Overseas Utilities Sector Weekly Report: Domestic policies continue to drive green power demand, with positive developments for power operators

Recent Industry Developments

The National Development and Reform Commission (NDRC) has introduced a new policy supporting green electricity. On January 21National Development and Reform Commission (NDRC), relevant departments released the 'Implementation Plan for Promoting Green Consumption,' further emphasizing support for green power consumption, using market mechanisms to promote green electricity absorption.It emphasizes 1) further stimulating the potential of green power consumption across society,and implementing requirements that newly added renewable energy and raw material energy are not included in total energy consumption control. 2) Coordinating the promotion of green power

Strengthen the rigid constraints on high energy-consuming enterprises to use green power through trading and green certificate trading.Regions can formulate the minimum proportion of green power in the electricity consumption of high energy-consuming enterprises according to actual conditions.。

Datang Power announced its annual power generation and 2025 new energy installation plan. On January 21, Datang Power announced: As of the end of 2021, it had cumulatively completed power generation of approximately 257.7157 billion kilowatt-hours, a year-on-year increase of 1.54%, with an average online electricity price of RMB 389.1 per megawatt-hour.Zou Lei, Party Secretary and Chairman of China Datang, emphasized at the work conference: We must achieve a transformation from a traditional power enterprise to a green and low-carbon energy enterprise.By 2025, non-fossil energy installations will exceed 50%.。

Key Insights

The new policy promotes the continuous improvement of green power on both the supply and demand sides. We believe that the 'Implementation Plan for Promoting Green Consumption' has loosened the control over energy consumption in green power construction, improving the tight supply-side issue in green power construction. In the future, as technology continues to advance and production scales up,Costs for upstream raw materials and midstream components are expected to continue declining.The industrial dividend is shifting towards green power operators.。On the other hand, high energy-consuming enterprises will face rigid constraints on their green power consumption, accelerating the release of their demand for green power consumption. From both supply and demand perspectives, this is beneficial for green power. We believe that under the promotion of the 30-60 dual carbon strategic goals, more supportive policies will be introduced in the future, and the power generation of green energy is expected to exceed expectations.

Traditional thermal power plants are accelerating their transition to green power under policy support.。Recently, China's electricity prices underwent a round of market-oriented reforms, with particular emphasis that the market transaction prices for high energy-consuming enterprises are not subject to the 20% cap. This reform is expected toboost the profitability of traditional thermal power plants and bring stable operating cash flow, combined with the state'snew energy special bondscontinuous issuance, which has fully addressed the funding issues for thermal power plants transitioning to green energy. Traditional thermal power plants are aligning with the national 30-60 dual carbon strategy, actively accelerating their transition to green energy, which could open up a second growth curve.

Investment advice

In summary, we believe that policies will continue to support the construction of green electricity, along with cost reductions in upstream and midstream sectors, enabling green energy to sustain high growth. We recommend investors to pay attention toinvestment opportunities in green power operators, as well as investment opportunities in traditional thermal power plants that are accelerating their transition to green energy.

Risk Warning

Risks include policy support lower than expected, slower-than-expected cost reductions in upstream and midstream sectors, unexpected declines in electricity prices, and unexpected drops in electricity consumption.

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