Restrict Wholesale-Retail Price Spreads! Dual "Price Inversions" Becoming the Norm! Will Electricity Sales Still Be Viable in 2026?

(Source: Polaris Power Market Network)

By 2026, China’s electricity market reform has entered deep waters. Since the issuance of Policy Document No. 9 in September 2015, the liberalization of the power sales side has led to the emergence of thousands of electricity sales companies. In the early stages of reform, relying on policy dividends and simple “buy low, sell high” strategies, many power sales companies easily turned a profit. However, as the construction of a unified national electricity market accelerates—especially with the official operation or long-term settlement of spot markets in multiple provinces—the survival environment for the power sales industry has changed dramatically.

(Source: Polaris Power Market Network, Author: Jiang Jiang)

Since last year, many regions have introduced policies restricting the retail-wholesale price spread for power sales companies. Under complex cost transmission mechanisms, “retail-wholesale inversion” phenomena have frequently occurred in multiple places. Moreover, in some provinces, there have been months where grid agency purchase prices are lower than the wholesale and retail prices of power sales companies. Power sales firms face an unprecedented survival crisis: “Multiple pressures” have become the norm, and the traditional business model of profiting from the buy-sell spread is coming to an end. Standing at the 2026 timeline, facing increasingly complex trading rules and shrinking profit margins, what can power sales companies do? Where is the future path?

Restrictions on Retail-Wholesale Price Spread and the Normalization of Dual “Price Inversion”

To explore the future of power sales companies, we must first clarify the three major challenges facing the industry: first, policy restrictions on the retail-wholesale price spread; second, the frequent occurrence of retail-wholesale inversion in spot market operations; third, the pressure from some provinces’ grid agency purchase prices on market prices.

1. Strengthened Regulation: Limiting the Retail-Wholesale Price Spread

In recent years, relevant authorities in many regions have explicitly limited the retail-wholesale price spread for power sales companies in their electricity market trading rules or annual trading plans. Some provinces have directly set caps on service fees or required clear ratio disclosures in standard contracts.

The logic behind these policies is clear. As a fundamental energy source, electricity prices directly impact the production costs of a wide range of industrial and commercial enterprises. In the past, some power sales companies exploited information asymmetry or loopholes in early market rules to withhold the price reductions that should have been passed on to the real economy, earning excess profits. Limiting the retail-wholesale spread aims to regulate market order, prevent capital speculation, ensure that the benefits of market-oriented reform truly reach end-users, and reduce overall societal energy costs.

However, for power sales companies, this effectively caps their profit potential. While profit ceilings are strictly imposed, the volatility of the wholesale market—especially after Document No. 136 allowed the spot market price floor to go negative for the first time—means there is no “floor” to cushion downward risks.

Additionally, many regions have begun disclosing information related to the transmission of retail and wholesale prices, including rankings of retail settlement average prices from high to low, and wholesale-retail settlement price spreads from high to low. This “red and black list” transparency exposes profit structures that were previously hidden, further constraining the space for power sales companies to profit from information asymmetry.

2. Cost Out of Control: Retail-Wholesale Inversion in Multiple Regions

If restrictions on the retail-wholesale spread cut off the possibility of excessive profits, then “retail-wholesale inversion” directly threatens the survival foundation of companies. Retail-wholesale inversion occurs when the comprehensive procurement cost in the wholesale market exceeds the retail contract price signed with end-users, resulting in higher sales volume leading to greater losses.

In the 2026 market environment, by January, regions such as Anhui, Guangxi, Guizhou, and Xinjiang already experienced retail-wholesale inversion. The causes are no longer just energy price fluctuations but are the result of multiple complex factors.

Most notably, the “self-destructive” low-price long-term contracts signed in 2026. For example, in Guangdong, the annual transaction average price was 372.14 cents/kWh, with long-term contract prices hitting the lower limit. Yet, in retail markets, various methods have been used to bypass this limit, causing the price floor to be effectively broken.

