The approval of the new unit has been accelerated beyond expectations. Combined with the flexibility transformation of existing units, “every effort should be made”, the procurement demand for thermal power main and auxiliary equipment has clearly increased.
The Zhitong Finance App learned that Guotai Junan released a research report saying that thermal power is still a supporting power source for power grids. It also has the ability to transfer baseload and adjust flexible peaks. It is a ballast stone for maintaining the stability of power grids in the context of the increasing share of wind energy sources on the Internet. The approval of the new unit has been accelerated beyond expectations. Combined with the flexibility transformation of existing units, “every effort should be made”, the procurement demand for thermal power main and auxiliary equipment has clearly increased.
Recommendation: 1) Environmental protection equipment owner and auxiliary equipment manufacturer Longjing Environmental Protection (600388.SH), Clean Environment (002573.SZ), benefiting from Hailu Heavy Industries (002255.SZ), Dongfang Electric (600875.SH), and Huaguang Huaneng (600475.SH). 2) The newly approved project supports rigid environmental protection online monitoring requirements. Cedron (002658.SZ) is recommended to benefit from the target spotlight technology (300203.SZ). 3) The flexible transformation of existing coal power units “should be thoroughly revised”. Qingda Environmental Protection (688501.SH), which has flexible transformation technology, is recommended, and Longyuan Technology (300105.SZ), which benefits from the target.
Guotai Junan's main views are as follows:
New energy grid-connected increases the randomness of load output. Thermal power has both baseload operation and peak shifting capabilities, making it a stable “ballast stone” for power grids
China's new energy installed capacity continues to rise. In 2023, the installed capacity of photovoltaics and wind power increased by 55% and 21%, respectively. Due to fluctuations in wind power and photovoltaic output, the increase in wind power and photovoltaic installations poses a challenge to regulation capacity. Currently, China's power system regulation capacity cannot fully guarantee the balance between electricity supply and demand. As a supporting power source, thermal power plants operate continuously under full load conditions. Flexible power plants have fast climbing speed, large room for minimum power generation reduction, and can provide peak shaving services.
The “three 80 million” project is expected to speed up new thermal power installations, and existing units will continue to advance the “three reform linkage”
1) In terms of building new units, investment in thermal power was relatively low during the “11th Five-Year Plan” to “13th Five-Year Plan” period. In 2022, the “three 80 million” projects proposed the phased commencement and commissioning of thermal power plants from 2022 to 2024. According to the China Telecommunication Union's forecast, thermal power will add 70 million kilowatts of installed capacity in 2024, a new high of new installed capacity in the past five years. 2) In terms of stock transformation, energy saving, carbon reduction, heating, and flexibility transformation “three reform linkage” transformation scale was 600 million kilowatts during the “14th Five-Year Plan” period. Among them, flexibility was transformed until 2027, and the existing coal-fired power units were “fully reformed”.
The procurement requirements for thermal power equipment are the three major mainframes and auxiliary machines. The unit price of the main engine is higher, the bidding pace is earlier, the number of auxiliary machines is large, and procurement is carried out in batches
1) Thermal power equipment can be divided into coal-fired power generation and gas power generation equipment. Among them, the three main engines of boilers, steam turbines, and generators are the core equipment. Due to technical thresholds and qualification requirements, thermal power mainframe equipment is mainly a competitive pattern of the three leading oligopolies. The unit price of the three main engine devices is high, and they are usually the first batch of equipment to be tendered.
2) Environmental protection equipment. Boiler and steam turbine island support and power transformation equipment are the main auxiliary equipment. Environmental protection supporting equipment is equipped with desulfurization, denitrification and dust removal devices to achieve emission concentrations of smoke, sulfur dioxide, and nitrogen oxides from coal-fired power plants. The main auxiliary equipment on boiler islands and steam turbine islands include air preheaters, fans, air compressors, condenser vacuum pumps, circulating water pumps, etc. Power transformers and ancillary equipment include high-voltage inverters, transformers, etc. Compared with the number of hosts, auxiliary equipment products have a lower price per unit, and the equipment is standardized and standardized. Since auxiliary equipment needs to be adapted to host equipment, the bidding pace is later than that of the host, and procurement is centralized in batches.
Risk warning: The progress of new energy installations and grid connections falls short of expectations, and changes in industry policies.