CCTV Electric Reform “New” Observation: Significant Growth in Virtual Power Plant Projects, Demand-Based Energy Storage Configuration
On April 5, 2025, the release of Document No. 136 has begun to show its significant impact on China’s electric power market. The comprehensive entry of renewable energy, the realization of energy storage value, and the emergence of new models such as virtual power plants have garnered widespread attention. Recently, CCTV Finance’s economic information program aired an observation on electric reform, focusing on the latest trends in the power market reform across various fields, including the entry of renewable energy, energy storage, virtual power plants, and AI applications. The program visited multiple regions with projects related to renewable energy, energy storage, and virtual power plants, while interviewing several experts and industry professionals. Here are some key insights:
On Energy Storage: The previous requirement for mandatory energy storage with renewable energy has been canceled. Energy storage is now viewed as a crucial regulatory resource, transitioning from a “you must install” policy to a “you should install based on market demand” approach. This shift signifies a move away from merely competing on price to creating value in renewable energy generation. The market is expected to become more rational, with the industry placing greater emphasis on research and development investments and technological innovation, accelerating the process of competitive elimination.
On Virtual Power Plants: The new policies for renewable energy market reform have also created opportunities for new business models like virtual power plants. Experts predict that the national adjustment capacity of virtual power plants will exceed 20 million kilowatts in the next three years, nearing the installed capacity of the Three Gorges Hydropower Station.
On Renewable Energy Market Entry: With the deep activation of market mechanisms, the renewable energy sector is expected to move away from reliance on subsidies and achieve high-quality development under a new competitive landscape. The entry of renewable energy into the market may lead to increased volatility in spot market electricity prices. For example, areas like Shandong and Zhejiang have experienced instances of negative electricity prices, while in regions such as Mengxi and Shanxi, spot market prices have exceeded 1 billion yuan per kilowatt. New renewable energy projects will quote prices based on their marginal costs, directly testing the project’s location and technological capabilities, thereby achieving quality pricing and more rational investments.
On the Rush to Install Existing Renewable Energy Projects: Component prices are stabilizing and increasing. The implementation of new policies has created a clear division between old and new regulations. In provinces like Jiangsu and Guangdong, many renewable energy companies are accelerating construction to secure the benefits of existing policies. Following the June 1 policy deadline, there has been a surge in demand for distributed photovoltaic projects, especially from commercial users. Since March, many photovoltaic component manufacturers have been operating almost continuously, with order schedules extending to the end of the second quarter of this year. Overall component prices have seen a noticeable increase, with mainstream photovoltaic component prices rising from 0.6 yuan/W at the end of 2024 to over 0.7 yuan/W, and some distributed photovoltaic component spot prices reaching 0.8 yuan/W. Industry insiders believe that this round of price increases is primarily driven by policy changes and expect potential price adjustments in the third quarter.
On AI Traders: With nearly 80% of electricity generation and around 80% of electricity consumption entering the market, electricity trading is becoming more frequent. AI schedulers and traders have started participating in electricity markets in regions like Shandong, Zhejiang, and Inner Mongolia. By analyzing data on weather, user load, and energy storage equipment operations, they can formulate trading strategies to buy low and sell high.
Detailed Reporting on Energy Storage and Virtual Power Plants: Energy Storage Demand Configuration has shifted from a “you must install” policy to a “I want to install” market demand. The new electric reform policies have removed the mandatory energy storage requirement, allowing companies to select energy storage options based on their specific needs, thus uncovering the true value of energy storage. The profitability of energy storage projects is also expected to increase.
In Hainan, the first independent shared energy storage project is set to begin commercial operations in April, allowing multiple photovoltaic power stations to share resources over a 20-year lease. This will benefit both energy storage companies and renewable energy enterprises through shared peak regulation and frequency support service revenues. Zhang Min, project manager of the Lin Gao Zhen Jin energy storage station, stated that if the station provides services based on spot prices, annual earnings could exceed 4.8 million yuan, significantly benefiting renewable energy enterprises by covering over half of their energy storage rental costs.
In Zhejiang, the integrated charging and swapping station for heavy trucks equipped with 36 energy storage devices has begun operations, utilizing rooftop photovoltaic systems to provide charging services for 400 heavy trucks. Dai Zhen, the project manager, noted that in areas where the price difference between charging and discharging exceeds 0.7 yuan, the return on investment for energy storage equipment can be controlled to within seven years.
Industry insiders believe that the removal of mandatory energy storage requirements will lead market investments to focus more on the performance, quality, and service of energy storage solutions, widening the gap in investment returns for energy storage stations and intensifying industry reshuffling. Tian Qingjun, president of Envision Energy Storage, remarked that the current energy storage industry has an overwhelming number of investment entities, with over tens of thousands of energy storage companies. As the power market evolves, companies must rely on genuine capabilities to succeed, leading to a more rational market that emphasizes research and development and technological innovation, thereby accelerating competitive elimination.
The China Electricity Council indicated that many renewable energy and associated storage projects approved last year are expected to connect to the grid this year, with an average energy storage duration steadily increasing by 2025. Liu Yongdong, deputy secretary-general of the China Electricity Enterprises Association, stated that new energy storage resources will transition from “policy-driven installations” to being configured based on actual operational conditions and grid requirements, marking a significant shift towards market-driven configurations that focus on creating value in renewable energy generation.
Significant Growth in Virtual Power Plants: The new market reform policies introduced by the National Development and Reform Commission and other departments have presented challenges and opportunities for enterprises. Starting June 1, the electricity pricing mechanism has shifted from guaranteed returns to market volatility, which has opened more arbitrage opportunities for virtual power plants and reduced energy costs for commercial users. Investigations in Jiangsu and Hubei revealed that electric tugboats at Lianyungang Port are now able to purchase green electricity, similar to a super battery, recharging during low-demand periods with each charge reaching 6,000 kWh.
At the Lianyungang Port, electric tugboats, electric heavy trucks, and battery swap stations are aggregated to form a virtual power plant that participates in the electricity market. By increasing electricity consumption during low prices and utilizing port energy storage during peak demand, they can generate additional revenue in the electricity trading market. Xie Fei, secretary of the Party Committee at Jiangsu Lianyungang Port Group, stated that each electric tugboat saves approximately 4 million yuan annually compared to fuel oil, and they plan to construct more electric vessels in the future.
In Hubei’s Xiangyang, an automotive parts manufacturer has integrated its distributed photovoltaic, energy storage, and electricity loads into a virtual power plant platform to earn revenue and reduce costs. This “chimney-less” factory has enabled hundreds of local enterprises to upgrade their energy usage. Yan Han, the project leader for the national grid’s Xiangyang virtual power plant, noted that by aggregating the electricity loads of businesses, they create regulatory resources that help flatten demand peaks and troughs while achieving an 8% reduction in energy costs through participation in the electricity market.
This year, eight virtual power plant operators in Suzhou, Jiangsu have submitted applications for grid access, compared to only two last year. Liu Shan, project leader for the national grid’s Suzhou virtual power plant, stated that the policy adjustments have created profitable avenues for virtual power plants, making it easier for companies with energy storage, charging piles, and renewable energy to connect to them. Experts predict that national virtual power plant adjustment capacity will exceed 20 million kilowatts in the next three years, approaching the installed capacity of the Three Gorges Hydropower Station. Zheng Tao, an expert at State Grid NARI Group, mentioned that the profit potential for virtual power plant companies is significant and has roughly doubled in annual averages, with expectations for substantial growth this year.
