From policy-driven to market competition, how does Zhengtai Energy lead the household photovoltaic industry to break through the bottleneck? | Zhike
On February 9, 2025, the National Development and Reform Commission and the National Energy Administration issued the "Notice on Deepening the Market-oriented Reform of New Energy On-grid Electricity Prices to Promote the High-quality Development of New Energy" (hereinafter referred to as "Document No. 136"). For the entire new energy industry, Document No. 136 is of epoch-making significance. It is not only a watershed for the industry to shift from policy-driven to market-led, but also a touchstone to test the core competitiveness of enterprises.
Specifically, Document No. 136 clarifies that in principle, all the on-grid electricity of new energy projects (wind power and solar power generation) shall enter the electricity market, and the on-grid electricity price shall be formed through market transactions. Meanwhile, taking June 1, 2025 as the time node, differential policies shall be implemented for existing and incremental projects. For example, the concept of mechanism electricity price is introduced in off-site transactions. However, the mechanism electricity price of existing projects is stated as "implemented in accordance with the current price policy, not higher than the local benchmark price of coal-fired power", while that of incremental projects is stated as "voluntarily participating in the bidding by projects to form".
Since Document No. 136 mainly provides policy guidance at the macro level and has not further clarified the implementation details, this short-term "uncertainty" has triggered some concerns in the industry. However, from a long-term perspective, market-oriented transactions are the cornerstone for the further development of the installed capacity of renewable energy such as photovoltaic and wind power. At the same time, it also puts forward higher requirements for the development and operation strategies of new energy investment, which happens to be the advantageous area of many leading photovoltaic power station enterprises.
01 Market-oriented Transactions are Inevitable for Sustainable Development
According to the data released by the China Electricity Council, by the end of 2024, China's total installed power generation capacity reached 3.35 billion kilowatts, a year-on-year increase of 14.6%. Among them, the installed capacity of photovoltaic power generation was about 890 million kilowatts, a year-on-year increase of 45.2%; the installed capacity of wind power was about 520 million kilowatts, a year-on-year increase of 18.0%. The total installed capacity of photovoltaic and wind power reached 1.41 billion kilowatts, accounting for 42.1%, which is very close to the installed capacity of thermal power of 1.44 billion kilowatts.
As is well known, a very obvious characteristic of electric energy is that it cannot be directly stored. From the perspective of total quantity, the power generation and power consumption need to be consistent. From the perspective of instantaneous state, the power generation power and power consumption power need to maintain a dynamic balance. However, the output (output power) of photovoltaic and wind power stations is in an unstable state, resulting in the problem of spatio-temporal mismatch in the consumption of green electricity. For example, during the about 4-hour power generation period of photovoltaic power stations at noon, it is often the trough of power consumption. Therefore, the continuous increase in the proportion of new energy installed capacity will inevitably intensify the disturbance to the supply-demand balance of the power system.
However, under the constraints of the dual-carbon policy, the trend of increasing the proportion of new energy installed capacity is irreversible. For example, Article 1 of the "Energy Law" clearly states that "promote the green and low-carbon transformation and sustainable development of the economy and society, and actively and steadily promote carbon peaking and carbon neutrality". Therefore, how to maintain the stability of the power system while continuously increasing the proportion of new energy installed capacity has become an important issue for the entire power industry.
At present, a relatively clear path is to establish a new power system with the core of "source-grid-load-storage integration" through technologies such as virtual power plants and smart grids, so as to realize the coordinated interaction among the power source side (mainly new energy), the power grid side (intelligent and flexible), the load side (adjustable) and energy storage. And an important prerequisite for achieving the above path is to realize the market-oriented transaction of electricity.
The reason is not difficult to understand. The essence of the new power system is to optimize the allocation of power resources through market dynamic balance of supply and demand, so it naturally requires market-oriented transactions to form market-oriented electricity prices. Therefore, market-oriented electricity transactions are not a stumbling block to the development of green electricity, but the cornerstone for its future sustainable development. In the top-level planning, various policies have always shown support for green electricity such as photovoltaic and wind power.
On August 11, 2024, the Central Committee of the Communist Party of China and the State Council issued the "Opinions on Accelerating the Comprehensive Green Transformation of Economic and Social Development", which is the first systematic deployment at the central level to accelerate the comprehensive green transformation of economic and social development. The "Opinions" point out that: vigorously develop green and low-carbon industries. Vigorously develop non-fossil energy. Accelerate the construction of clean energy bases such as wind power and photovoltaic in the northwest, hydropower in the southwest, offshore wind power and coastal nuclear power, and actively develop new energy such as distributed photovoltaic.
