In June, the average price of electricity trading contracts in the major economic provinces of Jiangsu plummeted by 24%, while Guangdong saw an 8.3% drop. The spot electricity market fared even worse, with “negative electricity prices” appearing in Shandong, Zhejiang, and Inner Mongolia; and from January to May, Inner Mongolia’s average spot market price plummeted by 52%. Analysis points to four main factors contributing to the sharp decline in electricity prices: the trade war, overinvestment, plummeting coal prices, and policy adjustments.
China’s electricity trading is divided into long-term and spot trading. Long-term trading involves transactions for the future delivery of electricity products or services over various timeframes from years down to days. On the other hand, spot trading refers to electricity transactions conducted through a real-time platform for next-day, intraday, or real-time dispatch activities.
According to a report by Bloomberg citing announcements from the Jiangsu Provincial Electricity Trading Center, the average price of electricity trading contracts in June 2025 was 312.8 yuan per megawatt-hour, marking a 24% year-on-year plunge and a 22% decrease compared to the previous month.
Similarly, according to the Guangdong Provincial Electricity Trading Center, the average price of electricity trading contracts in June was 372.7 yuan per megawatt-hour, reflecting an 8.3% decrease year-on-year and a 0.3% decline compared to the previous month, dipping below Guangdong’s regulated lower limit of 373 yuan per megawatt-hour.
Blogger “Mars Macro” noted on June 6 that the average price of electricity trading in Zhejiang for June could not be found through public searches. However, the disclosed scale of Zhejiang’s long-term electricity trading for the year 2025 was 1.887 billion megawatt-hours with an average price of 412.39 yuan per megawatt-hour, representing a decrease of about 50 yuan per megawatt-hour or 10.8% compared to the 2024 average.
Guangdong and Jiangsu ranked first and second, respectively, in China’s regional GDP rankings in 2024, with Zhejiang taking fourth place. Bloomberg reported that these two coastal economic powerhouses, Jiangsu and Guangdong, heavily rely on exports, surpassing the economic output of France.
Guangdong has been facing a situation of insufficient electricity demand, oversupply, and sharp price drops since early 2024. Now, Jiangsu is following in Guangdong’s footsteps with a significant drop in electricity trading prices.
According to the article by “Mars Macro,” the contract supply volume in provincial electricity trading centers only represents about a quarter of the total supply, and these prices are determined purely by market forces. Therefore, the transaction prices in electricity trading centers can effectively reflect the supply-demand balance of electricity in China.
Interface News reported on June 6 that in April, Inner Mongolia Electricity (Group) Co., Ltd. (referred to as Mengxi Power Grid) saw the highest price in the spot market reaching 1.5 yuan per kilowatt-hour and the lowest price at -0.004 yuan per kilowatt-hour, with a maximum price difference of 1.5 yuan per kilowatt-hour (1 megawatt equals 1000 kilowatt-hours). This made Inner Mongolia the third provincial-level electricity market in China to experience negative electricity prices.
Up to now, Shandong and Zhejiang have both issued policy documents specifying that the minimum clearing price in the spot market can be below zero. According to Landada’s spot electricity data, from May 26 to June 1, Shandong, Zhejiang, and Inner Mongolia all saw negative electricity prices in real-time electricity trading.
The clearing price in the spot electricity market refers to the price at which the buying and selling bids reach equilibrium. Clearance is an economic term indicating supply-demand balance.
As reported by the Inner Mongolia Xinhua News Center in the “Northern Xinjiang News” on June 6, from January to May this year, the average clearing price in Inner Mongolia’s spot electricity market dropped by 52% compared to the same period last year.
Landada’s spot electricity data shows that the first-quarter average settlement price for new energy in Inner Mongolia Power Grid was 168.34 yuan per megawatt-hour, a 22% decrease from the 2024 average level, with wind power down 13% and solar power down 26%.
So why is the market-based electricity price in China’s local electricity trading centers continuously dropping significantly? Based on analyses by Bloomberg and “Mars Macro,” there are four main reasons:
The trade war and the uncertainties it brings have severely impacted Chinese companies’ export expectations. Due to the uncertain external demand in trade, many enterprises are hesitant to expand production and primarily rely on existing orders and inventory, which affects industrial electricity demand.
Jiangsu, Zhejiang, and Guangdong contribute 35.5% of the national industrial value-added, but their commodity exports make up 63% of the total national exports. Thus, the deteriorating export outlook significantly affects electricity demand.
Data from the General Administration of Customs of China released on Monday (June 9) shows that China’s exports to the United States in May plummeted by 34.5%, marking the largest drop since the outbreak of the COVID-19 pandemic in early 2020.
According to the data from the National Energy Administration and the National Bureau of Statistics, the growth rate of installed generating capacity over the past five years has significantly exceeded the GDP growth rate. From 2019 to 2024, China’s economy grew from 99.1 trillion yuan to 134.9 trillion yuan, a cumulative nominal growth of 36.1% averaging 6.4% annually. However, China’s total installed generating capacity grew from 2.01 billion kilowatt-hours to 3.35 billion kilowatt-hours, an accumulated growth of 66.7% averaging 10.8% annually; and electricity consumption increased from 7.23 trillion kilowatt-hours to 9.85 trillion kilowatt-hours, marking a cumulative growth of 36.3% averaging 6.4% annually.
Looking at recent developments, China’s actual GDP in 2024 grew by 5%, yet investments in electricity, heat, gas, and water supply saw a growth of 23.9%. In the first quarter of this year, nominal GDP increased by 4.6%, while fixed asset investment from January to April rose by 4%, with investments in electricity, heat, gas, and water supply surging by 25.5%.
Bloomberg reports that the significant decline in coal prices has been a major driving factor; over the past year, coal prices have dropped by 30%, and coal-fired power accounts for over half of China’s total electricity generation.
David Fishman, the head of The Lantau Group in Shanghai, a consulting firm, stated that due to lower generation costs, coal-fired power enterprises can accept lower prices when participating in bidding.
Kou Nannan, director of Bloomberg’s China Energy and Finance Research, explained that the sharp decline in Jiangsu’s electricity prices in June is due to the launch of the spot electricity market. According to the Jiangsu Electric Power News, starting from June 1, Jiangsu officially commenced the trial operation of long-term settlement in the spot electricity market.
It is projected that by the end of this year, most regions in China will have at least initiated trial runs in the spot market, which relies on near real-time supply-demand assessments. This policy change indicates that more provinces will witness significant downward movements in electricity trading prices in the spot market in the future.