Driven by the "dual carbon" policy, ultra-high voltage soars, and aluminum wire and cable rides the wind [SMM Analysis]

December 29, 2024

Time flies, and the year is nearing its end. As we look back on the processing and consumption of downstream aluminum industries over the past year, the aluminum wire and cable sector stands out, with "UHV" and "aluminum as a substitute for copper" frequently mentioned as key words. According to SMM's continuous tracking of aluminum wire and cable enterprises, since April this year, orders related to UHV have been in full swing, with deliveries continuing until November. This has alleviated production pressure on enterprises, allowing them to implement production cuts and conduct equipment maintenance in preparation for next year's production. Clearly, "UHV" has become a significant driver of development in the aluminum wire and cable industry. So, what exactly is "UHV"?

In China, UHV refers to DC power transmission lines with voltage levels of ±800 kV and above, and AC power transmission lines with voltage levels of 1,000 kV and above. DC power transmission lines of ±800 kV and above are suitable for long-distance, high-capacity power transmission with lower losses, while AC power transmission lines of 1,000 kV and above are typically used for shorter-distance transmission within or between provinces.

Why has UHV become the center of development today? At the 75th United Nations General Assembly in September 2020, China explicitly proposed achieving "carbon peaking" by 2030 and "carbon neutrality" by 2060. To achieve these "dual carbon" goals, the Chinese government has introduced a series of policies related to new energy, such as the "Implementation Plan for Promoting High-Quality Development of New Energy in the New Era" issued by the State Council in 2022. This plan aims to encourage the widespread use of new energy and green electricity while promoting the construction of large-scale wind and PV bases. Meanwhile, with increased investment and technological breakthroughs, the construction costs of new energy power stations have gradually decreased, and the power generation efficiency of components has continuously improved, leading to record-high new installed capacities for PV and wind power.

In terms of construction cycles, PV power stations take 3 to 6 months, wind power takes one year, and UHV projects take 1.5 to 2 years. Currently, new energy power stations are being constructed rapidly, but due to differences in construction cycles, related facilities remain incomplete, resulting in an imbalance in energy supply and demand. The first issue is a temporal imbalance: PV power generation peaks at noon, while electricity demand peaks often occur at other times. The second issue is a spatial imbalance: most of China's PV power stations are located in the "Three North" regions and south-west China, while eastern cities are major electricity consumers, creating challenges for long-distance power transmission. To address the temporal imbalance, China is actively developing ESS technologies to achieve peak shaving and valley filling. To tackle the spatial imbalance, UHV lines are needed to enable long-distance power transmission, thereby achieving the goal of "transmitting electricity from the west to the east." Thus, under the impetus of the "dual carbon" policy, UHV technology has naturally embraced a development opportunity.

During the 14th Five-Year Plan period, China's initial plan included "nine DC and three AC" projects, totaling 12 lines. Subsequently, on May 17, 2024, the State Grid announced the 13th batch of new procurement for 2024 (the first service pre-bidding for new UHV projects), revealing reserve projects including "five AC and nine DC." According to publicly available information, three AC projects were officially put into operation this year: the Sichuan and Chongqing 1,000 kV UHV AC project, the Zhangbei-Shengli 1,000 kV UHV AC power transmission project, and the Wuhan-Nanchang 1,000 kV UHV AC project. Meanwhile, DC projects such as Jinshang-Hubei, Longdong-Shandong, and Hami-Chongqing have been fully connected, pending further detailed inspections and verifications before official operation.

Although UHV construction currently appears urgent, UHV-related bidding has slowed this year. At the beginning of the year, the State Grid planned eight equipment and six material bidding procurements for UHV projects. Six batches of equipment bidding were completed (with the fourth batch canceled), and five batches of material bidding were completed. The number and value of bids fell short of 2023 levels. The urgent UHV deliveries in the aluminum wire and cable industry in 2024 rely on 2023 bidding orders, but this year's bidding performance fell short of expectations, which may affect next year's production and delivery conditions for enterprises. However, considering the current challenges in absorbing PV and wind power, UHV projects are expected to accelerate in approval, bidding, and construction in 2025. Whether the UHV-related segments in the aluminum wire and cable industry can sustain their growth trend next year will depend on close monitoring of the State Grid's UHV bidding and the urgency of order deliveries.