SMM12, April 4: recently, the National Grid Company issued a "Circular on further strict Control of Power Grid Investment" (State Grid Office [2019] No. 826). In the future, the power grid company will strictly control the power grid investment and take the initiative to adapt to the transmission and distribution price reform and price reduction expectations.
Now the national grid is facing the goal of improving the power generation structure, as well as the energy development target (by 2050, clean energy accounts for 50% of the primary energy composition and electricity accounts for 50% of the terminal energy consumption), as well as competition in the business of external power sales companies, as electricity growth slows down and general industrial and commercial electricity prices decrease, the losses of provincial power grid enterprises are expanding. It is reported that in the first quarter of the State Grid, the growth rate of electricity sales and revenue decreased by 4.9 and 11.5 percentage points respectively compared with the same period last year. After several rounds of lowering the transmission and distribution price, the losses of enterprises at all levels of the company continued to expand and their investment capacity continued to decline. However, there are still widespread expectations for the reduction of electricity prices, and the power grid development mode, which depends on the rapid growth of electricity to support large-scale investment, will be difficult to sustain. Transformation is inevitable.
But for a long time, the development concept of the national power grid is "high investment, heavy assets, rapid growth". However, it is mentioned in the document that "loss-making units should take reversing losses as the primary task, only arrange simple reproduction inputs urgently needed for maintaining safe operation and power supply services, and in principle will no longer start new projects." it will greatly affect the procurement of power grid materials and infrastructure projects in the year after next.
In the medium to long term, the rapid growth stage of the power grid is almost over, the capacity allocated in the early stage of the power manufacturing industry may be surplus, and the original product production, design and sales model aimed at power grid collection and mining will also encounter great challenges. Similarly, a large number of engineering service enterprises that survive around power grid infrastructure also face challenges.
According to the SMM research, the development direction of the national network gradually turns to the digital direction of the smart grid and optimizes the starting point structure. The market estimates that if the national network investment brakes, in fact, the demand for the wire and cable industry is weakening. In particular, the demand side of the industrial chain related to power grid material procurement and infrastructure projects will have a greater impact. The construction of distribution network and the transformation and upgrading of rural power network will be the focus of investment in the future.
From January to October this year, the national grid investment reached only 66.6% of the annual target, this year's investment is likely to be unachievable, and bidding volume will be reduced. However, as for next year, as the last year of the 13th five-year Plan, and many of the bids for this year have not yet been picked up, it is expected that the goods will be gradually picked up next year, and there are still some expectations for all the demand for wires and cables next year. But now undevolved tenders will be more focused on the need for the construction of the Internet of things (IoT).
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