Shandong's 136 Detailed Rules Interpretation | Why Aren't Distributed Renewable Energies Included in the Mechanism Electricity Price?

Recently, the Shandong Provincial Development and Reform Commission issued the "Shandong Provincial Renewable Energy Mechanism Electricity Price Bidding Implementation Detailed Rules (Draft for Comments)", clarifying that distributed photovoltaic power for general and large-scale industrial and commercial users, as well as wind and photovoltaic power generation projects such as incremental distribution networks, integrated source-grid-load-storage, and green electricity direct connection, will have all their grid-connected electricity (excluding self-generated and self-used electricity) participate in electricity market transactions and will not be included in the mechanism electricity price execution scope. This policy adjustment is not a simple rule change, but is based on a deep understanding of the current development status of distributed renewable energy in Shandong Province, an accurate grasp of industry pain points, and a long-term plan for the construction of a new power system. It contains multi-layered underlying logic and systematic governance wisdom.

I. Distributed Photovoltaic Power in Shandong

Development Status and Deep-seated Contradictions

Driven by the "dual carbon" goals and energy transition strategies, distributed photovoltaic power in Shandong Province has experienced explosive growth and has become a core force in the regional energy structure adjustment. As of June 2025, the total installed capacity of photovoltaic power in the province reached 91.18 million kilowatts, of which distributed photovoltaic power accounted for 59.29 million kilowatts, accounting for 65%, far exceeding the scale of centralized photovoltaic power generation, making it the absolute dominant form of photovoltaic power generation. However, behind this large-scale expansion, there are multiple structural contradictions that urgently need to be resolved through policy adjustments.

According to data released by the Shandong Provincial Energy Bureau in December 2023, among the province's 136 counties and cities:

• 53 counties and cities have a low-voltage grid connection warning level of "restricted," meaning that new distributed projects can hardly be connected to the existing grid;

• 43 counties and cities have a warning level of "general," with the grid operation being in a critical state and the absorption capacity nearing saturation;

• 40 counties and cities are in a "good" state, with some capacity to accept new projects.

Even more serious is that 37 counties and cities have prominent problems with backfeeding from distributed photovoltaic power, and new projects cannot be absorbed locally within the county and must rely on cross-regional transmission channels, which runs counter to the essential positioning of distributed energy as "nearby absorption." In 2024, the province added 9.22 million kilowatts of distributed photovoltaic power generation, accounting for 33% of the total newly added photovoltaic power generation, further intensifying the pressure on grid absorption.

II. Underlying Logic of Policy Adjustment

and Institutional Design Wisdom

The core development concept of distributed renewable energy revolves around "user-side development and nearby absorption." Its essence is to achieve four core values through the spatiotemporal matching of energy production and consumption: reducing user electricity costs, adapting to low-voltage levels to reduce access costs, reducing long-distance transmission losses, and alleviating the investment pressure on grid construction.

In February 2025, the National Development and Reform Commission and the National Energy Administration's "Notice on Deepening the Market-Oriented Reform of Renewable Energy On-grid Electricity Prices and Promoting the High-quality Development of Renewable Energy" clearly proposed promoting the full entry of renewable energy into the market and establishing a market-based price difference settlement mechanism, providing top-level guidance for local policy adjustments. Shandong Province's policy adjustment is based on a return to the essence of distributed energy and the deepening of market-oriented reforms, because the core value of industrial and commercial distributed renewable energy lies in "self-generation and self-use, and surplus electricity grid connection." Its vitality stems from the precise matching with user loads. If the grid-connected electricity (excluding self-generated and self-used electricity) is included in the mechanism electricity price, it is easy to cause a speculative tendency of "emphasizing application and neglecting absorption." Project entities may ignore local load demand, blindly expand installed capacity, and rely on mechanism electricity prices to obtain income, causing "nearby absorption" to become empty talk and instead intensifying grid absorption pressure.

The policy clarifies that grid-connected electricity must participate in electricity market transactions, using market price signals to guide project entities to strengthen their load matching awareness: on the one hand, it encourages enterprises to fully investigate user electricity demand during the planning phase to avoid blind expansion that is out of touch with reality; on the other hand, it promotes projects to improve the proportion of self-generation and self-use through technological innovation (such as configuring energy storage and optimizing scheduling), fundamentally reducing dependence on the grid and returning to the essential attributes of distributed energy.

