In 2025, China’s cumulative installed capacity of photovoltaic (PV) and wind power surpassed that of thermal power for the first time, reaching 1.84 billion kilowatts. This made PV and wind power the absolute mainstay of China’s electricity growth, accounting for 47.3% of the total installed capacity and nearly half of the global total installed capacity of PV and wind power. China has thus established the world’s largest and fastest-growing renewable energy system. This structural change has laid a solid energy foundation for achieving the “dual carbon” goals on schedule. However, due to the natural intermittency and volatility of renewable energy output, coupled with the dynamic adjustment of electricity supply and demand patterns, the risk of electricity price fluctuations has been significantly amplified, becoming a prominent bottleneck restricting the stable operation of the electricity market. This year, the National People’s Congress and the Chinese People’s Political Consultative Conference put forward relevant suggestions to accelerate the development of the electricity derivatives market.
The representatives stated that practice has shown that the deepening of electricity marketization reform cannot be separated from the collaborative support of the derivatives market. In the process of electricity marketization in Europe and the United States, they also encountered the dilemma of drastic fluctuations in electricity prices caused by the rise of new energy. The comprehensive application of derivatives instruments has become the core path to solve this problem. In the electricity marketization reform in 2001, the UK replaced the traditional electricity pool mechanism with a “bilateral contract + balanced market” model by introducing derivatives instruments such as futures and options, significantly improving the stability of market operation. In recent years, the trading volume of electricity derivatives in mature markets in Europe and the United States has remained at the trillion-dollar level all year round. The trading volume of electricity derivatives in Europe has reached 9-10 times that of the spot market, and in the United States, it has reached 15-20 times. More than 90% of electricity trading is covered by financial contracts such as futures, effectively stabilizing price fluctuations in the spot market. International practice has fully confirmed that a mature electricity derivatives market is crucial for hedging price risks, ensuring the stable operation of market entities, and maintaining the smooth operation of the electricity market. The representatives of the Two Sessions believe that compared to mature markets in Europe and the United States, China’s electricity derivatives market is still in its initial exploratory stage. The development process does not match the pace of electricity marketization reform and the demand for energy structure transformation. There are mainly three prominent shortcomings:
One issue is the outdated variety system.
The absence of electricity futures, a core standardized hedging tool, and the lack of specialized products covering specific risks such as fluctuations in new energy output, peak-valley price differentials, and impacts of extreme weather.
Secondly, cross-regional trade barriers are prominent.
The electricity market rules across provinces (including autonomous regions and municipalities) are not unified, the accounting mechanisms are incompatible, and there are significant differences in transmission pricing policies. Administrative intervention and local protectionism occur from time to time, making it difficult to achieve optimal allocation of electricity resources across provinces through the derivatives market.
Thirdly, the policy coordination and regulatory mechanism need to be improved.
The lack of a coordinated and interconnected mechanism between energy and financial regulation, coupled with the poor alignment between the delivery and settlement rules of derivatives trading and the electricity spot market, as well as the high participation threshold and numerous risk concerns for market entities, have led to a reluctance and inability to use derivatives instruments, thus restricting the effective exertion of the core functions of the market.
Currently, fluctuations in electricity prices have significantly impacted the operational development of entities upstream and downstream in the power industry chain. Due to output fluctuations, new energy power generation enterprises have seen their on-grid electricity prices deviate from expectations, with some project yields falling below the warning line, affecting the enthusiasm for new project investment. Electricity sales companies face a dual squeeze of “high electricity purchasing costs and limited electricity selling prices,” falling into operational difficulties. Industrial users, especially high energy-consuming enterprises, find it difficult to lock in electricity costs in advance, seriously affecting the stability of production plans and subsequently impacting the security of the industrial and supply chains. If we do not accelerate the development of the electricity derivatives market, it will further hinder the deepening of electricity marketization reforms, which is not conducive to the high-quality development of the new energy industry and may even affect energy security and the overall situation of supply guarantee. To effectively address the risk hedging challenges in the process of electricity marketization, promote the coordinated development of the electricity derivatives market and the spot market, and facilitate the steady progress of electricity marketization reforms, representatives at the Two Sessions suggest:
Firstly, it is suggested to accelerate the construction of a diversified and standardized product system to lay a solid foundation for risk hedging. Led by the China Securities Regulatory Commission (CSRC) and the National Energy Administration, the futures exchanges should be guided to accelerate the research, development, and listing process of electricity futures, and complete the research, development, and listing preparations for nationally applicable electricity futures contracts as soon as possible. A mechanism of “national coordination + local pilot projects” should be established to encourage mature provinces in the spot market to first carry out pilot projects for special products such as peak-valley price difference contracts and new energy output index futures. These pilot projects should focus on matching the risk hedging needs of emerging market entities such as new energy power generation, energy storage, and virtual power plants, and after forming replicable experiences, they should be promoted nationwide.
Secondly, it is recommended to expedite the establishment of a unified national market, remove barriers to cross-regional transactions, and establish unified national rules for the electricity derivatives market. Accelerate the establishment of a national coordination mechanism for the electricity derivatives market, promote the unification of trading rules, accounting standards, and price formation mechanisms across all provinces (including autonomous regions and municipalities), and eliminate policy differences and local protectionism. Promote the interconnection and interoperability between the national electricity trading platform and the futures trading platform systems, enable the sharing and utilization of key information such as trading data, position information, and contract fulfillment status, and reduce the cost of information asymmetry in cross-regional transactions.
Thirdly, it is suggested to strengthen the construction of market infrastructure and enhance the comprehensive service guarantee capability. Increase investment in the construction of infrastructure for the electricity derivatives market, support futures exchanges and electricity trading centers in upgrading their technical systems, and comprehensively improve the stability, security, and carrying capacity of the trading system. Establish a nationally unified electricity data sharing platform, integrate data resources across the entire chain of electricity production, transmission, consumption, and energy storage, and provide data support for accurate pricing of derivatives and effective risk prevention and control.
Fourthly, it is suggested to establish and improve a mechanism for policy coordination and regulatory synergy to ensure the standardized and orderly operation of the market. Establish a collaborative working mechanism between energy regulation and financial supervision, clarify the division of responsibilities among the National Energy Administration, the China Securities Regulatory Commission, and local governments in the supervision of the electricity derivatives market, and form a coordinated and efficient regulatory force that works in concert from top to bottom. Improve the supporting policy support system, incorporate enterprise hedging business into the risk management evaluation system, and provide precise support to enterprises that conduct hedging in compliance with regulations in terms of credit financing and tax incentives.
Fifthly, it is suggested to strengthen the cultivation and guidance of market entities, and enhance the risk hedging capabilities of the entire industry. A public welfare training platform should be established, incorporating knowledge training on electricity derivatives into the normalized training system of energy enterprises. Jointly with industry associations and futures exchanges, special training should be conducted to enhance the “risk neutrality” awareness and hedging practical operation capabilities of market entities, so that they can “use and dare to use” derivative tools.
Post time: Mar-14-2026