Overview of Industry Reform

China’s power industry has undergone three rounds of major reform.

The first round, initiated in 1988, separated government functions from enterprise operations and established provincial-level institutions as independent operational entities.

The second round, launched in 2002 under the Power System Reform Plan (State Council, effective 10 February 2002), restructured the former State Power Corporation into separate generation and grid enterprises, unbundling generation from transmission and distribution.

The third round, initiated by the Several Opinions on Further Deepening Power System Reform (CPC Central Committee and State Council, effective 15 March 2015), introduced competitive electricity markets, independent power trading institutions, incremental distribution network reform, and retail market liberalisation. This third round remains ongoing and has accelerated significantly since 2024.

China’s power industry has now substantially achieved the separation of generation from grid operations. Transmission and distribution remain regulated natural monopolies operated exclusively by state-owned enterprises, while generation, storage, incremental distribution networks and electricity retail are open to market competition and private investment. In 2025, market-based transactions accounted for 64% of total electricity consumption.

Legal and Regulatory Framework

Core legislation

Three statutes form the foundational legal framework.

• The Energy Law (effective 1 January 2025) establishes overarching national policy on energy security, low-carbon transition and market reform, and applies across all segments of the power industry.
• The Electricity Law (effective 1 April 1996, most recently amended in 2018) governs the entire power value chain, covering project construction, generation, grid operation, pricing, facility protection, and supply relationships.
• The Renewable Energy Law (effective 1 January 2006, most recently amended in 2009) provides the specialist legal framework for renewable energy development and grid integration.

Administrative regulations, state council policy documents and departmental rules

At the administrative regulation level, the Regulations on Electric Power Supervision (State Council, effective 1 May 2005) establish the formal supervisory framework, defining regulatory functions, enforcement procedures and market order governance rules.

State Council normative documents play an important policy guidance role. The Implementation Opinions of the General Office of the State Council on Improving the Unified National Power Market System (State Council, effective 8 February 2026) set out the national reform roadmap, establish unified rules for cross-regional electricity trading, and build the four core market segments of energy, ancillary services, capacity and green power trading.

Sector-specific departmental rules govern each segment. The Electric Power Business Licence Management Regulations (former State Electricity Regulatory Commission or SERC, effective 1 December 2005) provide the foundational licensing framework applicable across the industry.

The principal regulatory instruments by segment are as follows.

Generation

Key instruments include the Administrative Provisions for Power Grid-Connected Operation (National Energy Administration or NEA, effective 21 December 2021); the Special Implementation Plan for the New-Generation Coal Power Upgrade Initiative (2025–2027) (National Development and Reform Commission, or NDRC, and NEA, effective 14 April 2025); the Interim Measures for the Development and Construction Management of Pumped Storage Power Stations (NDRC and NEA, effective 7 February 2025); the Interim Measures for Wind Power Development and Construction Management (NEA, effective 25 August 2011); the Measures for the Development and Construction Management of Photovoltaic Power Stations (NEA, effective 30 November 2022); and the Guaranteed Purchase Measures (NDRC, effective 1 April 2024).

Transmission

Key instruments include the Measures for Pricing Cross-Provincial Special Project Transmission Tariffs (NDRC, effective 1 January 2026) and the Measures for the Supervision of Grid Fair Open Access (NEA, effective 29 September 2021).

Distribution

Key instruments include the Power Supply Business Rules (NDRC, effective 1 June 2024) and the Guidance on High-Quality Development of Distribution Networks under the New Situation (NDRC and NEA, effective 1 March 2024).

Electricity retail

The principal instrument is the Measures for the Administration of Power Retail Companies (NDRC and NEA, effective 22 November 2021).

Storage

Key instruments include the New Energy Storage Project Management Rules (Interim) (NEA, effective 24 September 2021) and the Notice on Promoting Grid Connection and Scheduling of New Energy Storage (NEA, effective 2 April 2024).

General market rules

Instruments applicable across all segments include the Basic Rules for Power Market Operation (NDRC, effective 1 July 2024), the Measures for Power Market Supervision (NDRC, effective 1 June 2024), and the Basic Rules for Medium and Long-Term Power Market Transactions (NDRC and NEA, effective 26 December 2025).

State-Owned Entities

The principal state-owned generation enterprises at the central level are China Energy Investment Corporation, China Huaneng Group Co, Ltd, China Datang Corporation Ltd, China Huadian Corporation Ltd, and China Three Gorges Corporation.

Principal local state-owned generation enterprises include Zhejiang Energy Group Co, Ltd, Beijing Energy Holding Co, Ltd, Luneng Group Co, Ltd, Shenergy (Group) Co, Ltd, and Jinneng Holding Group Co, Ltd, among others.

In transmission and distribution, the three principal state-owned grid enterprises are State Grid Corporation of China, China Southern Power Grid Company Limited, and Inner Mongolia Power (Group) Co, Ltd.

Private Entities

Principal private generation enterprises include Wintime Energy Group Co, Ltd, Guangdong Baolihua New Energy Stock Co, Ltd, Zhejiang Chint New Energy Development Co, Ltd, Jinko Power Technology Co, Ltd, Tongwei Co, Ltd, and Sungrow Renewables Development Co, Ltd, among others.

Private participation in transmission and distribution remains limited. Private entities are permitted to operate only in regional distribution networks and virtually none operates a national network. Notable private entities active in this space include GCL Group Holdings Ltd, Zhejiang Chenfeng Technology Co, Ltd, and Fujian Zhong Power Supply Co, Ltd.

China encourages foreign investment and protects the lawful rights and interests of foreign investors. The Foreign Investment Law (effective 1 January 2020) establishes the foundational framework for foreign investment, confirming the pre-establishment national treatment plus negative list management system.

