In 2025, the construction of the power grid will continue to focus on the long-term requirements of carbon neutrality transformation and the establishment of a new electrical utilities system, maintaining the trend of balanced efforts on both the main grid and distribution sides.
According to Zhito Finance APP, citic sec released a research report stating that the construction of the new electrical utilities system promotes continued favorable trends in power grid investment, fostering long-term development of the power grid. In 2025, the grid side is expected to further focus on carbon neutrality transformation and the main grid and distribution aspects, promoting balanced growth in investment. With the expected batch landing of reserve projects, it is anticipated that power grid investment will maintain a growth rate of over 10% in 2025. Bullish on the continuous growth momentum of leading quality enterprises in the electrical utilities industry during the favorable economic cycle, it is recommended to prepare for the key transitional period before and after the announcement of the power grid investment plan.
The main points of the Citic Securities research report are as follows:
The construction of the new electrical utilities system promotes the long-term development of the power grid, with an investment growth rate expected to exceed 15% in 2024.
After four years of systematic construction, the grid section of the system hub is currently in a policy-friendly atmosphere coupled with an investment-friendly cycle. The bank's previous determination is that 2023 is a turning point for loose power grid investment, entering a phase of structured investment growth driven by large wind and solar energy projects; 2024 will be a landmark year for comprehensive looseness in power grid investment, ushering in balanced growth in power grid investment and further reflecting the dual attributes of power grid investment considering both pro-cyclical and counter-cyclical aspects.
According to data from the National Energy Administration, the cumulative amount of basic construction investment in the power grid from January to October 2024 is 450.2 billion yuan (a cumulative year-on-year growth of 20.70%). Looking ahead, the annual power grid investment is expected to achieve a growth of more than 15%, and for the first time exceed 600 billion yuan, supporting the domestic demand performance of electrical utilities.
The new energy fund continues to grow structurally, and the construction of the main grid and distribution needs balanced efforts.
In 2024, there is still room for further improvement in grid construction: on one hand, according to polaris electrical utilities and the China Electricity Council, by October 2024, the newly installed capacity for wind and solar power will be 45.80 GW and 181.30 GW respectively, both showing a year-on-year growth trend, and the long-term trend of transforming the power source structure towards new energy fund remains unchanged, while the pressure for grid hub regulation is also increasing year by year; on the other hand, in terms of grid construction, the ultra high pressure is affected by factors such as the large scale of individual projects and certain uncertainties in coordinated management, leading to a lag in the bidding performance this year compared to market expectations; at the same time, after the high-quality development of distribution networks begins, there will also be a certain cycle from project formation to order landing.
Therefore, considering these two aspects, the bank determines that the construction of the grid in 2025 will continue to focus on the long-term requirements of "double carbon" transformation and the construction of new electrical utilities systems, maintaining the trend of balanced development in both main grid and distribution sides.
Reserved projects are expected to be implemented in bulk, with a forecast that the growth rate of grid investment in 2025 will maintain double-digit growth.
In the main grid construction aspect, several reserved projects such as the Inner Mongolia West to jing-jin-ji and Southeast Tibet to Guangdong-Hong Kong-Macao are expected to enter the construction and equipment bidding cycle; it is anticipated that in 2025, the two major grid companies will collectively start 4-5 ultra high pressure direct current projects and 2-3 ultra high pressure alternating current projects; in addition, there will also be a demand for ultra high pressure and direct current equipment procurement generated by 750kv lines and direct current back-to-back projects in the northwest region.
On the distribution construction side, the high-quality development of distribution networks proposed in 2024 and the demand for large-scale equipment updates and renovations are expected to take shape in 2025, along with the development of distributed power sources and the interactive development of source-network-load-storage, gradually forming a long-term growth demand on the distribution side. Considering all the above, it is anticipated that grid investment in 2025 will continue to maintain a growth rate of over 10%, achieving stable demand performance with double-digit growth for two consecutive years.
Risk factors: The development of the domestic new electrical utilities system is not as expected; domestic grid investment growth is below expectations; slow implementation of ultra high pressure projects; lower than expected growth in distribution investment; worsening industry competition landscape; significant fluctuations in prices of bulk raw materials; unexpected changes in industry policies.
