Guizhou, Hubei, Shaanxi Abolish Fixed Time-of-Use Tariffs – Power Prices Fluctuate with Market Dynamics

分类：Media Coverage 发布时间：2026-05-27 14:17:46 作者: 来源: Overseas Edition of People’s Daily

China’s power market has ushered in major reforms since the start of this year: Guizhou, Hubei, Shaanxi and other provinces have announced the abolition of fixed time-of-use (TOU) electricity tariffs. This means pricing peaks and troughs will no longer be uniformly set by local government authorities, but will instead shift in line with market conditions.

China has long operated a fixed TOU tariff system. Why are these regions handing over pricing power over time-differentiated electricity rates to the market at this juncture? What broader transformations in the power market does this shift reflect? And how will it affect household and commercial power consumers?

Rationale Behind the Reform

Fixed TOU tariffs fail to reflect genuine pricing signals amid a reshaped power mix
Provincial spot power markets now cover nearly all regions nationwide, enabling authentic price discovery
National policy documents have charted the direction for market-oriented pricing reforms

Fixed time-of-use electricity tariffs have been implemented in China for more than 40 years.

The fixed TOU mechanism is a pricing regime centrally formulated by competent authorities. Based on variations in grid load, regulators divide each day into fixed peak, off-peak and flat demand periods, with static price markup and markdown ratios assigned to each segment.

Under this model, daytime hours with heavy consumption are classified as peak periods with higher electricity rates, while nighttime hours with low demand qualify as off-peak slots with cheaper power. Fixed TOU tariffs were designed to incentivize consumers to shift power usage away from peak hours via cost incentives, safeguarding grid operational security.

Though the system has served its purpose well over decades, fundamental shifts have altered power supply-demand balances and generation mixes. Driven by the Dual Carbon goals, rapid expansion of wind, solar and other renewable energy capacity has rewritten grid demand curves. The rigid time segmentation under traditional fixed TOU tariffs can no longer flexibly accommodate the characteristics of new power systems with high shares of renewable energy, explained Han Fang, Deputy Director of the Planning & Development Department at the China Electricity Council.

For instance, in regions with large renewable energy penetration, abundant midday sunlight boosts solar power output, flooding the market with electricity that should logically command lower prices. Yet the old fixed TOU framework still categorizes midday as a peak period with elevated rates. This creates distorted price signals: power fails to cheapen when supply is ample and cannot rise when supply tightens, decoupling tariffs from real supply and demand fundamentals.

A second factor rendering fixed TOU tariffs obsolete is the nationwide rollout of spot power markets.

By the end of last year, provincial-level spot power markets had achieved near-full coverage across China – a landmark milestone marking the initial establishment of a unified national power market. Analogous to a stock exchange for electricity, spot markets generate real-time prices through competitive bidding that accurately reflect instantaneous power supply and demand, optimizing the nationwide allocation of power resources.

“Spot market price signals deliver far greater precision and flexibility than static time-segmented tariffs,” Han Fang noted. Scrapping fixed TOU tariffs in multiple provinces facilitates unobstructed price transmission between wholesale and retail power markets, prompting consumers to adjust their energy consumption patterns in response to real-time price swings.

National policy guidance also underpins local reforms to phase out fixed TOU pricing. The Basic Rules for the Medium and Long-Term Power Markets, jointly issued by the National Development and Reform Commission and the National Energy Administration, stipulate that artificially mandated TOU rate levels and time brackets will no longer apply to market participants engaging in direct power trading. “This policy shift aims to fully leverage the decisive role of the market in resource allocation, advancing a profound transformation from administratively set electricity prices to market-based pricing,” Han Fang elaborated.

In sum, the nationwide repeal of fixed TOU tariffs stems from the maturation of China’s power market, sending a clear signal: electricity pricing mechanisms are evolving from plan-driven administration to market formation.

Models for Implementation

Two primary rollout approaches are currently adopted: full market coverage and phased transition. In the long run, all provinces will gradually adopt full market-based TOU pricing.

With power market rules revised, how are local authorities translating reforms into practice?

A review of regional policies reveals that Guizhou, southern Hebei, Hubei, Shaanxi, Jilin, Yunnan, Chongqing, Liaoning and Henan have formally eliminated fixed TOU tariffs. Han Fang categorized local implementation frameworks into two core models: full market coverage and phased transition.

Full Market Coverage Model

Adopted in Hubei, Shaanxi and other markets, this model brings all retail consumers represented by power retailers into market trading, with end-user TOU prices derived directly from wholesale market transaction prices.

For example, a notice released by the Shaanxi Power Exchange Center on key 2026 power market trading provisions states that market participants (wholesale and retail consumers) will no longer follow static peak-off-peak price differentials in 2026. Tariffs for consumers serviced by power retailers will be primarily determined by the average wholesale transaction price between power retailers and generating units. The notice specifically alerts market participants: “The lowest power prices will generally occur at midday during peak solar generation; all market users should monitor price trends to adjust energy usage schedules accordingly.”

“The full coverage model delivers consistent, clear price signals, rapidly aligning wholesale and retail price mechanisms to drive efficient load shifting by consumers. It does, however, impose stringent requirements on power retailers’ market operation and risk management capabilities,” Han Fang commented.

