China’s renewable energy capacity has grown rapidly in recent years. In Q1 2025, the country’s installed wind and solar power capacity reached 1,482 GW, accounting for over 42.0% of the total installed capacity and surpassing coal-fired power capacity of 1,451 GW for the first time. This achievement surpassed China’s target of 1,200 GW six years ahead of schedule.
However, the increasing share of variable renewable energy in the power system presents new challenges. It calls for greater flexibility in power system operations to ensure reliability and cost efficiency. Policymakers increasingly rely on market mechanisms to mobilise flexible resources and promote efficient integration of renewables.
To enable this transition, China launched a series of policies on power market reforms since last year. The “Basic Rules for Power Market Operation”, effective from July 2024, provide an overarching framework for China’s evolving power market. This regulation defines clearly market participants including virtual power plants and aggregators, standardises transaction types across energy, capacity, and ancillary services, and lays the groundwork for future detailed implementation rules. The “Energy Law”, effective from January 2025, identifies market mechanisms as a legal basis for driving the energy transition.
In April 2025, the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) issued two more policies providing specific guidance on ancillary market and spot market development.
Basic Rule for the Ancillary Services Market completes top-level design for China’s unified power market
As China accelerates the development of a unified national power market, there is an urgent need to standardise and coordinate ancillary services as a key market segment at the national level. The “Basic Rules for the Ancillary Services Market”, released in April 2025, aims to address this issue and meet the growing demand for system flexibility amid higher renewable penetration. For the first time China set up national standards for the ancillary service market including the following highlights:
- Clear definitions of ancillary service for market participants.
- Procedures for introducing new service types.
- A cost allocation mechanism based on a “beneficiary pays” principle.
- Coordination between ancillary and spot power markets through standardised clearing approaches.
- Clarification of the responsibilities of system and market operators in procurement, trading, and settlement.
This rule, together with the “Basic Rules for Medium- and Long-Term Power Trading” (2020, NDRC & NEA) and the “Basic Rules for the Electricity Spot Market” (Trial, 2023, NDRC & NEA), forms the core framework for the three market segments—marking the initial completion of the top-level design for China’s unified power market. Together they create stronger incentives for flexible resources to participate in the market, supporting greater renewable integration.
Notice on Accelerating Electricity Spot Market Development requires faster rollout in 2025
Also issued by NDRC and NEA in April 2025, the “Notice on Accelerating Electricity Spot Market Development” calls for nationwide coverage of the electricity spot market by the end of 2025. The spot market serves as the foundation for the ancillary services market, capacity mechanism, and the development of medium- and long-term markets. The notice sets a clear timeline for spot market rollouts in 20 provinces, with targets for each region following a phased approach of pilot, regional coordination, and eventual nationwide coverage:
- Regular spot market operations in Hubei by June 2025 and in Zhejiang by the end of 2025;
- Anhui and Shaanxi to follow by mid-2026;
- Sixteen additional provinces, including Fujian, Sichuan, and Jiangsu, must begin the trial operation of continuous spot market settlement by the end of 2025;
- Regional and inter-provincial markets (e.g., Southern Grid) are expected to strengthen trial and simulation efforts.
The notice reinforces the spot market’s role in price discovery and real-time supply-demand balancing. It also emphasises enabling full demand-side participation in bidding, clearing, and settlement processes and supporting new types of market entities, such as virtual power plants.
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