CITIC SEC: Warm winter and high base numbers lead to flat demand, accelerating investment in nuclear and thermal power sources.

CITIC SEC released a research report stating that from January to February 2025, the year-on-year growth of electricity consumption in the whole society increased by 1.3%. On the supply side, investment in thermal power and nuclear power has accelerated significantly, while investment in the power grid has continued its strong growth trend since 2024, with a year-on-year increase of 33.5%; the growth in installed capacity and sluggish demand led to a 9.4% year-on-year decrease in thermal power utilization hours from January to February, and the wind and solar power penetration rate continued to decline slightly. Focus on four main themes: long-term assets such as hydropower and nuclear power benefiting from the decline in interest rates and return expectations; undervalued renewable energy stocks in Hong Kong, with valuation safety margin and expectations of policy improvements; selected niche sectors with resource endowments or business model advantages, such as offshore wind and coal-fired power integration; and new scenarios and models where digitalization and new power systems are increasingly integrated, such as virtual power plants, microgrids, comprehensive energy services, and power forecasting. CITIC SEC's main points are as follows: Demand: Electricity consumption growth rate in January and February was 1.3% due to a mild winter and leap year high base effect. According to data from the State Grid Corporation of China, from January to February 2025, total electricity consumption in the whole society was 1.564 trillion kWh, a year-on-year increase of 1.3%, which was 1.9 percentage points lower than in December 2024, with electricity consumption growth remaining flat or mainly influenced by the higher winter temperatures compared to historical periods and the high base effect caused by the leap year last year. In January and February, primary industry, secondary industry, tertiary industry, and residential electricity consumption contributed 7.7%, 40.4%, 50.7%, and 1.6% to the overall incremental electricity consumption, respectively. In January and February, the growth rate of electricity consumption in the secondary industry decreased month-on-month, and the demand for electricity in high energy-consuming industries slowed down; in terms of regions, the growth rate of electricity consumption in high energy-consuming areas fell to 2.4%, while in coastal areas it continued to decline. Supply: Accelerated investment in thermal power and nuclear power, and the investment growth rate in the power grid reached a new high. As of February 2025, the installed capacity of power plants with a capacity of 6,000 kilowatts or more nationwide reached 2.98 billion kilowatts, a year-on-year increase of 11.7%. From January to February, a total of 54.53 million kilowatts of new installed capacity was added domestically, including 39.47 million kilowatts of new solar power capacity. From January to February, power investment was 75.3 billion yuan, a year-on-year increase of 0.2%, 11.9 percentage points lower than the full-year growth rate in 2024; power grid investment was 43.6 billion yuan, a year-on-year increase of 33.5%, 18.2 percentage points higher than the full-year growth rate in 2024, with the construction and maintenance of ultra-high voltage and distribution networks maintaining a high growth trend. Compared to the data from 2024, investments in thermal power and nuclear power have accelerated significantly, while the overall growth rate of investment in the power generation sector has slowed down; the power grid sector has continued its strong growth trend since 2024, achieving a new high in investment growth rate in nearly four years. Integration: Noticeable decrease in thermal power utilization hours, slight decrease in wind and solar power. From January to February, the average utilization hours of power generation equipment in China was 505 hours, a year-on-year decrease of 10.3%. Among them, hydropower utilization was 368 hours, a year-on-year decrease of 0.3%; thermal power utilization was 691 hours, a year-on-year decrease of 9.4%; nuclear power was 1,226 hours, a year-on-year increase of 0.8%; wind power was 363 hours, a year-on-year decrease of 2.7%; CECEP Solar Energy was 166 hours, a year-on-year decrease of 1.2%. In February, the utilization rate of wind power in China was 92.9%, a year-on-year decrease of 0.8 percentage points; the utilization rate of solar power was 93.4%, the same as the previous year. The significant decrease in thermal power utilization hours is mainly due to the expansion of thermal power installed capacity in 2024 and the limited growth in electricity demand since 2025, leading to an overall easing of the supply-demand situation. Risks: Electricity demand lower than expected; significant decline in market trading electricity prices; substantial increase in fuel costs; upward trend in wind and solar costs; increased risk in the integration of new energy; lower-than-expected hydroelectric power generation, etc.