Price Guarantee and Risk Game: A Study on Bidding Decision-Making Mechanism of Newly Added Renewable Energy Projects under the Reform of New Energy Feed-in Tariffs- Evidence from China

Abstract

To advance the market-oriented reform of renewable energy feed-in tariffs and ensure a smooth policy transition, China has launched a dedicated pricing settlement mechanism. Combined with market-based power transactions, this mechanism establishes a dual decision-making framework for power producers to optimize electricity allocation and operating revenue. Based on the risk-return trade-off theory, this paper constructs a decision analysis framework for the bidding activities of newly added renewable energy projects and explores the internal operating logic of relevant decision mechanisms. The results show that enterprises need to dynamically balance policy-guaranteed returns and market-oriented risk-adjusted returns in decision-making. The core influencing factors include the gap between regulated electricity prices and expected market prices, corporate risk preference, and market price volatility. When regulated prices bring considerably higher certain returns than market expectations, it is optimal for enterprises to allocate a large proportion of power volume to the regulated channel. When regulated prices are roughly equal to expected market prices, risk-averse enterprises can allocate part of power volume to the regulated channel to hedge risks and stabilize revenue. When the market presents obvious profit premiums and enterprises have strong risk tolerance, expanding the share of market transactions will help maximize total revenue. This study provides theoretical support for renewable energy power producers to design rational bidding strategies and balance revenue security and development goals amid policy transition.