Phased Rise in Spot Power Prices in Southern China, Supply Remains Sufficient
Since the end of March, spot power prices in China’s southern region have witnessed a phased upward trend, driven by multiple factors including strong electricity demand, fluctuations in clean energy output and concentrated unit maintenance. People’s Daily Online reports that despite this price fluctuation, the overall power supply in the region has been sufficient to meet demand. The impact on electricity prices for end-users is limited due to the small proportion of spot electricity, and the situation is expected to ease gradually as hydropower in southwest China enters the flood season.
Industry insiders note that fluctuations in spot power prices are a normal reflection of changes in power supply and demand as well as primary energy costs. The key to power market reform lies in establishing a reasonable price formation mechanism. A short-term upward adjustment in spot market prices is precisely the market mechanism playing its role effectively, which helps encourage power generation enterprises to increase output, guide users to shift peak loads to off-peak periods, and promote optimal resource allocation on a larger scale. China Energy News points out that the southern region enters the dry-flood transition period every year from April to June, during which reduced supply, increased demand and tighter balance margins are common, making higher spot prices than in the flood season a normal manifestation of the "price indicator" function.
The surge in electricity demand is mainly attributed to higher temperatures and sound economic performance. Many provinces in the southern region entered summer about 20 days earlier than the same period last year, leading to the early release of cooling loads such as air conditioners. This has driven the regional maximum load to climb to 235 million kilowatts, a year-on-year increase of 13%. Guangdong, Guangxi and Hainan recorded significant growth rates of 12.8%, 16.9% and 22.8% respectively. China Southern Power Grid stated that as of April 20, the cumulative electricity consumption in the southern region in April reached 87.08 billion kilowatt-hours, a year-on-year increase of 14%.
Manufacturing industries in Guangdong, Guangxi and Hainan have become the core drivers of regional growth. Among them, Guangdong’s cumulative electricity consumption reached 48.16 billion kilowatt-hours, a year-on-year increase of 16%, with electricity consumption in the primary, secondary and tertiary industries growing by 13%, 12.7% and 23.4% respectively. People’s Daily Online reports that China’s electricity consumption has maintained steady growth amid an accelerated green shift, with non-fossil energy accounting for an increasing proportion of the total installed power generation capacity.
The limited supply of low-cost power sources has also contributed to the phased rise in spot prices. China Southern Power Grid has a high proportion of hydropower and new energy, accounting for more than 60% of its power source structure, and their output is highly volatile depending on seasons and weather. Affected by the dry season in southwest China and rainy weather in the south, the average daily hydropower output in April has decreased by 23% month-on-month compared with March, and the average daily photovoltaic new energy output in Guangdong has decreased by about 20% in some periods. Additionally, about 18 million kilowatts of units across the region are under maintenance to prepare for the summer peak power supply, forcing the spot market to rely heavily on thermal power units, whose higher quotes determine spot prices during peak periods.
To ensure stable power supply, multiple market mechanisms have been working together. The national unified power market mechanism has allocated resources on a large scale, increasing supply capacity by more than 15 million kilowatts since late April. Currently, the power supply capacity in the southern region remains sufficient, with the system operating safely and stably, and no power shortages or rationing have occurred. China Electric Power News reports that spot power prices in the southern region have been declining since April 16 and now fluctuate between 0.45 and 0.55 yuan per kilowatt-hour.
Cross-grid and cross-border regular transactions have played a prominent role. Since April, Guangzhou Power Exchange Center, in conjunction with Beijing Power Exchange Center, has organized 14 cross-grid medium and long-term as well as spot transactions, realizing the full-channel purchase of 1.1 million kilowatts and 2 million kilowatts of low-cost external power in April and May respectively. With the official commissioning of the China-Laos 500-kilovolt interconnection project, new energy from Laos delivered to the southern region through market transactions has recently reached 770,000 kilowatts, and Laos hydropower will further increase power supply to Guangdong by 600,000 kilowatts starting from June.
The Guangdong Provincial Energy Bureau emphasizes that the upward spot prices do not mean higher electricity prices for end-users, as the terminal electricity cost remains stable. Residents and agricultural users implement government-approved electricity prices, which are not affected by spot market fluctuations. This year, both the power generation and consumption sides in the southern regional power market have maintained a high proportion of medium and long-term contracts (about 84%), with the average price of medium and long-term contracts dropping by about 3.8% year-on-year. It is estimated that the impact of rising spot prices in Guangdong in April on the electricity costs of industrial and commercial users will be only about 1%, ensuring stable enterprise operation costs and controllable impact on economic and social development.
