GF SEC: The increase in electricity consumption boosts thermal power, and the electricity supply and demand pattern improves.

GF SEC released a research report stating that overall, the electricity consumption growth rate in the secondary sector is rebounding in the economic recovery and the transformation of high-end manufacturing, while the tertiary sector maintains high growth in the rapid development of emerging industries. China Electricity Council predicts that the total social electricity consumption will grow by 5%-6% by 2026, and the demand growth in the electricity industry is stable. On the supply side, the growth rate of thermal power and new energy installations is declining, with serious issues in the absorption of wind and solar energy. Supply growth is slowing down, while the demand side maintains relatively high growth driven by emerging industries. It is expected that the electricity supply and demand situation will continue to improve. The bank stated that the acceleration of public utility construction, and the focus on sector annual and first-quarter performance. GF SEC's main points are as follows: On the demand side, the electricity consumption growth rate of the secondary sector is rebounding, and the electricity consumption of the tertiary sector maintains high growth, leading to stable growth in total electricity consumption. From January to February 2026, the total social electricity consumption increased by 6.1% year-on-year, with a growth of 6.3% in the secondary sector compared to 2025. In particular, the electricity consumption of high-tech and equipment manufacturing industries increased by 10.6% year-on-year, and the electricity consumption of high-energy-consuming industries also returned to positive growth. The electricity consumption of the tertiary sector increased by 8.3%, maintaining high growth, especially in the internet data service industry and electric vehicle service industry, with electricity consumption growing by 46.2% and 55.1% respectively. Overall, the electricity consumption growth rate in the secondary sector is rebounding in the economic recovery and the transformation of high-end manufacturing, while the tertiary sector maintains high growth in the rapid development of emerging industries. China Electricity Council predicts that the total social electricity consumption will grow by 5%-6% by 2026, and the demand growth in the electricity industry is stable. On the supply side, the proportion of wind and solar energy is facing grid constraints, while thermal power generation is recovering. During the 14th Five-Year Plan period, a large number of coal-fired power plants were approved, with installations concentrated in the past two years. In 2025, the increase in coal-fired power installations was 95GW, and in January-February 2026, there was an additional 20GW installed. However, according to statistics from the Arctic Star Power Grid, only 32GW of coal-fired power was approved in 2025, and the future addition of coal-fired power installations is expected to gradually slow down. The installation of wind and solar power plants during the 14th Five-Year Plan has been growing year by year, with an addition of 434GW in 2025. After the release of Document No. 136, all new energy projects are market-oriented. It is expected that the installation of wind and solar power plants will slow down. In addition, in 2025, the proportion of new energy increased to 22%, facing grid constraints due to insufficient peak shaving resources and ultra-high voltage support. In the situation of a large increase in installations in 2025, the year-on-year increase in wind and solar power generation in January-February reached +5.3% and +9.9% respectively, with wind and solar power cumulative utilization rates at 91.5% and 90.8% (reaching historic lows). In contrast, coal-fired power generation in January-February increased by 3.3% year-on-year, reversing the trend of continuous negative cumulative growth rates in coal-fired power since 2025, which signifies an improvement in the supply and demand of electricity. Overall, the growth rate of thermal power and new energy installations is declining on the supply side, while the problem of wind and solar energy integration is severe, causing a slowdown in supply growth. On the demand side, driven by emerging industries, there is a relatively high growth expected. It is anticipated that the electricity supply and demand situation will continue to improve. Low expectations + low valuation + high dividends, the power sector is both offensive and defensive. The outstanding performance of coal-fired power companies and the expectations for annual reports and impairment have already been anticipated, and the first-quarter reports will be an important factor in the power sector market. The reassessment of the market continues, with multidimensional improvements ongoing: (1) In terms of electricity prices, the expected reductions in long-term agreements have already been anticipated, and the recent increase in coal prices bodes well for monthly and spot prices. (2) Supply and demand, a decrease in supply growth and the continuous over-expectation of AI demand are expected to improve the supply and demand situation of electricity. (3) Acceleration of electricity system reforms, expanding spot trading, and capacity prices + ancillary services are expected to increase the comprehensive electricity price. (4) In terms of cash flow, a decrease in investment, an improvement in free cash flow, and an increase in dividend expectations. (5) Expected performance exceeding expectations, low valuation, and public holdings at a ten-year low, the sector is both offensive and defensive. Accelerating the construction of public utilities, focusing on the annual and first-quarter performance of the sector. (1) Coal-fired power: HUANENG POWER, HUADIAN POWER, GD Power Development, Shenergy, Inner Mongolia Mengdian Huaneng Thermal Power Corporation, which are high-dividend outstanding performers; (2) Hydropower: Sichuan Chuantou Energy with stable performance and potential for increased dividends, Guangxi Guiguan Electric Power with asset injection and high performance growth; (3) Gas: Jiangxi Jovo Energy with coal-to-gas projects, Foran Energy Group with green methanol catalysis; (4) Nuclear power: CGN POWER with a mechanism for setting electricity prices. Risk warning Fluctuations in coal costs; insufficient inflow of water; fluctuations in operating hours.