Based on historical investment data and the mission of future distribution networks, the share of future power grid investment is expected to recover from the current level of about 35% to 50% or even higher; especially in the distribution network sector, the base is lower, there is more debt, and the difference in expectations is greater.
The Zhitong Finance App learned that Shen Wan Hongyuan released a research report saying that based on historical investment data and the mission of future distribution networks, the share of power grid investment is expected to recover from the current level of about 35% to 50% or more; especially in the distribution network sector, the base is lower, there is more debt, and a larger difference in expectations. Moreover, distribution grid investors are expected to diversify, starting from the original National Grid+China Southern Power Grid two-wheel drive to a wider range of roles such as load aggregators or virtual power plants. Based on the relevant companies' share of secondary equipment revenue, current valuation level, and new business layout such as virtual power plants, we recommend Xuji Electric (000400.SZ), Jinzhi Technology (002090.SZ), and Sifang Shares (601126.SH), and focus on Guodian Nanrui (600406.SH) and Haixing Electric Power (603556.SH).
Shen Wan Hongyuan's main views are as follows:
The “double height” characteristics of the new power system are obvious
The “double height” characteristics of its high proportion of renewable energy and high proportion of power electronic equipment make it exponentially more complex than traditional power systems. Renewable energy is both environmentally friendly and economical, and the share of domestic wind power photovoltaics in 2015-2023 increased from 3.92% to 15.56%. In 2023, China's electricity will account for about 28% of terminal energy consumption, which is expected to increase to more than 30% in 2025 and 36% in 2035.
The problem of energy consumption has reappeared. In February 2024, the country's wind and light abandonment rate reached 6.3% and 6.6%, and in the provinces that account for a high proportion of wind power photovoltaic installed capacity, the overall wind and light abandonment rate was significantly higher. The industry has begun discussions to remove the 95% consumption red line limit.
The EU pays more attention to grid investment and has strong renewable energy consumption capacity
Renewable energy in the EU accounted for 38% of electricity generation in 2020, surpassing fossil energy by 37%. In 2023, renewable energy accounts for 56% of total electricity generation in Germany, of which wind power accounts for 31.1%, photovoltaics for 12.1%, and thermal power accounts for only 26%. The reason for this is that while investing heavily in new energy, Europe is also focusing on grid-side investment. The overall ratio of IEA-caliber EU grid investment/power investment has remained above 40%, while the domestic market has continued to fall below 30% for 4 years.
Domestic grid investment accounts for the bottom. Insufficient grid investment has become a bottleneck, and distribution grid expectations are even worse
Domestic grid investment continued to decline from 66% in 2018 to 35% in 2023. In particular, on the distribution grid side, domestic investment in 110 kV and below grade power grids was 290.1 billion yuan in 2023, which is even a slight decline from 308.5 billion yuan and 307.4 billion yuan in 2018-2019. Underinvestment in power grids has become a bottleneck limiting domestic consumption of renewable energy. According to the relevant plan, in the context of huge historical debt, the distribution network side has been burdened with many new tasks, which is in stark contrast to historical investment data. 2024Q1 grid project investment increased 14.7% year-on-year (-6.74% to 1.83% in the 17-22 range, 7.5% in 23Q1, 5.4% in '23).
Every round of power investment restructuring nurtures at least a few tenfold share opportunities
Domestic electricity shortages, accounting for 70% of power supply investment, nurtured traditional power generation side investment opportunities represented by Dongfang Electric (03-08) and Kazakh Air Conditioning (04-08). Subsequently, due to the lack of geographical overlap between power generation and electricity consumption, the share of power grid investment increased from 30% to more than 60%, driving TBEA (06-08), Xuji Electric (05-14), and Guodian Nanrui (08-11); to the power supply side explosion in the past 5 years, power generation accounted for 35% of new energy investment in 2017 Again in 2023 It reached 64.7%. Wind power represented by Goldwind Technology (13-15) and Sinoma Technology (13-21), photovoltaics represented by Longji Green Energy (17-21), and Tongwei Co., Ltd. (17-21) showed a spectacular market in turn.
Risk warning: Grid investment fell far short of expectations; progress in electricity reform fell far short of expectations.