China imposes no market access restrictions on foreign investment in the power industry, with the exception of nuclear power plants, which must be Chinese-controlled under the Special Administrative Measures for Foreign Investment Access (Negative List) (2024 Edition) (NDRC and Ministry of Commerce, effective 1 November 2024). Outside this exception, the Catalogue of Industries Encouraged for Foreign Investment (2025 Edition) (NDRC and Ministry of Commerce, effective 1 February 2026) identifies new energy sectors including wind, solar, hydrogen, clean energy power stations, virtual power plant operation and independent energy storage as priority areas for foreign investment.

Establishing a Foreign-Invested Enterprise

The principal steps for establishing a foreign-invested enterprise in China are as follows.

• Negative list compliance review: The proposed business activities must first be assessed against the foreign investment negative list. Restricted or prohibited activities will result in refusal of subsequent applications.
• Pre-approval of sector-specific licences (if required): Where the proposed activities require an industry-specific licence, approval must be obtained from the competent authority prior to registration.
• Market entity registration: The investor submits the requisite documents to the Administration for Market Regulation to obtain a business licence.
• Post-registration filings with relevant authorities include: submission of the foreign investment information report (commerce department); engraving of the official seal (public security department); tax registration and invoice application (tax department); social insurance registration (social security department); registration as an import and export goods consignee and consignor through the China International Trade Single Window, where applicable (customs); foreign exchange registration with the Foreign Exchange Administration; and account opening at a bank.

Foreign investors are generally able to enter China’s power industry on a pre-establishment national treatment basis, subject to compliance with the Anti-Monopoly Law (effective 1 August 2008, most recently amended in 2022) and the Security Review Measures for Foreign Investment (NDRC and Ministry of Commerce, effective 18 January 2021).

Foreign-invested enterprises benefit from protections under the Foreign Investment Law. Article 5 confirms that the state protects foreign investors’ investments, returns and other legitimate rights and interests. Article 20 provides that expropriation may only occur in exceptional circumstances of public interest, must follow legal procedures, and must be accompanied by timely and fair compensation. Article 21 further guarantees foreign investors the right to freely remit into and out of China their contributions, profits, capital gains, asset disposal proceeds and other returns, in either CNY or foreign currency.

During the construction phase, a transfer of assets in a project that has obtained government approval or filing under the Regulations on the Approval and Filing Management of Enterprise Investment Projects (State Council, effective 1 February 2017) will result in a change of investor. For approval-based projects, the transferor must apply to the competent development and reform commission to amend the original approval, or the transferee must obtain a fresh approval. For filing-based projects, prior notice must be given to the competent development and reform commission, or the transferee must complete a fresh filing.

During the operational phase, under the Electric Power Business Licence Management Regulations, the transferor must apply to amend its licence within the prescribed period following completion of the transfer, and the transferee must apply for a new licence.

Where the transferor is a state-owned enterprise, the transfer must also comply with the Measures for the Supervision and Administration of State-owned Asset Transactions of Enterprises (State-owned Assets Supervision and Administration Commission or SASAC, and Ministry of Finance, effective 24 June 2016). Prior to the transfer, the transferor must commission a qualified asset valuation institution to assess the assets, with the result subject to approval or filing by the competent authority. The transfer price must be based on the confirmed or filed valuation. Where the asset value exceeds the prescribed threshold, the transfer must be conducted through public competitive means at a property rights trading institution.

The NDRC is a ministerial-level department of the State Council responsible for formulating and implementing national economic and social development strategies, plans and policies. In the power sector, the NDRC plays a central role in policy formulation and economic regulation: it issues key electricity market rules and reform policy documents, sets and adjusts government-regulated electricity tariffs, supervises price compliance, and approves major power infrastructure investment projects above prescribed thresholds.

The NEA, which is managed by the NDRC, is separately responsible for sector-specific energy administration, including project approval and filing, licensing, and day-to-day industry supervision. Many of the principal regulatory instruments governing China’s power sector are jointly issued by the NDRC and the NEA.

Under the Electricity Law, power grid operation is subject to unified scheduling and hierarchical management. Under the Regulations on the Administration of Power Grid Scheduling (State Council, effective 1 November 1993, most recently amended in 2011), the NEA acts as the national competent authority for power grid scheduling, while provincial energy administrations are responsible for scheduling within their respective administrative regions. Under the Implementing Measures for the Regulations on the Administration of Power Grid Scheduling (Ministry of Electric Power, effective 11 October 1994), grid scheduling institutions are responsible for duties including the formulation and implementation of scheduling plans, directing grid frequency and voltage regulation, handling grid accidents, managing equipment maintenance schedules, and organising professional training for scheduling personnel.

Power plants are required to operate in accordance with scheduling plans and voltage ranges specified by scheduling institutions, and to adjust power output and voltage as instructed. The State Grid Corporation of China and China Southern Power Grid Company Limited are required to formulate power generation and supply plans and submit them to the competent electricity administrative department of the State Council for filing.

The Energy Law represents the most significant recent legislative development. It institutionalises the legal status of the new power system, brings new energy, storage and demand-side response within the statutory regulatory framework, strengthens non-discriminatory grid access requirements, establishes a framework for transmission and distribution pricing and cost supervision, and supports cross-regional electricity trading to promote the development of a unified national electricity market.

Several important regulatory instruments have recently come into effect to accelerate the development of a unified national electricity market. The Basic Rules for Power Market Operation establish unified supervisory requirements for spot, medium and long-term, and ancillary services markets. The Basic Rules for Medium and Long-Term Power Market Transactions replace the 2020 version, strengthening the interface between medium and long-term and spot trading, and adding dedicated provisions on green power trading, capacity compensation and cross-regional joint trading. The Implementation Opinions of the General Office of the State Council on Improving the Unified National Power Market System set a target of achieving a spot market with national coverage and market-based transactions accounting for 70% of total electricity consumption by 2030.

