Notice of the National Development and Reform Commission and the National Energy Administration on Improving the Generation-Side Capacity Tariff Mechanism
Document No. Fagai Jiage 〔2026〕114
Development and Reform Commissions and Energy Bureaus of all provinces, autonomous regions, municipalities directly under the Central Government, and the Xinjiang Production and Construction Corps; Tianjin Municipal Bureau of Industry and Information Technology, Liaoning Provincial Department of Industry and Information Technology, Chongqing Municipal Commission of Economy and Information Technology, Gansu Provincial Department of Industry and Information Technology, Beijing Municipal Commission of Urban Management; all dispatched offices of the National Energy Administration; State Grid Corporation of China, China Southern Power Grid Co., Ltd., Inner Mongolia Power (Group) Co., Ltd., China National Nuclear Corporation, China Huaneng Group Co., Ltd., China Datang Group Co., Ltd., China Huadian Group Co., Ltd., State Power Investment Corporation of China, China Three Gorges Corporation, National Energy Investment Group Co., Ltd., China National Development and Investment Corporation, China Resources (Holdings) Co., Ltd., China General Nuclear Power Group Co., Ltd.:
To implement the decisions and arrangements of the Party Central Committee and the State Council on advancing price reform in the energy sector and accelerating the development of a new energy system, guide the steady and orderly development of regulating power sources, ensure the safe and stable operation of the power system, and support the green development of the economy and society, we hereby notify the relevant work on improving the generation-side capacity tariff mechanism as follows:I. General Approach
Adapting to the needs of developing a new power system and a power market system, we will better balance the safe and stable supply of electricity, the green and low-carbon transformation of energy, and the economical and efficient allocation of resources. We will improve the capacity tariff mechanisms for coal-fired power, natural gas-fired power, pumped storage, and new energy storage by category and optimize the power market mechanism. After the continuous operation of the electricity spot market, we will establish a reliable capacity compensation mechanism on the generation side in an orderly manner, and compensate the reliable capacity of generating units according to their peak-shaving capacity in accordance with unified principles, so as to fairly reflect the contribution of different generating units to the peak-shaving of the power system.
II. Improving the Capacity Tariff Mechanism by Category
(1) Improving the capacity tariff mechanism for coal-fired and natural gas-fired power
All regions shall, in accordance with the requirements of the Notice on Establishing a Capacity Tariff Mechanism for Coal-fired Power (Document No. Fagai Jiage 〔2023〕1501), raise the proportion of fixed costs of coal-fired power generating units recovered through capacity tariffs to no less than 50%, and may further increase the proportion based on local actual conditions such as market development and utilization hours of coal-fired power.
Provincial competent price departments may establish a capacity tariff mechanism for natural gas-fired power, where the capacity tariff is determined by recovering a certain proportion of the fixed costs of natural gas-fired power generating units.
(2) Improving the capacity tariff mechanism for pumped storage
For pumped storage power stations started construction (obtaining water intake, temporary land use and environmental impact assessment approval documents, the same below) before the issuance of the Opinions on Further Improving the Price Formation Mechanism for Pumped Storage (Document No. Fagai Jiage 〔2021〕633, referred to as Document 633), the capacity tariff shall continue to be set by the government, which shall be verified or reviewed by provincial competent price departments in accordance with the measures specified in Document 633. After the expiration of the operation period of the power stations, the price shall be re-verified on the principle of covering the necessary technical transformation expenses and operation and maintenance costs.
In accordance with the spirit of gradually realizing cost recovery and profit acquisition mainly through market participation as specified in Document 633, for power stations started construction after the issuance of the document, provincial competent price departments shall formulate a unified capacity tariff for newly started power stations connected to the provincial power grid during the same period (with a corresponding reduction for those with a full-power operation duration of less than 6 hours) every 3 to 5 years in accordance with the principle of covering the average costs during the operation period and the cost parameter rules specified in Document 633. The implementation period may be determined by taking into account the development of the power market, the demand of the power system, the sustainable development of power stations and other factors. At the same time, pumped storage power stations shall independently participate in the electricity energy, auxiliary services and other markets, and share the market income in a certain proportion determined by provincial competent price departments; the remaining part shall be used to offset system operation costs and shared by users.