During the 12th collective study of the Political Bureau of the Central Committee in 2024, General Secretary Xi Jinping emphasized that "China's energy development still faces a series of challenges such as huge demand pressure, many supply constraints and arduous tasks for green and low-carbon transformation. The way out to address these challenges is to vigorously develop new energy."
The significance of green electricity to the whole society is not only "low-carbon". For example, the National Development and Reform Commission mentioned in the "Report on the Implementation of the National Economic and Social Development Plan in 2023 and the Draft National Economic and Social Development Plan for 2024" that "by actively developing household distributed photovoltaic, the income channels of farmers have been broadened, covering more than 5 million farmers in total, and the average annual income of each household has increased by about 2,000 yuan".
02 Introduction of Mechanism Electricity Price to Reduce Transition Risks
Realizing market-oriented electricity transactions is not achieved overnight, but a progressive process. In 2024, the National Energy Administration clearly defined the "roadmap" and "timetable" for the development of a unified national electricity market in the "Blue Book on the Development Plan of the Unified National Electricity Market", that is, initially completed in 2025, fully completed in 2029, and improved and upgraded in 2035. The core purpose is to achieve steady progress.
Therefore, "Document No. 136" introduced the concept of mechanism electricity price, which is essentially to reduce the risks of new energy power station operators during the policy transition period and smoothly promote the market-oriented reform of new energy on-grid electricity prices.
The mechanism electricity price can be simply understood as follows: it is an electricity price outside the market-oriented electricity transactions. Its function is that after the new energy power operators determine the electricity price through market-oriented transactions and settle the income, a secondary settlement will be carried out based on the difference between the mechanism electricity price and the average price of market-oriented transactions, with more refunded and less supplemented.
The advantage of this institutional design is that it not only enables the new energy electricity to have a market price, but also ensures the minimum income of new energy power station operators. Especially for existing projects, the confirmation method of the mechanism electricity price is implemented in accordance with the current price policy (not higher than the local benchmark price of desulfurized coal-fired power), rather than being formed through the annual bidding method like incremental projects. Everbright Securities believes that the mechanism electricity price is essentially a difference contract. Its main consideration is to avoid the new energy electricity price simply referring to the market-oriented transaction electricity price level (weighted average of spot prices). Under the simple market-oriented transaction electricity price model, in areas with loose power supply and demand or serious problems in new energy consumption, the electricity price is low, and the internal rate of return (IRR) of new energy projects is poor, which affects the installation expectations. The introduction of the mechanism electricity price is expected to slow down the fluctuation level of the electricity price.
In fact, the mechanism electricity price also draws on the mature experience overseas. For example, the competitive allocation method of the Contracts for Difference (CfD) in the UK. Under this system, the government-authorized Low Carbon Contracts Company (LCCC) signs long-term contracts with renewable energy power generation enterprises to determine the performance price, and power generation projects directly participate in market transactions in accordance with the rules of the electricity market. If the market electricity price is lower than the contract performance price, the CfD fund pool will provide subsidies to the power generation enterprises up to the contract performance price. On the contrary, the power generation enterprises will return the excess part to the fund pool. Since the implementation of this mechanism in 2017, it has achieved good results in reducing the electricity price level of renewable energy and ensuring the income of new energy enterprises.
It is not difficult to see that when designing the system at the top level, full consideration has been given to the possible income fluctuations that power station operators may face during the policy transition. Therefore, the mechanism electricity price is used as a transitional means to ensure the stability of the income of new energy power station operators.
03 Need to Change the Business Paradigm in the Long Run
In the photovoltaic industry, the distributed photovoltaic, which has been very popular in recent years, is greatly affected by "Document No. 136". An important reason is that the newly filed centralized photovoltaic projects have achieved parity on-grid power in 2021, and there has been years of practice in market-oriented transactions. However, the "self-use of self-generated electricity and grid connection of surplus electricity" and "full grid connection" models of distributed photovoltaic power stations still rely on subsidies. After "Document No. 136", distributed photovoltaic will shift from "fixed electricity price + subsidy" to full marketization, which will involve the multi-dimensional reconstruction of the on-grid mode, electricity price mechanism, consumption rules, etc. CMB Research believes that under the drive of the market-oriented electricity policy, the development and operation strategies of power stations will become the core competitive factor. Specifically, it includes controlling cash outflows by reducing technical costs such as equipment prices and non-technical costs such as unreasonable channel fees during the investment stage; increasing power generation by means of refined site selection and using advanced technical equipment; matching photovoltaic output and load through emerging industries such as energy storage and virtual power plants, and creating a new income curve through the income models of peak-valley price difference arbitrage and auxiliary service market.