III. Deep Value and Industry Impact of Policy Adjustment

深层价值与行业影响

The significance of this policy adjustment goes far beyond the rules themselves. It marks the entry of Shandong Province's renewable energy development into a new stage of "quality first" and provides important inspiration for the governance of distributed energy nationwide:

Promoting the transformation of the industry from a "scale competition" to an "efficiency competition": By removing the mechanism electricity price floor, it forces enterprises to focus on cost control, technological innovation, and load matching capabilities, eliminating high-cost, low-efficiency projects, and improving the overall quality of the industry;

Reshaping the synergistic relationship between the grid and distributed energy: Shifting from "passive acceptance" to "active synergy," enabling distributed projects to become "friendly partners" rather than "burdens" for the grid, laying the foundation for the construction of a new power system;

Exploring a governance model of "government guidance + market dominance": Both defining development boundaries and regulating market order through policies, and giving full play to the decisive role of the market in resource allocation, achieving a virtuous cycle of "releasing, regulating, and combining";

IV. Distributed Renewable Energy

Exploration of Paths for High-Quality Development

The ultimate goal of the policy adjustment is to promote the transformation of distributed renewable energy from "scale expansion" to "quality improvement." To this end, Shandong Province needs to build a support system from multiple dimensions, including infrastructure upgrades, technological innovation applications, and market mechanism improvement:

(1) Strengthen the intelligent upgrade of infrastructure to break through absorption bottlenecks

Taking the substation as the basic unit, build an integrated "planning-construction-operation" system to improve the distribution network's ability to accept distributed energy:

1. Precise planning of energy storage systems: Combining regional load characteristics (such as the daytime peak of industrial loads and the midday peak of commercial loads) and renewable energy generation curves (such as the midday output peak of photovoltaic power), energy storage devices are configured according to the dual needs of "peak-valley difference compensation + short-term regulation." For example, industrial parks can configure large-capacity lithium-ion battery energy storage to meet the peak-shaving and valley-filling needs of 4-6 hours; residential substations can configure small-scale energy storage to cope with short-term power fluctuations.

2. Construction of an intelligent monitoring system: Install smart meters, power sensors, voltage monitors, and other IoT devices at the access points of distributed projects and key nodes of the distribution network. Through the power dispatch cloud platform, real-time monitoring of the entire operation status of "power generation - load - grid" is achieved, providing data support for precise dispatching and fault warning.

3. Source-grid-load-storage system integration: Using virtual power plant technology as a link, integrate distributed photovoltaic, user-side energy storage, and controllable loads (such as interruptible industrial loads and commercial air conditioning loads) to form a collaborative interactive network of "source follows load, load follows source", improving the overall flexibility of the system.

(2) Deepen collaborative control technology innovation and improve self-use ratio
Through technological innovation, break through the bottleneck of "intermittency and volatility" of distributed energy and maximize the value of self-generation and self-use:

1. Construction of an intelligent energy management system: Based on big data and artificial intelligence technology, research and develop an energy management system suitable for distributed scenarios, realizing three core functions: precise prediction of distributed power generation power (combining meteorological data and historical output curves, with an error rate controlled within 10%); optimized scheduling of energy storage charging and discharging status (dynamically adjusting charging and discharging strategies based on electricity price signals and load forecasts to improve revenue); dynamic response to changes in load demand (guiding users to use electricity off-peak through demand response mechanisms to match new energy output).

2. Implementation of microgrid self-balancing mechanism: In areas with concentrated distributed resources such as industrial parks and large communities, build microgrid systems. When distributed power generation is excessive, automatically control energy storage devices to charge; during peak electricity consumption, simultaneously release energy storage electricity and coordinate controllable loads to reduce demand, achieving "generation-use balance", greatly reducing reliance on the main grid. For example, through microgrid management in a certain industrial park, the self-generation and self-use ratio of distributed photovoltaics has increased from 60% to 85%, reducing the annual grid-connected electricity by 1.2 million kWh, reducing grid absorption pressure while saving enterprises more than 300,000 yuan in electricity costs.

(3) Improve market-oriented trading mechanisms and stimulate the vitality of entities

Guide distributed energy to participate in system regulation through market mechanisms to maximize value:
1. Promote the "green electricity direct supply" model: Encourage distributed projects to sign long-term green electricity direct supply agreements with surrounding users, locking in self-generation and self-use electricity through "point-to-point" transactions to form stable revenue expectations.

2. Explore participation paths in the ancillary service market: Allow distributed aggregators (such as virtual power plant operators) to represent individual projects to participate in the peak regulation, frequency regulation, and other ancillary service markets, obtaining additional income by providing flexible resources to compensate for the price fluctuation risks of market-oriented transactions of grid-connected electricity.

In the future, with the implementation of supporting measures and technological advancements, distributed new energy in Shandong Province is expected to "seek development in standardization and improve quality in development", truly becoming a backbone force in energy transformation and providing a replicable and promotable "Shandong model" for the whole country.