The question on every investor's mind is whether the negotiated electricity price for long-term contracts will rise in 2027, and by how much across the national and Guangdong markets. Based on current dynamics, an increase in thermal power long-term contract prices for 2027 is nearly a 100% certainty, with the magnitude likely to exceed market expectations.
Industry projections suggest the national average thermal power contract price could climb by roughly 0.03 yuan per kilowatt-hour, while regions like Guangdong, where spot electricity prices have already jumped significantly, could see increases of more than 0.06 yuan per kWh. This stands in stark contrast to the current market consensus, which anticipates only a modest national uplift of around 0.01 yuan.
The mechanism driving this price surge is deeply tied to coal price fluctuations. When negotiating next year's long-term contract tariffs, the reference point is typically the December coal price, extrapolated in a linear fashion. In December 2025, the average coal price hovered around 700 yuan per tonne, but expectations for December this year place the benchmark at approximately 900 yuan per tonne—a year-on-year increase of 200 yuan per tonne. This translates to a fuel cost rise of about 0.07 yuan per kWh at the generation level. Even if we assume 50% of contracted coal remains at fixed prices, the spot coal portion alone would push fuel costs up by 3.5 cents, meaning the coal factor on its own supports a contract price increase of at least 0.03 yuan.
Assessing the supply-demand balance during peak thermal power generation periods in 2027 requires a nuanced view that separates renewable energy from dispatchable power sources. During evening peak hours, solar output is weak and wind power stability remains low, forcing reliance on hydro, thermal, and new energy storage systems. Calculations reveal that during the 14th Five-Year Plan period, the cumulative growth rate of dispatchable power sources was 31%, which lagged behind the 38% growth in total societal electricity consumption. If we consider only physical hydro and thermal installations, the compound growth rate drops to 13%, significantly trailing the 31% increase in power demand. While new energy storage is growing at roughly 30%—barely matching demand—its high costs are already showing signs of slowing expansion. This year marks the final year of robust thermal capacity additions; from next year onward, growth will taper to around 40 gigawatts, including retrofits of older units. Consequently, the supply-demand situation during peak thermal generation windows is tightening, and the broader narrative of loose power market balance does not apply to these specific periods.
Shifts in the behavior of electricity retail companies are also set to reshape the 2027 contract signing landscape. Historically, because long-term contract prices exceeded spot prices, retailers aggressively bid ultra-low prices in the contract market to secure volume, which dragged tariffs downward. However, with spot prices now surpassing contract prices, over 60% of Guangdong's retail companies suffered losses in the first half of this year, and in certain periods the figure exceeded 80%. This has dismantled the long-held assumption that spot rates are invariably below contract rates. Looking ahead, retailers are expected to adopt more rational pricing strategies next year. The rebate phenomena observed in Guangdong this year are unlikely to resurface in 2027, and enterprise-side expectations for Guangdong's long-term contract prices are now above 0.4 yuan per kWh—markedly higher than the broader market forecast.
The core investment logic for positioning in the thermal power sector at this juncture revolves around the market's overly pessimistic outlook for next year's tariffs. With valuations and expectations both at low points, the sector offers attractive entry opportunities. If price increases beat expectations, the upside potential for the sector is substantial; even if hikes underperform, share prices are cushioned by fundamental support. Our key recommendations focus on two categories: thermal power companies based in Guangdong, and coal-power integrated enterprises with high proportions of long-term contracted coal and robust dividend commitments, which provide both earnings visibility and tariff flexibility. The content provided above is for reference only and should not be construed as investment advice; any losses incurred from relying on this information are solely the responsibility of the investor.
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