Caixin Financial reported on August 12th that the eco-friendly sector saw an upward trend due to policy influences today. By 2030, the energy-saving and environmentally-friendly industry is expected to reach a scale of approximately 15 trillion yuan, with the proportion of non-fossil fuel consumption rising to approximately 25% according to the "Opinions on Accelerating Comprehensive Green Transformation of Economic and Social Development."

As China's supply-side reform and economic structural adjustment deepen, it has become a consensus to vigorously support the development of the energy-saving and environmentally-friendly industry. According to the Ministry of Industry and Information Technology, China's energy-saving and environmentally-friendly industry has experienced rapid development, with a 2022 output value of over 8 trillion yuan, and an annual growth rate of over 10%. Hence, it is expected that the energy-saving and environmentally-friendly industry will almost double in size by 2030 compared to 2022.

It is noteworthy that this is the first systematic deployment by the central government to accelerate comprehensive green transformation of economic and social development. The "Opinions" cover multiple domains, including constructing a green, low-carbon and high-quality development space pattern, accelerating the industrial structure's green and low-carbon transformation, prudently advancing energy's green and low-carbon transformation, transportation and urban-rural construction development's green transformation.

Liu Jiaqi, an environmental and resource protection expert, told Caixin Financial that this Opinions' issuance emphasizes two key elements, "acceleration" and "comprehensiveness." The former denotes a requirement for the speed of green transformation, while the latter describes the extent of green transformation. The Opinions specify many specific green goals and tasks, clarifying the direction of green development in the near future.

Industry analysts believe that constructing a new power system emphasizing green and low-carbon energy is the key to realizing energy's green, low-carbon transformation. The Opinions promote the robust development of non-fossil fuel energy, and aims for non-fossil fuel consumption to account for approximately 25% by 2030.

It is essential to accelerate the construction of a new power system and enhance the electricity grid's capacity for accommodating new energy. On August 6th this year, the National Development and Reform Commission, the National Energy Administration, and the National Bureau of Statistics issued the "Action Plan for Accelerating New-Type Power System Construction (2024-2027)," which proposed nine key targeted actions.

These include ensuring the stability and security of the power system, tackling the large-scale and high-proportion output of new energy, promoting high-quality development of distribution networks, building a smart dispatching system, enhancing new energy system performance, and optimizing power system regulation capacity, among others. Additionally, appropriate charging infrastructure is required to promote electric vehicle use.

Regarding specific applications, the "Opinions" focus on accelerating construction of renewable energy facilities, such as wind and photovoltaic power in the northwest, hydropower in the southwest, offshore wind power, and coastal nuclear power. The opinions are calling for active development of distributed photovoltaics, decentralized wind power, locally applicable new energy like biomass, geothermal, and ocean energy, and promoting the full chain development of hydrogen energy.

Continual increases in the proportion of clean energy within the energy structure will lead to growth in wind and solar power demands. According to S&P Global, global photovoltaic installed capacity is expected to reach 520GW by 2024, with China accounting for over 240GW and a market share of more than 43%.

However, in the background of the continuous increase in the proportion of new energy generation, factors such as grid connection, compliance review, and the expectation of power reform have emerged and will have short to medium term impacts on the industry's sustained development. As pointed out by industry insiders to Caixin Financial, several provincial power pricing adjustment policies, regional centralized and distributed comprehensive grid electricity prices have significantly decreased. As such, pre-existing or in-progress photovoltaic power projects may experience reduced benefits, causing asset shrinkage.

Therefore, perfecting green transition price policies is considered a pressing need for the further development of the wind and solar energy industry. The Opinions promote the deepening of power price reform, the improvement of price mechanisms to encourage flexible power sources to participate in system regulation, implementation of a coal power capacity price mechanism, research and establishment of robust pricing mechanisms for new energy storage, perfecting dynamic pricing and time-of-use electricity policies and perfecting energy consumption tiered pricing systems for high-energy-consumption industries.

Regarding the wind and solar power industry's next round of growth, industry analysts believe that it will come with current conditions of supply and demand tightening. Caixin Financial reported that based on the attributions of electric power development and Equity mapping, valuations of the wind and solar power industry are expected to improve. Demand side management is expected to strengthen, electricity system flexibility is expected to increase. The coordination of energy usage is wished to unlock space for green energy consumption, and green energy's environmental premiums will gradually emerge.