SHANGHAI, Mar 3 (SMM)—Carbon neutrality stocks have attracted market attention recently. In December 2020, the Central Economic Work Conference determined that promoting a peak in coal consumption and carbon neutrality are one of the key tasks to be focused in 2021. China is aiming to improve the system that caps both national carbon intensity－carbon dioxide emissions per unit of GDP－and energy consumption, as it strives to reach a peak in carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060. Carbon neutrality refers to achieving net zero carbon dioxide emissions by balancing carbon dioxide emissions with removal (often through carbon offsetting) or simply eliminating carbon dioxide emissions altogether. It is used in the context of carbon dioxide-releasing processes associated with transportation, energy production, agriculture, and industrial processes. Carbon neutrality is expected be an important part of the "Two Sessions" and the "14th Five-Year Plan” to be held this week. 

Guo Yungao, Secretary-General of the Energy Storage Equipment Technical Committee of the China Electric Power Market Association, believes that promoting a peak in coal consumption is an issue of energy transition and ecological environmental protection, which are related to high-quality and sustainable economic development. The proportion of new energy and renewable energy supply should be expanded, energy efficiency should be improved, carbon dioxide emissions per unit of GDP should be lowered, and the impact of social production and people's lives on the ecological environment should be reduced. 

The latest research by CITIC Securities believes that the key to achieving carbon neutrality lies in the transformation of fossil energy, which accounts for 85% of carbon emissions, to clean energy. In this context, it is predicted that China will have the following changes before 2060: First, with the growth of photovoltaic and wind power installed capacity, the power system will be completely decarbonized. Second, hydrogen energy will be fully commercialized, especially in the aviation field. Third, energy consumption sectors such as steel, building materials, and transportation will carry out large-scale electrification and hydrogen energy transformation. Fourth, carbon capture is a key puzzle to achieve the ambitious goal.

The State Grid issued a "carbon peak, carbon neutral" action plan

The State Grid Corporation of China issued the "Carbon Peak and Carbon Neutral" action plan on March 1, becoming the first central enterprise to issue a carbon peak and carbon neutral action plan. The plan proposes to fully promote the development of new energy and clean energy supply, speed up the construction of power grids, and invest about 2.4 trillion yuan in power grids during the 13th Five-Year Plan period to build strong smart grids in order to ensure the timely integration and consumption of new energy sources, strengthen the construction of power transmission channels, reach 230 million kilowatts of power transmission across provinces, and transmit 43% of the clean energy power, realizing the optimal allocation of resources across the country, and accelerate the construction of pumped-storage power stations. Since the 13th Five-Year Plan, construction of 21 pumped-storage power stations with an installed capacity of 28.53 million kilowatts has been started, and the scale of capacity under construction has reached 62.36 million kilowatts, which increased the capacity for new energy consumption. By the end of 2020, the installed capacity of clean energy in the company's operating area was 710 million kilowatts, accounting for 42%. Among them, the installed capacity of wind power and solar power generation was 450 million kilowatts, accounting for 26%, an increase of 14 percentage points from 2015, and the utilization rate reached 97.1%. New energy has become the first and second largest power sources 21 provinces and regions. Electricity generated by wind and solar power reached 587.2 billion kilowatt-hours, with 250 million mt of electric coal consumption and 450 million mt of carbon dioxide emissions reduced.

Everbright Securities believes that the State Grid increasing its efforts to promote the development of clean energy is beneficial to the photovoltaic and wind power sectors. The new energy planning goals are in line with expectations. It is estimated that in 2025 and 2030, non-fossil energy will account for about 20% and 25% of primary energy consumption respectively, while electric energy will account for more than 30% and 35% of end user energy consumption. By 2030, the installed capacity of wind power and photovoltaic power in the operation area of the State Grid will reach more than 1,000 GW.

In order to promote the consumption of new energy, the construction of UHV and energy internet has been increased. The northwestern region of China is abundant in new energy resources. The construction of UHV can promote the consumption of new energy in the northwest and reduce the rate of wind and solar abandonment. The State Grid plans to build 7 UHV DCs during the 14th Five-Year Plan, with an additional transmission capacity of 56 million kilowatts, and initially establish an internationally leading energy Internet. By 2025, the company's cross-provincial and cross-regional power transmission capacity will reach 300 million kilowatts, and the proportion of clean energy transmission will reach 50%.

