CITIC SEC has released a research report indicating that the system operation fee has now increased to 0.08 yuan per kilowatt-hour, becoming a core component of the terminal electricity price for industrial and commercial users. As power sector reform and the construction of the new-type power system progress, the system operation fee is projected to potentially exceed one trillion yuan by 2030, equivalent to 0.11 yuan per kilowatt-hour. At present, due to an oversupply of thermal power capacity, relatively low feed-in tariffs for new energy, and manageable power system regulation pressure, the increase in system operation costs is primarily reflected in changes to the structure of end-user electricity costs. The report judges that this rise is unlikely to push up the overall electricity cost for end-users for the time being.
Key Points from the Analysis
Since 2023, the system operation fee has been itemized separately and its scope is continuously expanding. This fee refers to the specialized costs incurred to ensure the safe and stable operation of the power system and the accommodation of new energy, including expenses for system regulation, reserve capacity, ancillary services, and capacity support. Starting from May 2023, this fee has been listed as a separate item on the electricity bills of industrial and commercial users. With the advancement of the new power system and the deepening of electricity market reforms, the components of this fee are continually broadening, making it the central vehicle for covering the specialized costs of power system stability and security.
Projected Growth Trajectory
By 2030, the total amount of the system operation fee is expected to surpass one trillion yuan. There have been two notable surges in the domestic system operation fee since 2024 and 2026, corresponding to the allocation of coal power capacity tariffs and the settlement of price differences for new energy mechanism electricity fees, respectively. Currently, the allocation of thermal power capacity fees and the settlement of price differences for new energy mechanism electricity constitute the main components of the system operation fee. Regionally, trends are similar but the scale varies in coastal, northwestern, and southwestern areas due to differences in power supply structure, affordability, and policy implementation. The average system operation fee across provinces and cities is now estimated at 0.08 yuan/kWh. The national total is anticipated to exceed one trillion yuan by 2030, with a compound annual growth rate of approximately 10% from 2026 to 2030.
Impact on End-User Tariffs
Oversupply and structural changes suggest the system operation fee will not elevate terminal electricity prices. As its scale grows, the fee now accounts for over 10% of the industrial and commercial electricity price. Given the oversupply pressure on capacity, when users pay the thermal power capacity fee, thermal power generators tend to moderately reduce the energy price in their power purchase contracts with users. At this stage, the pressure on power system regulation remains controllable, and the tariffs for both new energy's mechanism-based and market-based electricity do not exceed the coal power benchmark price. With new energy becoming the key incremental power source, it is expected that allocating thermal capacity fees and new energy mechanism fee settlements will not drive up terminal electricity prices. Looking ahead, once the thermal power sector moves past its oversupply cycle and system regulation pressure significantly increases, the system operation costs could substantially impact user electricity expenses.
Investment Implications and Outlook
As the energy transition and power market reform advance, the system operation fee is becoming explicit and rapidly forming a significant part of the terminal electricity price. Currently, changes in this fee reflect more of a shift in the cost structure for end-users rather than an actual increase in the electricity price. In the future, once the oversupply of thermal power capacity eases and the risks to system regulation posed by large-scale new energy integration are fully realized, it is expected to then push up user costs. From the power generation side, channeling thermal power capacity tariffs and new energy price difference settlements to end-users via the system operation fee reflects the supportive stance of regulatory authorities towards generators during the energy transition and market reform.
Potential Risk Factors
Key risks include a significant surge in coal prices, increased pressure on power system regulation, an extremely tight power supply and demand environment, and a large-scale increase in flexible resources such as energy storage.
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