Rating: OUTPERFORM (maintain)
Electricity prices have increased across many cities in China. This week, we present our insights into electricity price increases, based on supply and demand factors. We also share our trend forecasts.
Upside potential: China electricity prices are lower than in other countries
In 2019, the average electricity sales price in China was RMB0.611/kWh, 59/80/83% of OECD countries/newly industrialized countries/the US. China’s power market transactions continue to grow. From January to July 2021, electricity trading volume in power trading centers across the country increased 35.3% yoy. Breaking this down, the medium to long-term direct trading in China’s power market increased 38% yoy, accounting for 34.8% of total power consumption, up 5.4ppt yoy. In the future, market-oriented reforms would realign power resources toward commodity factors, and the impact of supply and demand on electricity prices would increase.
Supply factors: stability hurt by slowing investment and rise of wind and solar
Investment yoy growth rates for China's power industry fluctuated downward from 2004 to 2019, particularly during the 13FYP period. We saw significantly curtailed overall power investment. Meanwhile, the country's installed power capacity continued to grow, while the proportion of wind and solar installed capacity increased to 24% by the end of 2020. We predict that by the end of 2030E, China's wind and solar installed capacity will reach 1.65bn kW, accounting for 45% of the total power market. Instability in wind and solar power generation would affect the stability of total supply to an extent.
Demand factors: economic growth, carbon-neutral demand and extreme weather
With the reduction of the Covid-19 impact, economic growth, high-temperature weather and electricity consumption have continued to increase this year. Electricity consumption increased 22.4% yoy in 1Q21 and increased 8.2% yoy rose in 2Q21. Driven by carbon neutral demand, electrification of the terminal energy market would increase. With the rise of markets such as data centers, we see a lot of growth potential for electricity consumption in China. We expect a 2020-25E CAGR of 5.5% in electricity consumption and ~3.4% for 2020-35E.
Tight electricity supply would lead to price increases
We believe that electricity supply will tighten in the future on higher demand as the median electricity price rises. Currently, electricity prices in many areas have increased. In August 2021, the average transaction price of power plants in Yunnan Province rose 9.38% yoy and that in Inner Mongolia rose 30.50% yoy. The bid spread in August in Guangdong Province was -RMB0.0025/kWh, significantly narrower than in previous years. In response to the tight supply, multiple notices have been issued to allow prices to rise. Ningxia notified that monthly trading prices of coal and electricity could rise no more than 10% against benchmark prices. Inner Mongolia notified that starting August 2021, transaction prices of coal-fired power generation in the power trading market in the western Mongolian region could rise no more than 10% against the benchmark prices. In addition, the Shanghai Economic and Information Commission removed a temporary ceiling on electrification market prices.
Valuation and risks
Under electricity market reforms, power supply is tightening, so we see a basis for power prices to rise. China has issued a number of coal supply guarantee policies. With incremental coal production capacity increases in the future, the supply and demand balance would improve and coal prices would gradually decline. With lower costs and rising electricity prices, the performance of thermal power companies could improve. With carbon neutrality and cost reductions, we estimate cumulative installed capacity CAGRs of 9%/15% for the wind/solar generation markets over 2020-30E. Currently, the new energy business for power operators continues to strengthen. Compared with pure new energy operators, revaluations of new energy assets of traditional thermal power companies have large growth potential, so we expect valuations to improve. We recommend Huaneng Power InternationalInc (600011 CH, BUY), China Resources Power Holdings (0836 HK, BUY), Jilin Electric Power (000875 CH, BUY), Fujian Funeng (600483 CH, BUY), SDIC Power Holdings (600886 CH, BUY), China Longyuan Power Group Corporation (0916 HK, BUY)
Other stocks (not rated): Jinko Power Technology, CECEP Solar Energy, CECEP Wind-Power Corporation.
Risks include: policy implementations falling below expectations; industry technological progress slowing down; electricity demand falling below expectations; and coal price fluctuations.
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評級：強於大盤(維持)
中國許多城市的電價都在上漲。本週，我們將根據供需因素提出我們對電價上漲的見解。我們還分享了我們的趨勢預測。
上行潛力：中國電價低於其他國家
2019年，我國平均售電價格為0.611元/千瓦時，是OECD國家/新興工業化國家/美國的59/80/83%。中國電力市場交易持續增長。2021年1-7月，全國電力交易中心電力交易量同比增長35.3%。其中，我國電力市場中長期直接交易同比增長38%，佔總用電量的34.8%，同比增長5.4%。未來，市場化改革將把電力資源重新配置為商品要素，供求對電價的影響將加大。
供應因素：投資放緩以及風能和太陽能的上升損害了穩定
從2004年到2019年，中國電力行業投資同比增速波動較大，特別是在十三五期間。我們看到總體電力投資大幅減少。與此同時，中國的電力裝機容量繼續增長，到2020年底，風能和太陽能裝機容量的比例提高到24%。我們預計，到2030年底，中國風能、太陽能裝機容量將達到16.5億千瓦，佔電力市場總量的45%。風能和太陽能發電的不穩定會在一定程度上影響總供給的穩定性。
需求因素：經濟增長、碳中性需求和極端天氣
隨着新冠肺炎影響的減少，今年經濟增長、高温天氣和用電量持續增加。2011年第一季度用電量同比增長22.4%，2011年第二季度用電量同比增長8.2%。在碳中性需求的推動下，終端能源市場的電氣化將會增加。隨着數據中心等市場的興起，我們看到了中國用電量的巨大增長潛力。我們預計2020-25E的用電量複合年增長率為5.5%，2020-35E的複合年增長率約為3.4%。
電力供應緊張將導致價格上漲。
我們認為，隨着電價中位數的上漲，未來的電力供應將因需求上升而趨緊。目前，許多地區的電價都有所上漲。2021年8月，雲南省電廠成交均價同比上漲9.38%，內蒙古電廠成交均價同比上漲30.50%。廣東省8月份的投標價差為-0.0025元/千瓦時，比往年明顯收窄。為了應對供應緊張，已經發布了多個允許價格上漲的通知。寧夏通知煤電月度交易價格較基準價格漲幅不得超過10%內蒙古通知，自2021年8月起，蒙西地區電力交易市場燃煤發電交易電價較基準電價漲幅不得超過10%。此外，上海市經濟和信息化委員會取消了電氣化市場價格的臨時上限。
估值和風險
在電力市場化改革下，電力供應趨緊，因此我們看到了電價上漲的基礎。中國出台了多項煤炭供應保障政策。隨着未來煤炭增量產能的增加，供需平衡將有所改善，煤炭價格將逐步回落。隨着成本的降低和電價的上漲，火電公司的業績可能會有所改善。在碳中性和成本降低的情況下，我們估計2020-30e年風能/太陽能發電市場的累計裝機容量年複合增長率為9%/15%。目前，電力運營商的新能源業務持續加強。與純新能源運營商相比，傳統火電企業的新能源資產重估增長潛力較大，因此我們預計估值會有所改善。我們推薦華能國際電力有限公司(600011 CH，買入)、華潤電力(0836HK，買入)、吉林電力(000875 CH，買入)、福建福能(600483 CH，買入)、國投電力控股(600886 CH，買入)、龍源電力(0916HK，買入)
其他股票(未評級)：京科電力科技，CECEP太陽能，CECEP風電公司。
風險包括：政策落實低於預期，行業技術進步放緩，電力需求低於預期，煤炭價格波動。
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