Hainan Issues Document 136: New Solar Pricing Mechanism with 0.2 Yuan/kWh Bid Cap and 75% Mechanism Ratio

Hainan Document No. 136 Officially Released: Photovoltaic Incremental Bidding Lower Limit Set at 0.2 Yuan/KWh, Mechanism Ratio at 75%

On September 26, the Hainan Provincial Development and Reform Commission announced the implementation plan for the market-oriented reform of new energy grid prices in Hainan Province. The document specifies the mechanism pricing, energy quotas, and execution duration for both existing and incremental projects.

Existing Project Energy Quotas: For projects operational before 2023, all generated energy is included in the mechanism quota. Projects launched in 2023 will have a mechanism quota ratio of 90%, while those starting in 2024 will have a ratio of 85%. Projects that commence between January 1 and May 31, 2025, will have a mechanism quota ratio of 80%.

Mechanism Pricing: For grid-connected projects under the competitive allocation scheme, the original allocation price will apply. Other projects will follow the Hainan Provincial coal power baseline price of 0.4298 yuan/kWh. The execution duration will be determined by subtracting the time the project has been operational from 20 years, ending on December 31, 2025.

Incremental Project Bidding Schedule: The first bidding for incremental projects will occur in October 2025, covering concentrated and distributed renewable energy projects that commence operations between June 1, 2025, and December 31, 2026 (excluding offshore wind projects with defined prices). Subsequently, annual incremental project bidding will take place every October.

Mechanism Energy Quota: The total scale of energy for the first bidding will be aligned with the non-market ratio of new energy for 2025. Offshore wind energy will be determined at 80% of the expected annual total grid-connected energy, while onshore wind and photovoltaic energy will be set at 75%.

Mechanism Pricing: The bidding upper limit will be determined each year considering reasonable cost returns, green value, supply and demand dynamics in the electricity market, and user affordability, with a maximum of 0.4298 yuan/kWh. The initial bidding lower limit will be calculated based on the cost of the most advanced power station (excluding returns) and may be adjusted in subsequent rounds. During the initial year, the bidding lower limit for onshore wind and photovoltaic projects will be set at 0.20 yuan/kWh, while offshore wind projects will have a lower limit of 0.35 yuan/kWh.

Execution Duration: The duration will be based on the average period required for similar projects to recover initial investments, with specific terms detailed in the bidding notice. In 2025, the execution periods will be 14 years for offshore wind projects and 12 years for onshore wind and photovoltaic projects.

The complete plan is outlined in the notification from the Hainan Provincial Development and Reform Commission regarding the implementation of the market-oriented reform of new energy grid prices.

Overall Strategy and Principles: The aim is to deepen the market-oriented reform of new energy grid prices in Hainan, establishing a sustainable pricing mechanism that aligns with the characteristics of new energy development in the province. This includes fair responsibility sharing, clear differentiation between existing and incremental projects, and strong support for Hainan’s free trade port new energy development goals.

Key Tasks:

1. Transition to Market-Driven Pricing: From January 1, 2026, all new energy projects in Hainan (including all wind and solar power) will fully enter the electricity market, with prices determined through market transactions.
2. Enhancing Market Transaction Mechanisms: New energy projects will be eligible for various trading cycles, allowing both parties to self-determine the terms of long-term contracts.
3. Improving Price Mechanisms: Adjustments to the spot market price limits will consider local fuel costs and user affordability.
4. Clarifying Auxiliary Service Fee Allocation: Fees will be shared based on electricity consumption and participation in market transactions.

Support for High-Quality Development: Establish a sustainable price settlement mechanism that differentiates between existing and incremental projects, specifying energy quotas and pricing levels.

Projects and Pricing:

• Existing projects operational before June 1, 2025, will have their entire grid-connected energy included in the mechanism.
• Incremental projects starting from June 1, 2025, will be subject to bidding for pricing mechanisms in future years.

Transition Period Pricing Policy: From June 1 to December 31, 2025, existing and incremental centralized projects will refer to the “Hainan Province 2025 Electricity Market Transaction Plan” for pricing.

Monitoring and Risk Prevention: Regularly monitor transaction price fluctuations and assess their reasonableness. In case of abnormal fluctuations, prompt warnings and analyses will be initiated.

Policy Communication: Conduct training to raise awareness of policies, transaction rules, and settlement processes, helping enterprises enhance their market participation capabilities.

This comprehensive reform aims at fostering a competitive environment for renewable energy in Hainan, ultimately contributing to the province’s green development goals.