Selling 1,000 kWh of electricity only generates a profit of 3.9 yuan. 60% of electricity retail companies in Guangdong are loss-making, and the industry backfired by the "flat fixed-price" mechanism is currently undergoing reshuffling.
The backlash of low-price "fixed-price" contracts, coupled with the skyrocketing spot electricity price that has caused wholesale-retail price inversion, is accelerating the reshuffling of the electricity retail industry.
The *2026 Semi-Annual Report of Guangdong Electricity Market* recently released by Guangdong Power Exchange Center shows that among the 500 electricity retail companies participating in retail transactions, 298 are loss-making, with a loss ratio of 59.6%. The average profit per kilowatt-hour across the whole industry is only 0.0039 yuan — selling 1,000 kilowatt-hours of electricity earns merely 3.9 yuan. In the same period, the total electricity consumption of the whole society in Guangdong reached 471.48 billion kilowatt-hours, a year-on-year increase of 8.8%, and the maximum load hit 174 million kilowatts, up 13.7%.
Electricity consumption keeps rising, yet electricity retailers are losing money, which itself indicates that the problem does not lie on the demand side. The risk broke out even earlier in Guangxi, where 146 electricity retail companies suffered a total loss of 645 million yuan in the first quarter, with an average loss of 4.42 million yuan per company.
The losses in Guangdong and Guangxi are not isolated cases. A large number of independent electricity retail companies that used to profit from price differences are caught in the dual squeeze of drastic spot electricity price fluctuations and "fixed-price" contracts, collectively hitting the hardest wall since the electricity reform in 2015.
Earning 0.002 yuan per kilowatt-hour sold, retailers lose less if they stop selling
The differentiation of Guangdong's electricity retail market can no longer be described by the "Pareto Principle". The 32 electricity retail companies with power generation backgrounds gain a profit of about 0.0066 yuan per kilowatt-hour; while the 456 independent electricity retail companies accounting for more than 90% of the total only get 0.0002 yuan per kilowatt-hour. What does 0.0002 yuan mean? Calculated based on an annual electricity sales volume of 100 million kilowatt-hours, the total annual profit is only 200,000 yuan, which is not even enough to rent a decent office in Beijing. Compared with the level of 0.0322 yuan profit per kilowatt-hour for independent electricity retail companies in the first half of 2025, their profits have evaporated by more than 99% in a year, almost dropping to zero.
Despite such a large loss ratio, the number of new entrants has not decreased at all. By the end of June, there were 141,725 registered business entities in Guangdong, a year-on-year increase of 23.1%, with 7,667 new entities added within the year. More and more players are flooding into the market, squeezing profits thinner and thinner. All sides suffer heavy losses in the cutthroat competition, and no one can benefit in the end. Electricity retail companies with power generation backgrounds have their own power sources to hedge risks, while independent electricity retail companies do not have power generation assets as support. They can only passively accept the price in the wholesale market, and are cornered by the low-price strategies of competitors on the retail end, facing pressure from both sides.
In the first half of the year, the direct transaction volume of Guangdong's electricity market reached 241.3 billion kilowatt-hours, a year-on-year increase of 16.2%, and the total transaction scale hit 320.45 billion kilowatt-hours, up 8.8% year on year. The growth rate of transaction scale far exceeds that of electricity consumption, and the marketization level is indeed improving. However, the dividends are not evenly distributed to all players. The cake has grown larger, but there are more people sharing it, and the knives and forks are still in the hands of others.
Previous reports from the China Macroeconomic Forum pointed out that the much-discussed "K-shaped differentiation" at present is only a superficial phenomenon, and the complete picture is the triple logic of "sticking to the bottom line, optimizing and adjusting, and creating a new situation". The current situation of the electricity retail industry exactly confirms this differentiation: the overall market size is expanding, profits are concentrating on leading players, and small and medium-sized players lacking core capabilities are being eliminated at an accelerated pace.
Wrong bet on electricity price turns the full-year contract into a IOU
Wholesale-retail price inversion, a term that has been repeatedly mentioned in the electricity industry in 2026.
What is wholesale-retail price inversion? The cost for electricity retail companies to purchase electricity from the wholesale market is higher than the retail price they sell to end users. It is like a supermarket operator whose purchase price is higher than the selling price — the more goods he sells, the more money he loses. But he cannot stop selling, because the contract is signed and users are waiting to use electricity.
In November 2025, Guangxi Power Exchange Center issued a risk notice (No. 8, 2025), explicitly warning that some electricity retail companies may induce contract signing with unreasonably low quotations such as "ultra-low price" and "fixed price". Once the market electricity price rises in 2026, their capital chain is very likely to break due to losses. The market did not take the warning seriously. A large number of electricity retail companies chose low-price "fixed-price" contracts not linked to spot prices to seize market share. The moment they signed the contracts, they turned themselves into counterparties of bet in the electricity market, taking the number of users as chips and betting that the spot electricity price would not rise, or at least not rise too much.
