The power and grid equipment sector has recently delivered standout performance, with industry momentum consistently exceeding expectations. In July, the state released the 15th Five-Year Plan for Renewable Energy Development, setting a target of approximately 3.5 billion kilowatts of total installed renewable energy capacity by 2030. State Grid's 2026 ultra-high-voltage bidding volume has already substantially surpassed last year's full-year total, while summer electricity load records continue to be broken, with projected national peak demand exceeding 1.6 billion kilowatts. A profound energy transformation is unfolding, driven by the convergence of policy support, industrial cycles, and new demand from artificial intelligence.

On September 4, China AMC's in-depth research video podcast DeepTalk released its tenth episode, focusing on the red-hot power and power equipment sector. The program was hosted by China AMC's Xu Meng, featuring Professor Wang Yongli, deputy director of the Energy Internet Research Center at North China Electric Power University and director of the Institute of Power Economic and Technical Analysis, alongside Xun Yugen, chief economist at Guosen Securities and director of its Institute of Economic Research. The cross-disciplinary conversation examined shifting supply-demand dynamics in the power industry, pathways to resolve energy misallocation, global industrial patterns, and secondary market investment logic, helping investors clarify industry trends and decision-making frameworks amid the energy revolution.

From Aggregate Growth to Structural Reshaping

The dialogue opened with an examination of the profound changes underway in the power sector. On the supply side, a dramatic restructuring of the energy mix is taking place. Professor Wang Yongli noted that China has become the world's largest grid and installed capacity nation, with installed capacity surpassing 4 billion kilowatts by the first half of 2026. A landmark historical milestone has arrived: coal-fired power generation reached 2.51 trillion kilowatt-hours, accounting for 49 percent of total electricity consumption, falling below 50 percent for the first time ever. Coal power is transitioning from its role as the absolute primary power source toward serving as a balancing, peak-shaving, and flexible matching resource, while wind and solar are evolving from supplementary energy into mainstream power sources.

On the demand side, AI computing centers and new energy vehicle charging infrastructure have emerged as two powerful new growth poles. Xun Yugen analyzed that national electricity consumption growth stands at approximately 5 percent in the first half of the year, yet data center power demand is growing at roughly 45 percent and charging pile demand at approximately 55 percent. These two new demand sources not only grow rapidly but also exhibit fundamentally different consumption patterns. AI data centers require uninterrupted, stable, high-quality power supply around the clock, while charging piles display a tidal effect with concentrated charging after work hours, posing enormous challenges to the grid's instantaneous load capacity.

"The traditional thermal power era followed a load-following generation model where output tracks consumption," emphasized Professor Wang. "Wind and solar power inherently possess volatility and intermittency, and when combined with new uncertain loads like computing power and charging infrastructure, the operating logic of the power system has fundamentally changed. Electricity production and consumption must achieve real-time balance, and the volatility of renewables plus the uncertainty of new loads has significantly raised the difficulty of maintaining that instantaneous equilibrium."

Resolving Misallocation: UHV, Computing-Power Coordination, and Distribution Upgrades

Facing dual misallocation of energy resources and consumption loads across both geography and time, China's power industry is charting a systematic course toward resolution. For geographic misalignment under the West-to-East power transmission framework, ultra-high-voltage transmission technology has become the linchpin. Professor Wang Yongli indicated that China's UHV system has matured into a systematic and scaled framework, encompassing a complete industrial chain covering converter transformers, converter valves, combined switchgear, and control protection systems, along with full-chain capabilities in system design, equipment manufacturing, construction commissioning, and complex grid operations management, with full turnkey export capacity. Looking ahead, to support the 2035 target of 3.6 billion kilowatts of new energy capacity, the state plans to add approximately 15 new UHV direct current transmission lines, with west-to-east transmission volume expected to exceed 420 million kilowatts, equivalent to one-quarter of the national maximum load, ushering in a new peak period for UHV construction.

An even more imaginative solution is computing-power coordination. Xu Meng highlighted the Ulanqab Xinghe Smart Computing Center as a typical case, with a base roughly the size of 20 football fields and 160 megawatts of power supply capacity. The project places energy-intensive computing facilities directly in resource-rich regions, drawing power locally and eliminating cross-regional transmission costs. While electricity requires wired transmission, computing results can be transmitted back to eastern demand centers via communication networks without the need for long-distance transmission corridors, structurally mitigating the spatial mismatch between energy and load.

For temporal misalignment, where consumption peaks fail to align with generation peaks, the guests identified four pathways. First, price mechanisms that raise tariffs during peak periods to encourage users to shift non-urgent consumption to off-peak hours. Second, coal power peak-shaving, where output is reduced during valleys to accommodate renewables and ramped up to fill gaps during consumption peaks, leveraging its ability to generate immediately when coal is available. Third, energy storage development, essentially equipping the grid with massive rechargeable batteries. Fourth, promoting virtual power plants that aggregate distributed industrial, residential, charging pile, data center, and storage loads for grid dispatch participation.

Professor Wang Yongli added an important point: during extreme weather events that distort market signals, reliance on the national dispatch system and mandatory management measures remains essential, which is precisely the institutional reason China has never experienced an Iberian-style large-scale blackout.

Notably, distribution network upgrades are widely regarded as the next construction priority. Professor Wang Yongli used a vivid analogy: past investment focused on the major arteries of the transmission network, but future efforts must strengthen the capillary network of distribution systems. With the proliferation of distributed generation and charging piles, distribution networks are evolving from one-way consumer networks into two-way prosumer networks, making intelligent and flexible retrofitting urgently needed and presenting enormous investment opportunities.

Riding the Wave: A Long-Cycle Sector with Triple Tailwinds

After clarifying the industrial logic, the conversation turned to investment opportunities most relevant to investors. Xun Yugen believes the power equipment sector is currently experiencing a convergence of three favorable factors: domestic construction, overseas demand, and technological upgrading. First, the domestic 15th Five-Year Plan provides exceptionally clear guidance for grid investment growth, with State Grid's fixed asset investment projected at 4 trillion yuan over the period, a 40 percent increase from the 14th Five-Year Plan and an all-time high.

Second, overseas market demand is vast, whether from aging grid replacement in Europe and the United States or new grid construction in emerging economies, offering export opportunities for Chinese power equipment companies with cost and technology advantages. Despite challenges such as trade barriers, China's global competitiveness in transformers and smart meters remains beyond question. Third, AI and other technologies have generated new requirements for power quality and system stability, driving equipment technology iteration and value enhancement.

Xun Yugen analyzed that the market previously treated the power equipment sector as a low-growth field, but with multiple factors converging, industry profit growth expectations have been revised upward and growth attributes have been reevaluated, creating potential for simultaneous earnings and valuation expansion, or a Davis double play. As the guests emphasized, power is a quintessential long-cycle industry, and investing requires returning to industrial logic and viewing technological iteration and value creation through a long-term lens.

From the coordinated evolution of source-grid-load-storage to the paradigm innovation of computing-power coordination, the power industry serves as the cornerstone of a new round of productivity revolution, and the prologue to its value reassessment has only just begun. China AMC's DeepTalk has now reached its tenth episode, covering topics from new AI paradigms to gold's safe-haven logic and semiconductor self-reliance. Through sustained content innovation, China AMC translates years of active research accumulation, industrial resources, and expert perspectives into decision-making references that investors can understand and apply. Going forward, DeepTalk will continue focusing on frontier sectors, connecting production, academia, research, and investment perspectives, and helping investors navigate cycles and seize opportunities through companion-style professional content.

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