Home Business Huatai Securities: Power rationing and frequent power rationing have led to the revaluation of thermal power stocks, and the value of operational assets such as distributed/energy storage has become prominent.

Huatai Securities: Power rationing and frequent power rationing have led to the revaluation of thermal power stocks, and the value of operational assets such as distributed/energy storage has become prominent.

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Huatai Securities: Power rationing and frequent power rationing have led to the revaluation of thermal power stocks, and the value of operational assets such as distributed/energy storage has become prominent.


Huatai Securities released a research report saying that the peak electricity consumption in summer 2022 will be affected by high temperature and drought, and the power shortage will be highlighted. In the short term, the shortage of power supply also means high coal demand. And the expectation of profit model may be reflected in the valuation, leading to the revaluation of thermal power stocks. Distributed/energy storage and other operating assets are of outstanding value in the context of power shortages, and the value of short-term investment is worthy of attention; it is a foregone conclusion that the inflow of hydropower in the third quarter will be dry, but the adjustment capacity of large reservoirs will be further emphasized. In the green power sector, the bank still recommends paying attention to the cost downturn/installation progress and the possibility of more-than-expected green power transactions bringing about opportunities for valuation repair.

The main views of Huatai Securities are as follows:

Electricity curtailment occurs frequently, the value of baseload power supply is prominent, and electricity price reform is imperative

The peak power consumption in the summer of 2022 will be affected by high temperature and drought. The power gap will be highlighted, the asset value of baseload power (thermal power/nuclear power) will be highlighted, and the vulnerability of the power system will be further exposed under extreme weather events. It is expected to further increase to consolidate the safety and stability of the new power system. The bank believes that the reform of the power market is urgent, and the general trend of multi-energy complementarity between the supply side and the demand side has been established, and its long-term significance to the power sector cannot be ignored.

The 2022 power curtailment is different from 2021: the base load power supply has a hard gap, and the status of the short-term fire and voltage tank remains unchanged.

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The power gap in 2021 is due to the insufficient power generation of thermal power plants under high coal prices. After the opening of the power price increase in October last year, the on-grid electricity price in various places has increased by about 20%. The National Development and Reform Commission has frequently issued policies this year to control the supply/price of thermal coal , Most thermal power plants are marginally profitable, and peak output as usual this summer.But the increased demand brought about by the high temperatureChangheThe dry water caused by the drought has led to a power gap in July/August. According to the China Electricity Council’s forecast, the guaranteed capacity of new energy sources in the next three years will be less than 40 million kilowatts, while the country’s highest electricity load in 2021 has reached 1.2 billion kilowatts (+11 %yoy). The insufficient capacity of thermal power/nuclear power as a baseload power source is highlighted. The bank believes that thermal power needs to increase moderately in the short term, and the installed capacity will not decline significantly before 2030; the development of nuclear power can be more active, but because of its long-term construction cycle, it will not be able to quench thirst.

Extreme weather occurs frequently, power security and stability are under pressure, and power decarbonization increases the cost of electricity consumption in the whole society in the short term

Since 2020, there have been many extreme climate events at the global level, and electricity shortages in many countries are not uncommon. In fact, extreme weather is inseparable from the impact of human activities on global climate change, and the transformation of the energy structure in order to reduce “carbon emissions” has intensified the pressure on energy security. To this end, the state has clearly put forward the construction goals of pumped storage (62GW in 2025) and new energy storage (30GW in 2025). The power grid transmission and distribution link also needs a lot of investment to consolidate infrastructure construction and load forecasting capabilities, and virtual power plants on the power side In fact, the power system needs more redundant space and adjustment ability across a longer period to achieve the goal of new energy as the main body of my country’s power supply; if the short-term wind and solar costs cannot be greatly reduced, this part of redundancy Investment will be reflected in the cost of electricity in our country in various forms.

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The reform of the electricity market cannot be delayed, and the bottleneck of inter-provincial and inter-regional channels needs to be solved urgently

In 2021, the newly added capacity of coal power is only 28 million kilowatts, which is the lowest level in 15 years; how to stimulate the enthusiasm for thermal power construction in the context of “carbon neutrality” goals and high energy prices (at least 140 million kilowatts of coal power needs to be put into production in the next three years), The bank believes that the introduction of thermal power capacity tariff policy is very necessary to help thermal power transition from power generation to peak shaving. At the same time, the acceleration of the spot market is also urgent, not only can the resources of flexible units (coal power/gas power/storage, etc.) be mobilized on the supply side (the proportion of flexible units in my country is less than 6%, which is much lower than that in Europe and the United States), On the demand side, it can further cut peaks and fill valleys (according to the forecast of China Electricity Council in 2025, the demand side response should reach at least 3%-5% of the load). At the same time, the capacity of sending/receiving end grids in some areas is weak, resulting in limited support for incoming calls from Sichuan/Chongqing/Hunan/Guizhou/Anhui/Henan and other places.

The short-term impact on the power sector is limited, but the long-term significance is far-reaching

In the short term, the shortage of power supply also means high coal demand, and it is doubtful whether coal prices can effectively fall in the third quarter; even if the peak output of thermal power can obtain excess income through the intra-provincial/inter-provincial spot income, but after all, the peak power that benefits is limited, so The income statement won’t have much impact. However, the blackout event once again affirmed the value of thermal power assets, and expectations for future pricing mechanisms and profit models may be reflected in valuations, leading to a revaluation of thermal power stocks. Distributed/energy storage and other operating assets are of outstanding value in the context of power shortages, and the value of short-term investment is worthy of attention; it is a foregone conclusion that the inflow of hydropower in the third quarter will be dry, but the adjustment capacity of large reservoirs will be further emphasized. In the green power sector, the bank still recommends paying attention to the cost downturn/installation progress and the possibility of more-than-expected green power transactions bringing about opportunities for valuation repair.

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risk warning:In extreme weather events, coal prices rose more than expected, and the baseload power supply with peak output had an accident.

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