Analysis of Peak-Valley Arbitrage Model Transformation for Energy Storage Enterprises Following the Cancellation of Administrative Time-of-Use Tariffs in the Photovoltaic Industry

Based on the latest information I have collected, I now provide you with a systematic and comprehensive analysis report.

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In December 2025, the National Development and Reform Commission (NDRC) and the National Energy Administration issued the “Notice on Doing a Good Job in the Signing and Performance of 2026 Medium and Long-Term Electricity Contracts” (Fa Gai Yun Xing No. 1502), clearly stating: “In principle, electricity users directly participating in market transactions will no longer implement government-formulated time-of-use tariffs.”[1] This policy marks a critical stage in China’s electricity marketization reform.

Province/Region	Policy Status	Core Content
Shaanxi Province	Implemented starting 2026	Time-of-use prices for market-oriented users will no longer implement the government’s peak-valley floating policy; electricity prices are formed through the transmission of market wholesale average prices[1]
Sichuan Province	Optimized and adjusted	The market-oriented transaction electricity price component is determined by the market, while the non-spot component still implements the current time-of-use policy[1]
Liaoning Province	First to cancel	Cancelled the peak-valley time-of-use electricity tariff policy[2]
Chongqing Municipality	In progress	After the trial operation of continuous settlement in the spot market, electricity prices are formed in a market-oriented manner based on supply and demand relations[1]
Hubei Province	Follow-up issued	New rules will be implemented in the 2026 medium and long-term electricity transaction scheme[3]

The essence of this reform is

: the time-of-use tariff mechanism itself is retained, but its formation method has shifted from “government-formulated” to “market-determined”[1]. The core driving factors include:

1. Inevitable requirement for the construction of a national unified electricity market
   : The goal is to “regulate the middle (power grid) and liberalize the two ends (power generation and electricity consumption)” so that prices truly reflect supply and demand and costs[2]

2. Technical conditions provided by the mature electricity spot market
   : As of 2025, most provinces across the country have launched trial operations of the electricity spot market, which can provide real-time electricity price signals every 15 minutes to 1 hour[2]

3. Addressing inherent drawbacks of the original administrative time-of-use tariffs
   :
   • Difficulty adapting to new energy fluctuations: When photovoltaic power generation is in full swing, the market price is low, but the administrative tariff is set as “peak”, curbing consumption[2]
   • Distorted price signals: Fixed time period division cannot match the real supply and demand that changes daily[2]

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Comparison Dimension	Traditional Administrative Time-of-Use Tariff Model	Market-Oriented Pricing Model (Post-Reform)
Price Determination Mechanism	The government stipulates fixed peak, flat, and valley time periods and floating ratios	Determined by market supply and demand; time periods and price differences fluctuate in real time
Core Arbitrage Logic	Passive arbitrage: Charge during fixed valley periods, discharge during fixed peak periods	Active trading: Requires accurate prediction of daily electricity price fluctuations to identify multiple charging and discharging windows
Revenue Predictability	High. Price differences and time periods are clear, and the revenue model is simple and stable	Low. Electricity prices are highly volatile, leading to high revenue uncertainty
Requirements for Energy Storage	Low. Only need to operate according to fixed strategies	Extremely high. Requires electricity trading capabilities, load forecasting algorithms, and rapid response capabilities
Typical Revenue	Stable but low	Volatile but with higher potential returns

1. Significant narrowing of arbitrage space
   : In regions such as Zhejiang and Jiangsu, due to policy adjustments, the revenue of existing energy storage projects has dropped by
   more than 40%
   , and the investment payback period has been significantly extended[2]

2. Industry reshuffle is imminent
   :
   • Enterprises lacking technology, capital, and operational capabilities face elimination[2]
   • The simple business model that relied on fixed price differences in the past is no longer sustainable[2]
   • Small and medium-sized manufacturers may be forced to exit the market

3. Revenue model invalidation
   : The “certain revenue model” based on government-fixed peak-valley price differences has become invalid; the charging costs and discharge revenues of energy storage will change daily with market prices[4]

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Energy storage enterprises need to achieve

