Guolian: The policy investment gradually tilts towards the smartification of distribution networks.

Guolian released a research report stating that the proportion of wind power and photovoltaics in operation generator units is increasing, and the growth rate has accelerated in recent years. The power structure dominated by new energy will consume the flexibility regulation resources of the power system, requiring the power system to improve its distribution network intelligent regulation capabilities. Both policy and investment ends are gradually leaning towards intelligent distribution networks. The next step may gradually enter a peak period of distribution network transformation. It is recommended to focus on NARI Technology (600406.SH), which is expected to benefit first from accelerated investment in intelligent distribution networks; Hexing Electrical (603556.SH), with stable growth in its main business of electric meters and continuous breakthroughs in overseas distribution networks; Sungrow Power Supply (300274.SZ), a leading player in grid-connected energy storage control technology with sufficient reserves. Inadequate carrying capacity promotes the transformation of intelligent distribution networks With the large-scale access of distributed new energy sources, electric vehicles, and other new types of loads on the user side, the carrying capacity of the distribution network directly connected to the user side is insufficient, leading to overloading issues in some areas of the power grid. Intelligent distribution networks utilize smart communication and power sensing technology to integrate operation data of distribution network devices, achieve real-time monitoring, protection, and control of distribution networks, and improve power supply reliability when faults occur by quickly locating and isolating faults and restoring power to non-faulty segments. This also enhances the operational efficiency of the power grid by saving on labor costs through functions like intelligent inspections and maintenance by Siasun Robot & Automation, which is one of the key tasks in building a new type of power system. Improving the capacity for distributed power access is the core of distribution network transformation The proportion of new energy installations in China's power structure continues to rise. As of the end of June 2024, the proportion of wind power and photovoltaic installations in China reached 15% and 23%, respectively, with distributed photovoltaics accounting for 10%, an increase of 7 percentage points compared to 2020. With the massive integration of distributed power sources, the distribution network is transitioning from "sourceless + one-way radiation" to "source + two-way interaction", which significantly increases the requirements for its capacity scale and intelligent control capabilities. Currently, China's distribution network structure is limiting the pace of distributed photovoltaic grid connection, with several provinces issuing restrictive policies on distributed photovoltaic connection since 2023, resulting in a 29% year-on-year decline in residential distributed installations in 2024. The urgent need for accelerated upgrade and transformation of the distribution network cannot be ignored. Both policy and investment ends are gradually leaning towards intelligent distribution networks From a policy perspective, intelligent grid-related policies are evenly distributed from the generation, distribution, and consumption sides, with relatively fewer policies on the transmission and transformation sides. Starting in 2024, intelligent grid-related policies focus on the distribution network side, proposing to "improve the operation mechanism of the new distribution network". From an investment perspective, according to an announcement from State Grid, the total grid investment in 2024 will exceed 600 billion yuan, with the majority of new investments going towards constructing ultra-high-voltage AC/DC projects and upgrading the digitalization and intelligence of the power grid. Future investments in transmission and transformation may mainly focus on the construction of ultra-high-voltage lines, with intelligence and flexibility expected to become the key investment areas in the distribution network. Risk warning: Risks of policy advancement falling short of expectations; risks of fluctuating raw material costs; risks of project construction progress falling short of expectations.