JPMorgan: China Power Sector - Renewable Energy Growth and Coal Power Transition
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
JPMorgan highlights that China's power sector is accelerating its transition toward renewable energy, with renewables projected to exceed 50% of total installed capacity by 2026. Wind and solar levelized costs of electricity have already fallen below coal, driving over 80% of new capacity additions. However, grid curtailment rates are rising, reaching 5% in 2025 and expected to hit 6% in 2026, creating an urgent need for energy storage solutions.
Coal power is shifting from baseload generation to a balancing role. Utilization hours are declining steadily, falling from 4,500 in 2020 to a projected 3,600 by 2026. This trend, combined with rising carbon trading costs increasing from 60 RMB/ton in 2025 to 80 RMB/ton in 2026, is pressuring pure coal operators.
The report projects 8% overall profit growth for the power sector in 2026, with renewable profits surging 20% while coal power profits decline 10%. JPMorgan maintains an Overweight rating on Longyuan Power (0916.HK) with a target price of HKD 12.5, citing its high renewable asset base. Conversely, Huaneng Power International (0902.HK) is rated Underweight with a target price of HKD 3.2, reflecting vulnerability to falling utilization hours and escalating carbon expenses.