China Post Securities released a research report stating that the classified improvement of capacity pricing serves as a transitional measure before the establishment of a capacity market, involving areas such as coal power, natural gas, pumped storage, and grid-side independent new energy storage. Overall for capacity pricing, it represents an upward adjustment for coal power, while pumped storage faces differentiation pressure in the long term (existing and new projects are treated separately, transitioning from a station-specific price to a province-wide price). Independent energy storage sees the first establishment of national-level rules, with gas power and independent storage referencing coal power standards. In the long run, other reliable capacity on the generation side (such as nuclear power, solar thermal, etc.) will be gradually included, and even the demand side (stable adjustable loads, V2G, etc.) will also be progressively incorporated. The main viewpoints of China Post Securities are as follows:
The event: On January 30, 2026, the National Development and Reform Commission and the National Energy Administration issued the "Notice on Improving the Capacity Pricing Mechanism for the Generation Side," which classifies and improves the capacity pricing mechanisms for coal power, natural gas power generation, pumped storage, and new energy storage. After the continuous operation of the electricity spot market, a reliable capacity compensation mechanism for the generation side will be established in an orderly manner, compensating unit reliable capacity based on peak capacity according to unified principles.
The classified improvement of capacity pricing is a transitional phase before the capacity market is established. For coal power, the proportion of fixed costs recovered through capacity pricing will be increased to no less than 50%, and this can be further raised based on local market conditions and coal power utilization hours. For natural gas, provincial pricing authorities can establish a capacity pricing mechanism for natural gas power generation (which may reference coal power capacity pricing). For pumped storage, projects that commenced before Document No. 633 (having obtained water intake, temporary land use, and environmental approval documents) will follow government pricing; for projects starting after, provincial pricing authorities will set a unified capacity price for all new power stations within the provincial grid over a 3-5 year period, based on the principle of covering average costs during the operational period and according to the cost parameter rules specified in Document No. 633 (with corresponding reductions for full-power generation durations of less than 6 hours).
For grid-side independent new energy storage, the capacity price level will be based on the local coal power capacity price standard, adjusted by a certain ratio according to peak capacity (the ratio is calculated by dividing the full-power continuous discharge duration by the annual maximum net load peak duration, with a maximum of 1), and determined by considering factors such as progress in electricity market development and power system requirements.
The reliable capacity compensation mechanism for the generation side is a medium-term transitional measure. After the electricity spot market operates continuously, a reliable capacity compensation mechanism will be established at an appropriate time to compensate unit reliable capacity according to unified principles. Regions with a high proportion of new energy installations and significant demand for reliable capacity should accelerate the establishment of this mechanism. Guided by the state, qualified regions can form capacity prices through methods like capacity markets in line with electricity market development. The compensation standard is based on covering the fixed costs that the marginal market unit cannot recover in the energy and ancillary services markets.
The scope of the reliable capacity compensation mechanism can include coal power, gas power that voluntarily participates in local markets, and qualified grid-side independent new energy storage, and will gradually expand to other units with reliable capacity, such as pumped storage, as the electricity market develops and pricing reforms progress. After the reliable capacity compensation mechanism is established, relevant units like coal power, gas power, and grid-side independent new energy storage will no longer follow the original capacity pricing. Provincial pricing authorities can, on the basis of a relatively sound market system, uniformly implement the reliable capacity compensation mechanism for pumped storage power stations constructed after this notice is issued, allowing them to participate in energy and ancillary service markets, with all market proceeds going to the power stations.
The capacity market is accelerating its establishment, emphasizing the importance of regulation resources. Overall, capacity pricing means an upward adjustment for coal power, pumped storage faces long-term differentiation pressure, and independent storage sees its first national rules, with gas power and independent storage referencing coal power. Long-term, other reliable generation-side capacity will be gradually included, and even demand-side resources will be incorporated. China Post Securities stated that it has always believed in subjecting all technologies to market testing, which allows for the development of regulation resources tailored to local conditions, reducing the "fallacy of composition" from numerous single-industry policies, while better reflecting the economics of generation technologies in both the energy market (gradually lifting restrictions, such as no longer uniformly enforcing the 20% lower limit below the benchmark price) and the ancillary services market.
Investment recommendations: The accelerated establishment of the capacity market first benefits the rapid construction of regulation resources. For energy storage, it is recommended to focus on HySence (688411.SH). For gas power, attention should be paid to whole-machine manufacturers like Shanghai Electric (601727.SH), China Post Electric (600875.SH), Hangzhou Steam Turbine, as well as high-temperature component suppliers like Yingliu Co., Ltd. (603308.SH) and Wanze Co., Ltd. (000534.SZ). Pumped storage faces relatively minor policy changes in the medium term, with stable owner expectations; recommended whole-machine manufacturers include China Post Electric, Harbin Electric (01133), and Zhefu Holding (002266.SZ).
Risk warning: Risks associated with electricity marketization falling short of expectations.
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