On one side are high-cost long-term agreements; on the other, retail contracts locked at low prices—this highly unequal structure has become a trigger for losses.

3. Pressure from Grid Agency Purchase Prices

Beyond retail-wholesale inversion, power sales companies face another critical price squeeze: in some provinces, grid agency purchase prices are frequently lower than the market-based retail prices.

Initially, policies intended for grid purchase prices to reflect supply and demand, slightly above market average, to serve as signals encouraging industrial and commercial users to participate actively in the market. However, in practice, due to lagging calculation mechanisms and the inclusion of low-cost priority generation in the purchase pools, some months see the integrated cost of grid agency purchases below the actual procurement costs of power sales companies.

This phenomenon was especially prominent at the start of 2026, severely undermining power sales firms. End-user industrial and commercial customers are highly sensitive to electricity prices. If they find that participating in market-based procurement is more expensive than simply staying with grid agency purchases, they tend to hesitate, cancel contracts, or withdraw from the market.

To retain customers and market share, power sales companies are often forced to lower prices, with some signing “not higher than the same period’s grid agency purchase price” clauses. Some companies have even promoted contracts with prices always 2 cents lower than the grid purchase price. This situation, where wholesale costs are high but retail prices are pegged to non-market-based grid prices, further enlarges losses, turning their business into a de facto subsidy to users.

Core Features and New Variables in the 2026 Power Market

To answer “Can power sales companies still operate?” we must deeply understand the development trends and underlying logic of China’s power market in 2026 and beyond.

1. Deep Integration of Green Power, Green Certificates, and Carbon Markets

With global climate governance advancing—especially the implementation of international carbon tariffs like the EU CBAM—demand for green electricity among export-oriented and multinational companies within China has surged. By 2026, green power trading and green certificate trading have become integral parts of the electricity market. Meanwhile, the national carbon emissions trading market continues to expand its coverage. The interactions among the electricity, green certificate, and carbon markets create complex linkage effects. For power sales firms, this not only increases costs but also opens new business growth avenues.

2. The Ultimate Demand for Flexibility in the New Power System

As renewable energy sources like wind and solar become fully integrated, their dependence on weather conditions (“dependence on the sky”) poses significant challenges to maintaining real-time supply-demand balance. The system’s need for flexible regulation resources reaches unprecedented levels. On the supply side, flexible thermal power upgrades and pumped storage are mainstays; on the demand side, virtual power plants, demand response, and user-side energy storage are forming closed-loop business models. Market rules in 2026 increasingly encourage and guide demand-side resources to participate in system regulation via market mechanisms, enabling them to earn economic benefits.

3. Standardization and Linkage of Retail Packages

To mitigate market risks, regulators are guiding retail markets from fixed “one-price” models toward “linked mechanisms.” More provinces are introducing model retail contracts with spot price linkage clauses. This means retail prices will no longer be fixed but will fluctuate with wholesale market signals. Such arrangements not only guide user consumption behaviors but also allow power sales companies to pass some systemic risks onto users in a reasonable manner.

Pathways to Breakthrough: Transformation Roadmap for Power Sales Companies in 2026

Under the combined pressures of “restricted retail-wholesale spread,” “spot wholesale inversion,” and “agency purchase inversion,” traditional “middleman” power sales companies are destined to be phased out. In 2026, power sales firms must undergo a fundamental transformation from “profit from spread” to “profit from technology and service.” Here are some feasible paths and development directions:

1. Transition to a Tech-Driven Trading Entity: Build Extreme Risk Control and Quantitative Systems

Core logic: Since spreads are limited and risks are amplified, future profits will depend on precise market forecasting and strict hedging.

Enhance forecasting: This includes comprehensive monitoring of macroeconomic trends, meteorological data (especially for large-scale renewable generation and extreme weather), fuel prices, and grid operation status, enabling high-precision prediction of market clearing prices. Deeply analyze load curves of代理用户，准确预测其用电行为。

Optimize trading portfolios: Skillfully utilize different trading instruments—annual, monthly, and ten-day contracts, as well as spot markets. In pilot regions allowing financial derivatives, actively employ tools like Contracts for Difference (CfD) to hedge price risks.