A series of new electricity pricing regulatory instruments came into effect in late 2025, led by the Measures for the Supervision and Audit of Costs for Power Transmission and Distribution Tariffs (NDRC, effective 1 December 2025). These instruments establish a strict regulatory framework for the grid’s intermediate segment, implementing rigorous cost auditing, prohibiting the transfer of non-core costs, introducing two-part tariffs, applying performance-linked pricing for cross-regional transmission, and requiring independent accounting of ancillary grid businesses to prevent cross-subsidisation.

The NDRC and NEA also issued the Circular on Promoting the Orderly Development of Green Power Direct Connection for Multiple Users (NDRC and NEA, effective 20 May 2026), requiring green power from wind and solar facilities to be supplied directly to multiple enterprises via dedicated lines to facilitate local consumption and reduce operational costs.

China’s power industry stands out with a unique blend of progressive market reform, strong policy orientation, a continuously improving legal governance framework and energy transition priorities. On the generation side, China maintains an open investment regime, welcoming diverse investors. On the retail side, end-users enjoy the freedom to choose retail suppliers, driving a competitive market. In contrast, transmission and distribution are treated as regulated natural monopolies, with grid operators acting as public utilities whose tariffs are subject to strict regulatory scrutiny, ensuring open and non-discriminatory grid access.

In recent years, China’s power legal system has undergone accelerated evolution. Anchored by the newly enacted Energy Law, supporting regulations governing electricity markets, renewable energy grid integration, energy storage and green power trading are being progressively developed. China stands as one of the world’s largest and fastest-growing markets for renewable energy and flexible resources, with wind and solar capacity growing steadily and emerging sectors such as energy storage and virtual power plants flourishing, supported by a continuously improving regulatory framework.

Market Structure

China has established a unified, hierarchically co-ordinated wholesale electricity market. The wholesale market operates primarily on market-based pricing, with generation-side prices determined through centralised bidding and cleared by power trading institutions on a security-constrained economic dispatch basis. Guaranteed supply, residential and agricultural electricity continue to be subject to government-set tariffs. The NEA and its local offices exercise statutory supervision over market transactions, price formation and competitive behaviour.

Energy Market and Capacity Market

China operates energy and capacity markets, supported by ancillary services markets. The energy market comprises medium and long-term markets, which conduct annual and monthly contract trading to lock in the majority of electricity demand, and spot markets covering day-ahead, intraday and real-time trading. Most regions currently apply a unified nodal clearing price. The capacity market provides compensation for available generation capacity under instruments including the Notice on Establishing a Coal Power Capacity Tariff Mechanism (NDRC and NEA, effective 1 January 2024), incentivising power investment and reliable supply capacity maintenance. Ancillary services markets provide frequency regulation, peak shaving and reserve services, with eligible participants including storage facilities and virtual power plants.

Large-Volume Consumers

Large-volume consumers such as data centres may participate in the market through two principal pathways. The mainstream route requires industrial and commercial users to enter the market directly or through licensed retail companies, with users at 10 kV and above generally required to participate. An emerging alternative is green power direct connection, available in single-user and multi-user modes under the Circular on Promoting the Orderly Development of Green Power Direct Connection (NDRC and NEA, effective 30 May 2025) and the Circular on Promoting the Orderly Development of Green Power Direct Connection for Multiple Users, allowing enterprises to receive green power directly from wind and solar facilities via dedicated lines.

China permits the import and export of electricity, though cross-border power trade currently operates primarily under intergovernmental arrangements rather than fully market-based mechanisms. China’s main power import sources are Myanmar, Russia and Laos, while its principal export destinations are Vietnam, Mongolia, Myanmar and Laos.

According to the Statistical Communiqué on the 2025 National Economic and Social Development published by the National Bureau of Statistics, total electricity generation in 2025 reached 1,057.525 TWh.

The supply mix was as follows:

• thermal power – 632.715 TWh (59.83%);
• hydropower – 146.167 TWh (13.82%);
• solar power – 117.324 TWh (11.09%);
• wind power – 112.792 TWh (10.67%); and
• nuclear power – 48.523 TWh (4.59%).

There is no national legislation specifically limiting market concentration in the power sector, though mergers and acquisitions in the industry remain subject to the Anti-Monopoly Law.

Some provincial authorities have introduced local concentration limits. For example, the Shandong Electricity Market Rules (Trial Implementation) (Shandong Provincial NEA, effective April 2026) provide that the aggregate installed capacity of generation enterprises within the same group may not exceed 20% of total market installed capacity, and that affiliated retail companies may not represent users accounting for more than 20% of total provincial market electricity consumption. Entities exceeding either threshold are required to reduce their market share through asset divestiture, transaction segregation or other means.

Under the Provisions of the State Council on the Reporting Thresholds for Concentrations of Undertakings (State Council, effective 22 January 2024), a concentration must be notified to and cleared by the anti-monopoly enforcement authority before implementation where: all undertakings participating in the concentration had combined global turnover exceeding CNY12 billion in the preceding financial year, and at least two of them each had a turnover in China exceeding CNY800 million; or all participating undertakings had a combined turnover in China exceeding CNY4 billion in the preceding financial year, and at least two of them each had turnover in China exceeding CNY800 million.

The Anti-Monopoly Regulatory Framework

China’s anti-monopoly regulatory framework is based on the Anti-Monopoly Law, which prohibits three categories of conduct: monopoly agreements, abuse of dominant market position, and concentrations of undertakings with anti-competitive effects.

Supporting instruments include:

• the Provisions on Prohibiting Monopoly Agreements (State Administration for Market Regulation or SAMR, effective 1 February 2026);
• the Provisions on Prohibiting Abuse of Dominant Market Position (SAMR, effective 15 April 2023);
• the Provisions on the Review of Concentrations of Undertakings (SAMR, effective 15 April 2023);
• the Provisions of the State Council on the Reporting Thresholds for Concentrations of Undertakings, and the Fair Competition Review Regulations (State Council, effective 1 August 2024).

The SAMR is the central anti-monopoly enforcement authority, responsible for monitoring, investigating, reviewing and penalising anti-competitive conduct across all industries, including the power sector.

