China Market Insider China's Industry Becoming Increasingly Stronger Globally Thanks to Falling Electricity Prices

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The electricity price in China continues to fall, making the country's companies increasingly competitive globally.

This year, prices for industrial users in the People's Republic have reached several historic lows. The reasons for this are the rapid expansion of renewable energies, whose scaling enables increasingly cheaper electricity, as well as the consistently industry-friendly policies of the government in Beijing.

During the extremely hot summer months, when air conditioners are running at full blast everywhere, electricity prices usually rise even in China. Not so this year. In several regions, they are even falling. In the southern province of Guangdong, for example, spot electricity prices have dropped below 0.04 euros per kilowatt-hour several times in July.

"The price drop is a blessing for manufacturers operating under the pressure of a slowing economic growth," writes the business portal Caixin. Analysts predict that electricity prices will continue to fall over the next two years as China keeps expanding its renewable energy infrastructure at an enormous pace.

This development also has significant impacts on the international competitiveness of the German manufacturing industry, where energy prices are among the highest in the world—while in China, they are lower than in many developing countries.

Electricity costs twice as much in Germany

The typical industrial electricity user in Germany without special privileges paid an average of 16.77 cents per kilowatt-hour last year, according to statistics from the Federal Network Agency. In comparison, in China in 2024, it was around 8 cents.

This meant that electricity prices for many industrial companies in Germany were already roughly twice as high as in China last year. At the same time, more and more German companies are having to compete increasingly directly with Chinese firms, as they are catching up technologically very quickly. And since the end of 2024, electricity prices in China have fallen further significantly.

When more and more companies in Germany, whether in mechanical engineering, the automotive sector, or the chemical industry, face economic difficulties and have to lay off employees, there are numerous reasons for this—but energy prices are among the most significant.

"More and more companies are considering relocating their production abroad, where energy is cheaper. Other companies are considering reducing their production in Germany," wrote the German Chamber of Industry and Commerce earlier this year in its "Energy Transition Barometer."

The Chinese government is aware of the importance of energy for the country's manufacturing industry, where electricity costs account for around 30 percent of production costs for many companies (even more in energy-intensive sectors). Therefore, it has been keeping electricity prices relatively low for decades while simultaneously pushing the green transformation of the country with giant strides.

This year marks a turning point where the expansion of wind and solar energy has begun to become one of the key drivers for the decline in industrial electricity prices in China. For the first time in China's history, more energy was generated from wind and solar power (1.482 billion kilowatts) than from coal (1.451 billion kilowatts) in the first half of 2025. This is evidenced by statistics from the National Energy Administration in Beijing.

This important milestone for the country's desired sustainable energy mix will fundamentally change the dynamics of electricity pricing in China—and the trend is currently continuing toward even cheaper energy.

More electricity from wind and solar parks is not the only factor influencing the electricity price in the People's Republic. Currently, the price of coal in China is also falling, among other things, as the economy is recovering very slowly from the excessive COVID lockdowns and GDP continues to grow at a (for Chinese standards) relatively slow pace of around five percent.

China is also currently implementing further reforms for its energy management. For the first time, all electricity producers, including those of renewable energy, must now trade on the spot market. Fixed purchase prices for green electricity are gradually being abolished. All of this creates a situation that can sometimes seem almost overwhelming for laypeople.

These factors are driving electricity prices down

Overall, the main factors driving China's electricity prices further downward are crystal clear: the most important is the extremely rapid expansion of renewable energy sources. Once solar panels and wind turbines have paid for themselves, this electricity can be generated very cheaply. Additionally, China is heavily investing in storage capacity and the expansion of power lines to improve the integration of green electricity into the grid.

In the first half of this year alone, an additional 268 gigawatts of new wind and solar energy were installed in China, according to the "National Energy Administration" (NEA). This adds to the total wind and solar energy capacity of more than 1,400 gigawatts reached by the end of 2024. In Germany, by the same point in time, there was a total of 172 gigawatts of wind and solar capacity.

The second main factor is that the government in Beijing is aware of the strategic importance of affordable energy for the global competitiveness of its industries and acts accordingly.

All of this will make it even harder for Manufacturers in the coming years to compete with Chinese products and services in the global market. Substantially lower energy prices are hardly to be expected in this country in the foreseeable future.