Hubei's centralized photovoltaic power plants fully face "losses"

"In the first half of this year, the settlement electricity price of our photovoltaic power plants was around 0.28 yuan, which is more than 30% lower than the benchmark coal-fired electricity price, almost to the point of insolvency," said Lin Han (a pseudonym), a person in charge of a central enterprise in Hubei, helplessly. "Under such market conditions, it is very difficult for new photovoltaic projects to start construction; they simply cannot pass the approval, yet local governments are still urging us to build as soon as possible."

 

This predicament is not faced by just this one company, Almost all companies holding grid parity photovoltaic power plant assets in Hubei are under enormous operational pressure. Although the implementation of Document No. 136 has made investment decisions for new projects difficult, the large amount of existing assets held by Hubei power investment companies are clearly under greater pressure than the new policy adjustments.

 

"Although electricity load increases in summer, the past two months have only seen minimal profits, and it looks like the whole year will be at a loss," "I heard that a local state-owned enterprise with many photovoltaic projects commissioned in recent years could only pay basic salaries to employees for several months," "With existing power plants losing money like this, how can new projects start?" "If this continues, no one will invest in photovoltaic power plants in Hubei," "The sunk costs of supporting energy storage are even higher, and they are still losing money..." In Wuhan, photovoltaic stakeholders have heard these voices from various new energy investment companies.

 

Are these problems faced by Hubei's new energy sector "reasonable"? Are photovoltaic power plants being "bullied" or is this situation inevitable once they reach a certain scale? Photovoltaic stakeholders took these questions further by visiting related companies and experts.

 

Electricity prices drop over 20% year-on-year, existing photovoltaic plants fall into losses

 

In the first half of 2025, the average settlement electricity price for new energy in Hubei Province was less than 0.3 yuan/kWh (a certain company's photovoltaic average settlement price was about 0.28 yuan/kWh), compared to 0.37-0.38 yuan/kWh for the whole of last year, a drop of more than 20%. This is the fundamental reason why existing grid parity new energy power plants in Hubei Province, especially photovoltaic power plants, generally fall into losses.

 

Although nationwide, the continuous decline in new energy electricity prices in the spot market is a common cause of electricity price drops across provinces, Hubei's peculiarity lies in that the original medium- and long-term transactions intended to replace guaranteed purchases do not have actual guarantee effects due to reasons such as no over-contracting allowed. At the same time, strict deviation assessments and adjustments to excess profit return rules have further lowered the comprehensive settlement electricity price.

 

 

In April 2024, Hubei launched spot market trial operations. From April to December, 60-70% of new energy power plant electricity was purchased at the coal-fired benchmark price of 0.4161 yuan/kWh as guaranteed purchase, with the rest entering the spot market. More than half of the guaranteed purchase also somewhat supported Hubei's new energy electricity price in 2024.

 

In June 2025, Hubei's spot market entered formal operation. In the same year, the guaranteed purchase portion for new energy was canceled and replaced by a lower medium- and long-term transaction quota. Against the backdrop of increasing grid agency purchases, the actual proportion of new energy signed medium- and long-term contracts relative to generation capacity was only 50-60% for photovoltaics and 20-30% for wind power.

 

Average medium- and long-term settlement prices for new energy in Hubei Province from January to May 2025

(Unit: yuan/MWh, Source: Guoneng Rixin)

 

Although from the price level, the average settlement prices for wind and photovoltaic medium- and long-term transactions were 0.463 and 0.425 yuan/kWh respectively, higher than the coal-fired benchmark price, the guarantee effect of medium- and long-term transactions was greatly weakened in actual rule implementation.

 

According to power generation companies participating in Hubei's electricity market, because medium- and long-term transactions in Hubei do not allow over-contracting, "new energy generation is volatile; it's fine when the weather is good, but on cloudy days, the medium- and long-term settlement price difference is only a few cents. Not allowing over-contracting means there is not much guarantee effect. And Hubei may have nearly 200 cloudy days a year, which greatly reduces the actual value of medium- and long-term contracts. 。”

 

With limited medium- and long-term guarantee value, photovoltaic electricity prices in the spot market can only sell for 0.1 to 0.2 yuan/kWh, even during the summer peak load season, at most just over 0.2 yuan. This is the electricity price settlement situation for photovoltaic power plants in Hubei Province in the first half of the year.

