Guotai Haitong: The inflection point for green certificate supply and demand is approaching, and the industry inflection point may arrive earlier.

Guotai Haitong released a research report stating that green certificates, once optional for companies as a branding and carbon reduction tool, are gradually transforming into fundamental certificates for key industries to fulfill their green electricity consumption responsibilities. They are also evolving into compliance tools that can be monitored, quantified, and assessed for energy-intensive industries. The bank predicts that after 2028, the green certificate market will shift from a clearly loose state to a balanced one. If industry expansion continues or the proportion of green electricity consumption in key industries accelerates, the turning point for the industry may arrive earlier than expected. The main points from Guotai Haitong are as follows: The green certificate system is moving from voluntary consumption to strict constraints, with increasing certainty in demand growth. Since 2017, China's green certificate system has undergone stages including voluntary subscription, green electricity trading, full coverage issuance, and the construction of a mandatory consumption mechanism. The Order No. 42, implemented in 2026, further clarifies that the minimum proportion of renewable energy electricity consumption for key energy-intensive industries will be assessed based on the green certificate accounting corresponding to the production volume for that year. Companies that fail to meet the targets will need to buy supplementary certificates. Green certificates are transitioning from optional branding and carbon reduction tools for companies to fundamental certificates for key industries to fulfill their responsibilities for green electricity consumption. The core of supply analysis is not the total issuance but the effective supply of independent green certificates. The issuance volume of green certificates in 2024 includes a large number of historical electricity replenishments and does not represent normalized annual supply. In 2025, a total of 2.947 billion green certificates will be issued nationwide, of which 1.893 billion are tradable. After deducting 250 million green certificates transferred through green electricity trading, the effective supply of independent green certificates will be approximately 1.640 billion. Considering the issuance increase brought by new wind and solar projects, as well as the continuous growth of mechanism electricity, non-tradable green certificates, and green electricity trading, it is estimated that the effective supply of independent green certificates will reach about 1.98 billion by 2029, slightly falling to 1.96 billion in 2030. The expansion of mandatory consumption industries constitutes the main driver of demand growth. Currently, demand for green certificates primarily comes from key energy-intensive industries, provincial consumption responsibility gaps, as well as voluntary consumption and export supply chains. Based on the electricity consumption and green electricity consumption proportions of industries such as electrolytic aluminum, steel, cement, polysilicon, and data centers, the demand for independent green certificates is expected to be 910 million, 1.14 billion, 1.36 billion, 1.55 billion, and 1.77 billion from 2026 to 2030, respectively. Among these, the demand growth from 2026 to 2027 is mainly driven by the alignment and expansion of key industry assessments, while after 2028, it will be primarily driven by the continual increase in green electricity consumption proportions. In a baseline scenario, supply and demand are gradually converging, and the market may enter a price elasticity release window in 2029-2030. It is expected that the ratio of independent green certificate demand to effective supply will increase from 0.41 in 2025 to 0.70 in 2028 and 0.90 in 2030, transitioning the market from a clearly loose state to a balanced one. If the proportion of green electricity consumption in key industries increases by 5 percentage points each year, the supply-demand ratio in 2030 will reach 0.98; if it increases by 8 percentage points per year, the supply-demand ratio will rise to 1.07, which may lead to a supply shortage, significantly enhancing the upward pressure on green certificate prices. The further expansion of the industry may be a key catalyst for an earlier price increase. The current model has not yet included potential new industries such as flat glass, refining, ethylene, synthetic ammonia, methanol, other non-ferrous metals, lithium-ion batteries, 5G base stations, and charging infrastructure. If these industries are gradually included in the assessment of green electricity consumption, demand growth may significantly outpace baseline predictions, prompting an earlier turning point in supply and demand. Risk warning: The expansion of key industries and the increase in green electricity consumption proportions may fall short of expectations; new energy installed capacity and tradable green certificate supply may exceed expectations; changes in green certificate, green electricity, and carbon accounting policies may occur.