Huayuan Securities: Microgrid Economics Become Prominent; Mine Green Power and Electric Mining Trucks Expected to Accelerate Development

Huayuan Securities released a research report stating that the levelized cost of electricity (LCOE) for solar-plus-storage microgrids is only RMB0.6-0.7/kWh, offering a significant cost advantage and meeting mining companies' carbon reduction demands, with outstanding substitution potential. The global mining industry is undergoing an investment growth cycle, and mining companies' capital expenditures may continue to increase, which is expected to bring new demand for green power at mines. Chinese enterprises, leveraging complete domestic industrial chains and project implementation experience, have outstanding competitiveness in overseas markets. The main viewpoints of Huayuan Securities are as follows: Development background: High diesel generation costs and carbon emission pressure at mines; mine microgrids are expected to accelerate substitution Electricity costs account for 15%-40% of mine operating costs. A large number of remote overseas mines are far from main power grids and rely heavily on diesel generation, which suffers from high costs, poor stability, and high carbon emissions. The LCOE for solar-plus-storage microgrids is only RMB0.6-0.7/kWh, offering a significant cost advantage and meeting mining companies' carbon reduction demands, with outstanding substitution potential. Market space: Replacement of existing diesel generation + incremental demand from mining truck electrification + global mining exploration investment & capital expenditure pull; broad global market space for mine green power Existing space: The estimated annual market space for global mine solar-plus-storage microgrids is RMB164.6-247 billion, of which the African mining area accounts for RMB74.1-111.1 billion; global potential demand for solar replacement installations is approximately 103GW, with storage at 309GWh; Africa corresponds to 46GW of solar and 139GWh of storage. Incremental space: 1) Mining truck electrification replacement demand: annual diesel consumption for mining truck transport is approximately 2.6 times that of on-site diesel generation. If 100% electrified, this would add 428.06 billion kWh/year of electricity demand; considering that domestic electric mining truck penetration is only 10% with a 5-year replacement cycle, the existing replacement space is relatively large. 2) Exploration investment & capital expenditure pull: Global exploration investment in non-ferrous metal minerals (excluding oil and gas, and coal) in 2026 grew by 30% compared with 2025, achieving the largest increase in 10 years. In addition, the global mining industry is undergoing an investment growth cycle, and mining companies' capital expenditures may continue to increase, which is expected to bring new demand for mine green power. Business model: Overseas mines mainly adopt the PPA (long-term power purchase agreement) model; typical projects have excellent profitability Overseas mines mainly adopt the PPA power sales model, with independent power producers responsible for investment, financing, construction, and operation and maintenance. Settlement electricity prices are divided into fixed prices and settlement at the average of diesel costs and solar-plus-storage LCOE. Mining companies have zero capital expenditure, and project parties sign 15-20 year long-term power purchase agreements. For a typical project (average annual utilization hours of 1,600, 1:3 storage ratio, selling price of RMB1.4/kWh, 10-year depreciation), net profit per kWh is approximately RMB0.7, all-investment IRR reaches 23%, and equity IRR reaches 62.6%, indicating strong replicability of the business model. Industry layout: The industry is accelerating its layout, and the trend of the mine green power industry is established Chinese enterprises, leveraging complete domestic industrial chains and project implementation experience, have outstanding competitiveness in overseas markets. Overseas projects of Zijin Longking, BRETON, Sany Silicon Energy, and others continue to be implemented. Yutong Heavy Industries leads in new energy mining truck sales and market share. JinGuan Electric focuses on heavy truck charging piles in mining areas and integrated solar-storage-charging solutions. Shenzhen hongfuhan Technology has entered the microgrid business through acquisitions or self-invested green power projects. Huawei, Envision, Sungrow Power Supply, Shanghai Holystar Information Technology, and others are accelerating the layout of microgrid technology solutions across the technology industry. Risk warnings: Uncertainty in power station construction and implementation; risk of operational fluctuations of power users; risk of electricity fee collection; risks related to overseas policies and compliance.