How to Read a Chinese Renewable PPA: Market Price, Mechanism Price, Green Certificates and Time-of-Use

Short answer. A Chinese renewable power price today is assembled from four layers: an energy price formed in the electricity market; a provincial "mechanism price" that is settled outside the market as a difference against the market average; a green certificate priced separately from the electricity; and a time-of-use shape that decides how a flat contract is actually settled. A "PPA" between a generator and a user is a medium- or long-term market contract sitting inside this structure. This guide walks through the national documents that define each layer. It gives no price numbers, because every number is provincial.

1. The energy price: all new energy goes to market

On 27 January 2025 the NDRC and NEA issued Document 136 (发改价格〔2025〕136号) on deepening market-based reform of new-energy on-grid tariffs. Under it, in principle all on-grid electricity from wind and solar projects enters the market and the on-grid price is formed by trading; projects may bid quantity and price or accept the market price. Provinces had to issue and implement their specific schemes before the end of 2025.

The market itself is defined by the Basic Rules for Electricity Market Operation (NDRC Order No. 20, effective 1 July 2024), which list energy, ancillary-service and capacity trading, split energy trading into medium/long-term and spot, and count storage companies, virtual power plants and load aggregators among market participants. The coal-fired benchmark still matters: Document 1439 (2021) provides that in principle all coal generation enters the market with prices formed within "benchmark price ± float", widens the band to in principle ±20% (from +10%/−15%), exempts energy-intensive users from the 20% upward limit, exempts spot prices from the band, and keeps the coal benchmark as the anchor for new-energy pricing. The same document pushed all commercial and industrial users into the market, abolished the C&I catalogue tariff and set up grid-company agency purchase for users not buying directly; it took effect on 15 October 2021. When a Chinese counterparty quotes a renewable price "relative to the coal benchmark", this is the reference.

2. What a PPA is in Chinese market terms

The Basic Rules for Medium- and Long-Term Electricity Trading (发改能源规〔2020〕889号, 10 June 2020) define such trading as wholesale trades over multi-year, annual, quarterly, monthly, weekly and multi-day periods, concluded by bilateral negotiation or centralised trading among generators, users and retailers. Centralised trading takes three forms — centralised bidding, rolling matching and listing — alongside bilateral negotiation. A bilateral multi-year contract between a wind farm and a factory is therefore a "medium- and long-term bilateral trade", and it still has to be registered through the exchange. Document 136 explicitly encourages multi-year power purchase agreements between new-energy generators and users and asks exchanges to explore multi-year trading.

The contract's content is prescribed. A power purchase and sale contract must specify the buyer, seller, transmitter, quantity (power), price, delivery period, settlement method, deviation metering, liability for breach and payment details; the exchange's electronic confirmation is treated as an electronic contract. Since 28 December 2021, grid-connection and power-sale agreements in China must be concluded with reference to the NEA/SAMR model texts, including the power purchase and sale contract model. A PPA draft that lacks a deviation clause or a delivery curve is incomplete by the rules' own list.

The end user's bill is layered too: a market user's price is composed of the energy trading price, the transmission and distribution price, ancillary-service charges, and government funds and surcharges. A PPA price is only the first of these.

3. The mechanism price: a difference settlement outside the market

Document 136 creates a "sustainable-development price settlement mechanism" for new energy: for electricity volumes included in the mechanism, the gap between the market average price and the mechanism price (机制电价) is settled by the grid company and charged to local system operating costs. It is settled monthly; where a spot market runs continuously the market average is in principle the monthly generation-side real-time weighted average for the same project type, and elsewhere it is the weighted average of medium- and long-term trades in the active period.

Existing and new projects are treated differently. For projects commissioned before 1 June 2025, the mechanism price follows current price policy and may not exceed the local coal benchmark price, with the term following existing guarantee periods; solar-thermal projects and offshore wind already allocated competitively follow existing local policies. For projects commissioned from 1 June 2025, the mechanism price is set by annual competitive bidding, selected from the lowest bid upward, in principle at the highest selected bid but not above a bidding ceiling set by the provincial price authority; the term equals the average payback period of similar projects.

Three consequences for reading a PPA. First, the mechanism applies to a volume, not to the whole plant; the rest is pure market exposure. Second, the settlement reference is a provincial average for the project type, not the project's own contract price — a project that sells below the average through its PPA does not get the gap back. Third, Document 136 states that electricity settled under the mechanism does not additionally earn green-certificate income, and it prohibits making storage a precondition for approval, grid connection or export of newly built new-energy projects.

Underlying all this is the older distinction in NDRC Order No. 15 (2024): a renewable project's exported electricity consists of guaranteed-purchase electricity, bought under the consumption-responsibility mechanism, and market-traded electricity priced by market means and bought by retailers and users.

4. The green certificate: priced separately

Document 1044 (2023) makes the green certificate the sole proof of the environmental attribute of renewable electricity, with one certificate per 1,000 kWh; tradable certificates may currently be traded only once; and in green-power trades the contract must state certificate and physical-electricity volumes and prices separately. Tradable certificates are issued for the exported electricity of centralised wind and solar and of distributed wind and PV projects. Document 136 repeats the split: green-power trades must state the energy price and the green-certificate price separately.

For a buyer this means a "green PPA" has two prices on its face, and the environmental claim travels with the certificate, not with the electrons. For a seller it means the certificate is a second revenue line — unless the volume is inside the mechanism, in which case Document 136 says there is no double benefit.

5. The shape: time-of-use decides how a flat price settles

Document 1093 (2021) sets catalogue peak-valley price ratios of in principle not below 4:1 where the maximum system peak-valley load difference exceeds 40%, and 3:1 elsewhere; critical-peak prices are in principle at least 20% above the peak price, with critical-peak hours set from the hours at or above 95% of system maximum load in the past two years. It also tells market participants what happens to a flat contract: where no spot market runs, medium- and long-term contracts should declare a load curve and time-differentiated prices, and contracts without a declared curve or time-differentiated price are settled at the catalogue time-of-use periods and ratios. The trading rules add that where all contracts specify a curve the next-day schedule follows the contracted curves, and where only some do, dispatch arranges the generation curve for the portion without a contracted curve.

For solar, whose output is concentrated in hours that many provinces now classify as off-peak or valley, the difference between a flat price and a curve-weighted price can be the whole margin. A PPA that quotes one number per kWh without a curve is not yet a price.

Reading a term sheet: where each number comes from

Scope limits

National documents only; no provincial scheme, ceiling, mechanism price or coal benchmark value is quoted. Cross-provincial trading, direct-connection green power and storage revenue stacking are out of scope. The model contract text itself was not read; only the notice that mandates it. Translations of Chinese terms are CNWattHub's.