Green Electricity Direct Connection Policy Commentary: Positive for PV Demand, Opening Up a Trillion-Yuan New Market

On May 30, 2025, the National Development and Reform Commission and the National Energy Administration jointly issued the "Notice on the Orderly Promotion of Green Electricity Direct Connection Development." This policy comes at a time when the 531 rush installation has ended and domestic demand has plummeted. It involves important new scenarios for domestic photovoltaic applications and is positive for photovoltaic demand. The following is a commentary:

I. Policy Highlights

(1) Definition of Green Electricity Direct Connection: New energy sources such as wind power, photovoltaics, and biomass supply green electricity to a single electricity user through a direct line, with clear physical traceability of the electricity supply. It is divided into grid-connected and off-grid types. The method for direct supply to multiple users via a direct line will be stipulated separately.

 

(2) Voltage Level: No more than 220kV, with 220kV requiring approval.

(3) Investment Entity: In principle, the electricity load (e.g., industrial and commercial enterprises) shall be the main responsible entity. Self-investment by electricity loads is allowed, investment by power generation enterprises is allowed, and joint ventures between the two parties are allowed, but it is clearly stated that the operating entity does not include the power grid. For self-investment by non-electricity users, an EMC agreement must be signed.

(4) Grid Connection Mode: For grid-connected projects, in electricity spot continuous operation areas, it is "self-generation and self-use, surplus electricity to the grid." In electricity spot non-continuous operation areas, it is "self-generation and self-use, reverse power transmission is not allowed."

(5) Consumption Ratio Requirements: The proportion of self-generated and self-used electricity to available power generation shall not be less than 60%, and the proportion to total electricity consumption shall not be less than 30% (not less than 35% by 2030). The proportion of grid-connected electricity to available power generation shall not exceed 20%.

(6) Encouraging Energy Storage: Grid-connected green electricity direct connection projects are required to improve project flexibility through reasonable configuration of energy storage, etc. The project plan should reasonably determine the maximum peak-valley difference rate, and should not send power back to the grid during periods of difficulty in new energy consumption.

 

(7) Entities and Methods Participating in the Electricity Market: If the green electricity direct connection is invested by the electricity load unit, it shall participate in the electricity market as a whole, and the power grid shall not purchase electricity on its behalf. If it is invested by a power generation enterprise or a joint venture, they can register separately to participate in the electricity market and participate in the electricity market in an aggregated manner.

(8) Dispatch Management: Grid-connected projects and their internal power sources shall be managed by the corresponding dispatching institutions according to their connection voltage level and capacity scale. Except for emergencies that affect the safe and stable operation of the public system, the dispatching institution shall issue dispatch plans according to the project's self-arranged power generation and consumption curve.

(9) Fee Payment: Green electricity direct connection projects shall pay transmission and distribution fees, system operation fees, policy-based cross-subsidies, government funds and surcharges, etc., in accordance with the relevant regulations of the State Council's price and finance departments. Local authorities shall not reduce or exempt relevant fees in violation of national regulations.

II. Policy Interpretation and Commentary

(1) Relationship between Green Electricity Direct Connection and Distributed Photovoltaics? What is the theoretically achievable scale?

According to the latest distributed photovoltaic policy, the requirements for large-scale industrial and commercial distributed power supply via dedicated lines are that the load and photovoltaic project have the same investor and are within the same land use red line. This situation generally does not occur. However, green electricity direct connection allows the investor to be a power generation enterprise or a joint venture between a power generation enterprise and an electricity load, and does not require a land use red line.

It is almost impossible for enterprises to meet the conditions for large-scale distributed industrial and commercial power supply via dedicated lines. However, green electricity direct connection has low requirements for the entity and land use red line, so a large number of projects can meet the requirements. As long as suitable land can be found, indicators can be obtained, grid connection is not obstructed, and the electricity user entity is reliable, the scale can be very large. In theory, it is possible to achieve 100GW of new photovoltaic scenarios within a year in the future.

