China added a record 264GW of wind and solar capacity in the first half of 2025 before moving to a new pricing mechanism that will prioritise “high-quality” growth, according to Wood Mackenzie.
Developers accelerated build-out to secure access to an auction-free regime before a 1 June deadline.
Wood Mackenzie said Shandong’s first auction under the new competitive model saw solar and wind prices fall 32% and 9% below current averages.
Senior analyst Sharon Feng (pictured) said: “The auction-free mechanism appeals to investors because it provides long-term price certainty and favourable generation coverage.”
Feng added: “Average project internal rate of return for utility solar and onshore wind projects installed in H1 2025 could reach 8% and 11% respectively.”
Wood Mackenzie reported onshore wind and utility solar LCOE fell 7% in 2025.
Under the revised mechanism, execution periods average 10 years rather than 18, exposing investors to price fluctuation and curtailment risk.
Feng said: “The Shandong results provide an early indication of pricing dynamics under the new competitive framework.”
Wood Mackenzie forecasts wind and solar curtailment above 5% in seven and 21 provinces respectively over the next decade.
Feng said: “Provinces with high curtailment rates and volatile power prices will face challenges attracting investment.”
China needs 741TWh of additional renewable generation by 2026 to meet a government target of 24% non-hydro renewables in power demand.
Wood Mackenzie expects more than 750GW of new capacity across 2025 and 2026.
Feng said: “Wind will be the preferred technology for many investors given the superior economics and lower curtailment risks.”
She added: “After the breakneck addition of 264GW of wind and solar in the first six months, the renewable development will switch to a more sustainable growth pattern, focusing on quality over quantity.”