:

1. Shift from passive arbitrage to active trading
   : No longer rely on fixed peak-valley time periods stipulated by the government, but conduct value scheduling based on real-time market signals, focusing on discharging during actual price peak periods[4]

2. Shift from single arbitrage to diversified profit generation
   : Build a diversified revenue model of ‘spot market arbitrage + capacity compensation + ancillary services’[5]

3. Shift from policy-driven to market-driven
   : Put an end to the “easy profit” model that relies on policy dividends, and enter a high-level competition stage that competes on technical hard power, operational soft power, and market insight[2]

Profit Model	Specific Content	Revenue Characteristics
Spot Market Arbitrage	Capture intraday real-time price difference fluctuations through high-frequency charging and discharging with more than 4 daily cycles	Volatile revenue, dependent on price forecasting capabilities
Capacity Compensation	Fixed fees are paid for available energy storage capacity in regions such as Shanxi	Stable “guaranteed minimum income”
Ancillary Services	Obtain compensation by providing services such as peak regulation, frequency regulation, and backup to the power grid	Stable revenue, requires technical capabilities
Virtual Power Plant	Integrate distributed resources to participate in power grid demand response and transactions	Aggregated revenue, scale effect

in 2025, significantly enhancing investment return capabilities[5]

1. Hardware Level
   :
   • Provide products with longer cycle life (e.g.,
     15,000 cycles
     )[6]
   • Higher safety and reliability to adapt to more frequent charging and discharging demands
   • Large-scale application of large battery cells, replacement of winding process with lamination process[5]

2. Software and Service Level
   :
   • Intelligent EMS (Energy Management System)
   • Support for electricity trading algorithms
   • Accurate price forecasting capabilities

Shift from rigid “clock-based scheduling” to “value-based scheduling” based on real-time or day-ahead price signals[4]:

• Discharging Timing
  : Focus on actual price peak periods (e.g., the 19:00-22:00 evening peak highlighted under marketization)[4]
• Charging Timing
  : Charge during daytime price valleys or when providing ancillary services such as frequency regulation to the system[4]
• Strategy Adjustment
  : No longer operate according to fixed schedules, but dynamically adjust based on market signals

1. Enterprise Level
   : Transform from a simple “arbitrageur” to a “service provider” for the power system[3]
2. Investor Level
   : Transform from an “asset holder” to a “resource operator”[4]
3. Positioning Transformation
   : Upgrade from a pure energy storage manufacturer to an energy storage solution provider[3]

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For commercial and industrial users, in response to the tariff mechanism reform, the following strategies can be adopted:

User Type	Strategy Recommendations
Enterprises with Strong Capabilities	Deploy their own energy storage systems, charge during valley periods, and use energy storage power supply when electricity prices are high to smooth out the electricity cost curve[3]
Enterprises with Weak Capabilities	Outsource energy storage-related businesses to specialized power sales companies or energy management service companies[3]
Large-Scale Users	Cooperate with third-party operation companies with strong trading capabilities to obtain professional support[6]

Investors can no longer make investment decisions based solely on historical price differences, and must incorporate the following factors into core considerations[6]:

1. Electricity Trading Capability
   : Whether capable of participating in spot market transactions
2. Risk Hedging Solutions
   : How to respond to electricity price fluctuation risks
3. Operational Capability
   : Market-oriented operational capabilities throughout the entire life cycle
4. Cooperation Strategy
   : Choose to build an in-house professional team or cooperate with third parties

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According to industry analysis, the energy storage market will present the following characteristics in 2026[5]:

1. Market Size
   :
   • China’s new energy storage installed capacity is expected to reach
     203GWh
   • Global lithium battery shipments for data center energy storage will exceed
     69GWh
     in 2027, increase to
     300GWh
     in 2030, with a compound annual growth rate (CAGR) of over
     80%
     from 2024 to 2030

2. Development Stage
   : Enter a new stage of large-scale development characterized by
   “simultaneous growth in volume and price + quality-first”

