoltaic projects, the degree of impact and difficulty of rush installation are shown in the table below.

For distributed photovoltaic projects, the degree of impact and difficulty of rush installation are shown in the table below.

II. Investment Decision-Making Stagnation Period

In the article Photovoltaic Power Stations: Detailed Explanation of Development, Construction, and Grid Connection Progress and Procedures! article, the preparations required before project grid connection are introduced in detail, as shown in the figure below.

After completing the above procedures, from project completion to formal grid connection, normally,

Ground-mounted photovoltaic power stations require 1-2 months for grid connection procedures; commercial distributed projects are faster; however, household photovoltaic projects generally also require 1-2 months, and some platform companies for household photovoltaic projects have indicated that the grid connection procedures in some provinces even require 3 months.

If grid connection takes 2 months, to meet the deadline before May 31, installation must be completed by the end of March;

For household photovoltaic projects, it takes at least one month from customer development to installation completion;

For commercial distributed projects, it takes basically 3-6 months from development to installation completion;

For ground-mounted power stations, it takes 6-18 months from development to installation completion.

Therefore, household photovoltaic, commercial photovoltaic projects that decide on investment before the end of February, and ground-mounted power station projects that are nearing completion can still try to meet the May 31 deadline. Projects with decisions made after March will most likely not be able to meet the deadline!

For projects that cannot meet the May 31 deadline, how should companies make investment decisions?

In fact, Before the provincial details are released, companies cannot make development decisions for new projects!

Taking the most severely impacted household photovoltaic projects as an example, the acquisition prices of projects previously acquired by investors were all calculated based on the "100% coal-fired power benchmark price" premise.

Under the new pricing system, if the project can be realized,

1) Within 8 years, 1300 hours, with an electricity price of 0.35 yuan/kWh, the remaining electricity will follow the spot price, and the possible acquisition price is 2.9 yuan/W ；

2) Within 8 years, 1300 hours, with an electricity price of 0.28 yuan/kWh, the remaining electricity will follow the spot price, and the possible acquisition price is 2.2 yuan/W ；

If the 8-year term is adjusted to 10 years or 6 years, the acquisition price will also change;

If only 1000 hours or 800 hours can be guaranteed, the acquisition price must also be adjusted!

So, is the "return on investment period" 8 years, 10 years, or 6 years?

Is the "pre-qualified electricity volume" 800 hours, 1000 hours, or 1300 hours?

Is the "mechanism electricity price" 0.25 yuan/kWh, 0.28 yuan/kW, or 0.35 yuan/kWh?

These all depend on the specific rules of each province!

Because they are all artificially stipulated, before the detailed rules are released, it is impossible to even infer or predict!

With so many uncertainties, it is impossible to make any investment decisions!

Therefore, from March to before the provincial detailed rules are released, the photovoltaic project investment market may form a decision-making gap! Consequently, there may be a decrease in the future project start-up and grid-connection volume!

III. Conclusion

According to national policies, the detailed rules of each province can be released by the end of the year at the latest. During this period from March to the end of the year, it will be difficult for enterprises to make development and investment decisions for new projects!

It is hoped that the detailed rules of each province can be released as soon as possible to reduce the impact on the market!