Shandong has recently released three important policy documents related to renewable energy integration.
The first is the Notice on Public Consultation on Certain Price Parameters of the Electricity Spot Market, issued by by the Shandong Provincial Development and Reform Commission. The proposal would lower the energy bid floor from RMB -80/MWh to RMB -120/MWh and the clearing price floor from RMB -100/MWh to RMB -140/MWh.
The second is the Letter on Further Optimizing the Time-of-Use Pricing Mechanism, jointly issued by the Shandong Provincial Development and Reform Commission, the Shandong Energy Regulatory Office and the Shandong Energy Administration. State Grid Shandong subsequently released the adjusted time-of-use tariff periods, which will take effect on October 1, 2026.
The third is the Notice on Accelerating the High-Quality Development of Energy Storage Co-located with Renewable Energy Stations, issued by the Shandong Energy Administration. The document further clarifies storage power caps, grid-access capacity allocation, joint renewable-storage bidding, and charging and discharging requirements.
The three documents operate at different levels of the market. Spot-market price parameters affect wholesale clearing, time-of-use tariffs primarily influence industrial and commercial consumers, while the storage guideline governs plant-side operations. Nevertheless, all three respond to the same structural issue: as Shandong’s installed PV capacity continues to grow, midday is increasingly becoming a period of surplus electricity and downward price pressure.
For PV projects, the focus is therefore shifting from whether electricity can be generated to how much that electricity is worth when it reaches the market. Shandong’s latest policy package is pushing the sector beyond a volume-based model toward closer management of generation timing and electricity value.
An Additional 212 Deep Off-Peak Hours Expand the Midday Consumption Window
Shandong’s revised time-of-use tariff periods will take effect on October 1, 2026. Under the new schedule, total annual off-peak hours will increase from 2,185 to 2,520, an addition of 335 hours. Deep off-peak hours will rise from 819 to 1,031, an increase of 212 hours.
The additional off-peak periods are concentrated around hours of strong solar output. From March to June, the off-peak window will run from 08:00 to 15:00, including a deep off-peak period from 10:00 to 14:00. From September to November, the off-peak window will begin at 09:00, with deep off-peak pricing applied from 11:00 to 14:00.
Combined with tariff adjustments of 70% below the flat rate during off-peak periods and 90% below the flat rate during deep off-peak periods, the new schedule sends a clearer retail price signal for industrial and commercial consumers to move part of their electricity demand into the middle of the day.
The most immediate effects will be on the demand side. Industrial production, cooling and heating systems, electric-vehicle charging facilities, behind-the-meter storage and virtual power plants may all adjust their operating schedules in response to the revised tariff periods. If midday demand increases accordingly, it will effectively create a larger demand-side reservoir for solar generation.
However, industrial and commercial time-of-use tariffs should not be equated with wholesale spot prices received by PV stations. The former changes the cost of electricity for end users, while the latter determines the settlement outcome for generators participating in the wholesale market. The link between the two still depends on retail contracts, demand response and spot-market clearing. An increase in deep off-peak hours will not automatically improve PV station revenues.
A RMB 40/MWh Reduction Extends the Downside Price Tail
While expanding the midday demand window, Shandong is also proposing to widen the permitted downside range of its spot market.
Under the consultation proposal, the energy bid floor would fall to RMB -120/MWh and the clearing floor to RMB -140/MWh, representing a reduction of RMB 40/MWh in both cases. The bid and clearing price caps would remain unchanged at RMB 1,300/MWh and RMB 1,500/MWh, respectively.
Hourly data from January 1 to September 7, 2026 show that both Shandong’s day-ahead and real-time spot prices already follow a pronounced midday-trough and evening-peak pattern. The average day-ahead price fell to RMB 103.52/MWh at 13:00 before rising to RMB 460.83/MWh at 19:00, creating an intraday spread of RMB 357.31/MWh. The average real-time price also reached its daily low at 13:00, at RMB 112.55/MWh, before increasing to RMB 457.58/MWh at 19:00.
These figures do not mean that hourly average prices will decline across the board after the price floors are lowered. Current hourly averages remain positive, while the price floor primarily constrains extreme price outcomes during periods of severe oversupply. The adjustment is therefore more likely to affect the depth of negative prices, the amount of time spent at the floor, and the shape of the downside price distribution than to push the entire average price curve mechanically lower.
This distinction is critical when assessing the impact on PV generators. During periods of excess midday supply, prices will have more room to move downward until the market reaches equilibrium. The low marginal cost of renewable generation can be reflected more fully in bidding and dispatch order, but market-exposed PV volumes will also face a deeper negative-price tail.
