In 2025, China’s cumulative installed capacity of photovoltaic (PV) and wind power historically surpassed that of thermal power, reaching 1.84 billion kilowatts. It has become the absolute mainstay of China’s incremental power capacity, accounting for 47.3% of the total installed capacity and nearly half of the global PV and wind power installed capacity, building the world’s largest and fastest-growing renewable energy system. This structural transformation has laid a solid energy foundation for achieving the carbon peaking and carbon neutrality goals on schedule. However, due to the inherent intermittency and volatility of renewable energy generation, coupled with dynamic adjustments in the power supply-demand pattern, electricity price volatility risks have significantly amplified, becoming a prominent bottleneck restricting the stable operation of the power market. At this year’s Two Sessions, Liu Hanyuan, Chairman  to the National People’s Congress (NPC), Vice Chairman of the All-China Federation of Industry and Commerce, and Chairman of the Board of Directors of Tongwei Group, put forward relevant proposals on accelerating the development of the electricity derivatives market.

Chairman  Liu Hanyuan stated that practice shows that the deepening of power market-oriented reform cannot be separated from the coordinated support of the derivatives market. During the process of power marketization, European and American countries also encountered the dilemma of sharp electricity price fluctuations caused by the rise of new energy, and the comprehensive application of derivative instruments has become the core path to solve this problem. In the 2001 power market-oriented reform, the UK introduced derivative instruments such as futures and options, replacing the traditional power pool mechanism with a “bilateral contracts + balancing market” model, which significantly improved market operation stability. In recent years, the trading volume of electricity derivatives in mature European and American markets has remained at the trillion-dollar level annually. The trading volume of electricity derivatives in Europe is 9–10 times that of the spot market, and in the US it is 15–20 times. More than 90% of electricity trading is covered by financial contracts such as futures, effectively stabilizing spot market price fluctuations. International practices fully confirm that a mature electricity derivatives market is key to hedging price risks, ensuring the stable operation of market entities, and maintaining the smooth functioning of the power market.

Chairman  Liu Hanyuan believes that compared with mature European and American markets, China’s electricity derivatives market is still in the initial exploration stage, and its development pace is incompatible with the rhythm of power market-oriented reform and the demand for energy structure transformation. There are three prominent shortcomings:First, the product system lags behind. There is a lack of electricity futures, the core standardized hedging instrument, and specialized products covering specific risks such as new energy generation fluctuations, peak-valley price differentials, and extreme weather impacts.Second, cross-regional trading barriers are prominent. Power market rules vary across provinces (autonomous regions and municipalities directly under the Central Government), accounting mechanisms are incompatible, and transmission price policies differ greatly. Administrative intervention and local protectionism occur from time to time, making it difficult for power resources to achieve cross-provincial optimal allocation through the derivatives market.Third, policy coordination and regulatory mechanisms need improvement. There is insufficient synergy between energy and financial regulatory mechanisms. The delivery and settlement rules for derivative trading are not well connected with the power spot market. Market entities face high participation thresholds and many risk concerns, leading to “dare not use, cannot use” derivative instruments, which restricts the effective functioning of the market’s core functions.

Currently, electricity price volatility has significantly impacted the operation and development of entities along the entire power industry chain. New energy power generation enterprises face deviations from expected on-grid electricity prices due to generation fluctuations, with some projects’ yields falling below the warning line, dampening investment enthusiasm for new projects. Power sales companies are caught in a two-way squeeze of “high power purchase costs and limited power sales prices,” falling into operational difficulties. Industrial users, especially energy-intensive enterprises, struggle to lock in power costs in advance, severely affecting the stability of production plans and further impacting the security of the industrial and supply chains. Failing to accelerate the construction of the electricity derivatives market will further hinder the in-depth advancement of power market-oriented reform, undermine the high-quality development of the new energy industry, and even affect energy security and supply stability.

To effectively solve the risk hedging challenges in the process of power marketization, promote the coordinated development of the electricity derivatives market and the spot market, and support the steady progress of power market-oriented reform, Chairman  Liu Hanyuan proposes the following:

First, accelerate the construction of a diversified standardized product system to lay a solid foundation for risk hedging. Led by the China Securities Regulatory Commission (CSRC) and the National Energy Administration (NEA), guide futures exchanges to speed up the R&D and listing of electricity futures, and complete the R&D and listing preparation of a national universal electricity futures contract as soon as possible. Establish a “national coordination + local pilot” mechanism, encourage provinces with mature spot markets to take the lead in piloting specialized products such as peak-valley price differential contracts and new energy generation index futures, focusing on meeting the risk hedging needs of emerging market entities such as new energy power generation, energy storage, and virtual power plants. Form replicable experience and promote it nationwide.

Second, accelerate the construction of a unified national market, break down cross-regional trading barriers, and establish unified national rules for the electricity derivatives market. Speed up 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 provinces (autonomous regions and municipalities directly under the Central Government), and eliminate policy differences and local protectionism. Promote the interconnection of the national power trading platform and futures trading platform systems, realize the sharing of key information such as trading data, position information, and performance status, and reduce information asymmetry costs in cross-regional trading.

Third, strengthen the construction of market infrastructure to improve comprehensive service support capabilities. Increase investment in the infrastructure construction of the electricity derivatives market, support futures exchanges and power trading centers in upgrading technical systems, and comprehensively enhance the stability, security, and carrying capacity of trading systems. Establish a unified national power data sharing platform, integrate data resources across the entire chain of power generation, transmission, consumption, and energy storage, and provide data support for accurate pricing of derivatives and effective risk prevention and control.

Fourth, establish and improve policy coordination and regulatory synergy mechanisms to ensure standardized and orderly market operation. Establish a collaborative working mechanism between energy regulation and financial regulation, clarify the division of responsibilities among the NEA, CSRC, and local governments in the supervision of the electricity derivatives market, and form an efficient, coordinated regulatory force with vertical linkage. Improve the supporting policy support system, incorporate corporate hedging businesses into the risk management evaluation system, and provide targeted support to enterprises conducting compliant hedging in terms of credit financing and tax incentives.

Fifth, strengthen the cultivation and guidance of market entities to enhance the industry-wide risk hedging capacity. Build public welfare training platforms, integrate electricity derivatives knowledge training into the regular training system of energy enterprises, and carry out special training in conjunction with industry associations and futures exchanges. Enhance market entities’ awareness of “risk neutrality” and practical hedging capabilities, enabling them to “know how to use and dare to use” derivative instruments.