Guosen Securities Co.,Ltd. has released a research report indicating that market electricity prices are beginning to show signals of a cyclical reversal. From January to May 2026, new wind power installations totaled 0.24 billion kilowatts, a year-on-year decrease of 48.2%, while new solar photovoltaic installations reached 0.60 billion kilowatts, down 69.7% from the same period last year. The brokerage believes that generation-side profitability may have bottomed out, with free cash flow improving, paving the way for a potential revaluation of power companies.

Electricity consumption has risen sharply, while the pace of new renewable energy installations has slowed. This shift is driving the balance of power supply and demand toward a tightening equilibrium. In the first half of 2026, total social electricity consumption reached 5,099.9 billion kilowatt-hours, an increase of 5.3% year-on-year. Ten provincial-level regions saw growth rates exceeding 6%, driven by surging demand from data centers and electric vehicle charging infrastructure. The full market integration of renewable energy has led to declining on-grid prices for new energy sources, reducing project returns and slowing installation growth in some areas.

A clear reversal signal for electricity prices has emerged, strengthening the bargaining power of generation companies. On June 11, the U.S. National Oceanic and Atmospheric Administration declared the formation of an El Niño event in the tropical Pacific, issuing an El Niño warning. Forecasts suggest the phenomenon may strengthen to moderate or strong levels by autumn. Summer heatwaves associated with El Niño are expected to increase air conditioning loads, further boosting electricity demand and intensifying price negotiations. Signs of a price floor have appeared, with Guangdong experiencing significant price surges in May and July. The July monthly medium- to long-term electricity price in Guangdong reached 483.4 yuan per megawatt-hour, rebounding by 82.0 yuan per megawatt-hour month-on-month and surpassing the annual long-term contract price by 111.2 yuan per megawatt-hour. Provinces such as Zhejiang and Jiangsu are also showing upward price trends. Guosen Securities Co.,Ltd. contends that market electricity prices are now displaying cyclical reversal signals.

The dual drivers of clean energy integration and computing power demand are accelerating the adoption of collaborative models. The explosive growth of AI computing power is driving a sustained increase in electricity demand from data centers, making the synergy between computing and power a critical pathway for balancing digital economy development with renewable energy consumption. On the policy front, "computing-power collaboration" has been included in the government work report, with multiple departments offering support through green electricity trading, source-grid-load-storage integration, and direct clean energy connections. Industrially, the high stability demand of data centers complements the low marginal cost and long-term absorption needs of renewable energy, leading to the rapid rollout of models such as green electricity trading, direct green power connections, and integrated source-grid-load-storage-computing systems. Several listed companies, including Datang Group, Jinkang New Energy, Yuneng Holdings, Jinko Technology, Shaoneng Co., Ltd., and Gansu Energy, have already begun deployments. Economically, a typical 100MW project with an 80% clean energy coverage ratio and a PPA price of 0.29 yuan per kilowatt-hour could save a data center approximately 70 million yuan in annual electricity costs, with an unlevered IRR of about 5.5% and an equity IRR of roughly 7.5%, indicating nascent commercial appeal. However, the green certificate market currently suffers from oversupply, severely undervaluing environmental benefits. The direct green power connection model also faces policy bottlenecks such as backup fees and constraints on return power flows, making project returns sensitive to PPA prices and initial investment. Looking ahead, as data center electricity consumption surges from 196 billion kilowatt-hours in 2025 to 800 billion kilowatt-hours by 2030 (roughly fourfold growth), combined with declining green power costs and deepening electricity market reforms, computing-power collaboration projects tied to stable loads are poised for large-scale development. The revaluation of green electricity's environmental value is expected to be a key variable in enhancing project economics.

Green electricity absorption and the substitution of shipping fuels are opening growth opportunities for green methanol. Since 2025, China has issued a series of policies to promote green electricity consumption, making absorption a central focus of renewable energy development. Green methanol serves as an important local absorption pathway for green electricity. Additionally, the International Maritime Organization's push for a net-zero framework is creating demand for green methanol as a shipping fuel. As of 2025, China has signed or filed 173 green methanol projects with a total capacity of 53.46 million tons per year, showing rapid growth in both project numbers and scale. Electrified methanol is currently the most promising green methanol route. As green electricity costs decline and local consumption models are promoted, the cost of electrified methanol is expected to fall significantly. When green electricity costs drop below 0.1 yuan per kilowatt-hour, electrified methanol may become economically competitive with traditional coal-based methanol.

Generation-side profitability appears to have bottomed out, with free cash flow improving and power companies on the cusp of revaluation. As spot and monthly electricity prices signal a reversal, coal prices have stabilized and rebounded, providing support for a floor and rebound in medium- to long-term contract prices. Looking ahead to 2027, annual long-term contract prices are expected to bottom out and recover. Thermal power companies, as marginal clearing units in the electricity market, are likely to see profitability rebound. For hydropower, El Niño events increase the probability of higher precipitation in Southwest China, leading to significant year-on-year growth in hydropower output and boosting earnings. In the renewable energy sector, lower capital expenditure scales and the disbursement of renewable energy subsidies have improved corporate free cash flow, potentially lifting valuations. For nuclear power, the sustainable electricity pricing mechanisms first released in Liaoning and Guangxi are likely to spread. Coupled with nuclear power companies entering a period of intensive commissioning, earnings are expected to stabilize.

In terms of investment recommendations, with tightening power supply-demand dynamics and price reversal signals appearing, Guosen Securities Co.,Ltd. recommends focusing on thermal power leaders Huadian Power International and GD Power Development. For hydropower, given ample water inflows, it recommends leading company China Yangtze Power. For computing-power collaboration and green methanol-driven renewable absorption, it suggests SPIC Green Hydrogen Energy Platform Power Investment Green Energy, Jinkang New Energy, and Jinko Technology. For nuclear power, the scarce targets are China National Nuclear Power and CGN Power. Key risks include policy changes, delays in project construction and commissioning, electricity price declines, and a slowdown in macroeconomic growth.