Penalties

Penalties for violations include an order to cease the unlawful conduct and confiscation of unlawful gains. Undertakings found to have concluded monopoly agreements or abused a dominant position are subject to a fine of between 1% and 10% of the preceding year’s turnover. Unlawful concentrations may be ordered to dispose of shares, assets or businesses, with fines of up to 10% of the preceding year’s turnover or CNY5 million, as applicable. In cases of particularly serious circumstances, fines of two to five times the above amounts may be imposed. Where an undertaking obstructs an investigation, fines of up to 1% of the preceding year’s turnover, or up to CNY5 million where turnover is unavailable, may be imposed, with responsible individuals subject to fines of up to CNY500,000.

The construction and operation of generation facilities is governed by a multi-layered regulatory framework comprising both general construction regulations and facility-specific rules.

Core legislation includes the Electricity Law, the Renewable Energy Law, the Construction Law (effective 1 March 1998, most recently amended in 2019), the Land Administration Law (effective 1 January 1987, most recently amended in 2019), the Environmental Impact Assessment Law (effective 1 September 2003, most recently amended in 2018, to be consolidated into the Ecological Environment Code effective 15 August 2026), the Work Safety Law (effective 1 November 2002, most recently amended in 2021) and the Law on Prevention and Control of Occupational Diseases (effective 1 May 2002, most recently amended in 2018).

Key administrative regulations and departmental rules include the Regulations on the Approval and Filing Management of Enterprise Investment Projects, the Construction Project Safety Facilities “Three Simultaneities” Supervision and Administration Measures (former State Administration of Work Safety or SAWS, effective 1 February 2011, most recently amended in 2015), the Construction Project Occupational Disease Prevention Facilities “Three Simultaneities” Supervision and Administration Measures (former SAWS, effective 1 May 2017), and the facility-specific instruments identified in 1.1 Law Governing the Structure and Ownership of the Power Industry.

Incorporation into Plans

Generation projects must be incorporated into national and provincial power development plans. Renewable energy projects must additionally be included in the annual development and construction plan issued by the provincial energy authority before any approval process commences.

Project Approval or Filing

The applicable investment management regime varies by project type. Coal-fired power projects are subject to government approval under the Government-Approved Investment Project Catalogue (2016 Edition) (State Council, effective 12 December 2016), with approval authority exercised at provincial or local level depending on project scale. Solar projects have been subject to filing management since 2014. Wind power projects remain subject to government approval at the national institutional level, though policy since 2022 has been directed towards transitioning wind projects to filing management, with some provinces having already implemented this.

Construction-Phase Approvals

Principal approvals required prior to commencement of construction include:

• fixed asset investment project approval or filing documents;
• preliminary land use review opinion and site selection opinion;
• construction land planning permit;
• construction project planning permit;
• construction works commencement permit;
• water and soil conservation plan approval;
• flood impact assessment approval (where applicable); and
• fire, seismic and lightning protection design review.

Completion acceptance covers the main works, environmental protection facilities, water and soil conservation facilities, and fire protection facilities.

Licensing

Following construction and grid connection, the operator is generally required to apply to the NEA or its regional offices for a generation electric power business licence within six months of grid connection. Certain projects are exempt, including distributed generation projects approved or filed by the competent energy authority, and renewable energy generation projects with an installed capacity of below 6 MW.

To obtain the necessary approvals, investors typically prepare project application reports, siting proposals and design documents, and submit them to the competent authority for approval or filing. Most approvals do not require hearings, though most decisions are subject to a public notice period. Public participation applies primarily to land acquisition and environmental impact assessment.

Environmental Impact Assessments

All projects must conduct an environmental impact assessment under the Environmental Impact Assessment Law. Projects are classified into three tiers according to their likely environmental impact:

• those likely to cause significant environmental impact must prepare a full Environmental Impact Assessment Report;
• those likely to cause moderate impact must complete an Environmental Impact Assessment Form; and
• those with minimal impact need only complete an Environmental Impact Assessment Registration Form.

For projects likely to cause significant environmental impact and required to prepare a full Environmental Impact Assessment Report, public participation is mandatory: prior to submission, the building unit must solicit opinions from relevant organisations, experts and the public through public hearings or other appropriate means, and must attach to the submitted report a written explanation of whether and how such opinions have been adopted.

Projects requiring a full Assessment Report or Form must obtain formal approval from the competent ecological environment authority before construction commences. Projects requiring only a Registration Form need only complete a filing. The competent authority must issue its decision within 60 days of receiving a complete report, or within 30 days of receiving a complete form. Approving authorities have direct power to issue binding decisions.

All approval and filing procedures are conducted in accordance with the relevant laws and regulations specifying the required documents. Investors may consult preliminary document checklists on government affairs service websites. Competent authorities may attach conditions to approvals for the siting, construction and operation of generation facilities, including requirements as to commencement and completion dates, investment scale, construction standards and validity periods of approval documents. There is no standalone process for obtaining an amendment or relaxation of approval conditions under PRC law; where material changes to approved parameters are required, the investor must apply to the competent authority for an amended approval document.

The principal mechanism for obtaining land-use rights for generation facilities is through state-owned construction land. Where the proposed site involves rural collectively-owned agricultural land, the land must first be expropriated by the government and converted to state-owned construction land, following which, land-use rights may be granted to the investor through tender, auction or listing. Local governments determine compensation standards for expropriated agricultural land and reserve prices for state-owned construction land-use rights based on market conditions.

Secondary transfers of state-owned construction land-use rights are also permitted, allowing investors to acquire land-use rights directly from existing right holders, subject to applicable prerequisites and regulatory requirements.

Compensation for compulsory acquisition of agricultural land is determined under the Land Administration Law based on composite land prices for districts formulated by provincial governments, taking into account original land use, resource conditions, output value and locational factors, and reviewed at least every three years. Compensation for above-ground attachments and standing crops is paid to their respective owners under the Regulations on the Implementation of the Land Administration Law (State Council, effective 1 September 2021).

