The global power market is experiencing a dramatic divergence. In the United States, the explosive growth of artificial intelligence (AI) and data centers is pushing the power grid to its limits, with capacity prices hitting regulatory caps and forcing regulators to intervene in cost-sharing; meanwhile, in China, the rapid expansion of renewable energy capacity is driving electricity prices into a significant downward trend, forcing a re-evaluation of industrial and commercial power costs. Recent market data shows that the latest auction prices from PJM, the largest US grid operator, have reached historic highs; without price controls, data center demand would have driven prices up by another 60%. In response, US President-elect Trump has explicitly pressured tech giants to "pay their own way" for the surging power demand. This political battle is directly intensifying market concerns about the operating costs of utility sectors and technology companies. Simultaneously, the market in China, across the ocean, presents a starkly different picture. According to the latest research report from BofA Global Research, the downward trend in China's electricity prices is accelerating. The agent purchase power tariff for January 2026 fell significantly by 10% year-on-year, while annual power contract prices in key economic provinces like Guangdong and Jiangsu have also seen notable declines. The supply-demand矛盾 in the US power market has reached a critical point. The base residual auction for 2027/2028 by PJM Interconnection saw generation capacity prices climb to $333.40 per megawatt-day (MW-day), not only breaking records but also directly hitting the price cap approved by the Federal Energy Regulatory Commission (FERC). Even more startling is the regulated "shadow price." Details from the auction report indicate that if the price cap were removed, the simulated market clearing price would be as high as $529.80 per MW-day. This implies that in a completely unregulated market environment, the massive demand from data centers would have pushed prices nearly 60% higher than the current "capped" level. Goldman Sachs has warned that if future auctions remove price caps, US electricity bills could double, potentially forcing the market into an extreme test of choosing between "AI development" and "basic power reliability." Facing runaway price expectations, political pressure has followed. On Truth Social, Trump explicitly stated that while data centers are crucial for AI prosperity, the large tech companies building these facilities must "pay their own way," rather than passing the costs on to ordinary consumers. He revealed that the government has engaged in dialogue with Microsoft, which will make "significant changes." Microsoft Vice Chairman Brad Smith is expected to issue a statement on sharing the costs of AI infrastructure. This policy shift means that tech giants, while enjoying the AI boom, will have to bear the substantial costs of power infrastructure. Data from the US Energy Information Administration (EIA) last November showed that US household electricity expenditures have reached a historic high, approaching a record of 20 cents per kilowatt-hour. With rising fuel costs and growing demand, power costs are expected to climb further in 2026, with similar trends facing transportation and commercial users.
In stark contrast to the persistently high "fever" of US electricity prices, a BofA Global Research report titled "China Power: 7th Power Pulse" points out that Chinese electricity prices are facing downward pressure. The data shows that the agent purchase power tariff for January 2026 fell by 10% year-on-year, equivalent to a decrease of 4 fen per kilowatt-hour. BofA notes that in Guangdong, annual contract prices have fallen to the floor price level; contract prices in Jiangsu fell by 7 fen year-on-year; prices in Fujian and Jiangxi dropped by 3-4 fen, while declines in provinces like Hubei and Liaoning even exceeded 4-5 fen. Early market checks suggest that, excluding capacity prices and potential rebates, the annual electricity price for 2026 could fall by 3-4 fen per kilowatt-hour year-on-year nationwide. This trend confirms that China's power market is shifting from structural tightness to a surplus, with buyer's market characteristics becoming increasingly evident.
The core reasons for the decline in Chinese electricity prices lie in rapid expansion on the supply side and relative weakness on the demand side. BofA's report analysis indicates that due to a warm winter delaying heating demand, thermal power output in December is expected to be disappointing. Data from November showed that weekly thermal power production statistics from the China Electricity Council (CEC) fell 9% year-on-year. Concurrently, the supply of renewable energy continues to grow. Although a 44% year-on-year decrease in rainfall in December may drag on hydropower utilization hours, the water flow for Yangtze Power increased 55% year-on-year in the fourth quarter of 2025, driving its output up 20% year-on-year. In wind power, domestic wind turbine procurement volume reached 167GW in 2025; although this was down 13% year-on-year, it remains high, and onshore wind turbine bid prices rebounded 20% year-on-year in Q4 2025, indicating strong future installation momentum. The solar PV industry chain faces more intense price competition. The report points out that the gross profit margin for PV module manufacturers has fallen to a historical low (-11 fen/watt), and preliminary January production schedules show that output for wafers, cells, and modules has declined month-on-month. This industry-wide "involution" and capacity release are further depressing the grid-connection prices for new energy power, thereby pulling down the overall electricity price center.
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