China Securities Co., Ltd.: Energy storage and grid construction will replicate the prosperity of gas turbines, and it is optimistic about the elasticity of the related industrial chain.

China Securities Co., Ltd. issued a research report stating that the explosive demand for AIDC will lead to a power shortage in the North American power grid reaching 39.9, 51.8, and 67.8 GW in 2026-2028. The company believes that thermal power generation, energy storage, and power grid equipment will gradually become core beneficiaries, with the market currently only recognizing the prosperity of thermal power generation. It is expected that in the next six months to one year, investments in the power grid and energy storage construction will start to increase continuously, with North America's profit volume far exceeding that of other regions globally, and optimistic about the flexibility of the related industrial chain. China Securities Co., Ltd.'s main points are as follows: The large-scale deployment of AIDC will lead to a long-term trend of power shortage in the United States The peak load forecast for US electricity in 2030 has been significantly revised upwards by 166 GW to nearly 1000 GW, with data centers contributing 54%. This has led to long-term increases in regional electricity prices and continuous new highs in capacity prices, with various regional power grids facing a shortage of reserve capacity. This reflects the continuous exacerbation of the contradiction between supply and demand in the US electricity sector under the large-scale construction of AIDC, and the gradual retirement of thermal power and other power sources further exacerbates the power shortage problem. The company believes that the persistent power shortage and tight supply and demand in the US electricity sector will become the norm. Under the constraints of power grid resources, off-grid natural gas power supply has become the current preferred solution for data centers Electricity is the core element of AIDC site selection, however, the average grid connection period in the US has exceeded 4 years, and the reserve capacity in most regions of the US is less than 15%. In addition to issues such as aging transformers and lagging transmission grid construction, CSP manufacturers have had to turn to off-grid solutions. In North America, where natural gas resources are relatively abundant and costs are low, using off-grid gas turbines for power supply can help projects be quickly put into operation. Therefore, the state of Texas, with abundant natural gas resources, has become a hot spot for AIDC planning and construction, with planned projects/capacity reaching 108/48 GW. AI giants commit to building their own power sources, the prosperity of thermal power generation is recognized by the market, while energy storage and power grids will soon become reality AI giants have recently signed commitments to build their own power sources at the White House, including self-built/shared power sources and fully bearing the costs of grid upgrades, and also need to support the grid to prevent blackouts. (1) Natural gas power generation, with its high reliability and rapid deployment advantages, has become the preferred choice for self-built power sources, while diesel engines, medium-speed marine engines, SOFCs, and aviation modified power plants are also favored options. After the data center is put into operation, in order to pursue reliability, it still needs to operate on the grid, (2) storage can meet the new grid requirements for load response capacity and become a necessary option, and can further achieve the supply of green electricity with solar storage. The United States has also put forward a $75 billion plan for ultra-high voltage grid investments, with US grid company capital expenditures rapidly rising. With the exhaustion of new energy grid connections and AIDC supporting equipment orders among European, American, and Japanese companies, Chinese power grid equipment companies are expected to fully benefit from this round of US grid capital expenditure cycle. Investment recommendations: focus on thermal power generation first, followed by energy storage, and simultaneous development of power grid equipment Based on the actual project configurations of AI giants such as xAI, Meta, and Microsoft, the company believes that natural gas power generation and energy storage are complementary rather than mutually exclusive in AIDC power supply solutions, with power grid construction advancing simultaneously. Recommendations include: (1) Gas turbine industry chain: Dongfang Electric Corporation, Yantai Jereh Oilfield Services Group (mechanical group), Weichai Power (mechanical group), China Shipbuilding Industry Group Power (mechanical group), Anhui Yingliu Electromechanical, etc.; (2) Energy storage industry chain: Sungrow Power Supply, Beijing HyperStrong Technology, Shenzhen Clou Electronics, etc.; (3) Power grid equipment industry chain: Sieyuan Electric, TBEA Co., Ltd., NARI Technology, Xj Electric Co., Ltd., Henan Pinggao Electric, China XD Electric, Hainan Jinpan Smart Technology, Jiangsu Shemar Electric, Huaming Power Equipment, Eaglerise Electric & Electronic, etc.