Zhongtai: Ultra-high voltage construction gradually enters performance realization period, focus on sector opportunities.

Zhongtai released a research report stating that since the resumption of the construction of Ultra High Voltage (UHV) projects in 2023, the overall progress of the projects has been smooth. 2023 is considered a big year for the approval of conventional direct current UHV projects, and it is expected that 2025 will be a big year for the approval of flexible direct current UHV projects. Based on the historical UHV direct current construction cycle of 2-2.5 years, it is speculated that 2025 will be the first complete year for UHV performance realization, and 2027 will be a big year for performance realization for flexible direct current UHV projects, with the industry outlook expected to remain positive. The main viewpoints of Zhongtai are as follows: - The approval and bidding process for UHV projects using direct current is expected to slow down in 2024, but accelerate in 2025. - For direct current projects, there were a total of 1/0/4 approved projects from 2021 to 2023, with 2 projects approved by December 20, 2024. There is a rich pipeline of projects for 2025 and the 14th Five-Year Plan period, with an expected increase in the number of projects bidding in 2025 to four or more. - In terms of alternating current projects, the total scale of projects approved and bidded for in 2024 decreased compared to 2023, with a total of 54 bays. The pipeline of pre-feasibility and feasibility projects is rich, with a total scale of approximately 146 bays, most of which are expected to be approved in 2025, resulting in a doubling of the overall scale in 2025. - The rapid advancement of flexible direct current technology, with SLCC and other common direct current technologies serving as transitional technologies. - The construction of the Gansu-Zhejiang UHV project has started and been successfully bidded, marking the first UHV project to adopt full flexible direct current technology. The successful implementation of this project signals the transition of flexible direct current technology from the validation stage to mass construction. CLSS and SLCC are both improved versions of LCC, while VSC is a new generation technology, with CLCC and SLCC possibly serving as transitional technology routes. - The main aspects of UHV direct current remain stable, with the overall value of tenders remaining stable. - Converter valves: The structure is stable, with a focus on the penetration of direct current into lower voltage levels. Converter transformers: The value remains stable, with high-capacity converter transformers expected to become a trend. Combination appliances: There is a trend of price reduction, with the share of China Electric improving to 100%. Direct current control and protection: The value of flexible direct current control and protection is increasing, with changes in share still to be observed. - The current round of UHV construction is gradually entering the period of performance realization, focusing on sectoral opportunities. Since the resumption of UHV construction in 2023, overall project progress has been smooth. 2023 was a big year for the approval of conventional direct current UHV projects, and 2025 is expected to be a big year for the approval of flexible direct current UHV projects. Based on the historical UHV direct current construction cycle of 2-2.5 years, 2025 is expected to be the first complete year for UHV performance realization, and 2027 is expected to be a big year for performance realization for flexible direct current UHV projects, with the industry outlook expected to remain positive. Risk warning: UHV planning and construction are lower than expected; changes in technology routes; electricity investment is lower than expected; upstream component price increases; risks of deviation in data calculation; risks of outdated or not timely updated information in the research report.