There are currently no laws or regulations in China specifically governing the decommissioning of generation facilities, and project approvals do not generally attach decommissioning requirements. China is however exploring and researching the development of unified decommissioning standards.

The construction and operation of transmission lines and associated facilities is governed by a multi-layered legislative framework. The Electricity Law establishes the general principles for power construction, grid management, land use and facility protection. The Energy Law provides a higher-level framework requiring co-ordinated source-grid construction, smart grid upgrades and non-discriminatory transmission network access.

At the administrative regulation level, the Regulations on the Protection of Power Facilities (State Council, effective 15 September 1987, most recently amended in 2011) and their Implementation Rules (NDRC, effective 1 March 2024) establish physical protection zones for transmission infrastructure and define compensation obligations. Other relevant administrative regulations include the Regulations on the Administration of Power Grid Scheduling and the Regulations on Electric Power Supervision. The Renewable Energy Law and the Guaranteed Purchase Measures further require grid enterprises to provide grid connection services for renewable energy generation enterprises.

In practice, China’s transmission network is owned and operated primarily by the three principal state-owned grid enterprises, each holding a transmission electric power business licence issued by the NEA and operating within its designated service area. For foreign-invested generation enterprises, the practical focus is typically on accessing the existing grid rather than constructing independent transmission infrastructure.

Regarding storage as an associated facility, new energy storage projects are regulated under the New Energy Storage Project Management Rules (Interim) and are generally subject to provincial filing management. Grid enterprises must provide fair and non-discriminatory grid connection services to storage projects that have completed filing and meet technical requirements.

Transmission projects are subject to environmental review under the Environmental Impact Assessment Law, as described in 4.2 Obtaining Approvals to Construct and Operate Transmission Lines and Associated Facilities.

Incorporation into Plans

Transmission network projects must be incorporated into the relevant power development plans before any approval process commences. Cross-provincial or cross-regional transmission networks, and intra-provincial transmission networks at 500 kV and above, are generally required to be incorporated into national power development plans. Transmission networks at 110 kV (or 66 kV) and above are generally required to be incorporated into provincial power development plans.

Project Approval

Transmission grid projects are subject to government approval rather than filing, given their strategic resource allocation and significant public interest implications. Approval authority is determined by voltage level and geographical scope. Projects at approximately 500 kV and above involving cross-border or cross-provincial direct current transmission, and 500 kV, 750 kV and 1,000 kV alternating current transmission projects involving cross-border or cross-provincial transmission, are approved by the NDRC, with projects that are approximately 800 kV direct current and 1,000 kV alternating current additionally subject to State Council filing. Non cross-border, non cross-provincial projects at equivalent voltage levels are approved by provincial governments, with other transmission projects generally approved by local governments. Approving authorities must issue decisions within 20 working days of accepting an application, extendable to 40 working days for complex projects.

Environmental Impact Assessment

Transmission projects are subject to environmental review under the framework described in 3.2 Obtaining Approvals to Construct and Operate Generation Facilities. Given the scale and land occupation of large transmission line projects, a full Environmental Impact Assessment Report is generally required. Approving authorities have direct power to issue binding decisions.

Licensing

Following construction and completion acceptance, the operating entity must apply to the NEA for a transmission electric power business licence before commencing transmission operations. Transmission licences are issued by the NEA, are valid for 20 years, and specify the permitted transmission business scope and service area of the licence holder.

Grid Connection Agreements

Under the Electricity Law and the Guaranteed Purchase Measures, grid enterprises are required to sign a grid connection agreement and a grid connection scheduling agreement with the connecting generation enterprise, and, where applicable, a power purchase and sale contract. The grid connection scheduling agreement governs the technical and operational parameters of the connection, including voltage level, capacity, and the demarcation point of responsibility between the generation enterprise’s equipment and the grid enterprise’s facilities. Grid enterprises must also specify the construction timeline for grid connection works in the parallel operation agreement.

Where a generation enterprise and a grid enterprise cannot reach agreement on connection terms, the relevant electricity regulatory authority must mediate; where mediation fails, the regulatory authority may issue a binding decision pursuant to the Guaranteed Purchase Measures and the Energy Law. Generation enterprises suffering economic losses due to a grid enterprise’s failure to fulfil its connection obligations may seek compensation, and the NEA may impose a fine of up to the amount of such losses under the Guaranteed Purchase Measures.

Self-Built Transmission Lines and Buy-Back Mechanism

Under the Notice on Matters Relating to the Investment and Construction of Transmission Works Associated with New Energy Projects (NDRC and NEA, effective 31 May 2021), where a grid enterprise is unable to complete grid connection works within a timeframe compatible with the generation project’s development schedule, the generation enterprise may independently invest in and construct the connection works. Upon completion, the generation enterprise and the grid enterprise may enter into a buy-back agreement, with the transfer price and other commercial terms determined by negotiation. Prior to any buy-back, the generation enterprise retains ownership and operational responsibility for the self-built works.

Land Acquisition for Transmission Projects

The construction of transmission lines and associated facilities requires the acquisition of various forms of land rights depending on the nature of the infrastructure involved. The principal mechanisms available under Chinese law are formal construction land approval, administrative allocation, and, in a number of provinces, a compensation-based arrangement that dispenses with formal land acquisition proceedings.

For permanent facilities such as substations and converter stations, the relevant land-use rights are typically acquired through formal construction land approval procedures under the Land Administration Law, which may involve agricultural land conversion approval where the project site includes agricultural land. Where the project qualifies under the national catalogue of land uses eligible for administrative allocation, land-use rights may alternatively be obtained through allocation without payment of a land premium.

