Zhongxin Securities released a research report stating that flywheels, as carriers of kinetic energy storage, can be widely used in short-term energy storage for power generation, rail transportation, UPS (uninterruptible power supply), and spacecraft attitude control. Currently, they are gradually transitioning from demonstration projects to commercialization and entering a period of growth. It is expected that the flywheel industry will exceed 100 billion market spaces by 2030. It is recommended to pay attention to key component manufacturers and complete machine factories in the flywheel industry: 1) upstream raw materials and component links; 2) midstream flywheel manufacturing links.

The main points of the Citic Securities research report are as follows:

Flywheels: a rare energy storage variety with high power and efficiency.

Flywheels are a physical carrier for storing energy. They use the kinetic energy generated by the rotation of the rotor to store and release electricity. They can be widely used in power regulation, UPS (uninterruptible power supply), rail transit energy recovery, spacecraft attitude control, and other fields. Compared with other energy storage devices, according to the Head Leopard Research Institute, flywheels have high efficiency (95%), high power density (>4000W/kg), and inertia characteristics, which directly enhance the charge and discharge economy of flywheels, improve their application limits, and expand their application space. Overall, flywheels because of their unique characteristics will become a scarce energy storage variety.

Applications: flywheel energy storage has a rich variety of applications, and the trillion-yuan market is poised to take off.

1) In the field of power regulation, renewable energy such as wind and solar power will continue to rise in China's new power system, and the instability of the power grid will increase the urgent demand for unit frequency modulation. The partnership of flywheels with generating units or independent energy storage has flexibility, accuracy, and fast response characteristics. Flywheels will play an important role in the frequency modulation field, with accumulated installed capacity expected to reach 85.3GW by 2030, with a corresponding CAGR of 160% for the period and a corresponding market space of 101.5 billion yuan.

2) In the field of rail transportation, the flywheel device is used as a highly efficient kinetic energy recovery device. Without impacting the power grid, single station or whole line flywheel braking devices have been implemented or planned in the Beijing and Qingdao subways and the Changlong Railway in the country. Flywheel braking devices are expected to occupy a billion-yuan market space by 2030.

3) For spacecraft attitude control, flywheel inertia can be fully utilized. According to the International Telecommunication Union, China submitted 12,992 broadband communication satellite orbits and wireless frequency band usage applications in two phases in September 2020. Considering China's rapid space development, the space for attitude control flywheels is expected to reach 3 billion yuan by 2030.

4) Flywheel UPS, UPS is the 'power insurance cabinet' of the digital economy era. Flywheel energy storage has rapid response, high instantaneous power, clean and eco-friendly, and long service life advantages. It is expected to receive important applications in the high-end field. The flywheel UPS market space is expected to reach 3.6 billion yuan by 2030. Overall, the flywheel industry market space in 2030 is expected to reach a total of 118.5 billion yuan.

Changes: Technological and policy support accelerate, and the 'flywheel effect' will appear.

1) At the technical level, key problems are continually being resolved, and technical feasibility is gradually being advanced. Faced with key technical problems such as rotor materials, magnetic bearings, motor heat dissipation, and array control, domestic manufacturers have made sustained breakthroughs in flywheel largescale and all-weather operations, and are fully prepared for trial operations;

2) At the policy level, the auxiliary service model is gradually becoming clear, and the flywheel frequency modulation profit space is gradually opening up. The National Development and Reform Commission and the Energy Bureau continue to introduce policies to encourage the development of flywheel energy storage and the construction of auxiliary service markets. With Shanxi as the representative, a frequency modulation market is improving. Flywheels have relatively high initial costs but reasonable power costs. Combined with their high efficiency, long service life, and low maintenance costs, their economics will become prominent. The capital IRR of a frequency modulation flywheel running for 20 years is 14.2%, with a payback period of 8 years. With the gradual reduction of flywheel costs in the future, its profitability will further increase.

Investment strategy:

Risks: the growth rate of new wind and solar energy installations is lower than expected; the commercialization of flywheel technology is slower than expected; there is a risk of changes in the technical path; the progress of flywheel cost reduction is slower than expected; the progress of China's power market reform and the opening up of the secondary frequency modulation market is slower than expected; there is a risk of major safety accidents in the industry; the IPO and financing progress of related industry companies are slower than expected.