Harnessing the Sun: The Rise of Distributed Photovoltaics in China’s Energy Market

Distributed Photovoltaic (PV) Power Generation: Capturing Light in the Market Wave

As of the end of 2024, distributed photovoltaic power generation has emerged as a significant force in the energy transition. The total installed capacity reached 370 million kilowatts, which is 121 times greater than the end of 2013 and accounts for 42% of the total photovoltaic power generation capacity. In 2024 alone, the newly added capacity for distributed photovoltaic power generation was 120 million kilowatts, representing 43% of the total new photovoltaic generation capacity that year. The total generation from distributed photovoltaic systems was 346.2 billion kilowatt-hours, making up 41% of the overall photovoltaic power generation.

With the increasing capacity of distributed photovoltaic installations, the industrial development environment has also changed. The release of the Notice on Deepening the Market-oriented Reform of Renewable Energy Grid Electricity Prices (hereafter referred to as “Document No. 136”) and the Management Measures for the Development and Construction of Distributed Photovoltaic Power Generation marks the official entry of distributed photovoltaic systems into a new phase of market-oriented pricing. This shift raises questions about how its business models will change and what opportunities will arise.

Reconstructing the Industry Ecosystem through Market Mechanisms

Liu Yiyang, Executive Secretary General of the China Photovoltaic Industry Association, stated that China’s photovoltaic industry has maintained rapid growth in recent years, continually driving high-quality development. The issuance of Document No. 136 and the latest revisions to the management measures signify the end of the “fixed-price” era for renewable energy, pushing photovoltaic power generation into a new phase of market-oriented pricing and accelerating the establishment of a unified national electricity market.

According to Zheng Hua, an Associate Professor at the School of Electrical and Electronic Engineering at North China Electric Power University, the proportion of electricity in terminal energy consumption has risen sharply in recent years. The goal of achieving 50% renewable energy in global electricity structure by 2050 is now expected to be met ahead of schedule. In this context, the previous fixed investment approach will transition to operational models, making the rapid development of the electricity market crucial.

Under the dual drivers of the “dual carbon” targets and current electricity market construction, Zheng emphasizes that market mechanisms should promote a shift toward green energy. For renewable energy to become a primary support source, issues of intermittency, volatility, and randomness must be resolved, along with enhancing grid compatibility.

Wang Shujuan, Expert Consultant for the Energy Investment Professional Committee of the China Investment Association and Founder of Zhihui Photovoltaic, explained that the new policies involve mechanisms for both pricing and volume. If a project qualifies for the mechanism-based volume, it can operate under a relatively fixed mechanism price. “Large-scale ground-mounted photovoltaic plants can trade independently, while distributed photovoltaic projects can aggregate for collective trading,” she stated.

Deep Integration of Source, Grid, Load, and Storage

Pan Huimin, Deputy Director of the New Energy and Renewable Energy Department at the National Energy Administration, pointed out during a news conference in the first quarter of 2025 that the rapid growth of distributed photovoltaic installations has led to grid connection and absorption becoming the primary constraint on development. There is an urgent need to adjust management strategies to promote collaborative efforts among sources, grids, loads, and storage, facilitating the industry’s healthy and rapid growth.

As photovoltaic power is an intermittent energy source, technological solutions must be developed to address its dependency on weather conditions. Zheng believes this requires joint efforts at both the source and load levels to drive solutions. In the context of the spot market, it is essential to convert renewable energy into controllable resources. “There are two main application scenarios: one is centralized single stations, and the other is decentralized direct current supporting power stations,” he stated.

He further emphasized the need to develop flexible resources represented by energy storage. “Flexible resources are designed for renewable energy. Time-of-use pricing can reflect the advantages of integrating variable power sources with flexible resources. New business models and market opportunities will emerge through participation in market transactions.” Looking ahead, the industry should focus on differentiated demands in niche markets and emphasize the accumulation of operational technologies.

Wang Shujuan proposed that the future of distributed photovoltaic will trend toward a development model that integrates source, grid, load, and storage. “Previously, project returns were mainly dependent on the grid company’s absorption capacity and electricity pricing, but in the future, self-consumption will become more predominant, with order sizes and pricing determined by customers. Provinces, including Henan and Shandong, have already begun promoting the development of distributed photovoltaic projects focusing on this integration.”

Technological Integration Fostering New Business Models

In the future, opportunities in the segmented market for distributed photovoltaic systems will continue to emerge, unlocking multiple avenues for value creation. Wang Shujuan highlighted that energy conservation and carbon reduction will drive the development of distributed photovoltaic systems. “As companies are required to absorb a certain percentage of non-hydropower renewable energy according to national or local government regulations, the motivation to build and install distributed photovoltaic power stations will further increase. Simultaneously, export enterprises in China are actively exploring product carbon footprints, which will also expand the market space for distributed photovoltaics.”

Wang predicts that distributed photovoltaic systems will align with energy transition requirements, developing in a “light-storage-charging” model. Investment willingness from urban construction companies and energy-consuming enterprises in distributed photovoltaic power stations will continue to rise. There is significant potential for zero-carbon industrial parks, particularly in industries where energy conservation and carbon reduction are paramount. The integration of light, storage, and charging will present new opportunities. “This integration isn’t limited to urban industrial parks; rural areas also have substantial growth potential. The increasing number of electric vehicles in rural regions and the corresponding demand for charging stations provide favorable conditions for this development. Furthermore, the greening of logistics parks will drive high electricity demand from heavy-duty trucks, making the adoption of green electricity through charging stations a vital pathway.”

Liu Yiyang remarked that without considering system balance, photovoltaic power is currently the most affordable new energy source. The marginal operating costs of photovoltaic generation are low, and future integration with energy storage and other technologies will continue to allow it to compete effectively with traditional energy sources.

Industry experts generally agree that the transition from “fixed pricing” to “full marketization” signifies that China’s photovoltaic industry is moving into a new phase of high-quality development. The introduction of new policies marks the accelerated formation of a unified national electricity market, and the photovoltaic sector will continue to unleash its green potential through technological innovations and model transformations.