For overhead line corridors, tower foundations and underground cable corridors, the position at the national legislative level is not fully settled. The Land Administration Law requires construction projects to obtain the requisite land-use approvals but does not specifically address whether transmission line tower foundations must be processed as formal construction land subject to full land acquisition or agricultural land conversion procedures. No national law or administrative regulation expressly establishes a unified framework either requiring or permitting tower foundations and cable corridors to be handled through compensation in lieu of formal acquisition.

In practice, a significant number of provinces have addressed this gap through local legislation, expressly providing that overhead transmission line corridors and underground cable corridors do not require formal land acquisition, and that the construction enterprise must instead pay one-time economic compensation to affected land rights-holders. Provinces with such legislation include:

• Jiangsu (Electricity Regulations, Jiangsu People’s Congress, effective 1 May 2020);
• Henan (Power Supply and Use Regulations, Henan People’s Congress, effective 5 December 2025);
• Hunan (Regulations on the Protection of Power Facilities and Maintenance of Power Supply and Use Order, Hunan People’s Congress, effective 27 May 2017);
• Hebei (Electricity Regulations, Hebei People’s Congress, effective 29 July 2025); and
• Gansu (Grid Construction and Protection Regulations, Gansu People’s Congress, effective 1 May 2023).

In provinces where no such local legislation exists, the compensation-in-lieu approach may still be pursued in practice, but it is generally advisable to seek written confirmation from the relevant natural resources authority before proceeding.

For temporary land use required during the construction phase, approval from the relevant natural resources authority is required under the Land Administration Law, and the construction enterprise must enter into a temporary land-use agreement and pay temporary land-use compensation. The period of temporary land use generally may not exceed two years.

Compensation Standards

Compensation for compulsory acquisition of agricultural land is determined by reference to the zonal composite land price established by the relevant provincial government under the Land Administration Law, taking into account the original use, resource conditions, output value and location of the land, and subject to adjustment at least once every three years. Compensation for above-ground attachments and crops belongs to their respective owners under the Regulations for the Implementation of the Land Administration Law (State Council, effective 1 September 2021). Where transmission line construction requires felling of trees within a woodland corridor, the construction enterprise must obtain the relevant forestry approvals and pay one-time compensation to the affected rights-holders.

Expropriation Risk and Foreign Investor Protection

Under the Land Administration Law, the state may compulsorily acquire collectively owned land for public interest purposes, which expressly includes energy infrastructure construction organised by the government. The expropriation process requires a pre-announcement period of not less than 30 days, a current status survey, a social stability risk assessment, and the conclusion of compensation and resettlement agreements prior to formal submission for approval.

Foreign-invested enterprises benefit from the protections afforded by the Foreign Investment Law. Article 5 provides that the state undertakes to protect the investments, returns and other lawful rights and interests of foreign investors in China. Article 20 provides that the state will not expropriate foreign investors’ investments save in special circumstances where the public interest so requires, in which case, expropriation must be conducted in accordance with legal procedures and result in timely, fair and reasonable compensation. Article 21 further guarantees foreign investors the right to freely remit their contributions, profits, capital gains, asset disposal proceeds and other returns into and out of China, in either CNY or foreign currency.

The construction and operation of transmission networks in China is in practice carried out by the three major state-owned grid enterprises, State Grid Corporation of China, China Southern Power Grid Company Limited and Inner Mongolia Power (Group) Co, Ltd, each operating within its designated service territory, together with a number of smaller local grid enterprises operating in certain areas on a historically established basis.

While Chinese law does not contain a provision expressly granting these enterprises exclusive rights over transmission within their respective territories, the position in practice is clear: the NEA has issued Electric Power Business Licences for Power Transmission to the three major grid enterprises in respect of their service territories, and the transmission sector is generally not open to private or foreign-invested entities as independent transmission operators under the current regulatory framework.

Transmission charges in China are established and regulated by the NDRC, which approves transmission tariffs across three categories depending on the nature and geographic scope of the relevant transmission infrastructure.

Provincial Grid Transmission and Distribution Tariffs

Provincial grid transmission and distribution tariffs are governed by the Measures for Pricing Provincial Grid Transmission and Distribution Tariffs (NDRC, effective 1 January 2026). These tariffs are set on a combined transmission-and-distribution basis at the provincial level, differentiated by voltage level and user category. Tariffs are determined on a permitted revenue methodology, under which the NDRC calculates the total permitted revenue for each grid enterprise as the sum of its permitted costs, a permitted return on its effective asset value calculated by reference to a weighted average cost of capital, and applicable taxes. The permitted cost base is subject to a dedicated cost review process under the Measures for the Supervision and Audit of Costs for Power Transmission and Distribution Tariffs, which excludes assets unrelated to the core transmission and distribution function such as pumped hydro storage, electric vehicle charging facilities, and assets acquired through related-party transactions at above-market prices.

Regional Grid Transmission Tariffs

For electricity transmitted across provincial boundaries through regional grid infrastructure, tariffs are governed by the Measures for Pricing Regional Grid Transmission Tariffs (NDRC, effective 1 January 2026) and are structured on a capacity fee plus energy fee basis, allocated among the relevant provincial grids in proportion to their actual usage of the regional transmission infrastructure.

Cross-Provincial Special Project Transmission Tariffs

For dedicated cross-provincial or cross-regional transmission projects, tariffs are governed by the Measures for Pricing Cross-Provincial Special Project Transmission Tariffs, adopting a life cycle methodology based on an assumed operating period of 35 years. A temporary transmission price applies upon commissioning, subject to periodic recalibration and final settlement over the life of the project. Capital returns are subject to an NDRC-prescribed cap on the internal rate of return.

Regulatory Cycle

All three categories of transmission tariffs are subject to review and re-approval by the NDRC on a three-year regulatory cycle. The fourth regulatory period (2026 to 2028) is currently under way.

