China’s National Development and Reform Commission and the National Energy Administration recently issued the "Notice on the Signing and Performance of Medium- and Long-Term Electricity Contracts for 2026." The document states that, in principle, electricity users participating directly in market transactions will no longer be subject to government-mandated time-of-use (TOU) pricing.

The original intent of the TOU pricing policy was to encourage users to shift peak demand and fill troughs in electricity consumption, using pricing as a lever to move demand from high-price peak periods to low-price off-peak periods. However, it is important to clarify that this policy does not eliminate TOU pricing.

Instead, it shifts from the previous broad regulatory approach—where the government uniformly defined peak/off-peak periods and fixed price ratios—to a fully market-driven TOU pricing mechanism. Ultimately, this could result in "hourly TOU pricing," allowing electricity prices to reflect real-time market supply and demand more closely.

At its core, this change stems from shifts in China’s energy landscape. The increasing proportion of installed wind and solar capacity has raised the balancing costs of the power system, which, in turn, requires the energy storage sector to assume greater responsibility.

Under the new rules, the previous business model for commercial and industrial energy storage—relying on fixed peak/off-peak price differentials and operating on a "two charge and two discharge cycles per day" power-bank-style arbitrage—will essentially become unviable.

This will drive a comprehensive upgrade across the energy storage industry.

The new regulations impose higher requirements on energy storage products. Storage systems must be able to rapidly respond to changes in electricity prices. In contrast, at the system level, they must coordinate with electricity retailers and virtual power plants, ultimately becoming a key component in maintaining the stability of the power system.

This will further accelerate market transformation, hastening the exit of small- and medium-sized system integrators, helping the energy storage industry advance towards high-quality development whilst shifting to diversified revenue models. It also marks a milestone in the market-oriented application of energy storage.