CITIC SEC: Embrace Upgrading and Digitalization for High-Quality Development of Power Distribution Networks.

CITIC SEC released a research report stating that to build a new type of power system, it is required that the power grid coordinate and promote construction around the dimensions of 1) large bases + external transmission channels and 2) distributed intelligent distribution networks. The construction of power grid facilities and the upgrade to digital intelligence should be moderately advanced, and power grid investment is expected to maintain steady growth. Based on the target of high-quality development of distribution networks, it is recommended to focus on sectors that benefit from the expansion of distribution networks, digital intelligence upgrades, and energy efficiency improvements: 1) comprehensive electric NETDRAGON; 2) transformer industry chain; 3) electric meter industry; 4) digital intelligence construction; 5) charging pile industry chain. Key points of CITIC SEC are as follows: New requirements for distribution network upgrade: Moderately advanced construction for high-quality development. On March 1, the National Development and Reform Commission and the National Energy Administration issued the "Guiding Opinions on the High-Quality Development of Distribution Networks in the New Situation." Against the background of continuous growth in distributed new energy access and the rapid growth in demand for charging pile construction driven by the accelerated penetration of new energy vehicles, the "Opinions" propose to promote the formation of a "source" bidirectional interactive distribution network around the goal of building a new energy system and a new power system, creating an efficient resource allocation platform for source-grid-load-storage resources. It also proposes to plan and construct moderately advanced to maintain reasonable power supply adequacy in two stages of development: 1) By 2025The distribution network should have the capacity to connect around 500 million kilowatts of distributed new energy and around 12 million charging piles. The source distribution network should be compatible with the power grid, and the digital transformation of the distribution network should be comprehensively promoted. In regions with conditions, vehicle-grid coordination interaction and new technologies such as network-building new energy and network-building energy storage should be promoted. 2) By 2030The flexible, intelligent, and digital transformation of the distribution network should be basically completed, achieving multi-level coordination of main distribution microgrids, aggregation and interaction of massive resources, plug-and-play for diverse users. This will effectively promote the integration development of distributed intelligent networks and the power grid, better meeting the development needs of distributed power sources, new energy storage, and various new business models. Focusing on sourcing and V2G interaction, advancing digital intelligence. From the first stage development goals, it can be seen that the pain points in the current construction of distribution networks lie in the flexible interaction requirements of sourcing-grid-load-storage in the process of transitioning to sourcing. Therefore, new requirements have been put forward for overall distribution network systems, including over-provisioning of capacity, upgrading of equipment system intelligence, and increasing data granularity. The report believes that the distributed new energy and charging pile grid goals proposed in the "Opinions" are conservative goals supported by current stage distribution network construction plans. If factors such as the accelerated construction of new power systems, increased penetration of new energy vehicles, and continued rapid growth in electricity consumption catalyze further acceleration of distribution network investment, the investment in distribution and usage of electricity is expected to recover and grow rapidly by 2024, with the proportion of electricity investment in the power grid increasing. In the medium to long term, power grid investment supporting the "dual carbon" transformation is expected to maintain stable growth, and investment in distribution and use of electricity is expected to become an important source of long-term increment. Focusing on equipment efficiency and intelligent upgrading, accelerating equipment renewal. From the perspective of the power equipment industry, the "Opinions" mention planning ahead for the transformation of distribution and allocation of distribution pointscombining the renovation of old urban neighborhoods, flood prevention, and anti-flooding requirements. It is expected that by 2023, based on the direct construction of damaged distribution networks in some regions, distribution grid investment will continue to be directed towards the upgrading of distribution network infrastructure, the upgrading of meter distribution points, and the construction of charging facilities. At the same time, the "Opinions" also explicitly state that by 2025, grid enterprises will completely phase out S7 (including S8) type and distribution transformers that have been in operation for over 25 years and do not meet the efficiency entry requirements. The proportion of transformers with efficiency levels exceeding the national standard in operational efficiency compared to 2021 is expected to increase by more than 10 percentage points. The report expects that this move is likely to accelerate the release of a batch of existing distribution transformers, accelerating the demand for renewal and upgrade, and further promoting the acceleration of energy efficiency upgrades and replacements in more medium and low-voltage equipment. Risk factors: Unexpectedly slow construction of new power systems, slowdown in grid investment growth, slow progress in the digitization upgrade of distribution networks, slowdown in the construction of distributed new energy, slower-than-expected growth in new energy vehicles, and increased industry competition.