Open-Access Obligation

Under the Energy Law, operators of energy transmission network facilities, including grid enterprises, are required to open their networks and provide energy transmission services fairly and without discrimination to qualifying entities. This obligation is further implemented in the electricity sector by the Measures for the Supervision of Grid Fair Open Access, which establishes detailed requirements governing connection procedures, processing timelines, information disclosure obligations, and the terms on which grid enterprises must accept connection requests from power sources, local independent grids, incremental distribution networks and microgrids. The Guaranteed Purchase Measures additionally require grid enterprises to build or upgrade grid connection infrastructure in accordance with applicable plans and to provide standardised connection services to renewable energy generators.

Regulation and Enforcement

The NEA and its regional offices are the primary regulatory authority responsible for supervising compliance with open access obligations. In March 2025, the NEA launched a dedicated special supervision programme on grid fair open access targeting 19 provinces, focusing on connection project investment and construction, processing timeline compliance, grid interconnection and information disclosure. In December 2025, the NEA published a notification identifying seven categories of typical violations observed across multiple provinces, including the unlawful imposition of fees on generation enterprises, the transfer of connection costs to generators, delays in the buy-back of self-built connection works, and the use of technical or procedural barriers to obstruct connection applications.

Penalties

Under the Energy Law, grid enterprises that violate the fair and non-discriminatory access obligation may be ordered to rectify the violation; where they refuse to do so, the regulatory authority may impose a fine of up to twice the economic losses suffered by the affected party, and in serious cases the responsible management personnel may be subject to disciplinary sanctions. Under the Guaranteed Purchase Measures, grid enterprises that fail to fulfil their connection and purchase obligations and thereby cause economic losses to renewable energy generation enterprises, are liable to compensate those losses and may additionally be fined up to an amount equal to the economic losses caused.

The construction and operation of electricity distribution facilities in China is governed by substantially the same legislative framework as the transmission infrastructure. The Electricity Law, the Energy Law, the Regulations on Electric Power Supervision, the Regulations on the Protection of Power Facilities and their Implementation Rules all apply equally to distribution facilities. At the regulatory level, the Power Supply and Use Regulations (State Council, effective 1 September 1996, most recently amended in 2019) and the Power Supply Business Rules govern the operational obligations of supply enterprises and the terms on which electricity is supplied to end-users.

Historically, distribution networks were constructed and operated exclusively by the three major state-owned grid enterprises. Since 2016, the incremental distribution network reform has opened distribution-level investment and operation to non grid-enterprise participants including private and foreign-invested enterprises. Under this reform, implemented through the Measures for the Administration of Incremental Distribution Network Business (NDRC and NEA, effective 8 October 2016), the Notice on Further Promoting the Reform of Incremental Distribution Network Business (NDRC and NEA, effective 14 January 2019) and the Implementation Measures for the Division of Distribution Areas for Incremental Distribution Network Business (NDRC and NEA, effective 2 April 2024), qualified investors may obtain the exclusive right to provide distribution services within designated areas, upon obtaining the requisite Electric Power Business Licence for Power Supply. Eligible projects cover distribution networks at 110 kV and below in general areas, and 220 kV (330 kV in certain north-west regions) and below in industrial parks, as well as existing distribution networks not owned by the three major grid enterprises.

Regarding storage as an associated facility, storage projects are subject to filing management at the provincial level under the New Energy Storage Project Management Rules (Interim), and distribution network operators are required to provide fair and non-discriminatory connection services to qualifying storage projects.

Intelligent microgrids are recognised as a distinct category of electricity infrastructure under current PRC policy. The Guidance on Promoting High-Quality Grid Development (NDRC and NEA, effective 31 December 2025) expressly defines intelligent microgrids as a new form of electricity business carrier with self-balancing and self-regulating capability, supporting their flexible grid-connected and off-grid operation in scenarios including remote areas, industrial parks and end-user green energy applications.

The regulatory process broadly mirrors the framework applicable to transmission projects described in 4.2 Obtaining Approvals to Construct and Operate Transmission Lines and Associated Facilities, with certain modifications for the distribution context.

Planning Inclusion

Distribution network projects must be incorporated into the relevant provincial distribution network development plan before any approval process commences.

Project Owner Selection and Approval

For incremental distribution network projects, the project owner is selected through open tender conducted in accordance with the Tendering and Bidding Law (effective 1 January 2000, most recently amended in 2017), organised by the relevant local energy authority or development and reform commission. The project is then subject to government approval or filing depending on the voltage level and scale of the project.

Construction-Stage Approvals

The construction-stage approvals and acceptance inspection requirements for distribution projects follow the general framework described in 3.1 Constructing and Operating Generation Facilities.

Environmental Impact Assessment

Distribution projects are subject to environmental review under the framework described in 3.2 Obtaining Approvals to Construct and Operate Generation Facilities. Given their typically smaller scale, many distribution projects will qualify for the less onerous Environmental Impact Assessment Form rather than a full report.

Licensing

Upon completion of construction and acceptance inspections, the project owner must obtain an Electric Power Business Licence for Power Supply before commencing distribution operations. Under the Notice of the General Affairs Department of the NEA on Simplifying and Optimising Licensing Conditions and Accelerating the Processing of Electric Power Business Licences for Incremental Distribution Projects (NEA, effective 11 July 2018), project owners are not required to have completed construction of the full distribution network prior to applying; it is sufficient to demonstrate the capability to supply existing users and provide a construction plan for the remainder of the network.

Typical Timelines

Under the Power Supply Business Rules, supply enterprises must provide supply scheme responses to end-users within three working days for low-voltage users, ten working days for high-voltage single-source users, and 20 working days for high-voltage dual-source users. The Guidance on Deepening and Improving “Getting Electricity” Service Standards (NDRC and NEA, effective 1 July 2025) provides that the full connection process for low-voltage users should be completed within five working days where no external power line works are required, and within 15 working days where such works are required.