Build risk control models: Set strict exposure limits, stop-loss thresholds, and profit targets. Every retail contract must undergo stress testing through risk models; contracts that cannot cover risks should be rejected.

2. Transition to Load Aggregators (Virtual Power Plants): Unlock Demand-side Flexibility

Core logic: In the new power system, “unused electricity” is more valuable than “generated electricity.” Power sales companies, being closest to users, are best positioned to organize dispersed loads.

By 2026, virtual power plants have moved from concept to practice. Power sales firms should actively apply to become load aggregators, consolidating controllable loads (central air conditioning, cold storage, industrial lines), distributed PV, user-side energy storage, and EV charging stations.

Participate in ancillary services: Control user loads during peak periods to reduce demand or increase during valleys, participating in grid regulation, frequency response, and ancillary service markets for substantial compensation.

Spot market arbitrage: Use spot price signals—charging storage or increasing production when prices are low or negative; reducing load or discharging storage when prices are high. This can significantly lower electricity costs or even generate reverse profits. Sharing these benefits with users can greatly enhance customer loyalty.

3. Transition to Integrated Energy Services and Carbon Asset Management: Provide One-Stop Green Solutions

Core logic: Industrial and commercial users’ needs are shifting from simply “buy cheap electricity” to “secure, green, low-carbon comprehensive energy management.”

In the context of restricted retail-wholesale spreads, power sales companies must extend their service chain to find new profit points.

Green power and green certificate trading facilitation: Leverage expertise to help enterprises (especially export-oriented and multinational companies) find suitable green power sources, develop optimal green certificate purchasing strategies, and meet ESG and carbon footprint requirements.

Carbon management services: Offer carbon inventory, accounting, and compliance planning, assist companies in participating in the national carbon market, and provide quota fulfillment and asset custody services.

Microgrid and integrated energy transformation: Provide energy-saving upgrades, distributed PV, and storage system investment, construction, and operation services (via EPC or energy management contracts). Help high-energy-consuming enterprises reduce absolute energy consumption, sharing in energy savings.

4. Implement Fine-Tuned User Operations: Reconstruct Retail Contract Models

Core logic: Break the all-users-one-price approach, achieve risk sharing and benefit sharing.

In a complex and volatile market, power sales firms can no longer bear all fluctuations alone. They must design detailed packages to transfer risks reasonably to users while incentivizing users to optimize their behaviors.

Promote spot-linked packages: Abandon fixed-price contracts with guarantees. Based on user load characteristics and risk appetite, design varying degrees of spot price linkage—e.g., for industrial users with load flexibility, create packages with prices that fluctuate significantly with the spot market, encouraging demand response; for risk-averse users, charge higher fixed service fees to cover risk.

Develop precise user profiles: Not all users are high-quality customers. Classify and manage users based on credit, load stability, scale, and flexibility. Decisively abandon poor-quality clients with erratic load curves (e.g., only peak usage) who refuse load response and seek low prices for free; focus resources on high-value customers capable of mutual benefit.

Conclusion

The restrictions on retail-wholesale spreads and the widespread occurrence of price inversion are not setbacks but signs of market maturity and rule refinement. They mark the end of the era of “wild growth” and “easy profit from spreads” in the power sales industry.

In 2026 and beyond, the complexity of the power market will only increase. For power sales companies, this is both a brutal elimination process and a transformative opportunity. The future market will no longer need simple “ticket scalpers” but will demand integrated energy service providers with strong data analytics, financial risk management, and the ability to integrate physical and digital resources.

Can power sales companies still operate? The answer is yes—and there is great potential.

But the premise is that companies must face reality, abandon illusions of past super-profits, and resolutely shift toward specialization, technological advancement, and service-oriented development. Those who lead this transformation will secure a dominant position in the future trillion-yuan new power system blue ocean.