The State Grid proposed to support the construction of peak-shaving gas power and the large-scale application of energy storage, and actively promote the development of "photovoltaic + energy storage" to improve the utilization efficiency of distributed power sources. By 2025, the distributed PV in the planned operation area of the State Grid will reach 180GW. Based on the results of the reform of the electricity market, the company also proposed to speed up the construction of the national carbon market, fully implementing the market-oriented trading of carbon emission rights, fully consider the impact of the carbon market on the electricity market, organically combine the price of electricity with the cost of carbon emissions, play the role of mutual promotion and synergy between the two markets, improve the market competitiveness of clean energy, and let energy-using companies bear the cost of carbon emissions, in order to promote clean energy and low-carbon transformation.

Inner Mongolia issued the "Several Measures for Ensuring the Completion of the Energy Consumption Dual Control Goals and Tasks during the 14th Five-Year Plan" for soliciting opinions According to the draft, the dual control target for energy consumption in the region in 2021 is determined to be a 3% reduction in energy consumption per unit of GDP, an increase in energy consumption of about 5 million mt of standard coal, an 1.9% increase in total energy consumption, and an added value per unit of industry energy consumption (equivalent) drop of more than 4%.

Guojin Securities believed that since China’s “carbon neutrality” targets were put forward in September 2020, Inner Mongolia has begun to take the lead in introducing energy consumption dual control measures. As a large coal energy supply province in China, Inner Mongolia has energy advantages and many energy-intensive industries have been transferred to the area. The draft for solicitation of opinions will play a demonstration role. It is expected that it will be gradually implemented in other provinces in the future, and gradually promote the implementation of the “carbon neutrality” policy. The production control of high energy consumption chemical products will be more stringent in the future.

High energy-consuming industries will face strict review, new management and control, and inventory optimization. The industry is expected to gradually form policy "barriers." The draft for comments emphasizes "strict energy-saving review constraints" and "full implementation of energy budget management". On the basis of meeting the total energy consumption control, strict project review of high energy-consuming projects has greatly restricted the disorderly construction of new production capacity. In addition, the elimination of existing backward and excess capacity, energy-saving transformation of high-energy-consuming industries will reduce the industry’s backward capacity.

“Carbon neutrality" has become a hot key word recently. Market participants believe that industries related to carbon neutrality, such as photovoltaics, new energy batteries, wind power, energy storage, and fuel cells, may usher in huge investment opportunities. Northeast Securities stated that the replacement logic of traditional energy by new energy sources such as photovoltaics and wind power under carbon neutrality has been further strengthened, and demand for new energy vehicles is guaranteed.

CITIC Construction Investment suggested to continue to deploy new energy vehicles, photovoltaics, and wind energy industry chains in the medium and long term. In 2035, pure electric vehicles will become the mainstream of new sales vehicles in China. New energy vehicles will replace traditional vehicles, and there is still a lot of room for improvement. As the nature of energy changes from natural resources to manufacturing, the demand for photovoltaic and wind energy equipment will usher in a surge. Traditional key carbon emission industries such as steel, building materials, and electrolytic aluminium may achieve the goal of carbon neutrality through production restrictions. The prices of related commodities are expected to increase, and leading companies are expected to fully premium.

Chuancai Securities said that the industry's basic orientation is the basis for this oversold rebound. In February, the new energy sector fell sharply, with the new energy vehicle index, lithium battery index, wind power index and photovoltaic index falling 4.87%, 5.17%, 2.43% and 6.32% respectively. However, since the second half of 2020, sales of NEVs has continued to hit new monthly highs. The CAGR will exceed 30% by 2025.  To achieve carbon peaking and carbon neutrality, photovoltaic, wind power generation and NEVs will see rapid development Longji, Tongwei, Mingyang Intelligent, CATL, Funeng Technology, Fulin Precision, Defang Nano, Dangsheng Technology and Yihuatong deserve attention. 

New Era Securities said that as the energy revolution is accelerating, global demand for photovoltaic installations is rising rapidly. Global PV installed capacity is expected to reach 170GW in 2021, an increase of 36% year-on-year. Among them, China is expected to install 66GW, Europe and the United States are expected to install 25GW and 18GW respectively. Domestic installed capacity will be 66GW in 2021, a year-on-year growth of 67.3% and the average annual compound growth rate is expected to reach over 15%. NEVs and photovoltaics are the vanguard of the energy revolution and are expected to maintain a high growth trend in the next few years.