3. Competition Focus
   :
   • Shift from “production capacity expansion” to “digital and intelligent integrated solutions suitable for different application scenarios”
   • Shift to “resource sharing, co-construction, and win-win ecological chain”

Energy storage technology features

[5]:

• Large Battery Cells
  : CATL’s 587Ah battery cell, BYD’s 2710Ah blade battery dedicated to energy storage, Hithium Energy’s 1300Ah battery cell dedicated to long-duration energy storage[5]
• Long-Duration Energy Storage
  : 4-hour energy storage systems have become mainstream, and the installed capacity share of long-duration energy storage (≥4 hours) increased significantly in 2025[5]
• Lamination Process
  : Large-scale application, breaking through bottlenecks in thermal management, lifespan, and cost for long-duration energy storage

Overseas markets are becoming the core engine of enterprise revenue growth[5]:

• Hithium Energy
  : 2025 European shipments increased
  10 times year-on-year
  ; 2026 overseas market layout will prioritize developed regions
• Shuangdeng Co., Ltd.
  : Emphasizes localization, builds localized R&D, production, and service capabilities, and realizes the leap from “Made in China for export” to “global localized operation”

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1. Policy Implementation Risk
   : There are differences in the pace of policy advancement across provinces, and transition arrangements may occur[1]
2. Electricity Price Fluctuation Risk
   : Spot market prices are highly volatile, increasing revenue uncertainty[2]
3. Technology Iteration Risk
   : Rapid technological iteration may lead to asset depreciation
4. Market Competition Risk
   : Industry concentration is increasing, and small and medium-sized manufacturers face elimination pressure[5]

1. Focus on leading enterprises with full industry chain capabilities
   : CATL, Sungrow Power Supply, Hithium Energy, etc., will gain more market share by virtue of technological innovation and cost advantages[5]
2. Focus on deploying high-value scenarios
   : Rigid demand markets such as energy storage supporting AI computing infrastructure and long-duration energy storage[5]
3. Focus on enterprises with international capabilities
   : Global layout capabilities have become a core competitiveness[5]
4. Emphasize operational capabilities rather than just initial investment costs
   : Market-oriented operational capabilities throughout the entire life cycle have become a core competitive factor[4]

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The cancellation of administrative time-of-use tariffs in the photovoltaic industry marks the end of the “era of easy peak-valley arbitrage profits” relying on government-fixed tariff policies, but this is

[2].

The energy storage industry is undergoing transformation from three dimensions:

1. Business Model
   : Shift from single peak-valley arbitrage to a diversified model of “spot market arbitrage + capacity compensation + ancillary services”
2. Operational Capability
   : Shift from “clock-based scheduling” to “value-based scheduling”, requiring accurate price forecasting and trading capabilities
3. Role Positioning
   : Transform from “arbitrageurs” to “service providers” for the power system

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[1] Shanghai Nonferrous Metals Network - Major Reform of Time-of-Use Tariffs! Farewell to “Unified Pricing”, Enter a New Stage of “Market Classification” (https://new-energy.smm.cn/h5/content/9014/103686557)

[2] Xuanyuan Zhitou - Cancellation of Time-of-Use Tariffs, Complete Restructuring of Energy Storage Arbitrage Logic, The “Era of Easy Profits” Ends! (https://www.xuanyuanzhihe.com/sys-nd/441.html)

[3] Tencent News - A Major News Broke Before the New Year, Shocking the Entire Industry, Is the Sky Falling for the Energy Storage Industry? (https://news.qq.com/rain/a/20260112A075ZO00)

[4] Shanghai Nonferrous Metals Network - Analysis of the Impact of Time-of-Use Tariff Reform on the Energy Storage Industry (https://new-energy.smm.cn/h5/content/9014/103686557)

[5] Securities Daily/Sina Finance/Eastmoney - The Energy Storage Industry Moves Toward a New Stage of Value Growth (https://finance.sina.com.cn/stock/hyyj/2026-01-13/doc-inhharqc8006834.shtml)

[6] Xuanyuan Zhitou - Analysis of Response Strategies for Energy Storage Enterprises (https://www.xuanyuanzhihe.com/sys-nd/441.html)