GF SEC: Price mechanism accelerates rationalization, Gansu's new energy storage growth momentum is strong

GF SEC released a research report stating that by the end of 2024, Gansu's installed capacity for power generation will exceed 90 million kilowatts, with new energy accounting for over 60%. Gansu is a typical province that exports electricity, with the current proportion of exported electricity reaching 28.0%. Currently, Gansu's new energy storage participates in the power spot market and ancillary service market, achieving preliminary market operation. Taking a 100 MW/200 MWh energy storage project as an example, the calculated capital IRR of Gansu's grid-side energy storage is 9.9%. Considering the significant pressure on Gansu's photovoltaic absorption, it is expected that Gansu's energy storage demand will reach 12 GWh by 2026, with a growth rate expected to reach 60%. Key Points of GF SEC: Electricity status in Gansu: a province with a high proportion of new energy exports, and the development of energy storage is gradually taking shape. By the end of 2024, Gansu's installed capacity for power generation will exceed 90 million kilowatts, with new energy accounting for over 60%. Gansu is a typical province that exports electricity, with the current proportion of exported electricity reaching 28.0%. Gansu has a relatively large scale of new energy storage installations, ranking fifth nationwide. Gansu's new energy storage participates in the power spot market and ancillary service market, achieving preliminary market operation. Gansu's lithium battery energy storage costs: calculated LCOS for daily charging and discharging is 0.29 yuan/kWh. According to the "2024 China Power Market Development Report," Gansu's energy storage has basically achieved daily charging and discharging, with some days achieving two charge and two discharge cycles. With a total of 360 charge and discharge cycles per year, the LCOS of Gansu's lithium battery energy storage is calculated to be 0.29 yuan/kWh. Gansu's energy storage revenue: a multi-dimensional income system formed by spot market price differences, ancillary services, and capacity electricity prices. Spot market price difference: Rapid expansion in 2025, reaching 0.27 yuan/kWh. In recent years, the spot price difference in the Hexi region has slightly narrowed, while in the Hedong region, it has decreased significantly. In the first half of 2025, the peak-valley price difference showed a widening trend, mainly due to thermal power raising overall prices, and the increase in new energy output lowering valley electricity prices. The new capacity electricity price regulations have reduced the upper limit of spot prices, but the impact is relatively small. Ancillary service revenue: Gansu's ancillary service market size is expanding over 25 years, with the average annual frequency modulation income for a typical 100 MW energy storage plant estimated to be 1.7 million yuan. Currently, it mainly includes peak-shifting capacity markets, demand response markets, and frequency modulation ancillary service markets, and in the future will mainly include frequency modulation ancillary service markets. In 2024, Gansu's energy storage ancillary service revenue was 120 million yuan, and in 2025, the space for frequency modulation ancillary services in Gansu is rapidly expanding, mainly due to the increase in the proportion of new energy generation. Capacity electricity prices: Capacity leasing and compensation mechanisms upgrade capacity electricity prices, with grid-side energy storage able to receive a capacity electricity price of 38.5 yuan/(kWhyear). GF SEC analysis shows that this capacity electricity price mechanism has two key features: on the one hand, the total size of the capacity electricity fee pot is controllable and easy to implement; on the other hand, it introduces a competitive mechanism for power sources that provide capacity support, promoting the selection of the best options. Calculations show that Gansu's independent energy storage capital IRR exceeds 9%, with the new type of energy storage installation expected to continue to grow by 60% in 2026. Taking a 100 MW/200 MWh energy storage project as an example, the calculated capital IRR of Gansu's grid-side energy storage is 9.9%. Considering the significant pressure on Gansu's photovoltaic absorption, it is expected that Gansu's energy storage demand will reach 12 GWh by 2026, with a growth rate expected to reach 60%. Investment Recommendations: Gansu is a microcosm of the Three-North New Energy Major Province, with energy storage station profitability gradually improving and a large potential installed capacity, indicating a strong demand for new energy storage in China in 2026. This is expected to drive improvements in profitability across the entire energy storage industry chain. Recommended leading companies in energy storage batteries and materials include: Contemporary Amperex Technology (300750.SZ), Eve Energy Co., Ltd. (300014.SZ), Hunan Yuneng New Energy Battery Material (301358.SZ), and Fulin Precision (300432.SZ). Recommended companies to pay attention to include: Do-Fluoride New Materials (002407.SZ), Tonze New Energy Technology (002759.SZ), and Hubei Wanrun New Energy Technology (688275.SH). Leading integrated companies with advantages in site selection and operations are expected to achieve higher profitability in energy storage stations and increase market share. Recommended companies include: Beijing HyperStrong Technology (688411.SH), China Southern Power Grid Technology (688248.SH), Sungrow Power Supply (300274.SZ), and CSI Solar Co., Ltd. (688472.SH). Companies to pay attention to include: Shenzhen Clou Electronics (002121.SZ). Electricity trading capabilities are becoming increasingly important as a core technical barrier to operations for energy storage stations. Recommended: State Power Rixin Technology (301162.SZ). Risks: Unexpected decreases in spot market price differences. Unexpected changes in capacity electricity prices. Unexpected increases in energy storage costs.