(2) What does the consumption requirement of green electricity direct connection mean?

The core of the consumption requirements for green electricity direct connection is four points: a) The proportion of self-generated and self-used electricity to available power generation is not less than 60%, b) The proportion of self-generated and self-used electricity to total electricity consumption is not less than 30% (35% by 2030), c) The proportion of grid-connected electricity to available power generation does not exceed 20%, d) During periods of difficulty in new energy consumption, the project should not send power back to the public power grid.

In the above document, since it is clearly stipulated that reverse power transmission is not allowed during periods of difficulty in new energy consumption, and the "lower limit of the proportion of self-generated and self-used electricity to available power generation (60%) + upper limit of the proportion of grid-connected electricity to available power generation (20%)" is less than 100%, a considerable proportion of power restrictions is allowed. To eliminate the losses caused by this power restriction and to achieve the "lower limit of the proportion of self-generated and self-used electricity to total electricity consumption (30-35%)," a considerable amount of energy storage must be added.

It is not difficult to calculate that, assuming that the load curve remains basically unchanged throughout the day (generally stable electricity consumption for industrial loads), and without energy storage devices, and the proportion of grid-connected electricity to available power generation does not exceed 20%, the upper limit of the penetration rate of self-generated and self-used photovoltaic electricity to available power generation is around 15-20%. Therefore, To achieve a proportion of self-generated and self-used electricity to available power generation of 30-35%, 1Wh-2Wh of energy storage battery capacity must be configured for every 1W of photovoltaic.

(3) What does green electricity direct connection mean for photovoltaic manufacturing enterprises?

For photovoltaic manufacturing enterprises, the "avalanche" of domestic demand after 531 has become a certainty, especially since the local No. 136 documents have not yet begun to be implemented, and even the detailed rules of the No. 136 document of the Mengdong power grid are "temporarily not arranging mechanism electricity." The introduction of the green electricity direct connection policy is somewhat similar to the "ground-based distributed" policy many years ago, and it also allows a 20% proportion of grid-connected electricity. If it can be successfully implemented, this will naturally drive a large amount of new photovoltaic demand. However, from the issuance of the policy, to the detailed rules of the local development and reform commissions and energy bureaus, to the implementation methods of the power grid, and finally to the implementation of specific projects, there is a time window (at least 6-12 months). If the green electricity direct connection policy is feasible, green electricity direct connection projects will gradually begin to contribute to photovoltaic demand at least after the second half of 2026.

(4) Do green electricity direct connection projects need to pay transmission and distribution prices?

This policy clearly states that "green electricity direct connection projects shall pay transmission and distribution fees, system operation fees, policy-based cross-subsidies, government funds and surcharges, etc., in accordance with the relevant regulations of the State Council's price and finance departments." But whether or not to pay transmission and distribution prices?

Many other think tanks interpret green electricity direct connection projects as requiring payment of transmission and distribution prices. According to Deepseek, "Internal user dedicated lines are exempt from transmission and distribution prices, but government funds must be paid. Dedicated lines for self-owned power plants are exempt from transmission and distribution prices, but standby fees and funds must be paid. Grid-connected dedicated lines must pay transmission and distribution prices according to voltage level." Therefore, According to the definition of green electricity direct connection, the dedicated line for green electricity direct connection is located after the power user's ownership boundary (meter) and belongs to the user's internal facilities, with no direct connection to the public power grid. In this case, self-generated and self-used electricity does not go through the public grid transmission and distribution process, so there is no need to pay transmission and distribution prices.

In the wording of this policy, the National Development and Reform Commission and the National Energy Administration seem to want to downplay this key issue. The phrase "pay transmission and distribution fees according to the relevant regulations of the State Council's price and finance authorities" is ambiguous. Does it mean payment is required or not? Does it appear to require payment but actually doesn't? Green electricity direct connection touches upon the core interests of the power grid and thermal power enterprises, entering the deep water zone of energy revolution. Ambiguous wording seems unable to solve the problem, but only delays the progress of the energy revolution.

