China Galaxy Securities: State Grid will maintain a relatively high investment intensity during the 14th Five-Year Plan, with a focus on core areas such as UHV and the main grid.

China Galaxy Securities released a research report saying that the State Grid Corporation officially announced that fixed-asset investment during the “15th Five-Year Plan” period is expected to reach 4 trillion yuan, a significant increase of 40% compared with the “14th Five-Year Plan” period, with an average annual investment scale of 800 billion yuan. If we add the investment scale of Southern Power Grid in the same period, optimistic projections suggest that the total investment in the national power grid during the “15th Five-Year Plan” could approach 5 trillion yuan, with the average annual investment breaking through the 1 trillion yuan mark. Overall, during the “15th Five-Year Plan” period, State Grid will maintain a relatively high investment intensity. Strengthening investment in ultra-high-voltage and backbone grid infrastructure as well as interconnection capabilities, increasing investment in upgrading urban and rural distribution networks and their carrying capacity, and enabling the grid’s intelligent transformation and dispatch capabilities are the core directions for future power grid investment.

The main viewpoints of China Galaxy Securities are as follows:

State Grid’s investment intensity and direction

Under the dual-carbon targets, the power generation side’s energy transition goals and the rapid growth in demand on the load side—such as AIDC and new-energy vehicles—are the core drivers for the power system’s transformation and upgrade.

During the “14th Five-Year Plan” period, State Grid planned investment of 2.4 trillion yuan, and actual investment reached about 2.85 trillion yuan. During the “15th Five-Year Plan” period, if the investment intensity is calculated based on 4 trillion yuan, the implied annualized CAGR is around 6%; optimistically, considering historical experience (from the 15th to the 14th Five-Year Plan, planned investment : actual investment is approximately 1:1.25), it is predicted that power grid investment during the 15th Five-Year Plan period could reach 5 trillion yuan, corresponding to an annualized CAGR of about 13%. Overall, State Grid will maintain a relatively high investment intensity during the 15th Five-Year Plan period.

According to the “Ten Measures for Supporting High-Quality Development of New Energy” released by State Grid, it is explicitly stated that the grid will treat “enhancing the grid’s resource allocation capacity and improving the new energy carrying capacity” as core tasks, ensuring that during the “15th Five-Year Plan” period, the grid connects no less than 200 million kW of new-energy resources on average each year and achieves efficient utilization. Strengthening investment in ultra-high-voltage and backbone grid infrastructure and interconnection capabilities, increasing investment in upgrading urban and rural distribution networks and their carrying capacity, and enabling the grid’s intelligent transformation and dispatch capabilities are the core directions for future power grid investment.

Ultra-high voltage and main grid

Strengthening investment in ultra-high voltage and the main grid, and enhancing the grid’s resource allocation capacity, is the top priority for State Grid during the “15th Five-Year Plan” period. State Grid said it will strive to bring the 15 ultra-high-voltage direct-current (UHV DC) lines already included in the planning into operation as early as possible, improve cross-provincial and inter-regional transmission capacity by 35%, build a number of power mutual-aid projects to expand regional flexible mutual-aid capability by more than two times, and meet the needs for large-scale, efficient allocation of new energy. At the same time, it will optimize the layout of regional main grid networks, coordinate the planning of power sources and grids, match the development schedule of centralized new energy bases, and ensure efficient and optimized allocation of resources.

Distribution network

Improving new-energy carrying capacity and expanding the connection space for distributed power sources are the main goals of distribution network upgrades. During the “15th Five-Year Plan” period, efforts will focus on addressing shortcomings in the distribution network, building a modern distribution network characterized by energization, intelligence, and flexibility, and achieving an increase in distribution network capacity of more than 900 million kVA during the planning period.

On the one hand, it will promote the construction of county-level active distribution networks and demonstration projects of microgrids at the township and town level, adapt to the connection of distributed new-energy resources such as distributed photovoltaics, rooftop wind power, and small-scale energy storage, and promote the utilization of new energy locally. On the other hand, it will upgrade urban distribution networks, support the construction of industrial green microgrid and integrated source-grid-load-storage projects for industrial parks, comprehensively implement the guidelines for assessing the carrying capacity of distributed power sources, and ensure the smooth grid-connection of newly added distributed new-energy resources of more than 60 million kW on average each year.

Intelligent grid

Promote investment in building a digital platform. Build an integrated intelligent dispatch and end-to-end monitoring platform for source-grid-load-storage, connect and remove barriers across dispatch, trading, and utilization stages, and enable cross-province and cross-region resource coordination and efficient matching of supply and demand. Increase investment in intelligent control technologies, focusing on key technologies such as precise forecasting of new energy, and simultaneously advance industrial application of grid flexible control and active support technologies. Explore demand-side regulation potential, plan grid facilities that support load aggregation and virtual power plants, and improve the system’s intelligent capabilities for peak shaving, frequency regulation, and voltage regulation.

Risk warning

Risks that industry policies fall short of expectations; risks that progress in new technologies falls short of expectations; risks of a surge in raw material prices and difficulties for enterprises in operating; risks of political instability overseas and deterioration of the trade environment.

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