A significant reform in the electricity sector is underway, set to impact how power is priced. The core change is the phasing out of the fixed time-of-use electricity pricing mechanism, which has been in place for over 40 years. It will be replaced by market-based pricing, where rates are determined by supply and demand dynamics. Provinces such as Guizhou, Hubei, and Shaanxi have already abolished the fixed time-of-use pricing system, with others expected to follow.
A key concern for many is whether this reform will lead to higher electricity bills. The reform primarily targets commercial and industrial electricity users. Residential electricity consumption remains unaffected and will continue to be priced according to the government's catalog tariff.
The rationale for ending the decades-old fixed time-of-use pricing lies in the evolving structure of China's power generation. Historically, thermal power (coal-fired) dominated. Demand was higher during the day, so more coal was burned to generate more power. At night, with lower demand, generation could be scaled back. This pattern aligned well with a fixed pricing schedule that designated peak, standard, and off-peak periods with different rates, allowing users to shift consumption—like charging electric vehicles—to cheaper, off-peak hours.
However, China's energy mix has undergone substantial transformation. While thermal power remains the largest source, the shares of hydropower, wind, solar, and nuclear power have grown significantly. In 2025, these clean energy sources collectively accounted for 35.4% of power generation. Notably, wind, solar, and nuclear power experienced rapid growth in 2025, with generation increasing by 9.7%, 24.4%, and 7.7% respectively, while thermal power generation declined by 1%. In terms of installed capacity, solar power saw a 35.4% increase and wind power a 22.9% increase in 2025. The proportion of clean energy in the power grid is expected to continue rising in the coming years.
The generation patterns of these new energy sources are less controllable. For instance, solar power peaks at midday when sunlight is strongest, a time when generation is highest and, logically, prices should be lower. This contrasts with the old fixed time-of-use system, which typically set higher prices during daytime peak demand hours. Therefore, the entire pricing mechanism is shifting from a planned model to a market-oriented one determined by supply and demand.
Market conditions will vary by region. Areas rich in solar resources (like the northwest) or hydropower (like Sichuan) will have different supply dynamics compared to eastern regions still reliant on thermal power. This will lead to regional differences in electricity prices, which will be set in accordance with local conditions.
Concerns about potential arbitrary pricing by power companies in the absence of fixed rules are unfounded. Distinctions between peak and off-peak periods will remain, and regulatory oversight by authorities will continue. In the short term, some users may experience cost fluctuations as they adapt to the new rules. However, with reasonable planning of electricity usage, the abolition of fixed time-of-use pricing is not expected to significantly impact overall electricity costs for most.
Furthermore, China's total power generation continues to grow robustly, ensuring ample supply. As the share of clean energy increases, overall generation costs are trending downward, providing little basis for substantial price hikes. For residential users, electricity prices in China have remained relatively affordable and stable compared to many other countries, with low increases historically. As electricity is a vital public service, significant volatility is unlikely, offering reassurance to consumers.
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