Analysis of Valuation Impact on Power Operators Against the Background of New Energy Power Marketization Reform

Based on public policies and industry research, Document No.136 clarifies the market-oriented arrangement for new energy grid-connected electricity prices. There are significant inter-provincial differences in the protection of “mechanism electricity prices” between existing projects (grid-connected before June 1, 2025) and new projects. The transition of thermal power to peak and frequency regulation is reshaping its revenue structure and valuation logic. The following sections are expanded in modules with data basis and risks attached.

1. Overall Policy Framework and “Separation of Old and New Projects”

• Document No.136 requires that new energy grid-connected electricity “should be fully integrated into the market in principle” and establishes a “price settlement mechanism for sustainable development of new energy” to achieve the transition. The mechanism electricity price for existing projects is implemented according to current policies, not higher than the local coal-fired power benchmark price; new projects need to form mechanism electricity prices through bidding [1][4]. This mechanism is a “transitional arrangement” and will exit when conditions are mature [1].

2. Inter-provincial Differences in Protection Intensity: High Protection in the East vs. Low Protection in the Northwest

• East China/Southeast China (e.g., Zhejiang, Jiangsu): Strong demand side, high coal-fired power benchmark price, more mature channels for green certificates and green power environmental premiums. Studies believe that the protection of new energy mechanism electricity prices in the eastern region is “relatively in place” (closer to the logic of minimum guarantee) [4]. Combined with market experience, under similar logic, existing projects in provinces like Zhejiang can obtain relatively high electricity quantity and price guarantees, which is conducive to the stability of cash flow and dividends of existing assets [4][5].
• Three Northern Regions (Gansu, Ningxia, etc.): The “electricity quantity scale guarantee” for existing projects is generally low. For example, the mechanism electricity quantity scale of existing projects in Gansu is about 15.4 billion kWh (including full inclusion of some special types), and the guarantee ratio for existing conventional projects is estimated to be “less than 20%” based on 2024 wind and solar grid-connected electricity [4]; Ningxia’s mechanism electricity quantity ratio for both existing and new projects is “only 10%”, which is one of the regions with the weakest protection intensity currently seen [4]. In addition, the implementation period and upper limit of mechanism electricity prices are stricter in many western provinces, further lowering revenue expectations [4].

3. Impact Path on Valuation of Power Operators

• Asset Structure and Regional Layout as Key to Valuation Differentiation:
  • Operators with a high proportion of existing assets, located in high-protection provinces, and with complementary thermal power/nuclear power/base load assets are more likely to hedge against new energy market entry volatility.
  • Operators with a single layout in the northwest low-protection region and weak consumption rate may face valuation pressure due to spot market risks and cash flow volatility.
• Changes in Profit Quality and Risk Premium:
  • Old projects in high-protection eastern provinces receive “minimum guarantee + limited reduction” transitional arrangements, which help maintain cash flow and dividend stability, thereby supporting dividend yield and valuation center.
  • Conversely, existing projects in low-protection northwest provinces have “weak minimum guarantee”, new projects rely on market electricity prices, leading to large cash flow volatility and rising risk premiums, with more obvious valuation discounts [4][8].
• Consumption Rate and “New Project Life Valve”:
  • Regulatory data shows that the national wind power utilization rate was 94.2% and photovoltaic utilization rate was 95.0% in January-September 2025; however, the photovoltaic utilization rate in Mengxi, Xinjiang, Gansu, and Qinghai was less than 90% [2]. In low-consumption provinces combined with low mechanism protection, the economic pressure of new projects intensifies.
  • Document No.136 requires that the scale of new mechanism electricity quantity in each region be dynamically linked to the “completion of non-hydro renewable energy consumption responsibility weight” each year. Regions that fail to complete the consumption task need to increase the scale of mechanism electricity quantity [3]. This linkage provides marginal improvement space for “exchanging consumption for guarantee”, but has limited impact on existing revenue and there is uncertainty in implementation rhythm [1][3][8].

1. Transition Logic and Formation of Three-Part Revenue System

• The role of thermal power is evolving from “main power source” to “regulating power source”, and the long-term downward trend of utilization hours is clear (expected to drop from about 4377 hours in 2024 to about 3098 hours in 2035) [4][5]. To compensate for the decline in utilization hours, regulators have established a capacity price mechanism:
  • From 2024 to 2025, the proportion of fixed costs recovered by capacity prices in each province is about 30%-50%, and will rise to 50%-70% from 2026 onwards. Calculated based on 1 million kW units and different utilization hour scenarios, the “per kWh capacity price subsidy” is about 0.058-0.066 yuan/kWh under a 70% recovery rate [4].
  • Form a three-part coal-fired power revenue system of “capacity fee + electricity quantity fee + regulatory fee” [4][5].
• The “Basic Rules for the Power Auxiliary Service Market” issued in April 2025 further unifies the auxiliary service mechanisms such as peak regulation, frequency regulation, reserve, and ramping, providing an institutional basis for peak and frequency regulation revenue [6].

2. Drivers of Value Revaluation

• Cash Flow and ROE Stabilization: Capacity prices lock in part of fixed costs, combined with auxiliary service compensation and falling coal prices, leading to improved ROE and rising dividend ratios for leading thermal power companies. In the first three quarters of 2025, some representative thermal power enterprises have increased their dividend ratios to the range of 50%-70%; many companies have given clear dividend ratio or amount commitments, supporting the “dividend asset” attribute [4][5].
• Dividend and Valuation Logic Switch: The market’s attention to thermal power has shifted from “profit volatility” to “shareholder return and stability”. Leading companies with high dividend commitments and stable balance sheets (e.g., some central coal enterprises) are more favored by low-risk preference funds, driving the valuation center upward [4][5].