 

On this basis, Hubei Province has two special rules. The "Hubei Province Electricity Spot Market Settlement Implementation Rules" clearly state that excess profit recovery funds for new energy are shared by direct trading users according to their cumulative electricity consumption proportion during 10:00-14:00 in the month, shared after M+2 months. This takes about 3-4 cents/kWh from the new energy grid electricity price. 。

 

The second rule is the strict spot market deviation assessment. Hubei implements the strictest generation execution deviation assessment nationwide for new energy, with an exemption range of only +2% to -6%. According to photovoltaic stakeholders, the deviation assessment alone causes a price drop of about 3-5 cents/kWh. The assessment amount is directly shared by industrial and commercial load sides, and in 2024, this part of the funds is returned to new energy companies with high forecasting accuracy.

 

An industry insider jokingly said, "Hubei is the toughest spot market in the country." In fact, even the leading power forecasting products in the industry have deviation rates of 30-40%. Ultra-short-term single-point power forecasting for new energy is a world-class challenge, and currently, there is no better solution.

 

Comprehensive calculations show that the settlement electricity prices for photovoltaic and wind power in Hubei Province in the first half of the year are about 0.28 and 0.29 yuan/kWh respectively, with slight differences among companies. For a large number of new energy power plants commissioned between 2020 and 2023, after bank interest rate reductions, the cost per kWh remains around 0.35 yuan. Lin Han said, "According to our group's evaluation system, Hubei wind power needs a return of 0.34-0.35 yuan/kWh to pass investment decisions."

 

Photovoltaic stakeholders learned that a private enterprise that has obtained photovoltaic development quotas decided to postpone construction after receiving the settlement electricity price of a nearby power plant. Several private new energy companies have withdrawn their development teams from Hubei.

 

Energy storage: more than just sunk costs

 

Hubei's new energy sector bears far more than just the sharp drop in electricity prices; energy storage power plants that have been "losing money on electricity bills" after commissioning are also a heavy burden on new energy power generation companies.

 

"Immediate loss upon investment" has become the current situation for energy storage power stations investment in Hubei. Although Hubei approved a large number of energy storage power stations during the 14th Five-Year Plan, the relevant pricing policies have not been introduced for a long time, resulting in almost all energy storage power stations that have been put into operation and are related to new energy being in a loss state.

 

Under the current management system in Hubei, these approved energy storage power stations are recognized by the grid company as "built to support new energy," so they are not given an "independent identity". The lack of pricing policies makes it difficult for energy storage power stations in Hubei to survive.

 

According to current rules, the charging and discharging losses of grid-side energy storage are borne by enterprises, directly deducted from new energy electricity. Gao Zhan (pseudonym), a production manager of another power generation enterprise, said, "Although the loss is not reflected on the books, it is indirectly borne by the new energy electricity. Taking a 50MW/100MWh energy storage power station as an example, with an 85% conversion efficiency, a single charge-discharge loss generates nearly ten thousand yuan in cost loss."

 

The reason for the loss on the source side energy storage is the inverted electricity price. Charging is done from the grid at the user electricity price, including paying transmission and distribution fees, government surcharges, etc., while discharging is settled at the spot electricity price, and operation and maintenance costs are borne by the power generation enterprise.

 

Currently, investment, construction, and operation of energy storage power stations in Hubei belong to power generation enterprises, but dispatching is controlled by the grid. Therefore, even if investors want to use source-side energy storage to smooth out new energy power clearing deviations, it is difficult to achieve. It is understood that multiple energy storage power stations have experienced situations where while the photovoltaic power station output is zero, the energy storage power station is still charging from the large grid and paying for it. Gao Zhan helplessly faces this situation, "When we want to use energy storage to regulate the new energy generation curve, we cannot; but when the grid wants to use the energy storage power station, it can call it at any time, and we have to bear the charging and discharging price difference and electricity loss."

 

It is understood that during the 14th Five-Year Plan period, Hubei issued many energy storage-related policies and has built more than 2GW of energy storage power stations, but the most important pricing policy has not been introduced for a long time. "Since last August, relevant departments have organized meetings to discuss it, but there has been no result so far."

 

For new energy investment enterprises, these requirements mean that when calculating project returns, "Currently, the policy has not been introduced for a long time, the project investment is completely uneconomical, energy storage investment is all sunk cost, and even requires additional money. When new energy returns were high before, it could be borne, but now it is simply unbearable."

 

As new energy electricity prices continue to fall and energy storage cannot effectively participate in the electricity market, both new energy and energy storage face significant development difficulties in Hubei.

 

Increasing consumption pressure

 

Besides the currently "visible" electricity price decline and energy storage "subsidizing" in Hubei, the urgent issue is the continuous increase in power curtailment ratio.

 

Affected by the structure of Hubei's power grid, the power curtailment situation varies greatly among different stations. According to photovoltaic insiders, some stations with higher curtailment have reached 20%, while some stations maintain a low curtailment rate below 10%, but the pressure is imminent.

