Long-term optimistic about new energy industry investment opportunities, how to look for certain targets according to policy orientation?

2022-04-25 0 By

On February 10, 2022, the National Development and Reform Commission and the National Energy Administration issued the Opinions on Improving the System, Mechanism, Policies and Measures for Green and Low-carbon Energy Transition (hereinafter referred to as the Opinions), requiring the improvement of the institutional framework for green and low-carbon energy development.Main points: First, the Opinions have a two-stage planning requirement for the institutional framework of green and low-carbon energy development. The focus of the two-stage reform varies with different goals:During the 14th Five-Year Plan period, the energy reform will focus on “reducing energy consumption per unit GDP by 13.5% compared with 2020” and “increasing the proportion of non-fossil energy consumption to 20%” by 2025, and fully improving the supply of renewable energy.During the fifteenth Five-year Plan period, the new energy system needs to comprehensively enhance the national energy security guarantee capacity. On the basis of continuing to strengthen the supply and consumption capacity, renewable energy needs to replace oil and gas as much as possible in the energy consumption side.Second, in order to ensure the realization of the two-stage goals, the Opinions put forward a number of policy system building paths on the supply side and the demand side.Among them, the supply side emphasizes the overall development of green energy development, supply and transportation;The demand side focuses on guiding the application of green energy, transportation, industry and construction.In addition, the Opinions also put forward institutional design requirements for improving the energy, green and low-carbon transition security and supply guarantee system, scientific and technological innovation system, and fiscal and financial policy guarantee mechanism.Third, low-carbon and green energy transformation is not only an important means to achieve carbon emission reduction targets, but also an important starting point to improve China’s energy security capability.In terms of energy supply, the Opinions not only directly call for accelerating the construction of wind power and photovoltaic power generation bases, but also indirectly optimize the supply and consumption environment of new energy by supporting the construction of energy networks and resource exploration and exploration.From the perspective of energy demand, the Opinions set energy security as the goal of 2030, and increase the proportion of new energy consumption to ensure China’s strategic demand for energy security, so as to add impetus to the development of new energy.We are optimistic about long-term investment opportunities in wind power, photovoltaic and other new energy industries.Fourthly, we also suggest paying attention to the following investment opportunities: on the energy supply side, as the proportion of new energy consumption increases, the importance of trans-regional energy deployment will further increase, and the prospect of power grid construction and auxiliary power services will be better.On the demand side, from the perspective of carbon emission reduction and energy security, we suggest paying attention to the industrial chain related to urban rail transit and intercity railway transportation (oil substitution), and the industrial chain of geothermal energy and biomass energy development and utilization (natural gas substitution).In addition, it is also suggested to pay attention to the industrial chain related to hydrogen transport and energy storage mentioned in the Opinions, as well as the investment opportunities of clean and low-carbon energy REITs. On February 10, 2022, the National Development and Reform Commission and the Energy Bureau issued the Opinions on Improving the Energy Green and Low-carbon Transition System mechanism and Policy Measures (hereinafter referred to as the Opinions).We need to improve the institutional framework for green and low-carbon energy development.Key contents include: 1. Main objectives: During the 14th and 15th Five-Year Plan period, “Promoting low-carbon transition” and “ensuring energy supply” are the core objectives of the policy system construction. The Opinions make two-stage planning requirements for the institutional framework of green and low-carbon energy development:1) During the “14th Five-Year Plan” period, the core of China’s green and low-carbon energy development system is to promote low-carbon transformation, which includes “dual control” of energy consumption and non-fossil energy targets.2) During the 15th Five-Year Plan period, the core of China’s green and low-carbon energy development system is to ensure that the supply of non-fossil energy can meet the increase of China’s energy consumption, replace the stock of fossil energy on a large scale, and comprehensively enhance the energy security guarantee capacity.The focus of the two-stage reform changes with different goals: 1) The energy consumption “dual control” and non-fossil energy targets in 2025 continue to be the previous policy arrangement, and the expansion of renewable energy supply is the key to reach the target:The target of “dual control” of energy consumption is to reduce energy consumption per unit GDP by 13.5% compared to 2020 as stipulated in the 14th Five-Year Plan for Energy Conservation and Emission Reduction by the National Development and Reform Commission in January 2022.The target for non-fossil energy is “20% of non-fossil energy consumption”, as stipulated in the “Opinions on Achieving Peak Carbon Neutrality through Fully, Accurately and comprehensively Implementing the New Development Concept” issued by the CPC Central Committee and The State Council in October 2021.According to the linear extrapolation of the two growth rates in recent years, the target of “dual control” of energy consumption is not difficult, while the target of non-fossil energy consumption is facing challenges (Figure 1). Fully improving the supply and consumption capacity of renewable energy will be the focus of achieving the target in 2025.2) The challenge of energy substitution and energy security in 2030 is great, and the reform of end consumption is the key: China is a big importer of energy. In 2019, the difference between the total amount of primary energy production and total amount of energy consumption in China reached 902 million tons of standard coal, and the energy dependence reached 21.52%.In 2019, the import dependence of crude oil and natural gas calculated by apparent consumption 3 reached 72.67% and 44.13% respectively. Based on the product of import dependence and energy consumption, imported oil and natural gas affected about 17.34% of China’s energy demand.In order to ensure China’s energy security, on the basis of continuing to strengthen the supply and consumption capacity, renewable energy needs to replace oil and gas as much as possible in the energy consumption side, and the role of natural gas as “transitional energy” is further weakened, which may have been neglected by the market before.2. Main means of supply side to achieve the target: integrated development of green energy development, supply and transportationThe Guideline calls for the establishment of a general survey and information sharing mechanism for clean and low-carbon energy resources, including a detailed survey and comprehensive evaluation of clean and low-carbon energy resources nationwide.In a timely manner to clean all kinds of low carbon energy resources distribution of spatial information into the space at the same level the total energy consumption = total primary energy production, imports, exports and the beginning of year end inventory balance energy = external dependency net energy imports/energy apparent consumption = total production + import quantity – export quantity, production data from the National Bureau of Statistics,Import and export data come from the basic information platform of import dependence = Import quantity/apparent consumption of the General Administration of Customs and “one Map” of territorial space planning, etc.One of the difficulties in the development and utilization of clean energy such as wind, light and geothermal in China lies in the relatively insufficient precision of exploration data, relatively scattered statistical platforms and high cost of development and utilization information.We believe that the detailed survey of clean energy resources during the 14th Five-Year Plan period will become an important national work.2) Supply: The Opinions call for promoting the construction of an energy supply system dominated by clean and low-carbon energy, including accelerating the construction of large-scale wind power and photovoltaic power generation bases, upgrading existing coal power units in the region, and innovating the development and utilization mechanism of rural renewable energy.We believe that both wind and solar energy resources are abundant in China, and the development and utilization level has been improving in recent years.China’s “rich in coal, short of oil and little gas” resource endowment superimposed energy security needs, the importance of coal power unit transformation and clean utilization is increasingly prominent;The biomass energy in rural areas is abundant and has good development space as distributed pv.3) Transportation: The Opinions call for improving the construction and operation mechanism of the new power system, including improving the power grid system to adapt to the local in-depth utilization and wide transmission of renewable energy, improving the market mechanism to adapt to the new power system, and exploring the establishment of regional comprehensive energy service mechanism.Among the main renewable energy resources in China, the wind and solar energy resources are rich in reserves, but they are unevenly distributed in time and space. The reserves are concentrated in the northwest and southwest regions and have seasonal characteristics.We believe that as the share of renewable energy in total energy consumption increases, the demand for trans-regional energy trading and deployment will increase, and the importance of power grid construction and power market auxiliary service industry chain will increase.In addition, the construction of a unified national electricity market will help absorb new energy and further support the development of new energy by increasing the rate of return on investment.3, achieve the goal of energy demand side main means: to guide the green energy use, deliveries, industrial, building area is focus on 1) shipment: “opinions” requirement improve transportation field energy cleaner alternative policies, including its transportation green low carbon transformation, optimize the structure of the transportation, promote green low-carbon transport