Phased Transition Model

This incremental reform retains administrative TOU pricing as a safety net in the interim, introduces diversified power consumption packages, and establishes transition periods to steadily raise the share of power traded under market-based TOU mechanisms.

The Key Trading Mechanisms and Parameters for Guangdong’s 2026 Power Market, published by the Guangdong Power Exchange Center, exemplifies this approach. Industrial and commercial consumers connected to 10kV and above grids are encouraged to participate directly in market trading. Eligible industrial and commercial users below 10kV may opt into direct market transactions, freeing their tariffs from fixed government benchmarks to fluctuate with market conditions. Consumers who decline voluntary market participation are deemed indirect market purchasers and charged under default retail power provisions.

“The phased approach balances the varying energy needs and risk tolerance of different consumer groups, enabling steady, controllable reform progress,” Han Fang explained. Power market development varies widely across China, and power retailers differ greatly in operational expertise and risk resilience. The full coverage model suits regions with stable spot markets and sophisticated market players with robust risk buffers, while the phased transition strikes a balance between reform advancement and market stability for less mature regions.

“Full market coverage represents the long-term direction of power market liberalization,” Han Fang stressed. As power market infrastructure matures, consumer market awareness grows, and power retailers build professional operational capacity, administrative TOU tariffs will gradually exit retail markets nationwide, paving the way for universal market-based time-differentiated pricing.

Impacts of the Reform

Energy storage and related sectors must compete based on operational expertise rather than static policy spreads
Ordinary household power bills will remain largely unaffected in the short term; in the long run, precise price signals will guide rational energy consumption planning

Industry insiders warn against two common misconceptions regarding the abolition of fixed TOU tariffs.

Misconception 1: Scrapping fixed TOU tariffs eliminates peak/off-peak differentiation or time-differentiated pricing entirely

The reform removes artificially mandated TOU rate levels and time brackets per national market rules, yet objective peak and low-demand periods persist on the consumer side. Phasing out administrative fixed TOU tariffs therefore requires complementary supporting policies.

“Power retailers can design granular pricing packages to accurately transmit wholesale market time-segmented price signals to end users, especially large industrial consumers. This encourages manufacturers to adjust production schedules and optimize energy strategies, enabling more precise and flexible peak shaving and valley filling,” Han Fang said.

Misconception 2: Market-based pricing means government regulators withdraw entirely from oversight

On the contrary, administrative authorities will strengthen their guiding and supervisory roles.

First, price regulators will continue to “coordinate and optimize peak/off-peak segmentation and price fluctuation ratios” for consumers purchasing power via grid agents – mainly small and medium industrial and commercial users that do not trade directly in markets. Second, while governments no longer set rigid peak/off-peak time slots or fixed rate gaps, they retain core functions including drafting market trading rules, imposing transaction price caps, and safeguarding fair market competition. Authorities will also uphold stable power supply for residential users and guarantee grid safety.

Impacts on the Energy Storage Industry

Fixed TOU tariffs previously created predictable commercial opportunities for energy storage operators. Facilities would charge batteries during cheap off-peak hours and discharge power at higher peak prices to capture static price spreads. The shift away from rigid fixed tariffs carries profound implications for this business model.

“The policy rollout has significantly squeezed profit margins for customer-side industrial and commercial storage projects in Jiangsu, Zhejiang, Guangdong and other provinces that previously benefited from wide fixed TOU spreads, as well as grid-side storage assets in Hebei reliant on steady medium-long term price gaps. Plant revenues in some provinces have fallen by roughly 50%,” shared Zhang Jianing, Senior Policy Research Manager at the China Energy Storage Alliance.

While power market liberalization creates short-term industry headwinds, it unlocks new development pathways for storage facilities to stack revenue streams across multiple markets and application scenarios.

“The core logic of peak-valley arbitrage for energy storage remains intact, yet investment and operational models must evolve accordingly,” Zhang Jianing explained. Storage operators once relied on guaranteed static price spreads under fixed TOU regimes. Moving forward, facilities must independently forecast supply-demand balances, deploy data-driven operational strategies, and identify dynamic peak and off-peak windows through specialized expertise to maximize arbitrage returns.

For customer-side storage, Zhang Jianing recommended a strategic shift toward integrated energy management for industrial clients. Leveraging AI control systems, storage assets can capitalize on spot market price volatility and deliver bundled energy services to lower overall consumer power costs. Grid-side storage must reduce reliance on simple price arbitrage and monetize system and capacity value by participating in energy markets, auxiliary service markets and capacity mechanisms to generate multiple revenue streams. After the removal of administratively set TOU tariffs and full renewable energy integration into power markets, generation-side storage will better stabilize variable renewable power output and boost plant competitiveness through coordinated market participation.

Overall, this round of power market reforms reinforces market orientation, pushing the energy storage sector and related industries to compete on operational competence rather than static policy spreads. For ordinary residential consumers, the elimination of fixed TOU tariffs will not alter electricity bill levels in the short term. Over the long run, refined market price signals will empower all consumers to plan power usage more rationally.

(Reporter: Liao Ruiling)

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