China’s first provincial renewable energy auction under a new pricing system has raised concerns for solar developers. In Shandong province, winning bids for solar cleared at just 225 yuan (about US$31.58) per megawatt-hour, with offers ranging from as low as 123 yuan to 350 yuan. Under the reformed rules introduced in February, renewable projects no longer receive guaranteed returns linked to coal prices. Instead, developers must compete in auctions and then sell electricity into the market, with limited compensation if power prices fall below their agreed “strike price.” Analysts warn that such low clearing rates could make it difficult for projects to remain profitable.
The outcome in Shandong is viewed as an early test of the new system — and a warning sign. With the province already hosting one of the country’s largest concentrations of solar capacity, oversupply has likely dragged prices down. Experts note that provinces with stronger electricity demand growth, especially in coastal regions, may offer better margins, but overall, the shift to competitive auctions is expected to squeeze profits and add new risks. Developers will now have to contend with narrower returns, market volatility, and financial uncertainty, making China’s solar boom harder to sustain. More