1 cent per kilowatt-hour, distributed photovoltaic has completely "changed" now!

Ask AI · Why does full market entry of distributed photovoltaic lead to a plunge in electricity prices?

“Oh my goodness, my photovoltaic electricity bill in January was only 1 cent per kilowatt-hour!”

Huaxia Energy Network notes that in January, a distributed photovoltaic project in Shandong Province, a major province for both economy and electricity consumption, had an on-grid electricity cost of only 0.0130 yuan per kWh. In the same month, another major province for economy and electricity—Jiangsu—also saw a startling 1-cent electricity price.

As a result, many distributed photovoltaic owners in Shandong, Jiangsu, and other regions have recently expressed similar sentiments when checking their electricity bills.

By early 2025, “Document No. 136” suddenly appeared. At that time, there was already a psychological expectation of ultra-low electricity prices for distributed PV. After a dull year of installation growth in 2025, all parties initially expected that the prices would rise in 2026. Unexpectedly, the beginning of the year brought a “surprise” with a 1-cent settlement, shattering the hope of price recovery.

All of this was difficult for distributed owners to accept psychologically. But the future has arrived—whether accepted or not, the era of “bare-bones” distributed PV has begun.

The “Terrifying” 1-Cent Electricity Price

The appearance of 1-cent electricity prices for distributed PV in Shandong and Jiangsu has an important policy background: starting January 1, 2026, several provinces including Shandong and Jiangsu officially implemented the “Full Market Entry and Settlement of Distributed New Energy” policy. The core of this adjustment is that “all new energy on-grid electricity enters the market,” which is a policy to promote the marketization of new energy electricity prices.

This policy means that distributed PV will no longer enjoy guaranteed purchase modes that ensure price and volume, but instead face the turbulent tide of market-based pricing, directly confronting various risks brought by price fluctuations.

Before the 14th Five-Year Plan, especially before 2018, China’s new energy installed capacity was relatively small. For this “infant,” policies provided extensive protection, adopting full guaranteed purchase by the grid, with subsidized prices higher than the coal benchmark price, and no worries about curtailment.

During the five years of the 14th Five-Year Plan, new energy installed capacity surged. By the end of 2025, total capacity reached 1.84 billion kW, firmly making it the largest power source. With so much new energy, the grid lacked the capacity to guarantee full purchase. Therefore, the reform of market-based pricing for new energy gradually advanced: first centralized market entry, then distributed; first large and medium-sized projects, then all distributed projects.

The 1-cent electricity price for distributed PV in Shandong and Jiangsu is precisely during the initial stage of full distributed market entry. However, Huaxia Energy Network clarifies that such ultra-low prices are not uniform throughout the day but mainly occur during peak solar output and low system load at noon.

Although the 1-cent price appears only during certain periods, its impact is significant—it drastically lowers overall electricity prices.

For example, in Jiangsu, a certain distributed PV project in January had an on-grid electricity volume of 11,946 MWh. Calculated at market average prices, the electricity cost was 3,098.45 yuan, or about 0.259 yuan per kWh, much lower than the previous fixed price. During the full guaranteed purchase period, the price was based on the local coal benchmark price of 0.39 yuan per kWh. Now, the price has “plummeted” to 0.013 yuan per kWh. The difference is enormous.

Moreover, industry concerns are growing that “1 cent” may only be the beginning, with future electricity prices still highly uncertain. Additionally, the case mentioned involves existing projects with certain advantages in price mechanisms and volume guarantees; the profitability of new projects remains unpredictable.

Who Should Be Alarmed?

After full market entry, different types of new energy have markedly different market competitiveness: wind power, which produces dispersed output over many hours daily, clearly outperforms midday-focused PV; centralized PV outperforms distributed PV; large-scale self-use PV projects are better than small household systems.

If we call this hierarchy the “contempt chain” under the over-standard environment of new energy, it may not be entirely precise but roughly reflects the market situation of various project types. Notably, the systemic fragility behind this ranking largely stems from whether certain provinces’ new energy capacity has “overstepped”—that is, exceeded the grid’s absorption and supporting capacity.

Achieving the “dual carbon” goals requires large-scale deployment of new energy. But more installed capacity isn’t always better; it must align with grid capacity, complement other power sources, and match regional electricity demand. If capacity expands too rapidly without supporting infrastructure, overcapacity issues will arise. The 1-cent PV in Shandong and Jiangsu exemplifies this overcapacity problem.

Take Shandong as an example. According to official data, by the end of 2025, the province’s new energy and renewable energy installed capacity reached 130 million kW, accounting for over 50% of the total capacity for the first time.

Within this 130 million kW, wind power is about 27 million kW, and PV about 93 million kW. Of the PV capacity, distributed PV exceeds 60 million kW—almost twice the centralized PV. This means that in Shandong, not only is PV capacity disproportionately high, but distributed PV is also excessively dominant.

Faced with the issues of low electricity prices and volume oversupply, different types of new energy have varying resilience: distributed PV is the most vulnerable. For example, centralized PV plants and larger industrial and commercial PV can consider pairing with energy storage to address price and volume issues; but for household PV under similar conditions, how can they afford storage? China’s retail electricity price is about 0.05 yuan per kWh, leaving little room for price differences—how can household storage survive? Many proposed solutions for household PV with storage are merely conceptual tricks.

The vulnerability of distributed PV, especially household systems, also lies in their lack of active market participation ability.

Some suggest that after full market entry, distributed PV could participate through aggregation trading or “group buying”: small-scale owners could unite as an “aggregator” to enter the market and participate in bidding, potentially securing better market prices than passively accepting market rates. But there’s a big gap between this idea and reality.

First, even if distributed PV wants to form alliances to enter the market, the long-term power market may not be interested in these “small fry.” That is, the entry tickets for the long-term power market, which guarantees price and volume, are unlikely to favor “small, scattered, and diverse” distributed PV.

Second, even if aggregated entry into the spot market with high price and volume volatility is possible, does aggregation not require costs? Small, scattered distributed PV projects that earn little money already struggle to raise initial capital for aggregation.

The 1-cent PV prices in Shandong and Jiangsu serve as a warning to all provinces: distributed PV has entered a new stage. Projects can no longer be launched recklessly; they must be carefully chosen and timed. Without demand, supporting infrastructure, and absorption capacity, blindly installing PV is no longer an option.

Author’s note: These are personal opinions and for reference only.