CITIC Securities has released a research report indicating that the "15th Five-Year Plan" for the construction of a new energy system provides policy support for the development of the power industry. High growth in installed capacity underpins industry prosperity, and with the deepening implementation of a national unified electricity market, the market-based pricing mechanism is gradually being rationalized. The power industry is poised for increased marketization and improvements to its profit model.
For allocation, the top choices are leading companies with high-quality underlying assets in hydropower, nuclear power, and integrated coal-power. Also attractive are H-share thermal power and green power stocks, which offer valuation safety and appealing dividends. New scenarios and models benefiting from digitization and the advancement of the new power system, such as energy storage, virtual power plants, and microgrids, are also recommended.
The main viewpoints of CITIC Securities are as follows:
Release of the New Energy System Construction Plan
The "15th Five-Year Plan" for constructing a new energy system was recently issued. This plan sets out multiple binding and indicative targets for the "15th Five-Year" period, including the installed capacity structure, the proportion of non-fossil energy consumption, and comprehensive energy production capacity. The goal is to initially establish a clean, low-carbon, safe, and efficient new energy system by 2030.
Building an Advanced and Adaptable Infrastructure System
To meet transformation needs, the plan proposes reasonable control over the scale and generation of traditional coal power, while non-fossil energy installed capacity is to maintain rapid growth during the "15th Five-Year" period. The total power generation capacity is planned to reach 5.4 billion kilowatts by 2030, translating to an average annual addition of 300 million kilowatts.
According to the plan's requirements, by 2030, domestic conventional hydropower capacity should reach 410 million kilowatts, operational nuclear power should reach 110 million kilowatts, pumped storage capacity should reach 160 million kilowatts, and new energy storage should reach 300 million kilowatts. Based on this, the implied average annual addition for wind and solar capacity is approximately 240 million kilowatts.
Significant Internal Structural Adjustment in Capacity
The positioning of power sources is adjusting with the energy transition. New energy is becoming the main power source and shifting towards high-quality development, with core increments coming from large-scale bases in northern China, integrated hydro-wind-solar projects in the southwest, and deep-sea offshore wind power. The role of coal power is undergoing a fundamental transformation, gradually stepping back as the primary source of electricity generation and shifting towards system support and peak-shaving backup.
Hydropower construction will focus on integrated hydro-wind-solar projects, with conventional hydropower seeing moderate growth. Nuclear power development will primarily rely on third-generation pressurized water reactor technology, maintaining a steady construction pace for coastal plants. The importance of energy storage is increasing, with steady progress in pumped storage and a significant expansion in the planned scale for new energy storage. Investment in the grid side is being substantially increased, accelerating the development of ultra-high voltage inter-provincial and inter-regional transmission channels, upgrades to the main grid framework, and the intelligent transformation of distribution networks.
Deepening Electricity Market Reform
The plan aims to build a nationally unified electricity market system that organically links spot, medium-to-long-term, ancillary services, and capacity markets. It promotes the connection between inter-provincial, inter-regional, and intra-provincial electricity trading, using market construction to provide an institutional guarantee for achieving the new energy system. It calls for deepening the continuous operation of the medium-to-long-term market and increasing the frequency and flexibility of medium-to-long-term trading. Steady progress should be made in bringing gas-fired, hydro, and nuclear power into the market. The establishment of a reserve ancillary services market should be accelerated, a reliable capacity compensation mechanism should be established and improved, and regions with suitable conditions are encouraged to explore building capacity markets.
Key Risk Factors
Potential risks include slower-than-expected policy implementation, delays in electricity market reform, significant increases in coal prices, constraints on terminal demand, substantial declines in electricity prices, and increased pressure on new energy integration.