According to Zhiyuan Finance APP, Soochow has released a Research Report stating that the issuance of the 'Implementation Plan for Optimizing the Regulation Capability of the Power System (2025-2027)' focuses on three key tasks: formulating a regulation capability construction plan, improving the calling methods of regulation resources, and enhancing the market mechanisms for regulation resource participation. With further high-quality development of green electricity and stable investment in construction, along with improvements in new reasonable consumption and utilization capabilities, optimization solutions for the consumption of new energy are expected from 2025 to 2027.

Event: The National Development and Reform Commission and the National Energy Administration issued the 'Implementation Plan for Optimizing the Regulation Capability of the Power System (2025-2027)'.

The main viewpoints of soochow securities are as follows:

Optimize the regulation capability of the power system and accelerate the construction of a new power system.

In July 2024, the National Energy Administration and other departments issued the 'Action Plan to Accelerate the Construction of a New Power System (2024-2027)', proposing nine key special actions to be carried out from 2024 to 2027 to promote the construction of the new power system. The issuance of the 'Implementation Plan for Optimizing the Regulation Capability of the Power System (2025-2027)' is a supporting special plan for implementing the optimization actions of the power system's regulation capability, promoting the consumption of new energy, and supporting the acceleration of the construction of a new power system.

From 2025 to 2027, the average new reasonable consumption and utilization of new energy is set to be over 0.2 billion kilowatts, with a national new energy utilization rate not lower than 90%. The 'Implementation Plan' emphasizes an average annual new energy consumption utilization of over 0.2 billion kilowatts, as well as a new energy utilization rate of not less than 90%. The dual carbon goals of 3060 guide the sustained high increase of new energy installations in China, with added installations from 2019 to 2023 of wind and solar amounting to 0.52/1.20/0.103/0.125/0.292 billion kilowatts, and an additional installation of 0.258 billion kilowatts for wind and solar from January to November 2024.

As the development of green electricity continues to advance in quality, construction investment is stabilizing. With the enhancement of reasonable consumption and utilization capacity, the absorption of New energy Fund is expected to be optimized between 2025 and 2027.

The Implementation Plan focuses on three key tasks:

The first key task is to develop a plan for improving adjustment capabilities.

Energy departments in various regions are to formulate adjustment capability construction plans for their areas and submit them to the National Development and Reform Commission and the National Energy Administration by the end of June 2025, specifying the scale of new flexible modifications of coal-fired power, gas power, hydropower, pumped storage, new energy storage, solar thermal, eco-friendly new energy, as well as grid-side and load-side adjustment capabilities.

Key elements include coal power (formulating flexible modification advancement schemes based on the principle of "as much as possible" for existing coal power units by 2027), gas power (properly deploying a number of peak-shaving gas power projects in suitable areas to further enhance gas power peaking capabilities), pumped storage (building with high quality), new energy storage (unified scheduling by dispatch agencies), hydropower (improving overall adjustment capabilities within river basins), and eco-friendly new energy (leveraging the proactive adjustment capabilities of new energy).

The second key task is to improve the methods for calling upon adjustment resources.

Regions are to study and propose reasonable sequences for calling upon various adjustment resources, in conjunction with the electricity market, to guide operation scheduling and achieve optimal resource allocation.

Key aspects include: pumped storage (differentiation, determining adjustment service areas based on power station positioning), coal power (economically reasonable calling, maximizing the economic adjustment capabilities of coal power units while minimizing frequent deep peaking and daily start-stop peaking of main coal power units), new energy storage (prioritizing scheduling of new energy storage during difficult periods for new energy consumption, achieving adjustments as much as possible within a day), and eco-friendly new energy (maximizing the utilization of supporting storage and smart control through integrated methods).

Key Task Three: Improve the market mechanism for adjustment resources.

Key areas include: Peak and valley electricity prices (in areas with spot market operations, reasonable peak-valley price differences are formed through market competition; in areas where spot market operations have not been realized, further improve the peak-valley time-of-use electricity price policy to enhance the economic incentive level of peak-valley price differences), auxiliary services (establish and improve the frequency regulation and standby auxiliary service market system, establish a market mechanism oriented towards adjustment effects, improve the regional auxiliary service market), and capacity compensation (clarify the acceleration of establishing a market-oriented capacity compensation mechanism to determine capacity demand and capacity value based on the market, guiding various resources to provide medium- to long-term stable capacity to the system).

Investment Suggestions: Optimize the adjustment capacity of the electrical utilities system and accelerate the construction of a new power system.

1) From 2025 to 2027, the reasonable absorption capacity of new energy will continue to improve, and the pressure on green electricity absorption will gradually ease. It is recommended to pay attention to national green electricity leading operators such as CHINA LONGYUAN (00916) and Three Gorges Energy (600905.SH), and high-quality offshore wind development Zhongmin Energy (600163.SH).

2) Adjustment resources participate in market mechanisms to tap the value of peak power generation from thermal power, flexibility value, and capacity value. Attention is recommended on high-quality regional thermal power operators An Hui Wenergy (000543.SZ) and Shenergy (600642.SH).

3) Various regions promote the construction of new adjustment capacity. Attention is recommended on pumped storage China Southern Power Grid Energy Storage (600995.SH) and the flexibility transformation of thermal power Qingda Eco-friendly Concept (688501.SH).

Risk Warning: Policy implementation progress is below expectations, fluctuations in coal and Henry Hub Natural Gas prices, and intensified competition.