(3) Establishing a capacity tariff mechanism for grid-side independent new energy storage
All regions may grant capacity tariffs to grid-side independent new energy storage power stations that serve the safe operation of the power system and do not participate in supporting energy storage. The capacity tariff level shall be based on the local coal-fired power capacity tariff standard, converted at a certain proportion according to the peak-shaving capacity (the conversion ratio is the continuous discharge duration at full power divided by the longest annual net load peak duration, capped at 1), and determined by taking into account the progress of power market construction, the demand of the power system and other factors. Grid-side independent new energy storage power stations shall be managed under a list-based system, and the management requirements shall be separately specified by the National Energy Administration based on the analysis of power supply and demand situation and power supply guarantee measures. The specific project list shall be formulated by provincial competent energy departments in conjunction with competent price departments.
III. Establishing a Reliable Capacity Compensation Mechanism on the Generation Side in an Orderly Manner
(1) General requirements for the reliable capacity compensation mechanism
Reliable capacity refers to the capacity of generating units to supply electricity continuously and stably during the annual system peak-shaving period. After the continuous operation of the electricity spot market, provincial competent price departments shall, in conjunction with relevant departments, establish a reliable capacity compensation mechanism in a timely manner and compensate the reliable capacity of generating units in accordance with unified principles. The compensation standard shall be based on covering the fixed costs of marginal market units that cannot be recovered in the electricity energy and auxiliary services markets, and be reasonably determined and adjusted in a timely manner by taking into account the power supply and demand relationship, the affordability of users, the progress of power market construction and other factors. Regions with a high proportion of new energy installed capacity and great demand for reliable capacity shall accelerate the establishment of the reliable capacity compensation mechanism. Under the guidance of the state, qualified regions may form capacity tariffs through capacity markets and other means in a timely manner in light of the development of the power market.
(2) Reasonably determining the scope of compensation
The compensation scope of the reliable capacity compensation mechanism may include coal-fired power, gas-fired power that independently participate in the local market, and eligible grid-side independent new energy storage, and be gradually expanded to pumped storage and other generating units with reliable capacity in light of the development of the power market and the market-oriented reform of electricity prices; no repeated compensation shall be given to the capacity that has obtained other guarantees. Generating units with government-set prices shall not be compensated.
(3) Ensuring connection with the capacity tariff policy
After the establishment of the reliable capacity compensation mechanism, the original capacity tariffs shall no longer be applied to the relevant coal-fired power, gas-fired power, grid-side independent new energy storage and other generating units. On the basis of a relatively sound market system, provincial competent price departments may apply the reliable capacity compensation mechanism uniformly to pumped storage power stations started construction after the issuance of this notice, which shall also participate in the electricity energy, auxiliary services and other markets, with all market income obtained by the power stations. Pumped storage power stations started construction after the issuance of Document 633 are encouraged to independently choose to implement the reliable capacity compensation mechanism and participate in the power market.
IV. Improving Relevant Supporting Policies
(1) Improving the power market transaction and price mechanism
After the improvement of the coal-fired power capacity tariff mechanism, all regions may appropriately adjust the lower limit of the medium and long-term market transaction price of coal-fired power within the province according to the power market supply and demand and the variable costs of all generating units participating in the market, and appropriately relax the requirements for the signing ratio of coal-fired power medium and long-term contracts on the premise of ensuring the balance of electricity power and quantity. Both supply and demand sides are encouraged to sign flexible price mechanisms in medium and long-term contracts that change with market supply and demand and power generation costs. When the supply and demand sides in the provincial market sign medium and long-term contracts, all regions shall not compulsorily require the signing of fixed prices, and may require a certain proportion of electricity in the annual medium and long-term contracts to implement flexible prices reflecting real-time supply and demand according to the power supply and demand, market structure and other factors.