How can green electricity direct connection projects increase revenue, and how can electricity users reduce costs?

Green electricity direct connection projects should select the optimal energy storage configuration ratio based on spot price signals. When midday electricity prices are extremely low and energy storage system costs are not high, configuring a large proportion of energy storage and storing all midday photovoltaic power generation to the evening peak price period is the most advantageous (but also the most serious erosion of thermal power enterprises' share). However, if midday electricity prices are high and energy storage system costs are high, then configuring a small proportion of energy storage and directly consuming photovoltaic power generation at noon is feasible.

Given the above, the optimal strategies for green electricity direct connection projects will be different in different regions if they can be implemented.

What are the difficulties in implementing green electricity direct connection projects?

For green electricity direct connection projects, there are four difficulties in implementation: a) obtaining indicators, b) obtaining land, c) dealing with the power grid, and d) the main body rating of the electricity user reaching 2A+ or higher, and no risk of bankruptcy, relocation, or significant reduction in load within 10 years (if not self-invested).

Among the above four difficulties, if the self-investment model is chosen by the electricity user, the fourth point can be excluded. However, solving the first three points is also not easy to achieve.

In particular, green electricity direct connection projects are similar to the "incremental distribution network," "microgrid," and "source-grid-load-storage" projects that have appeared in history. These historical projects have not been developed on a large scale or have been acquired by the power grid due to strong opposition from the power grid. Although green electricity direct connection projects directly prohibit power grid investment in the document, eliminating the possibility of being acquired by the power grid, the unresolved issue is that the policy not only affects the interests of thermal power plants but also affects the "big cheese" of the power grid. In the deep water zone of the energy revolution, it is difficult to predict the outcome of the game between the NDRC, NEA, and the power grid.

What is the significance and impact of green electricity direct connection on the energy revolution, the power grid, and thermal power enterprises?

Green electricity direct connection may constitute a landmark node in the historical process of the energy revolution. In the past six months, midday spot electricity prices have collapsed across the country, coupled with Document No. 136, leading to a significant slowdown in the growth of photovoltaic installations in the next five years. The spot price mechanism has protected thermal power enterprises whose share has been continuously encroached upon by photovoltaic power generation, and also protected the power grid whose share has been continuously encroached upon by distributed photovoltaics.

However, after the policy of green electricity direct connection was introduced, more than 30%-35% of the electricity share of the electricity users launching the project is directly supplied by wind, light, and storage projects. This part no longer buys electricity from the power grid, let alone thermal power. Therefore, the market share of thermal power plants and power grids for electricity users implementing green electricity direct connection projects has directly decreased due to this policy.

For the energy revolution, this is an important step. But for thermal power plants and power grids, this policy has touched their most sensitive nerves.

It is precisely because of the above reasons that whether this policy can truly be implemented and whether power grid companies in various places can actively cooperate are highly uncertain at present.

The issuing authorities of this policy are the NDRC and NEA, without the participation of the power grid, while the power grid reports to the SASAC. Although the NDRC implements business guidance and policy constraints on the power grid in terms of price regulation, project approval, and energy planning, if the power grid company sets obstacles to the implementation of each specific project based on "the project planning scheme should reasonably determine the largest peak-valley difference rate of the project, and the peak-valley difference rate of the power exchanged between the project and the public power grid should not be higher than the planned value of the scheme" (for example, assessing projects that violate the regulations), the NDRC and NEA have no way to object. In addition, if local power grid companies, based on safety considerations, explicitly or implicitly require that the implementation of direct connection lines be completed by suppliers recommended by them, the NDRC and NEA seem to have no jurisdiction. Since the green electricity direct connection policy does not fully take into account the interests of power grid companies, and power grid companies control key nodes in the implementation of the green electricity direct connection policy, the final scale of photovoltaic power generation under this policy is highly uncertain.