Electricity covered by the renewable energy pricing mechanism has a degree of revenue protection through contracts-for-difference-style settlement. By contrast, non-mechanism volumes and incremental electricity sold directly into the market are more exposed to spot-price movements. As the share of market-based electricity rises, generating more electricity will no longer necessarily translate into higher revenue.
PV Storage Power Cap Raised to 50%—But It Is Not a Mandatory Ratio
Against the backdrop of wider downside price exposure, Shandong’s updated rules for energy storage co-located with renewable energy stations take on greater significance.
Under the new guideline, the storage power cap for PV projects has been increased from 30% to 50%, while the cap for wind projects remains at 30%. The adjustment allows PV stations to incorporate larger storage systems into joint operation. However, the 50% threshold is a maximum permitted power ratio, not a mandatory storage requirement. It should not be interpreted as requiring every PV project to install storage equal to 50% of its generation capacity.
The “PV-to-wind ratio of 4:1” specified in the policy is also open to misinterpretation. It is neither a renewable-to-storage capacity ratio nor a requirement for PV projects to install storage at a ratio of 1:4. Instead, it is an allocation weight used when available grid-access capacity for co-located storage is insufficient.
Under such conditions, access capacity will be allocated based on the weighted scale of the associated renewable energy projects. PV projects receive a weight of four, while wind projects receive a weight of one. For two renewable projects of equal capacity, the weighted value of the PV project would therefore be four times that of the wind project.
The policy does not directly require PV projects to install storage, but it does give PV projects a higher weighting when limited storage access capacity is allocated. The system rationale is clear: PV generation is highly concentrated around midday and is therefore more likely than wind generation to create simultaneous supply surpluses and downward price pressure. Storage can shift part of this electricity into the late afternoon and evening peak.
More importantly, Shandong is positioning co-located storage as an operating and trading resource rather than simply a project-development requirement. The guideline allows renewable generation and associated storage to participate in joint bidding and operation. Stations will need to coordinate output forecasts, spot prices and battery state of charge when preparing market schedules.
Except when dispatched by the grid or under other specified circumstances, co-located storage is generally required to charge from its associated renewable energy project. Its value will therefore increasingly depend on forecasting, charging and discharging strategies, and deviation-risk management rather than on the completion of storage construction alone.
Do the Three Policies Point to Stronger Solar-Storage Coordination?
Viewed separately, the spot price floor proposal is a wholesale market reform, the time-of-use tariff adjustment is a demand-side measure, and the storage guideline is an operating framework for renewable energy stations. Taken together, however, they form a relatively clear transmission pathway.
Lower spot-market floors allow severe oversupply to be reflected through deeper negative prices. More midday deep off-peak hours encourage industrial and commercial consumers to increase electricity consumption when solar generation is abundant. Higher PV storage caps and revised grid-access allocation rules provide plant operators with greater room to shift midday electricity into later hours.
Shandong is therefore sending a stronger signal in favor of solar-storage coordination, but this does not amount to a return to administratively mandated storage. Instead, market prices and operating rules are increasing the cost of remaining fully exposed to midday power prices without flexibility.
Potential storage price spreads may also widen. On one side, the spot-market floor is moving lower; on the other, evening spot prices remain at relatively high intraday levels, while both deep off-peak and critical-peak retail periods are increasing.
A wider permitted price range, however, does not guarantee stronger storage returns. Project economics will continue to depend on the frequency of negative prices, evening peak prices, round-trip efficiency, battery degradation, grid-access conditions and trading strategy.
From Generating More Electricity to Selling It at the Right Time
Shandong’s latest policy package does not provide a single answer on how much storage a PV project should install. It does, however, change the questions that project developers and operators need to answer.
For non-mechanism PV volumes, the main risk may increasingly shift from outright curtailment to electricity being delivered but settled at persistently low prices. For energy storage, value will no longer come primarily from satisfying a development requirement, but from moving low-value midday electricity into higher-value evening periods.
From lower spot-market floors and expanded midday deep off-peak periods to a higher PV storage cap, Shandong is gradually converting renewable energy integration pressure into observable price signals and operating constraints.
The competitiveness of a PV project will ultimately depend not only on installed capacity and annual utilization hours, but also on its ability to manage the timing of generation, market-price exposure and the value of electricity across different hours.
The policies do not prescribe how much storage every PV project must install. The market, however, is sending an increasingly direct message: PV electricity without time-shifting capability may find it progressively more difficult to secure attractive prices.
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