The government had to write a new regulation to force power plants to generate power.
What happened
China's energy regulator just changed how it pays power plants for being available during peak demand. Instead of fixed capacity payments, plants now get paid based on how much power they can actually deliver when the grid needs it most — a shift that rewards reliability over mere existence. This means coal and gas plants have to prove they work when it matters, and new battery storage can now compete for the same payments.
Why it matters
For decades, China paid power plants to exist. Now it pays them to perform. This is a structural flip: the incentive moves from 'build capacity and collect rent' to 'deliver power when the system is stressed.' Coal plants with poor availability or high failure rates lose money. Battery storage and pumped hydro — technologies that can respond instantly during peak hours — suddenly have a revenue path that didn't exist before. The real effect is that China is forcing its grid to optimize for reliability rather than just volume, which means older, slower plants face margin pressure and newer, faster plants get a competitive advantage. This also means the grid operator can now measure and price what it actually needs instead of paying for theoretical capacity.
The signal
The shift is buried in a technical pricing notice issued to provincial bureaucrats. It stops being boilerplate the moment the first major coal plant defaults because it missed a performance target. Provincial operators now have to audit actual output. Local governments with heavy coal investments will likely try to redefine "peak demand" to keep the subsidies flowing.
The catch: Provincial governments with heavy coal investments will simply redefine peak demand to ensure their local plants still hit the performance metrics required to get paid.
Coal power plants are now guaranteed to recover half of their fixed costs entirely through capacity payments. They will be expected to earn the other half by generating electricity.