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China’s power grid equipment makers see boom ahead as Beijing underscores renewables push

  • One of two state-owned grid companies raises spending 23.5 per cent to US$24 billion in 2024 in race to wire in renewable capacity

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An aerial photo taken on September 13, 2022, shows part of the Baihetan-Zhejiang ultra-high-voltage transmission line project crossing the Yangtze River in southwest China’s Chongqing. Photo: Xinhua

China’s power grid equipment sector is set to boom as state-owned utility firms boost spending amid rising electricity demand and a renewed call from Beijing to better incorporate the country’s record-breaking renewable energy generation capacity into the power system.

China Southern Power Grid, one of two state-owned grid companies, has budgeted 173 billion yuan (US$24 billion) for capital expenditure in 2024, up 23.5 per cent year on year and a significant acceleration compared with a 12.1 per cent increase in 2023, state media outlet People’s Daily said.

The money will flow mostly to 194 energy-related projects in power grid development, pumped-hydro storage and additional energy storage capacity, the report said.

“We attribute the capex growth acceleration to facilitating more renewable project addition,” Pierre Lau, head of Asian utilities and clean energy research at Citi, said in a report on Monday. The other state-owned utility, State Grid, is likely to boost its capital expenditure for similar reasons, the report added.

Analysts are positive on China’s power equipment sector because rapid growth of wind and solar capacity has led to increased rates of power curtailment – when more power than the grid can handle is being generated. This means investments in grid capacity, smart grid infrastructure and energy storage must accelerate to keep up.

China’s National Energy Administration (NEA) published a notice on June 4 that called for ensuring the consumption and high-quality development of renewable energy. It highlighted the importance of management and support for transmission projects, especially for utility-scale wind and solar bases, and specifically pointed to 70 transmission and substation projects that are due to start operations or begin construction in 2024.

The notice reflects Beijing’s aim to accelerate the implementation of better transmission networks, according to Dennis Ip, an analyst at Daiwa Capital.

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