Distribution Area Designation

The distribution area within which the project owner holds the exclusive right to provide distribution services is designated by the relevant local authority in accordance with the Implementation Measures for the Division of Distribution Areas for Incremental Distribution Network Business. The distribution area designation is a fundamental condition of the project approval and is incorporated into the Electric Power Business Licence for Power Supply. Where the project owner fails to fulfil its construction commitments or its operational performance falls below the required standard, its project owner qualification may be revoked and a new owner may be selected through a fresh competitive process under the Notice on Further Promoting the Reform of Incremental Distribution Network Business.

Construction and Service Obligations

The project owner is required to complete construction within the agreed timeline and provide reliable supply to all users within its distribution area on a fair and non-discriminatory basis, including a universal supply obligation. These are ongoing conditions of the licence, supervised by the NEA and its regional offices.

Connection to the Public Grid

The incremental distribution network must be connected to the public grid. The grid enterprise must provide connection services on a fair, timely and non-discriminatory basis. Upon connection, the project owner has the same rights and obligations as grid enterprises with respect to interconnection, participation in electricity markets, distributed energy connection and new energy accommodation.

Amendment or Relaxation of Conditions

There is no dedicated standalone procedure under PRC law for amending or relaxing conditions imposed in distribution project approvals or licences. Where significant changes to approved parameters are required, the project owner must apply to the relevant approving authority for a modification. General administrative reconsideration and administrative litigation channels are available where a project owner considers a regulatory decision to be unlawful.

The mechanisms for acquiring land rights for the construction and operation of distribution facilities are substantially the same as those described in 4.4 Eminent Domain, Condemnation and Expropriation Rights to Construct and Operate Transmission Lines and Associated Facilities in the context of transmission infrastructure, and the same legal framework under the Land Administration Law, the Regulations on the Protection of Power Facilities and applicable provincial legislation governs the process, compensation standards and foreign investor protections.

Distribution facilities are generally smaller in scale than transmission infrastructure and are more frequently located within existing urban or industrial development areas. In the urban context, the Power Supply Business Rules and the Guidance on High-Quality Development of Distribution Networks under the New Situation provide that land and space for distribution facilities should be reserved in urban and residential development plans, and that new residential developments should include pre-planned allocation of distribution facility sites. Where distribution facility land is incorporated into urban planning and reserved accordingly, the project owner typically acquires the relevant land-use rights through construction land approval procedures co-ordinated with the local planning authority, rather than through the expropriation mechanisms more commonly applicable to transmission line corridors.

For underground cable corridors associated with distribution networks in urban areas, the same compensation-in-lieu framework described in 4.4 Eminent Domain, Condemnation and Expropriation Rights to Construct and Operate Transmission Lines and Associated Facilities applies, and the provincial legislation cited in that section is equally applicable to distribution cable installations.

The monopoly position of electricity distribution entities in China is more nuanced than in the transmission sector, reflecting the structural changes introduced by the incremental distribution network reform since 2016.

Under the traditional framework, supply enterprises held exclusive rights to provide distribution and supply services within their respective designated supply service areas. The Power Supply and Use Regulations provide that only one supply business institution may be established within a given supply service area, and that supply enterprises must provide supply services to all users on a continuous and non-discriminatory basis. The exclusive right to operate within a supply service area is derived from the Electric Power Business Licence for Power Supply issued by the NEA, which specifies the licensed service territory.

The incremental distribution network reform has introduced a significant qualification to this framework. Qualified non grid-enterprise investors, including private and foreign-invested enterprises, may obtain the exclusive right to provide distribution services within a designated incremental distribution area by winning the competitive selection process and obtaining the requisite licence. The Implementation Measures for the Division of Distribution Areas for Incremental Distribution Network Business and the Notice on Further Promoting the Reform of Incremental Distribution Network Business provide the legal basis for this regime.

Outside the incremental distribution reform framework, the construction and operation of distribution networks by private or foreign-invested entities as independent distribution operators, is generally not open under the current regulatory framework.

Provincial Grid Distribution Tariffs

For distribution services provided through the networks of the three major state-owned grid enterprises, distribution charges form part of the combined transmission and distribution tariff established under the Measures for Pricing Provincial Grid Transmission and Distribution Tariffs, as described in 4.6 Transmission Charges and Terms of Service. These tariffs are set by the NDRC on a permitted revenue methodology, reviewed on a three-year regulatory cycle, and differentiated by voltage level and user category.

Incremental Distribution Network Tariffs

For incremental distribution networks, a separate distribution tariff is established by the relevant provincial price authority and filed with the NDRC. Under the Guiding Opinions on Formulating Distribution Prices for Local Grids and Incremental Distribution Networks (NDRC, effective 29 December 2017) and the Notice on Further Promoting the Reform of Incremental Distribution Network Business, the distribution tariff is generally calculated as the difference between the applicable provincial grid transmission and distribution tariff at the relevant voltage level and the tariff at the voltage level at which the incremental network receives power from the public grid.

Regulatory Principles

Supply enterprises are required to charge end-users in accordance with government-approved tariffs and may not levy additional fees outside the approved tariff structure. The Power Supply Business Rules specifically prohibit non-grid supply enterprises from adding operational or maintenance costs for common facilities to end-user electricity charges beyond what is permitted under the applicable pricing policy.

Appeal and Complaint Mechanisms

Transmission and distribution tariffs constitute government-set prices under Article 18 of the Price Law (effective 1 May 1998), which provides that prices for goods and services involving natural monopoly operations and important public utilities are subject to government pricing regulation. A party wishing to challenge a tariff-setting decision may apply for administrative reconsideration under the Administrative Reconsideration Law (effective 1 January 2024) or bring administrative litigation under the Administrative Litigation Law (effective 1 October 1990, most recently amended in 2017). For complaints regarding existing tariff application or supply service terms, users may file complaints through the NEA’s 12398 energy regulation hotline or with the relevant local energy authority. Under the Guidance on Deepening and Improving “Getting Electricity” Service Standards, supply enterprises and the NEA and its regional offices are required to establish and maintain complaint-handling mechanisms.