Summary of Key Points
The new energy generation industry has recently encountered a tough period: state-owned and central enterprises focusing on wind and solar power have seen their net profits halve or even result in losses. Even benchmark companies like Three Gorges Energy have experienced a sharp decline in profits, with profits plummeting by 66%-73% in the first half of the year. The reasons behind this include a significant drop in electricity prices, an increase in the rate of wasted wind and solar power (electricity produced cannot be sold), and rising costs. The previous logic of "earning money by securing resources and expanding scale" no longer applies. Companies are now more selective in their projects and are willing to pay penalties to avoid winning bids. The industry is shifting from a focus on scale to a focus on quality, entering a painful period of transformation.
Detailed Analysis
1. Profits Plummet: State-Owned and Central Enterprises Suffering Losses
The decline in profits among new energy companies is not an isolated phenomenon; it represents a widespread collapse across the industry:
- Benchmark companies leading the decline: Three Gorges Energy's net profit for the first half of the year is expected to be between 1.045 billion and 1.295 billion yuan, a year-on-year decrease of 66%-73% (compared to 3.8 billion yuan last year); Datang New Energy's profit decreased by 58%-60%, and China General Nuclear New Energy's profit decreased by nearly 50%.
- Increased volume does not equal increased profits: Guodian Power's photovoltaic installed capacity and power generation have increased, but its net profit plummeted by 62.94%, with a net profit of only 0.026 yuan per kilowatt-hour (previously, it was more than 0.02 yuan per kilowatt-hour). Jinkai New Energy's profit decreased by 85.89%, almost resulting in a loss.
- The reasons are straightforward: More electricity is being produced, but it cannot be sold at a profitable price, or the electricity produced cannot be sold at all, leading to significant profit losses.
2. Electricity Prices and Consumption: A Double Blow to Profitability
The direct causes of the profit collapse are two major obstacles:
- Electricity prices fall below cost levels: Starting from 2026, all new energy projects will enter the market for trading, without the policy-backed price guarantees. Photovoltaic settlement prices in northwestern provinces are generally below 0.15 yuan per kilowatt-hour, and in Shandong, they are as low as 0.08 yuan per kilowatt-hour (lower than the cost). The electricity prices for wind power at China Resources New Energy have dropped from 0.45 yuan to 0.35 yuan per kilowatt-hour, and for photovoltaic power, from 0.37 yuan to 0.28 yuan per kilowatt-hour. For every 10-cent decrease in electricity prices, project profitability drops by 0.5-0.8 percentage points, completely ruining the previously calculated profit margins.
- Wasted wind and solar power returns: The utilization rates of wind and solar power nationwide are 90.9% and 91.4%, respectively, a year-on-year decrease of 2.3 and 2.6 percentage points, meaning that 10% of the produced electricity is wasted. Third-party estimates suggest that 360 billion kilowatt-hours of electricity were wasted in the first half of the year (a 49% increase compared to the same period last year), and this could rise to 700 billion kilowatt-hours for the whole year, equivalent to 20% of the total green energy production in 2025. For example, Chint Electric's photovoltaic power generation in 12 provinces decreased by 20%-40%, meaning the electricity produced went unsold and was essentially wasted.
3. Reversal of Investment Logic: From "Securing Resources" to "Selecting Projects"
Companies used to compete for wind and solar resources; now, they are more selective and even willing to abandon bids:
- New installed capacity halved: In the first half of 2026, new photovoltaic installed capacity decreased by 66% (the largest decline during the 14th Five-Year Plan period), indicating that companies are reluctant to invest in new projects.
- Even if they win bids, they may not proceed: In several large-scale photovoltaic projects in Xinjiang and Inner Mongolia, central enterprises have chosen to pay penalties to avoid taking them on, with the total amount exceeding 2.1 billion yuan. Why? Because the regions where these projects are located have poor electricity consumption and low electricity prices, making them unprofitable.
- Quality over scale: Companies are no longer solely focusing on the size of installed capacity but on the ability to sell electricity, electricity prices, and tax costs (including hidden expenses). For example, three 100MW wind farms with similar power generation levels can have significantly different annual revenues due to different trading strategies (one generating 60 million yuan and another 100 million yuan)—operational efficiency has become a critical factor.
4. Rising Costs: Additional Pressure on Profits
In addition to electricity prices and consumption issues, costs are also putting a strain on profits:
- Tax refunds: Early projects did not include land use taxes and farmland occupation taxes, which are now being reclaimed. These additional expenses further reduce already meager profits.
- Other costs: Costs such as grid connection fees and maintenance expenses are also increasing, further squeezing profit margins.
5. Industry Transformation: A Painful Transition to a New Direction
Although the industry is facing difficulties, the energy transition will not stop. This is merely a temporary setback:
- Policy support: Efforts are being made to develop a spot market, improve ancillary services (such as compensating power plants for peak shaving), establish capacity compensation mechanisms, and promote new models like direct green energy connections and zero-carbon parks.
- Company transformation: Companies are shifting from a strategy of "expanding rapidly" to one of "precision farming"—optimizing trading strategies (such as selling electricity at higher prices), improving maintenance efficiency, and selecting high-quality projects with good electricity consumption and higher electricity prices.
In short, the new energy industry used to rely on policies and scale to generate profits; now, it must rely on actual operational capabilities and project selection to be successful. After this period of hardship, the companies that survive will be more resilient and sustainable in the long run.
In one sentence: The new energy industry is moving from an era of easy profits to an era of competitive performance. The good times of the past are over, but in the long run, the transformed industry will be more sustainable.