China Galaxy Securities: Domestic electricity grid investment exceeds 1 trillion yuan per year, with the prospect of continued increase in both quantity and price of electricity equipment going overseas in 2026.

China Galaxy Securities released a research report, stating that the investment scale of State Grid during the "14th Five-Year Plan" period may reach around 1 trillion yuan, with an annual investment of around 1 trillion yuan in China's power grid during the "14th Five-Year Plan" period; in 2026, the investment of State Grid/Southern Power Grid is expected to reach 700 billion yuan/189 billion yuan, with year-on-year growth of +7.6%/8.0%. The acceleration of global electrification, economic recovery, rapid development of AI, combined with the demand for new energy grid connection and grid renovation, has led to a strong demand for AI electrical equipment. Future power grid investments are expected to accelerate, while overseas supply cannot meet demand. The delivery period for power transformers and high-voltage cables in Europe and the United States has almost doubled, and the waiting time for high-voltage direct current systems will be extended to the 2030s, ushering in a golden period for Chinese power equipment to go global. Main points of China Galaxy Securities: During the "14th Five-Year Plan" period, the domestic power grid investment will average one trillion yuan per year, focusing on strengthening the main grid, optimizing the distribution grid, and promoting transformation. The fixed asset investment of State Grid Company is expected to reach 4 trillion yuan during the "14th Five-Year Plan" period, a 40% increase compared to the investment in the "13th Five-Year Plan" period. The study predicts that the investment scale of Southern Power Grid during the "14th Five-Year Plan" period may reach around 1 trillion yuan, with an annual investment of around 1 trillion yuan in China's power grid during the "14th Five-Year Plan" period. In 2026, the investment amount of State Grid/Southern Power Grid is expected to reach 700 billion yuan/189 billion yuan respectively, with year-on-year growth of +7.6%/8.0%. (1) Ultra-high voltage: The "14th Five-Year Plan" period will start off with accelerated development, and the growth of both AC and DC systems. By the end of 2025, State Grid has completed a total of 42 ultra-high voltage projects, including 20 DC and 22 AC projects. By 2025, 2 DC and 3 AC projects have been approved domestically, with 1 DC and 3 AC projects under construction, and 4 DC projects in operation. The study believes that by 2026, State Grid is expected to approve the construction of 4-5 DC (Shaanxi-Henan, Badanjilin-Sichuan, Southern Xinjiang-Sichuan-Chongqing, Kubuqi-Shanghai, Qinghai-Guangxi) and 3-4 AC (Dalat-Mongolia, Panxi-Southwestern-China-Tianfu, and Zhejiang Ring Network) ultra-high voltage projects, with an AC construction demand driven by the DC interconnection and ring network. (2) Main grid: The urgent need to increase the power system's capacity has led to a strong demand for the renewal and addition of core equipment. In 2025, the bidding amount for State Grid's transmission and transformation equipment reached 91.88 billion yuan, a year-on-year increase of 25.3%. Among them, switchgear accounted for 25 billion yuan, transformer accounted for 19.5 billion yuan, and power cables accounted for 15.8 billion yuan. The study believes that the main grid construction will remain highly prosperous in 2026. (3) Distribution grid: The expansion of capacity and efficiency provides potential opportunities. In 2025, the total bidding amount for distribution network areas reached 124.57 billion yuan, with 42.6 billion yuan for 10kV power cables, 22.61 billion yuan for low-voltage power cables, and 21.26 billion yuan for overhead insulated wires. The study believes that the demand for secondary distribution equipment will continue to grow in 2026 as smart transformation progresses. (4) Meters: With the new standards in place, the prices are expected to rise in 2026. In 2025, the total bidding amount for State Grid's measuring equipment reached 13.5 billion yuan (third batch of contracts, a 49% decrease compared to the previous year), while Southern Power Grid's bidding amount for the first batch of measuring products was 3.5 billion yuan, and the second batch is expected to reach 3.7 billion yuan, totaling around 7.2 billion yuan, a 20% decrease compared to the previous year. The study believes that with the release of the new smart meter standards by State Grid, the prices of meters are expected to rise in 2026. (5) Power trading: Accelerating market-oriented reform, highlighting the demand for services and systems. As the electricity reform progresses, many provinces have officially launched spot markets, which are driving the demand for trading services and system construction. AI load growth is high in North America, highlighting the power shortage, accelerating global power grid investment. Overall, North America faces a significant electricity shortage, with the growth of AI and data centers exacerbating the gap. The U.S. Department of Energy predicts that the electricity consumption of AI and data centers in 2023 will reach 176TWh, accounting for 4.4% of the total electricity demand in the United States. From 2023 to 2028, this consumption is expected to reach between 325-580TWh, accounting for 6.7%-12% of the total electricity demand in the United States. The electricity demand for AI servers is projected to increase from about 40TWh in 2023 to between 165TWh and 325TWh in 2028, representing a growth of about 4-8 times. Traditional rapid energy replenishment is limited, and AI and data center combined storage systems are economically viable and have fast delivery times, with the potential to increase their market share. The acceleration of global electrification, economic recovery, rapid development of AI, combined with the demand for new energy grid connection and grid renovation, has led to a strong demand for AI electrical equipment. According to IEA data, global electricity demand is expected to increase by over 40% by 2035, with the electricity consumption of AI and data centers doubling. Renewable energy will account for nearly 55% of electricity production by 2035 (with installed capacity of 13,700GW, reaching 4,900GW in 2024), and solar and wind power will account for over 50% of new electricity generation, with energy storage reaching 1,700GW by 2035 (compared to 77GW in 2024). In terms of electricity and power grid investments, global electricity and power grid investments hit record highs of $1.5 trillion and $390 billion, respectively in 2024. By 2025, this is expected to exceed $1.55 trillion and $400 billion for the first time. By 2035, global electricity and power grid investments are expected to exceed $3.3 trillion and $650 billion, with a CAGR of 8% and 5% between 2025 and 2035. The overseas expansion of power grids continues in 2026 with a continued rise in prices. Future power grid investments are expected to accelerate, while overseas supply falls short of demand. The delivery period for power transformers and high-voltage cables from Europe and the United States has almost doubled, and the waiting time for high-voltage direct current systems is expected to extend into the 2030s. This presents a golden opportunity for Chinese power equipment to go global. According to data from the General Administration of Customs, the cumulative exports of transformers, meters, high-voltage switches, low-voltage switches, and electrical cables reached 80.8 billion, 13.2 billion, 47.9 billion, 333.3 billion, and 291.0 billion US dollars respectively from January to November 2025, with year-on-year growth rates of 35.3%, -8.4%, 29.4%, 11.3%, and 22.9% respectively. In 2026, the overseas expansion of power equipment is expected to continue to rise in prices. Risks: Risks include power grid investment falling short of expectations and rising raw material prices.