I. Quick Summary of the Core Content
This news report discusses two highly counterintuitive phenomena that occurred in the Guangdong electricity market in the first half of 2026: renewable energy (RE) power generation companies were actually willing to sell electricity at a loss. The average price they declared was as low as -0.035 yuan per kilowatt-hour, which means they were paying the buyer 0.035 yuan for each kilowatt-hour of electricity they supplied. The actual average settlement price for selling electricity was only 0.269 yuan per kilowatt-hour, significantly lower than the 0.38 yuan per kilowatt-hour for coal-fired power and 0.8 yuan per kilowatt-hour for gas-fired power. This is not a sign of a chaotic market, nor does it indicate that the cost of generating RE energy is truly much lower than that of coal-fired power. Instead, it is the result of the combined effects of the specific costs of power generation, market trading rules, and the inherently weather-dependent nature of RE energy. This also signifies that the era when RE companies could easily make profits has come to an end.
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II. A Simple Explanation of the Logic Behind the Phenomena from Four Different Perspectives
1. RE Companies Reporting “Negative Prices” is Not Charitable Behavior, but a Calculated Choice
Many people might wonder: How can selling electricity at a loss be a profitable strategy? However, a quick calculation reveals the truth:
Coal-fired power generation involves costs associated with mining, transporting, and burning coal, with fuel costs alone amounting to around 0.20 to 0.30 yuan per kilowatt-hour. The cost of natural gas for gas-fired power is even higher, leading to fuel costs of around 0.60 to 0.70 yuan per kilowatt-hour. Therefore, their pricing cannot be lower than these fuel costs, otherwise, they would incur a loss for each kilowatt-hour of electricity produced. Renewable energy, on the other hand, is different. Once the power plants are built, the wind and sunlight are free to use. Producing additional electricity hardly incurs any additional costs. It’s like having an open-air orchard where the apples are ripe and will rot if not picked—no revenue is generated if they are left unharvested.
During times when no one uses electricity at noon and the power grid cannot handle the excess supply, RE companies have a simple choice: Even if they have to sell electricity at a loss of 0.035 yuan per kilowatt-hour, it’s better than letting the electricity go to waste. Moreover, Guangdong’s regulations set a maximum loss limit of 0.05 yuan per kilowatt-hour. With additional benefits such as green energy certificates and carbon emission reductions, the overall outcome is not a loss. This is similar to how cinemas sell leftover tickets for 10 yuan 10 minutes before the show starts or how hotels sell empty rooms at low prices at the last minute. It’s better to earn less than to lose everything.
2. The Lower Average Selling Price of RE Energy Compared to Coal-Fired Power
The reason behind this is that the timing of RE energy production does not align with peak electricity demand. In Guangdong, photovoltaic (PV) power generation accounts for more than 70% of the total RE capacity. PV power generation is highest between 12 noon and 2 pm, during the off-peak production hours for factories and when people are on lunch breaks, resulting in extremely low prices. Conversely, electricity demand peaks between 6 pm and 8 pm when people return home to use air conditioning, lights, and go out to eat, driving up prices. However, by this time, the sun has set, and PV power generation stops. This means that over 90% of the RE energy is produced during the lowest-priced periods, leaving it with little opportunity to be sold at higher prices during peak demand times.
3. Coal-Fired Power Generates Higher Prices and Benefits from Early Contracting
Another factor contributing to the price difference is the difference in trading methods. In the Guangdong electricity market, 90% of electricity transactions are not made on the same day but are part of medium- to long-term contracts signed months or even years in advance, fixing the price. Coal-fired power companies can thus lock in a stable income by agreeing to supply electricity at 0.38 yuan per kilowatt-hour to factories and large enterprises at the beginning of the year, regardless of market fluctuations. RE companies, however, have not adapted to this approach. Less than 20% of their electricity production is covered by such contracts, and for PV power, less than 1% is locked in in advance. The remaining 90% of their electricity is sold in the spot market on the same day, leading to lower average prices. It’s like having a milk tea shop that produces all its products at 2 am when no one is around, resulting in lower average selling prices during peak demand times.
4. The Current Low Prices Are Not a Market Failure but a Wake-Up Call for the RE Industry
In the past, it was relatively easy for RE companies to make profits in China: the government set a fixed benchmark price, and as long as they built power plants and generated a certain amount of electricity, they could calculate their profit with little risk. However, the current price differences indicate that this profit model is no longer viable. Whether RE companies make a profit in the future depends not on the total amount of electricity they generate but on their ability to sell it during the periods when prices are highest. The industry’s focus will shift to companies that can accurately predict power generation, sign long-term high-price contracts, store electricity during off-peak times, and effectively utilize green energy incentives. The days of easily making substantial profits by simply installing PV power plants are over.