Guangdong Gas Policy Shift May Slow China LNG Demand

The Guangdong Provincial People's Government implemented a gas power policy reform in July 2025 that transitions gas-fired generation from baseload operations to peak-only dispatch. Under this new framework, gas plants no longer receive guaranteed dispatch hours or subsidies based on the weighted average cost of gas. Instead, plants must use pure economic dispatch by bidding to recover fuel costs.

To offset the loss of running hours, the province increased capacity payments to cover full capital expenditure, rewarding plants for their availability rather than total generation. This shift follows a massive surge in renewable energy, with solar and wind capacity in the province growing from 14 GW to 105 GW between 2020 and 2026.

Analysis from Wood Mackenzie suggests this Guangdong Model could be replicated across other Chinese provinces, which would likely slow national gas and LNG demand growth. Kai Dong, a principal analyst at the firm, noted that the policy shift means plants will run fewer hours, which significantly impacts the gas market. The analysis further indicates that switching from coal to gas remains economically unviable unless spot LNG prices fall below $6/mmbtu.