The characteristics of double height are prominent, and electricity reform is progressing at an accelerated pace. Since 2021, the lack of electricity and the increase in the volatility of the power system brought about by the continuous increase in the share of new energy sources have become a core contradiction in the power industry. The contradictory changes have accelerated the new round of power system reform. Summarizing the new round of power system reform since 2021, transmission costs and reflecting supply and demand are the core principles of market-based reform, while safeguarding reasonable returns is an important prerequisite for reform. We believe that utility attributes are expected to return as electricity reform accelerates. Driven by superimposed new energy sources to maintain rapid long-term growth, the power industry is expected to embark on a new round of rising stock prices.
High growth has brought pressure to consume electricity prices, and green policies have guided valuation repairs. Under the dual carbon target, wind power and photovoltaic installations will continue to grow rapidly, thus driving related entities to achieve rapid growth in revenue and performance. Since 2023, China's new energy installations have repeatedly reached new highs, and the industry is still growing rapidly. Although affected by marketization in the short term, there is some pressure on electricity prices in the industry, we believe that under the mission goal of dual carbon, new energy sources will still need to maintain rapid growth for decades, and reasonable returns are a prerequisite for the industry to maintain growth. We believe that fluctuations in electricity prices and yields brought about by new energy participation in the market are only short-term results. There will be no long-term trend changes in the yield of the new energy power generation operation industry, and the value of new energy investment remains stable.
Electricity reform promotes thermal power income, and dividend guidelines reshape industry value. Since 2021, coal and electricity have once again surfaced. In order to mitigate deep losses in thermal power, the country's will has shown in institutional reforms in both electricity prices and coal prices. In particular, the 2021 thermal power farewell plan and the two-track system of the market welcomed market-based electricity prices that could rise and fall. The introduction of the 2023 capacity electricity price policy dispelled concerns about the decline in the number of hours used in the long term for thermal power, and the thermal power price mechanism was finally straightened out. In 2024, the revenue side of thermal power will remain stable at a high level with the settlement of the Changxie agreement, while the cost side will release pressure as coal prices continue to fall, and thermal power performance will continue to grow. It is worth noting that listed thermal power companies generally have high dividend promises. After the industry returns to stable profits, the industry's high dividend and high dividend value will be truly demonstrated, and the industry's investment value will be historically reshaped.
The hydronuclear business remained steady, and the economy continued its upward trend. As an excellent stable and profitable asset, the hydropower and nuclear power sector will both reach an upward inflection point in 2024: in terms of hydropower, the scarcity of resources that continue to plague hydropower is expected to reverse in 2024 as incoming water is gradually repaired. Coupled with the strong dividend capacity of hydropower companies, their dividend returns will also be highly attractive. Furthermore, nuclear power will also bid farewell to the low point of unit production in 2023, and is expected to officially begin a new booming production cycle in 2024. Both listed nuclear power companies will also usher in the commissioning of new units, and the scale of nuclear power production in China is also expected to accelerate for 4 consecutive years.
As of May 24, 2024, the China Securities Green Electricity Index mainly focuses on thermal power generation, hydropower generation, wind power generation and other sub-industries under the power industry, with a concentrated distribution of industry weight. Compared with the China Securities Green Electricity Index and the China Securities Full Index Electricity Index, the China Securities Green Power Index focuses more on non-nuclear green power fields such as photovoltaic power generation, wind power, hydropower, etc., and more objectively gives listed companies involved in non-nuclear green power fields such as photovoltaic power generation, wind power, and hydropower during the sample selection stage, and does not completely exclude listed companies in the thermal power generation industry. Compared with the trend of the China Securities Green Electricity Index and the Shanghai and Shenzhen 300, the Shanghai Securities Index, the China Securities Green Electricity Index, and the China Securities All Index Electricity Index since the base date of the China Securities Green Electricity Index (June 30, 2017 to May 24, 2024), the China Securities Green Electricity Index is more flexible in some markets as a whole, and has long-term excess returns.
E-Fangda China Securities Green Power ETF (562960) uses passive indexed investment to closely track the underlying index to minimize tracking deviations and tracking errors.
Risk warning
1. There is a risk of deterioration in electricity supply and demand; 2. There is a risk of non-seasonal changes in coal prices; 3. Risk of changes in policy orientation; 4. Risk of nuclear safety accidents; 5. Index data are all based on historical estimates and do not represent future performance