In the long run, for the household photovoltaic industry, this is actually an elimination competition on the supply side, which is conducive to further improving the concentration of leading enterprises.
On the demand side, the China Electricity Council predicts that by 2030, the total electricity consumption of the whole society in China will exceed 13 trillion kilowatt-hours. From 2025 to 2030, the total electricity consumption of the whole society will maintain a continuous growth trend of 4% - 6% annually. For household photovoltaic, public data shows that the domestic household photovoltaic market has a huge capacity of more than 1,600 GW. It is estimated that more than 80 million household photovoltaic roofs can be installed. At present, its penetration rate is only about 10%, and the market still has great development potential.
Distributed photovoltaic, mainly household photovoltaic, has been the main force in photovoltaic installation in recent years. By the end of 2024, the cumulative installed capacity of distributed photovoltaic power generation reached 370 million kilowatts, 121 times that at the end of 2013. In terms of new installed capacity, the new installed capacity of distributed photovoltaic power generation in 2024 reached 120 million kilowatts, accounting for 43% of the new installed photovoltaic power generation capacity in that year, and the power generation accounted for 41%.
Therefore, there is no need to worry about the long-term development space of the household photovoltaic industry. However, a detail that needs attention is that the ultimate goal of the development of a unified national electricity market is the full market-oriented transaction of electricity, and the mechanism electricity price will gradually withdraw after completing its transitional task. For new energy power operators, improving their own operation ability and optimizing operation strategies is the ultimate countermeasure. This means that in the long run, new energy power operators need to change their own business paradigms, which will eliminate some enterprises with insufficient innovation and operation capabilities on the supply side.
04 Photovoltaic Leading Enterprises such as Zhengtai Energy are Ready
For leading household photovoltaic enterprises such as Zhengtai Energy, "Document No. 136" actually means huge opportunities. "In the long run, promoting household photovoltaic to participate in market-oriented electricity transactions is an inevitable test for household photovoltaic to become the main energy source." Lu Kai, President of Zhengtai Energy, said.
It is understood that Zhengtai Energy has made three echelons of layouts in the short-term, medium-term and long-term dimensions:
In the short term, it will continue to increase investment in non-natural person household business to ensure the continuous and stable development of the core business.
Relying on the construction experience of more than 1.5 million power stations, Zhengtai Energy has cultivated the comprehensive service ability of the whole process including investment, development, construction, operation and maintenance, and power sales. It continues to increase resource investment to ensure the stable development of non-natural person business. At the same time, it has launched the "village-wide development" solution to realize the centralized development, design, construction, operation and maintenance, management and high-voltage grid connection of power stations, effectively solving the "bottleneck" problem that plagues the development of distributed photovoltaic. At present, it has completed multiple projects such as the 3.5 MW household photovoltaic village-wide development project in Huanghua Town, Zhucheng, Weifang, Shandong.
In the medium term, it will broaden business scenarios through innovative industries, such as exploring innovative models such as high-end villa sales, smart microgrids, virtual power plants, and source-grid-load-storage integration.
The village-wide development itself is an embodiment of the excellent dispatching ability of power station operators. On this basis, Zhengtai Energy has also innovatively launched the "Smart Power Super Station". Through centralized development of photovoltaic power stations, centralized energy storage, construction of charging piles, and establishment of smart microgrids, it has built a one-stop smart energy ecosystem of "photovoltaic-storage-charging-cloud", and finally realized the integration of "source-grid-load-storage". This ecosystem can also be extended to multiple application scenarios such as industrial parks and transportation.
In addition, Zhengtai Energy has also innovatively launched the "Taishu Green Energy" customized green electricity solution for high-end private residences, integrating products such as photovoltaic tiles, high-efficiency intelligent energy storage components, smart charging piles, and heat pumps, greatly broadening the application scenarios of the company's core business.
In the long term, it will carry out market-oriented businesses such as green certificate and green electricity trading and power sales, and build an end-to-end integrated power trading ability of power generation and sales.
In terms of green certificate development, Zhengtai Energy is one of the first enterprises in the country to issue household green certificates, and the first enterprise to complete the filing and registration of 10,000 household power stations. In terms of green electricity trading, it has completed the green electricity trading work in Guangdong, Zhejiang, Jiangsu and other places. On October 18, 2024, its wholly-owned subsidiary