 

As of the end of May 2025, Hubei Province has a cumulative installed power generation capacity of 131.8962 million kilowatts, with thermal power accounting for 31.15%, hydropower 28.91%, wind power 7.8%, and photovoltaic power 32.13%.

 

Although wind and solar have become the largest power sources in terms of installed capacity, distributed photovoltaic power in Hubei has exceeded 20 million kilowatts. However, since distributed photovoltaic is not subject to grid dispatch and control, the peak regulation pressure falls on centralized wind and solar stations, further increasing consumption pressure.

 

In addition, due to partial grid section congestion in Hubei, the consumption situation of new energy in some areas is not optimistic.

 

Moreover, as Hubei is located at a hub position in the power system and is a major recipient province of transmitted electricity in China, the "Shaanxi-Wuhan DC" will transmit over 30 billion kilowatt-hours to Hubei in 2024, expected to account for about 10% of Hubei's annual electricity consumption; the Jinshang-Hubei ±800 kV UHVDC transmission project is planned to be completed and put into operation in December 2025, expected to transmit about 40 billion kilowatt-hours of clean energy from the upper reaches of the Jinsha River to Hubei annually.

 

With the successive operation of these two UHV lines, if Hubei's electricity consumption growth is limited, the incoming electricity will further squeeze the consumption space of local new energy. Huang Qiang (pseudonym), who has worked in Hubei's new energy field for more than ten years, said, "The incoming electricity to Hubei not only affects the local new energy consumption space but also the price of incoming electricity is too high to reduce the electricity price for Hubei users, so the local centralized new energy still bears higher electricity price pressure."

 

Stagnant photovoltaic in Hubei

 

Huang Qiang said, "Currently, the five major and six minor central enterprises in the province, along with private enterprises, have almost all suspended photovoltaic power station investments in Hubei, and even equipment manufacturers rarely come for technical exchanges." Centralized photovoltaic in Hubei is completely stagnant. 。

 

At the beginning of 2025, Hubei issued "Several Measures to Strengthen Support for Enterprises and Promote the Steady Development of Small and Medium-sized Enterprises," which mentioned: "Reduce energy costs. Promote new energy grid-connected electricity to fully enter the electricity market, strive for preferential pricing policies for Shaanxi-Wuhan and Jinshang DC transmission. Study and introduce major holiday deep valley electricity price mechanisms to guide SMEs to 'peak shaving and valley filling' to reduce electricity costs. Improve high reliability power supply charging policies, optimize billing methods, standardize classification, and support SMEs to reasonably reduce high reliability power supply expenses. Strive to build a 'Central China electricity price lowland' by the end of 2027."

 

Under the goal of building a 'Central China electricity price lowland,' centralized new energy power stations have become the biggest "target" under various regulatory measures.

 

Huang Qiang calculated for photovoltaic insiders, "Referring to the electricity price level in the first half of the year, Hubei new energy enterprises' electricity price dropped by 0.1 yuan/kWh, resulting in a total annual revenue reduction of 5-6 billion yuan for new energy power generation enterprises, contributing to lowering user electricity prices."

 

At the same time, the harsh electricity market rules and increased curtailment rates, the lack of energy storage pricing policies and unreasonable dispatch mechanisms, the squeezing of local consumption space by incoming electricity, and to some extent price sharing, even the responsibility sharing of existing distributed photovoltaic, all these pressures are directed at these already operational centralized new energy power stations in Hubei.

 

While striving to build a 'Central China electricity price lowland' and using low electricity prices to support local enterprises, Hubei also needs to ensure reasonable profits for new energy power stations so that investment enterprises have the capacity to manage power generation well, rather than struggling on the edge of loss to survive. 。

 

Facing difficulties, Lin Han stated, "Our new energy projects have paid over 100 million yuan in taxes to local governments in the past year. This year, despite operating losses, tax revenue will also significantly decrease."

 

When investments and operations in new energy power plants generally fall into losses and no solutions are in sight, it is time to reconsider whether there are deviations in various management details from the top-level design.

 

Meeting Notice In 2025, China's new energy development is entering a new stage. In the long term, areas with vast land resources such as deserts, gobi, and wastelands remain the main battlegrounds for centralized wind and solar projects. The 2025 Desert-Gobi-Wasteland Photovoltaic Integration Development Forum will be held on August 22, 2025, in Ordos, Inner Mongolia. The meeting will discuss topics such as development policies for new energy bases in desert, gobi, and wasteland areas, costs and economics, key technology discussions, and equipment selection, to support the smooth achievement of China's dual carbon goals and promote the coordinated development of new energy and ecology.

The related agenda is as follows: