This week’s view: the market mechanism of power auxiliary services welcomes major revision
On December 24, 2021, the website of the National Energy Administration issued the regulations on the management of power grid connection operation and the measures for the management of power auxiliary services, which ushered in a major revision of China’s power auxiliary service market mechanism after a lapse of 15 years. We believe that the revision of the regulations and measures is of great significance. First, it further defines the important position of auxiliary services in the new power system. With the rapid penetration of new energy, the proportion of auxiliary services in the total electricity bill of the whole society is expected to continue to increase in the future. In addition, this revision defines the compensation mechanism for power auxiliary services. At present, the cost of power auxiliary services is mainly shared by the power generation side, and in the future, it will be shared by all grid connected entities such as power generation enterprises and market-oriented power users in accordance with the principle of “who provides, who makes profits; who benefits, who bears”.
The improvement of auxiliary service market mechanism will boost the long-term development of China’s new energy storage. Compared with the traditional thermal power grid connected units, electrochemical energy storage is obviously superior in regulation rate, response time and regulation accuracy, and has strong competitiveness in the power auxiliary service market. Referring to the experience of overseas developed power markets, auxiliary services have become an important source of income for energy storage projects. The revision of the regulations and measures clearly brings the new energy storage into the main scope of providing auxiliary services. In the future, with the development and growth of the power auxiliary service market, the business model of energy storage in China is expected to be gradually adopted.
It is recommended to pay attention to energy storage manufacturers and integrated energy management scheme providers with experience in auxiliary service projects. On the whole, we believe that the revision of the regulations and measures provides a broad development space for new energy storage and user side load management. It is recommended to pay attention to Shaanxi Baoguang Vacuum Electronic Apparatus Co.Ltd(600379) , Guangzhou Zhiguang Electric Co.Ltd(002169) , Yunnan Wenshan Electric Power Co.Ltd(600995) , Zhejiang Wanliyang Co.Ltd(002434) and other energy storage integrators / operators with experience in power side auxiliary service projects, as well as Dongfang Electronics Co.Ltd(000682) , Longshine Technology Group Co.Ltd(300682) , Wiscom System Co.Ltd(002090) , Acrel Co.Ltd(300286) and other user side integrated energy management system / service providers.
Market review this week: the increase of power equipment sector leads the market in 2021
The power equipment sector rose 3.4% this week, outperforming the CSI 300 index by 3.0%, of which photovoltaic equipment performed best (+ 7.7%) and power grid equipment performed relatively poorly (- 1.4%). In 2021, the cumulative increase of the power equipment sector was 47.9%, significantly outperforming the Shanghai and Shenzhen 300 index (- 5.2%), ranking first in the whole market.
Industry chain tracking: the prosperity of lithium battery industry chain continues, and the price of silicon continues to fall
Lithium battery: the downstream demand boom is superimposed, and the shortage of some raw materials continues. In December 2021, the overall price of the lithium battery industry chain still rises, and some battery manufacturers are planning to raise the price.
Photovoltaic: the price of silicon materials and modules continued to fall this week. The inventory clearing of modules since November 2021 came to an end. The production scheduling of modules improved significantly in January 2022, and the prices of silicon wafers and cells were strong. With the gradual release of new silicon production capacity from 2022, the terminal installation demand is expected to rise rapidly.
Risk tips: changes in new energy industry policies, supply chain bottlenecks lead to lower than expected installed capacity, intensified market competition leads to decline in industry profitability, etc
