(Yicai) Sept. 14 -- Shandong, China’s second-largest province by installed photovoltaic capacity, plans to allow wholesale electricity prices to fall further below zero when supply exceeds demand, as China accelerates the development of its power spot market.

The province in eastern China plans to lower the minimum electricity offer price to minus CNY0.12 (2 US cents) per kilowatt-hour from minus CNY0.08 and the minimum market clearing price to minus CNY0.14 from minus CNY0.10, according to a recent notice from the local development and reform commission seeking public feedback. The respective price ceilings will remain unchanged at CNY1.30 and CNY1.50 (20 US cents).

Spot prices are set through bidding and can fall below zero when electricity supply exceeds demand, sending a signal for generators to reduce output. These wholesale prices are not directly passed on to residential consumers.

The proposed change comes as Shandong faces growing periods of electricity oversupply. Wind and solar power accounted for 50.2 percent of the province’s total installed generation capacity as of the end of June, exceeding half for the first time.

Lower negative price limits should strengthen market signals and encourage greater flexibility in electricity supply and demand.

Renewables Drive Oversupply

The supply-demand imbalance is most pronounced around midday when PV output peaks and at night during periods of strong wind generation, increasing the need for flexible market clearing.

The change should support higher-quality market development and shift Shandong’s power market from “whoever generates electricity makes money” to “whoever regulates at the right time makes money,” Lin Boqiang, dean of the China Institute for Studies in Energy Policy at Xiamen University, told Yicai.

Energy storage will see significant development during this process, while coal-fired and PV power will face a substantial impact, Lin added.

Spot Markets Expand Nationwide

The expansion of spot trading marks a further shift from China’s traditional grid-centered power market. Reforms began in 2002 with the separation of power generation from grid operations, though most electricity continued to be traded through grid companies under medium- and long-term contracts.

China began piloting electricity spot market trading in 2017 and entered a new phase in 2025, when spot markets were rolled out nationwide and several provincial markets began formal operations.

The rollout has since accelerated. Anhui’s electricity spot market began formal operations in early September, becoming the ninth in China to do so, following the power grid of the southern part of Hebei in August.

Editor: Emmi Laine