3. Sustainability Judgment (More “Fluctuating Upward” Than “Linear Continuous”)

• Supporting Factors:
  • The capacity price mechanism has been established and the recovery ratio has been increased in stages, providing thermal power with certainty like a “minimum wage” [4][5].
  • Under high-proportion new energy access, the system’s flexible regulation demand is rigid, and the expansion of peak and frequency regulation markets is expected to offset the decline in utilization hours [4][6].
• Constraints and Risks:
  • The continuous decline in utilization hours may weaken the contribution of electricity quantity fees, and spot price volatility in various provinces and the decline in marginal costs of new energy will bring competitive pressure [4][8].
  • Coal prices and carbon costs still have uncertainties, which may squeeze marginal profit margins [4][6][8].
  • The capacity price and auxiliary service compensation policies may be dynamically adjusted (recovery ratio, compensation intensity, pricing mechanism, etc.), bringing uncertainty in policy rhythm and magnitude [3][6][8].
• Conclusion Judgment: Overall, the value revaluation of thermal power driven by “peak and frequency regulation + capacity price” has certain institutional support and fundamental basis, but is constrained by multiple factors such as declining utilization hours, coal prices and carbon costs, spot market games, and policy rhythm. It is more likely to present a revaluation process of “gradually upward in fluctuations” rather than linear continuous improvement. Investors need to track the spot market clearing price and price volatility in each province, as well as the implementation rhythm of capacity price adjustments and auxiliary service rules [3][4][6][8].

• Regional and Asset Structure Selection:
  • Prefer operators with a high proportion of existing assets, located in high-protection provinces, and with complementary thermal power/nuclear power/base load assets to hedge against new energy market entry volatility.
  • Be cautious about new energy project portfolios with a single layout in the northwest low-protection region and weak consumption rate, and pay attention to their spot market risks and cash flow volatility.
• “Combination Strategy” of Thermal Power and New Energy:
  • Use the stability of thermal power capacity prices and auxiliary services to smooth new energy project volatility, balancing dividends and growth.
  • On the new energy side, it is necessary to strengthen forecasting and trading capabilities, and prioritize regions with high consumption rates and monetizable green certificate environmental values.
• Valuation and Tracking Points:
  • Pay attention to annual updates of mechanism electricity price rules in each province, changes in recovery ratios, and policy signals such as auxiliary service compensation intensity [1][3][4][6].
  • Track spot market clearing prices and price volatility, and attach importance to changes in the comprehensive revenue structure of “price difference + electricity quantity” [4][8].

• Differences in policy rhythm and inter-provincial implementation intensity may bring risks of adjustment to electricity price/compensation expectations [1][3][4][6][8].
• The decline in utilization hours combined with fluctuations in coal prices and carbon costs may squeeze marginal profit margins [4][6][8].
• New consumption targets, new installed capacity rhythm, and the development of flexible resources such as energy storage/demand response may change the power system balance pattern and revenue distribution [2][3][4][6].

• [1] Rocky Mountain Institute. 2025 Insight into Power Marketization Reform and Electricity Price System. https://rmi.org.cn/wp-content/uploads/2025/05/final-0508-2025电力市场化改革与电价体系洞察.pdf
• [2] The Paper. National Wind and Photovoltaic Utilization Rate Hit a Recent Low in the First Three Quarters of 2025. https://m.bjnews.com.cn/detail/1763026932129703.html
• [3] Zhonglun Law Firm. Impact of New Energy Electricity Price Marketization Reform on Project Investment and M&A and Countermeasures. https://www.zhonglun.com/research/articles/54422.html
• [4] Multiple Securities Firms/Research Institutions. Power Industry Strategy and Electricity Reform Interpretation (Including Detailed Rules for Gansu/Ningxia Provinces). https://pdf.dfcfw.com/pdf/H3_AP202508211731530717_1.pdf ; https://pdf.dfcfw.com/pdf/H301_AP202507181711187856_1.pdf ; https://pdf.dfcfw.com/pdf/H3_AP202505301681841978_1.pdf ; https://www.7hcn.com//f/343107/n9Tn0543JX005X1mh8j4j91Y.jpg ; https://www.7hcn.com//f/343093/lxdMaEwKwaNeNELX1eEBrlw6.jpg ; https://www.7hcn.com//f/343095/OMLmKv0L0KXtmL0KGKHKGLlJ.jpg ; https://www.7hcn.com//f/343089/EZ3HI2gj42xi2h2z0H0hjElK.jpg
• [5] Huabao Power ETF (159146) Component and Valuation Description (Including Dividend and Valuation Logic). https://www.163.com/dy/article/KHCICJ7A0519QIKK.html
• [6] Energy Storage Network. In-depth Interpretation of Document No.1360 | New Energy Consumption and Regulation (Peak and Frequency Regulation and Compensation Mechanism). https://www.chujiewang.net/cxw/col151/10269
• [7] Greenpeace/Industry Research. Visualization of Inter-provincial New Energy Consumption and Installed Capacity Structure. https://www.pvmeng.com/wp-content/uploads/image-1950.png ; https://www.greenpeace.org.cn/wp-content/uploads/2025/11/Figure-1_1-769x1024.png
• [8] 2026 Public Utilities Industry Annual Strategy (Including New Energy Operator Valuation and Policy Rhythm). https://pdf.dfcfw.com/pdf/H3_AP202512201804393762_1.pdf

• Market Data and Policy Interpretation: Mainly from securities firm APIs and policy documents/research reports, the above reference [0] corresponds to market and policy information provided by securities firm APIs.
• Internet Search and News: Used to supplement policy and industry background, with corresponding numbers [1]-[8] given, and original sources and links retained for verification.
• Correction Notes: Numerical valuation difference statements not directly supported by tools have been removed, all changed to qualitative judgments and matched to specific references; a more conservative