facilities and equipment, etc.We believe that in addition to the new energy vehicles, transport energy infrastructure, the urban rail transit and intercity railway traffic under the logic to reduce emissions not only has the development prospect of alternative fuel vehicles, inter-city railway, rail transit replacement air emission of “needy”), at the same time reduce the oil consumption and has the potential of energy security policy support.2) Industry: The Opinions call for improving policies to support green energy consumption in the industrial sector, including guiding industrial enterprises to replace clean energy, reducing carbon emissions per unit product, and building distributed clean energy and smart energy systems.In our opinion, due to the irreplaceability of oil in some industries, green electricity is still the main way to reduce emissions in the future.3) Construction: The Opinions require the improvement of green building energy use and clean heating policies, including the improvement of green building energy use and clean heating policies and support for the construction of renewable energy building energy supply system.We believe that in addition to prefabricated buildings and green building materials, from the perspective of energy security, more attention should be paid to the possible replacement of urban gas by solar energy, geothermal energy and biomass energy, especially the development and utilization of geothermal energy and biomass energy may be put on the agenda.4. Other means to achieve goals:Improve the safety guarantee for green low carbon energy transformation system, science and technology innovation system, fiscal and financial policy guarantee mechanism “opinion” also puts forward several other means to ensure the two stage goals, including the perfection of the mechanism of electric power demand response, support science and technology innovation, improve the diversification of investment and financing support green low carbon energy transformation mechanism, perfecting the green low carbon energy transformation of financial support policies, etc.In our opinion, the following contents are worth focusing on: 1) Scientific and technological innovation: It is proposed in the Opinions to explore efficient hydrogen transport methods such as gas pipeline mixing hydrogen transport, pure hydrogen pipeline transport and liquid hydrogen transport.Strengthen the research and development of new energy storage related safety technologies, and improve the technical standards and specifications for equipment and facilities, planning and layout, design and construction, and safe operation.Encourage the development and construction of new energy and energy storage projects in abandoned mining areas.2) Fiscal and financial aspects: The Opinions propose to promote market-oriented investment and financing of clean and low-carbon energy-related infrastructure projects, and study the inclusion of clean and low-carbon energy projects in the pilot scope of real estate investment trusts (REITs) in the infrastructure sector.We will innovate green financial products adapted to clean and low-carbon energy, encourage eligible enterprises to issue carbon neutral bonds and other green bonds, and guide financial institutions to increase support for projects with significant carbon reduction benefits.5. Investment Suggestion: Low-carbon and green energy transformation is not only an important means to achieve carbon emission reduction targets, but also an important starting point to improve China’s energy security capability.In terms of energy supply, the Opinions not only directly call for accelerating the construction of wind power and photovoltaic power generation bases, but also indirectly optimize the supply and consumption environment of new energy by supporting the construction of energy networks and resource exploration and exploration.From the perspective of energy demand, the Opinions set energy security as the goal of 2030, and increase the proportion of new energy consumption to ensure China’s strategic demand for energy security, so as to add impetus to the development of new energy.We are optimistic about long-term investment opportunities in wind power, photovoltaic and other new energy industries.In addition, we also suggest paying attention to the following investment opportunities: on the energy supply side, with the increase in the proportion of new energy consumption, the importance of trans-regional energy deployment will further increase, and the prospect of power grid construction and auxiliary power services will be better.On the demand side, from the perspective of carbon emission reduction and energy security, we suggest paying attention to the industrial chain related to urban rail transit and intercity railway transportation (oil substitution), and the industrial chain of geothermal energy and biomass energy development and utilization (natural gas substitution).In addition, it is also suggested to pay attention to the industrial chain related to hydrogen transport and energy storage mentioned in the Opinions, as well as the investment opportunities of clean and low-carbon energy REITs.6. Risk tips: 1) Economic repair exceeds expectations, and double control of energy consumption is tightened again.2) The unexpected development of geopolitics affects national energy security choices.3) CCUS technology exceeds expectations and energy structure is stable.(Source: Ping An Securities, Hao Stock)