(2) Improving the electricity fee settlement policy
The capacity electricity fees of the above-mentioned regulating power sources and reliable capacity compensation fees shall be included in the local system operation costs. In regions where the spot market operates continuously, the pumping/generating prices of pumped storage and the charging/discharging prices of grid-side independent new energy storage shall be implemented in accordance with market rules or real-time spot prices; in regions where the spot market does not operate continuously, the pumping (charging) price shall implement the grid-agent electricity purchase price for industrial and commercial users, and the formation method of the power generation (discharging) price shall be determined by provincial competent price departments by taking into account the charging and discharging losses of various technical routes. Pumped storage and grid-side independent new energy storage shall be regarded as users when pumping (charging), paying line loss fees and system operation costs in the grid-connection link, and implement the transmission and distribution price on a single electricity quantity basis for the time being; the corresponding transmission and distribution fees shall be deducted for the power generation (discharging) electricity quantity. The market income shared by pumped storage power stations in a certain proportion shall be settled monthly in a unified manner and liquidated annually.
(3) Specifying the allocation method of capacity electricity fees for regional shared pumped storage
The allocation proportion of capacity electricity fees for regional shared pumped storage power stations shall be determined according to the capacity allocation proportion, and the optimization through market-oriented means is encouraged. Among them, if the capacity allocation proportion has been specified, it shall be implemented in accordance with the specified proportion; if the capacity allocation proportion has not been specified but the project has been approved, it shall be jointly determined and specified by the competent energy and price departments of the provincial where the project is located in consultation with those of the provinces intending to participate in the allocation; for newly-built projects that have not been approved, it shall be determined through consultation in accordance with the above principles and specified in the project approval document.
V. Ensuring Effective Implementation
(1) Strengthening work coordination
Provincial competent price departments shall, in conjunction with relevant departments, improve the capacity tariff policy and establish a reliable capacity compensation mechanism in a timely manner, organize the implementation in a thorough and meticulous way, conduct policy interpretation, guide enterprises to strengthen operation and management, and promote the healthy development of the industry. Provincial competent energy departments shall, in conjunction with competent price departments, scientifically calculate the local power system's demand for reliable capacity. All regions shall accelerate the establishment and improvement of the power market system, enable pumped storage, new energy storage and other generating units to participate in various markets such as electricity energy and auxiliary services on an equal footing, better reflect their regulatory value, and give full play to their regulatory role. Power grid enterprises shall cooperate in data calculation, sign dispatching and operation agreements and relevant contracts with power stations, complete the calculation and settlement of market income, and report the relevant situation to provincial competent price departments and the Price Department of the National Development and Reform Commission every year. The state will strengthen guidance to all regions to promote the smooth implementation of the policies.
(2) Establishing an electricity price affordability assessment system
Provincial competent price departments shall, in conjunction with competent energy departments, establish a user economic affordability assessment system, and take the assessment results as an important basis for determining the reliable capacity compensation standard, formulating plans and schemes for the regulatory capacity of the power system and the development of new energy and new energy storage, and approving pumped storage and other projects. Regions with sufficient reliable capacity of the power system or weak user economic affordability shall strictly control the approval of new regulating power source projects; relevant projects for which no user economic affordability assessment has been conducted shall not be included in the planning and approval, nor shall they be granted capacity electricity fees or reliable capacity compensation.
(3) Strengthening the assessment of capacity electricity fees
We will improve the assessment measures for capacity electricity fees in light of the management requirements for various types of generating units, conduct assessments by category, guide generating units to improve their production and operation levels, and enhance their peak-shaving output capacity. After the establishment of the reliable capacity compensation mechanism, the assessment will be further tightened to give full play to the guiding role of capacity tariffs. For generating units that fail to meet the assessment requirements, the capacity electricity fees or reliable capacity compensation fees shall be deducted, the specific measures for which shall be specified by provincial competent price departments in conjunction with relevant parties.
National Development and Reform Commission
National Energy AdministrationJanuary 27, 2026
