Summary of Key Points
The new type of power grid, serving as a foundation for both energy and the digital economy, is receiving substantial support from both policy and capital: The national “15th Five-Year Plan” proposes investments of over 5 trillion yuan, with nearly 400 billion yuan already allocated to the two major power grids in the first half of this year, showing significant growth. Policies have been tightened at all levels, from high-level planning to concrete implementation, aiming to elevate the role of the power grid from a mere “transmission channel” to a core hub of the energy system. Companies are accelerating their strategic deployments in areas such as transmission technology, power generation sources, and coordination of electricity usage. The demand for AI computing power has given rise to a new business opportunity known as “electricity usage coordination,” with direct connections between renewable energy sources and cross-regional power dispatching becoming viable solutions. Although the current valuation of the power sector is low, institutions and foreign investors are beginning to see potential for recovery.
I. Policy Support and Heavy Financial Investment Make the New Power Grid an Attractive Venture
The state’s support for the new power grid is not just empty rhetoric; it comes with tangible resources:
- High-Level Guidance: In April this year, the “six networks” were included in the national development plan. In June, it was announced that the total installed power capacity by 2030 should reach 5.4 billion kilowatts, with wind and solar energy accounting for more than 50%. In July, there was a focus on building high-quality new power grids, and in August, there were further initiatives to link computing power with renewable energy (supporting the direct connection of data centers to renewable power sources).
- Substantial Funding: The “15th Five-Year Plan” includes investments of over 5 trillion yuan, averaging about 1 trillion yuan per year. In the first half of this year, the two major power grids have already spent nearly 400 billion yuan (the State Grid invested 310 billion yuan, an increase of 12.6%, and the Southern Power Grid invested 89.3 billion yuan, an increase of 14.79%). With such substantial investment, the industry is poised for significant development.
II. Companies Show Their Strengths to Compete for a Share of the New Power Grid Market
Different companies are positioning themselves in various segments of the new power grid based on their strengths:
- State Grid South China: Transforming the power grid from a mere transmission system into an energy command center, aiming to create safer, greener, and more intelligent networks.
- Pinggao Electric: Focusing on advanced technologies, such as 550-kilovolt GIL (Gas-Insulated Cables) for long-distance and high-drop transmission in challenging terrains (like mountainous or fractured areas), as well as developing new equipment for distribution networks (solid-state transformers).
- Datang Power Generation: Working on improving the flexibility of thermal power generation, building energy storage facilities, and creating multi-energy complementary projects (e.g., a ten-million-kilowatt project in Inner Mongolia). They are also developing smart platforms to digitally integrate power sources with the grid.
In short, all companies are striving to secure their place in areas where they have expertise, fearing to miss out on this opportunity.
III. AI Drives “Electricity Usage Coordination,” and New Energy Meets Computing Power
The growth of AI requires massive computing power, but the issue of powering these centers is a major challenge:
- Rising Demand: By 2030, the electricity consumption of computing centers is expected to reach 800 billion kilowatt-hours (6% of the total national consumption), and policies require that renewable energy account for more than 80% of the power used in these centers.
- Companies’ Solutions:
- Guotou Power: Utilizing its hydroelectric and wind energy resources to directly connect renewable power to computing centers.
- State Grid South China: Either locating data centers in areas with abundant renewable energy (northwest regions) to use green power on-site or offloading less time-critical computing tasks (such as background processing) to the northwest, where renewable energy is cheaper.
This collaboration between new energy and AI computing power opens up new business opportunities.
IV. Underestimated Valuation: Institutions and Foreign Investors See Potential for Growth
The power industry was once viewed as a traditional public utility with stable but limited growth potential; however, this is changing:
- Repositioning: With the new power grid supporting emerging industries like AI and new energy, leading companies are now seen as growth-oriented assets in the “technology + green” sector.
- Positive Views from Institutions: Guolian Securities believes that the power grid sector has moved from a phase of planning to one of active implementation, with numerous tender opportunities and stable cash flows for leading firms. Xinhua Asset Management sees the 5-trillion yuan investment and AI applications as providing market certainty.
- Foreign Investor Activity: Pinggao Electric recently saw an increase in foreign ownership (from 4.96% to 5.42%), indicating that investors also recognize the current low valuation and the potential for future growth.
In summary, the new power grid is a sector favored by policy, industry, and capital. With its currently low valuation, it may represent a good investment opportunity.