The Zhitong Finance App learned that Guolian Securities released a research report saying that the share of wind power and photovoltaics in operating generators is increasing, and the growth rate has accelerated in recent years. The power structure with new energy as the main body will consume the flexible regulation resources of the power system, making the power system need to improve the intelligent regulation capabilities of the distribution network. Currently, the policy side and investment side are gradually leaning towards intelligent distribution networks. Next, it may gradually enter the peak period of distribution network transformation. It is recommended to focus on Guodian Nanrui (600406.SH), the leading secondary equipment company that is expected to benefit from the acceleration of intelligent investment in distribution networks; Haixing Electric Power (603556.SH), whose main electricity meter business is growing steadily and continues to break through overseas distribution networks; and multi-track leading solar power supply (300274.SZ) with sufficient reserves of grid-based energy storage control technology.

Insufficient carrying capacity promotes intelligent transformation of distribution grids

With the introduction of large-scale distributed new energy and new loads such as electric vehicles on the user side, distribution networks directly connected to the user side have insufficient carrying capacity, and power grids in some regions have heavy overload problems. Intelligent distribution networks use intelligent communication and power sensing technology to integrate the operation data of distribution network equipment to achieve real-time monitoring, protection and control of distribution networks, which can 1) improve power supply reliability: in the event of a fault, it can quickly locate, isolate, and restore power supply to non-faulty sections of the distribution network; 2) improve grid operation efficiency: functions such as intelligent robot inspection and maintenance save labor costs, which is one of the important tasks in constructing a new power system.

Improving distributed power access capabilities is the core of distribution grid transformation

The proportion of new energy installed in China's power supply structure continues to rise. By the end of June 2024, China's wind power and photovoltaic stocks accounted for 15% and 23% respectively, of which distributed photovoltaics accounted for 10%, an increase of 7 pcts compared to 2020. With large-scale access to distributed power sources, distribution grids have gradually changed from “passive+unidirectional radiation” to “active+two-way interaction”, and the requirements for their capacity scale and intelligent control capabilities have increased dramatically. Currently, China's distribution grid structure has limited the rhythm of distributed PV grid-connected. Since 2023, many provinces have issued restricted access policies for distributed photovoltaics. In 2024, the scale of distributed household installed capacity dropped 29% year on year, and there is no time to delay the accelerated upgrading and transformation of distribution grids.

Both the policy side and the investment side are gradually leaning towards intelligent distribution grids

From the policy side, policies related to smart grids are evenly distributed on the power generation, distribution, and consumption side, and relatively few on the transmission and transformation side. Starting in 2024, policies related to smart grids began to focus on the distribution network side and proposed “improving the scheduling and operation mechanism of a new type of distribution grid”. From the investment side, according to the State Grid announcement, in 2024, the State Grid will invest more than 600 billion yuan in the annual power grid. The additional investment will mainly be used for UHV AC/DC engineering construction and digital intelligent upgrading of power grids. In the future, the State Grid's investment on the transmission and substation side may mainly focus on UHV line construction, and intelligence and flexibility are expected to become the focus of investment on the distribution network side.

Risk warning: risk that policy progress falls short of expectations; risk of fluctuating raw material costs; risk of project construction progress falling short of expectations.