The sustainability of renewable energy hinges significantly on the stability of its profit marginsThis notion has been reinforced by the recent national energy work meeting, which emphasized the need for improved policies regarding the integration and regulation of renewable energiesThe meeting promised a cautious approach to integrating renewable energies into the electricity market while guaranteeing reasonable returns for these sectorsThis approach sends a resounding message that bridging the existing gaps in both soft and hard infrastructure for renewable energy will be pivotalAssuring stable returns from renewable projects stands as a priority in the upcoming phases of development.

However, the renewable energy sector faces a daunting struggle with declining profitabilityWhile the installed capacity of renewable energies, especially solar and wind, has seen unprecedented growth in China, this expansion has not translated into better financial health for companies in the sector

This year alone, many large power generation companies reported an increase in volume without corresponding financial gains, leading to an alarming trend of diminishing revenue across the boardParticularly concerning are solar energy projects, where the returns have slipped below the minimum investment yield expected by the companies involvedThe escalating risks surrounding profit margins have made enterprises wary of investing further in renewable projects, leading to a notable decline in the application for solar project indicators and a rise in “project containment” where proposed projects are not actualized.

Logically, one would expect that as the costs associated with renewable energy equipment decrease, the overall expenses related to building renewable power stations would also drop, leading to better profitabilityWhy then has the outcome been less favorable? The crux of the issue lies in the simultaneous decline of both feed-in tariffs and the volume of electricity generated.

To begin addressing the issue of tariffs, it’s important to consider how the expanding scale of renewable energy generation and its decreasing costs have shifted China's approach from guaranteeing revenue through full-price purchases to balancing assured consumption with market-oriented sales, thus increasing reliance on the latter

• Ensuring Reasonable Returns on Renewable Energy Generation
• Micron Technology's Plunge
• AI Drives Hua Bei Credit Limits
• Strategies for Federal Reserve Rate Cuts
• In the New Era, Turn to AI for Guidance

Electric power generation companies no longer enjoy stable tariff rates that shield them from financial lossesThis shift has been particularly pronounced since the introduction of the “dual carbon” targets, which spurred explosive growth in renewable capacity leading to heightened market competitionSome regions have witnessed falling market prices, while others have even experienced negative pricing in wholesale markets, compounded by the gradual withdrawal of government subsidiesThis stagnation has undoubtedly exerted pressure on revenue streams from renewable projects.

Turning our attention to the volume of electricity generated, even with rapid advancements in installed capacity, the electricity grid has struggled to keep paceOn the one hand, the construction timelines for flexible power sources and transmission lines lag significantly behind that of solar and wind installations, creating unavoidable delays

On the other, inherent market misalignments often lead electricity providers and local governments to prioritize the development of renewable projects while neglecting the construction of flexible resources such as energy storage and load management systems necessary for balancing the gridThis combination results in a mismatch between renewable generation capacities and the grid's absorption capabilities, which in turn leads to issues such as curtailment of wind and solar power generationConsequently, reduced operational hours for power stations translate directly into diminished revenues.

As China embarks on its commitment to achieving the “dual carbon” goals—promoting a comprehensive green transition in economic and social development while enhancing the core competitiveness of the renewable energy sector—it has become increasingly critical to continue large-scale renewable energy development

Stability in scale, investment, and expectations becomes an urgent priorityEnsuring reasonable returns in this sector is essential, not only to attract more capital into renewable energy but also to facilitate research and application of innovative technologiesThe goal is to foster further development within the industry, generate increased employment opportunities, optimize energy structures, and ensure long-term sustainable evolution whilst reinforcing security of energy supply.

To guarantee reasonable returns, the imperative lies in refining the policies governing the absorption and control of renewable energiesAchieving optimal development hinges upon ensuring that renewable power generation is both feasible and usableThis requires accelerating the construction of supporting grid networks, streamlining connection processes, and enhancing the grid’s capability to incorporate and consume renewable energy

Additionally, the role of the grid as a resource allocation platform must be maximized to improve the transmission of renewable energy across provincial and regional boundariesStrengthening the system’s flexibility and responsiveness capabilities is paramount; this involves retrofitting coal power plants for flexibility, and advancing technologies such as pumped hydro storage and electrochemical storage, enabling grids to adapt to fluctuations inherent in renewable energy generation.

Supporting stable returns necessitates the prudent integration of renewable energies into the electricity marketAs the trend for market-oriented power generation accelerates, it becomes essential for renewable sectors to adapt to the competitive landscape of the market—a critical hallmark of maturityHowever, renewable projects are often hamstrung by inconsistent production schedules influenced by environmental conditions, leaving them disadvantaged within a rigorous competitive framework

Therefore, for renewable energy projects with established price policies from the government, strict adherence to assurances of guaranteed purchases must be upheld to shield enterprises from market fluctuationsEncouraging direct transactions between renewable projects and consumers and promoting long-term purchase agreements can effectively help these firms secure anticipated revenues while mitigating exposure to market volatility.

In the realm of the energy spot market, lessons can be drawn from international experiences, urging renewable projects to engage in market trading via contracts for differences as a buffer against the volatile nature of energy outputLong-term strategies must facilitate the design of market rules that not only consider the unique characteristics of renewable energies but also appropriately reflect the environmental value of green electricityThis will ensure that investments in renewable sectors remain attractive through clear profit expectations, thereby motivating industry investment enthusiasm.

Key to the substantial leap in the development of renewable energy is ensuring the stability of its returns