Since February this year, international geopolitical conflicts have pushed up the procurement costs of coal and natural gas, raising the power generation cost of thermal power. Coupled with the pull of electricity demand brought by the return of foreign trade orders in Guangdong, the fluctuation of new energy output and the centralized maintenance of generating units, the spot electricity price has risen sharply. In April, Guangdong electricity market experienced a price storm, the average spot day-ahead price surged from 310 yuan/MWh to 678 yuan/MWh, with an increase of over 118%, and the average daily price in the real-time market exceeded 0.975 yuan/kWh on some days.
The average annual long-term agreement price signed by electricity retail companies at the end of 2025 is about 372.14 yuan/MWh, and the price gap between it and the real-time electricity price is as high as 306 yuan/MWh. For every kilowatt-hour of electricity sold, they lose 0.23 to 0.30 yuan on average. A medium-sized electricity retail company with a monthly electricity sales volume of 100 million kilowatt-hours will lose 23 million to 30 million yuan in April alone. The loss of one month may equal the total profit of the whole year.
This wave of losses is caused by objective factors such as rising energy prices, subjective misjudgment of electricity price trend by electricity retail companies, as well as the long-standing drawbacks of cutthroat low-price competition and the institutional shortcomings of imperfect market rules. The root cause is not elsewhere: many electricity retail companies are essentially engaged in the business of "price difference arbitrage", which is highly dependent on a stable and predictable price difference environment. Once the spot price fluctuates drastically, the price difference is reversely compressed or even inverted, the whole business model will collapse.
Energy storage installed capacity rises by 45%, but the profit model is not yet mature
Amid the widespread losses, the data of new energy storage in Guangdong is particularly impressive. By the end of June, the unified dispatch installed capacity of energy storage in Guangdong reached 15.241 million kilowatts, a year-on-year increase of 45.4%, ranking first among all power sources and accounting for 5.5% of the total installed capacity of the province.
The installed capacity has increased, but has the profitability kept up? The report gives a pessimistic answer. In the first half of the year, the medium and long-term transaction volume of independent energy storage was only 190 million kilowatt-hours, and the profit from the charge-discharge price difference in the day-ahead market was limited. The whole sector is still in the early stage of "high unit price difference but small total scale".
Energy storage makes profits from price difference, and the realization of price difference requires sufficient frequent charge-discharge transactions as support. The 45% growth rate of installed capacity is exciting, but the transaction volume is only 190 million kilowatt-hours, and a large number of energy storage assets are just acting as "decorations". The installed capacity data looks good, but the actual utilization rate is very low. There are 28 independent energy storage business entities in total, 25 of which have participated in the electricity market transaction, with a high participation rate. But how much profit they can make after participation is another problem.
Policies are promoting electricity retail companies to transform from "price difference arbitrage" to "value-added services". The *Implementation Opinions on Improving the National Unified Electricity Market System* (Guo Ban Fa [2026] No. 4) issued by the General Office of the State Council clearly proposes to "strengthen the standardized management of electricity retail companies, and guide them to transform and upgrade to integrated energy service providers". The National Energy Administration defines 2026 as the year of "establishing new rules" for the system. Wang Yunbo, Deputy Director of the Market Supervision Department, said that the *Measures for the Administration of Electricity Retail Companies* will be revised in a timely manner, and the *Basic Rules for the Electricity Retail Market* will be studied and issued, to standardize the rights, responsibilities and obligations of electricity retail companies, and refine the compliance and self-discipline operation requirements.
The direction is correct, but the window period for transformation is narrowing rapidly. For the nearly 60% of independent electricity retail companies that are currently loss-making, the transformation from "price difference arbitrage" to "integrated energy services" is not just a matter of implementing a policy document, but a systematic reconstruction of a series of core capabilities including transaction capabilities, risk control systems and customer service capabilities. These capabilities cannot be built up by simply investing a lot of money in a short period of time.
Essentially, this wave of losses in Guangdong's electricity retail industry is an inevitable pain as the market-oriented reform advances into the deep water zone, and the industry shifts from the "policy dividend period" to the "capability competition period". Since the launch of the new round of electricity reform in 2015, the deregulation of the electricity retail side has spawned a large number of market entities, but many companies have not figured out a core question from the very beginning: Apart from earning price differences, what other value can they provide?
In the first half of the year, about 90% of the market electricity volume was covered in advance by medium and long-term contracts, which effectively stabilized price expectations. The market mechanism itself is evolving, and the "ballast" role of medium and long-term contracts is strengthening. As market rules become more and more perfect, those electricity retail companies that only know how to sign "fixed-price" contracts and lack risk hedging capabilities will not even have space to "gamble". Only by shifting the core capability from price difference arbitrage to value-added services can electricity retail companies find the way to survive.