Dongwu Securities: Optimizing Power System Regulation Capabilities to Accelerate Construction of New Electric Power Systems

The Zhitong Finance App learned that Dongwu Securities released a research report stating that the “Special Action Implementation Plan for Optimizing Power System Regulation Capacity Optimization (2025-2027)” lays out the three key tasks of preparing a capacity building regulation plan, improving how to regulate resource allocation, and improving the regulatory resource participation mechanism. With the further high-quality development of green power, construction investment is stabilizing. In line with the improvement of new rational consumption and utilization capacity, new energy consumption is expected to be optimally solved in 2025-2027.

Incident: The National Development and Reform Commission and the National Energy Administration issued the “Implementation Plan for Special Actions to Optimize Power System Regulation Capacity (2025-2027)”.

The main views of Dongwu Securities are as follows:

Optimize power system regulation capabilities and accelerate the construction of new power systems

In July 2024, the National Energy Administration and other departments issued the “Action Plan to Accelerate the Construction of New Electric Power Systems (2024-2027)”, which proposes to focus on carrying out 9 special actions in 2024-2027 to promote the construction of new power systems. The “Implementation Plan for the Special Action to Optimize Power System Regulation Capacity (2025-2027)” was issued this time. It is a supporting special plan to implement actions to optimize power system regulation capacity, promote the consumption of new energy sources, and support the accelerated construction of new power systems.

In 2025-2027, more than 200 million kilowatts of new energy were added for rational consumption and utilization, and the national new energy utilization rate is not less than 90%. The “Implementation Plan” focuses on the average annual consumption and utilization of new energy sources of 200 million kilowatts+, and the utilization rate of new energy sources not less than 90%. According to the 3060 dual-carbon target, China's Xinneng installed capacity maintained high growth. In 2019-2023, Scenery added 0.52/1.20/1.03/1.25/292 million kilowatts of installed capacity, and 2024M1-11 Scenery added 258 million kilowatts of installed capacity.

With the further high-quality development of green power, construction investment is stabilizing. In line with the improvement of new rational consumption and utilization capacity, new energy consumption is expected to be optimally solved in 2025-2027.

The “Implementation Plan” lays out three key tasks:

One of the key tasks is to prepare a regulatory capacity building plan

Local energy departments prepare regional regulatory capacity building plans and submit them to the National Development and Reform Commission and the National Energy Administration by the end of June 2025 to clarify the scale of additional flexible coal power transformation, gas and electricity, hydropower, pumped energy storage, new energy storage, photothermal, and friendly new energy, and grid-side and load-side regulation capabilities.

The focus includes coal power (to achieve the principle of “full reform” of existing coal power units in 2027), gas and electricity (moderately lay out a number of peak-shifting gas and power projects in eligible regions to further enhance gas and electricity peak shifting capabilities), savings (high-quality construction), new energy storage (unified scheduling by scheduling agencies), hydropower (improving the overall regulation capacity of watersheds), and friendly new energy (making full use of the active regulation of new energy sources).

The second key task is to improve the way to adjust resource allocation

Various regional studies suggest a rational allocation order for various types of regulated resources, and jointly guide scheduling and operation with the electricity market to achieve optimal allocation of resources.

Highlights include: savings (differentiation, determining the scope of adjustment services according to power plant positioning), coal power (economical and rational utilization, maximizing the economic regulation capacity of coal power units, minimising frequent deep peak shaking and intraday peak adjustment), new energy storage (prioritizing the scheduling of new energy storage during periods when it is difficult to consume new energy to achieve intraday adjustment), friendly new energy (making full use of supporting energy storage and intelligent control, using an integrated method), etc.

The third key task is to improve the mechanism for regulating resources to participate in the market

Highlights include: peak and valley electricity prices (spot operating regions, forming reasonable peak and valley price differences through market competition; regions that have not yet achieved spot operation, further improving the peak and valley hourly electricity price policy, raising the economic incentive level for peak and valley price differences), auxiliary services (establishing a market mechanism guided by regulation effects, improving the regional auxiliary service market), capacity compensation (clearly speeding up the establishment of market-based capacity compensation mechanisms to determine capacity requirements and capacity values in the medium to long term, and guide various resources to provide stable capacity for the system in the medium to long term).

Investment advice: Optimizing power system regulation capabilities and speeding up the construction of new power systems

1) In 2025-2027, the rational consumption capacity of new energy will continue to improve, and the pressure to consume green electricity will gradually ease. It is recommended to focus on leading green power operators in the country, Longyuan Electric Power (00916), Three Gorges Energy (600905.SH), and the development of Zhongmin Energy (600163.SH) with high-quality ocean breezes.

2) Regulate the mechanism of resource participation in the market and explore the energy value, flexibility value, and capacity value of thermal power peak electricity. It is recommended to focus on high-quality regional thermal power operators Wanneng Electric Power (000543.SZ) and Shenneng Co., Ltd. (600642.SH).

3) All regions promote additional regulatory capacity building, and it is recommended to focus on pumped energy storage in the South Grid (600995.SH) and thermal power flexibility to transform Qingda Environmental Protection (688501.SH).

Risk warning: Policy implementation progress falls short of expectations, coal and natural gas prices fluctuate, and competition intensifies.