CITIC SEC: The joint efforts of policies, technology, and market will drive the scale and commercialization of Internet interaction in vehicles, with promising prospects.

CITIC SEC released a research report stating that vehicle-grid interaction refers to the interaction of energy and information between electric vehicles and charging equipment and the power grid, including two modes: one-way ordered charging and two-way V2G. At the current point in time, with the push of policies, technology, and the market, the profit model of vehicle-grid interaction is becoming increasingly clear, and the path for future large-scale and commercial development is clear, bringing significant market space for related charging equipment companies and resource aggregators. Key points from CITIC SEC: Vehicle-grid interaction: The flow of energy and information between vehicles, charging stations, and the grid. Vehicle-grid interaction refers to the interaction of energy and information between electric vehicles and the power grid through charging stations, with the flow of energy typically divided into one-way interaction (ordered charging) and two-way interaction (V2G, bidirectional charging and discharging). Ordered charging refers to controlling charging behavior using electricity prices and power in order to reduce peak power and fluctuation of the grid load while meeting the charging needs of electric vehicles; V2G refers to electric vehicles acting as both a grid load and an energy storage unit, charging the vehicles when the grid load is low and supplying energy to the grid when the load is high, increasing the flexibility and stability of the grid operation. Necessity of vehicle-grid interaction: Understanding from the perspectives of new energy vehicles and energy storage. 1) New energy vehicle perspective: With the gradual increase in the number of new energy vehicles, the rapid demand for charging evolution towards high power levels has a significant impact on the safe operation of the distribution network and increases the cost of grid expansion, restricting the continuous development of new energy vehicles; vehicle-grid interaction through ordered charging and V2G can achieve low-peak charging and high-peak discharging, playing a role in "peak shaving and valley filling" for the grid load, solving the bottleneck of insufficient capacity for charging station access to the grid. 2) Energy storage perspective: In the context of the "dual carbon" background, the share of new energy generation and installed capacity is continuously increasing, requiring more flexible and controllable demand-side load due to the intermittency, volatility, and randomness of new energy generation output; electric vehicles have a dual attribute of transportation vehicles and energy devices, serving as a controllable distributed energy storage resource with advantages such as large scale, rich regulation means, flexibility, safety, and low cost. Commercialization of vehicle-grid interaction: Policy, technology, and market jointly drive towards clearer profit models. Vehicle-grid interaction has not achieved large-scale commercial applications in China before, mainly due to obstacles such as scale, incentives, technology, standards, and market mechanisms. At the current point in time, with the joint efforts of policy, technology, and market, we are optimistic about the prospects for the large-scale commercialization of vehicle-grid interaction. 1) Policy: The country has successively issued policies mentioning "vehicle-grid interaction," and related expressions have gradually transitioned from qualitative to quantitative. In December 2023, the Ministry of Development and Reform Commission and four other departments jointly issued the "Implementation Opinions on Strengthening the Integration and Interaction of New Energy Vehicles and the Grid." This outlines a clear development path for vehicle-grid interaction. 2) Technology: Technologies related to vehicle-grid interaction such as vehicles, charging stations, the grid, and load aggregation are gradually maturing, providing strong support for the large-scale commercial development of vehicle-grid interaction. 3) Market: With the steady advancement of China's electricity market reform, various flexible resources on the distribution side are participating in multiple electricity market categories including the electricity volume market and electricity ancillary services market. Profit models are clear, and we have calculated the cost-benefit of several typical application scenarios, for a 45KWh electric vehicle participating in peak shaving/adjustment frequency/ancillary services with a 15KW power, the estimated annual net income is approximately 1980/1380/2111 yuan. Investment opportunities: Seize the two main aspects of charging equipment upgrades and resource aggregation. Based on the commercialization progress of vehicle-grid interaction, we recommend grasping the two main aspects of charging equipment upgrades and load resource aggregation: 1) Charging equipment: Ordered charging and V2G bring demand for charging equipment upgrades. We estimate that by 2030, the penetration rate of intelligent ordered charging stations will reach 100%, with an additional market size of approximately 33.7 billion yuan for V2G charging stations. 2) Vehicle-grid interaction places high requirements on load aggregators in terms of qualifications, resources, and operations, with high barriers in the industry. We estimate that by 2030, the national electric vehicle V2G peak-valley arbitrage space will reach 108 billion yuan, assuming that the revenue distribution ratio for load aggregators during this process is 30%/50%, the revenue space for load aggregators will be 324/540 billion yuan respectively. Risk factors: Unexpectedly low sales of new energy vehicles; slower-than-expected progress in electricity market reform; lower-than-expected implementation of vehicle-grid interaction policies; slower-than-expected technological iteration of charging equipment; lower-than-expected participation of vehicle owners and users, etc. Investment strategy: Vehicle-grid interaction refers to the interaction of energy and information between electric vehicles and charging equipment and the power grid, including one-way ordered charging and two-way V2G modes. With the dual attributes of electric vehicles as both power loads and energy storage, against the backdrop of continuous growth in the number of electric vehicles and the share of new energy generation capacity, vehicle-grid interaction can alleviate the pressure of large-scale electric vehicle charging on the distribution grid and can actively participate in the demand-side regulation of the power system, ensuring the stability of the power system while obtaining certain regulatory benefits. At the current point in time, with the joint push of policies, technology, and the market, the profit model of vehicle-grid interaction is becoming increasingly clear, and the path for future large-scale and commercial development is clear, bringing significant market space for related charging equipment companies and resource aggregators. In terms of investment logic: 1) From the perspective of load aggregation, we recommend investing in leading charging operators who have significant advantages in vehicle-grid interaction qualifications, resources, and operations, and are also natural load aggregators; 2) From the perspective of charging equipment, the development of vehicle-grid interaction brings demand for the upgrade and iteration of related charging equipment, and we recommend forward-looking layout for manufacturers of V2G charging equipment.