Huajin Securities: State Grid's investment in the next 25 years is expected to exceed 650 billion yuan, and the investment in the power grid will remain highly prosperous.
17/01/2025
GMT Eight
Huajin Securities released a research report stating that the total investment in national grid projects in the first 11 months of 2024 was 529 billion yuan, an 18.7% increase year-on-year. It is estimated that State Grid's investment in 2025 will exceed 650 billion yuan for the first time (projected to be 600 billion yuan in 2024), reaching a new high since 2015. Additional investments will focus on optimizing the main power grid, strengthening the distribution network, supporting the high-quality development of new energy, and continuing to promote the implementation of major projects. From the perspective of grid planning, grid investment covers a long industry chain and yields quick results, making it an important option for counter-cyclical investment and driving growth. Coupled with the growth in electricity demand, the investment growth rate of the grid in 2025 is expected to continue to maintain double digits, effectively supporting the performance growth of industry-leading companies.
Huajin Securities' main points are as follows:
Grid investment is expected to reach new highs, with ultra-high voltage remaining prosperous
From January to November of 2024, the total investment in national grid projects was 529 billion yuan, an 18.7% increase year-on-year. It is estimated that State Grid's investment in 2025 will exceed 650 billion yuan for the first time (projected to be 600 billion yuan in 2024), reaching a new high since 2015. Additional investments will focus on optimizing the main power grid, strengthening the distribution network, supporting the high-quality development of new energy, and continuing to promote the implementation of major projects. In 2024, State Grid completed and put into operation three ultra-high voltage projects (a total of 38 ultra-high voltage projects completed), and in 2025, a batch of key projects such as the Shaanxi to Henan ultra-high voltage line, as well as the Zaozhuang in Shandong, and Tonglu in Zhejiang pumped storage power stations, will also advance successively.
On December 15, 2024, the National Energy Work Conference proposed to actively promote the approval of construction for four UHVDC projects: Mongolia-West-Beijing-Tianjin-Hebei, Tibet-Southeast Guangdong-Hong Kong-Macau, Badan Jilin-Sichuan, and South Xinjiang-Sichuan-Chongqing. This marks a significant increase in the number of projects compared to those starting in 2024, with a relatively high proportion of flexible DC technology applications. Flexible DC is suitable for weak grid scenarios such as large wind and solar bases and offshore wind power transmission. With the continuous establishment of large bases and the growth in electricity consumption, the development trend is clear. Combined with the continuous increase in renewable energy exports, the prosperous cycle of ultra-high voltage is expected to continue.
Strong demand for distribution network reinforcement, smart development stepping to a new level
In 2024, the cumulative bidding amount for distribution network equipment in the Southern Grid was 12.636 billion yuan, a 52.32% increase year-on-year. In March 2024, the "Guiding Opinions on High-quality Development of Distribution Networks in the New Situation" pointed out that by 2025, the grid structure of the distribution network should be more robust and clear, with reasonable and adequate power distribution capacity; the carrying capacity and flexibility of the distribution network should be significantly increased, with the capacity to connect approximately 500 million kilowatts of distributed new energy and around 12 million charging piles; by 2030, the transformation of the distribution network into a flexible, intelligent, and digitalized system should be basically completed. These goals pose higher requirements for distribution network investment.
At the same time, the reliability improvement project of the distribution network played an important role in the new round of equipment updates and renovations announced by the Southern Grid in July 2024, with an investment proportion of 14.66%. In terms of energy-saving and efficiency improvement, the Southern Grid will completely phase out S7 (including S8) type distribution transformers by 2025, and transformers with an operating life of over 25 years and energy efficiency below the entry level requirements. By 2027, equipment efficiency levels are expected to double compared to 2023. In terms of digital network construction, the Southern Grid Company plans that by 2027, the proportion of digital and intelligent transformations of all substation equipment in the Southern Grid will reach 55%, and the effective coverage of distribution automation will not be less than 90%. The pace of transformation towards an intelligent and digitalized distribution network is expected to continue to increase.
Rapid expansion of data centers drives high demand for electrical equipment
The expansion of data centers has led to a sharp increase in electricity demand. According to IEA estimates, by 2026, the electricity consumption of data centers may exceed 1,000 TWh (approximately equivalent to Japan's annual electricity consumption). Attention should be paid to directions such as coordinated computing power and electricity, network construction technology, and intelligent scheduling. In August 2024, the "Action Plan for Accelerating the Construction of a New Type of Power System (2024-2027)" clearly stated the need to enhance the grid's ability to accept, allocate, and control clean energy. In terms of coordinated computing power and electricity planning and operation, coordinated planning and layout of computing power and electricity infrastructure should be carried out; increasing the level of coordinated operation between computing power and electricity, increasing the proportion of green electricity in data centers; exploring the "green energy aggregation supply" model of nearby power supply, aggregation trading, and on-site consumption of renewable energy.
On January 13, at the 2025 Data Center Energy Trends Conference, Huawei explicitly stated that "coordinated computing and electricity will become a new mode of DC construction." As data centers continue to increase their capital expenditures, the demand for supporting electrical equipment such as UPS, transformers, and switchgear is expected to continue to grow.
Investment recommendation: From the perspective of grid planning, grid investment covers a long industry chain and yields quick results, making it an important option for counter-cyclical investment and driving growth. Coupled with the growth in electricity demand, the investment growth rate of the grid in 2025 is expected to continue to maintain double digits, effectively supporting the performance growth of industry-leading companies.
It is recommended to pay attention to suppliers of ultra-high voltage and core equipment for the main power grid: NARI Technology (600406.SH), China XD Electric (601179.SH), Henan Pinggao Electric (600312.SH), Xj Electric Co., Ltd. (000400.SZ), Zhuzhou CRRC Times Electric (688187.SH), Sieyuan Electric (002028.SZ), Beijing Sifang Automation (601126.SH), Changgao Electric Group (002452.SZ), etc.; in terms of distribution network construction and digitalization, it is recommended to pay attention to Hexing Electrical (603556.SH), Hangzhou Zhongheng Electric (002364.SZ), Kehua Data Co., Ltd. (002335.SZ), Shenzhen Hop...Ewind Electric (603063.SH), Hainan Jinpan Smart Technology (688676.SH), State Power Rixin Technology (301162.SZ), etc.Risk warning: grid investment below expectations; policy implementation below expectations; intensified industry competition.