Fitch Ratings: Electrification process may continue to support electricity demand

According to the latest information from Zhitong Finance and Economics APP, Fitch Ratings stated that due to the continuous deepening of electrification, the growth rate of China's electricity demand in the first half of 2024 will exceed the GDP growth rate for the same period. Supported by the strong growth of downstream industries related to energy transformation, such as manufacturing, electric vehicles, charging infrastructure, and data centers, the electrification process is expected to continue to drive electricity demand.

In the first half of 2024, national electricity consumption is expected to increase by 8.1% year-on-year, with industrial, commercial, residential, and agricultural electricity demand growing by 6.9%, 11.7%, 9%, and 8.8% respectively, while GDP is expected to grow by 5% year-on-year. China aims to increase the proportion of electricity in its energy structure from around 28% in 2023 to over 30% by 2025.

By the end of the first half of 2024, the combined installed capacity of solar and wind power in China has exceeded that of coal-fired power for the first time. However, the strong growth in renewable energy installed capacity has also led to an increase in curtailment rates for wind and solar power. In the first half of 2024, the curtailment rates for solar and wind power increased by 1.2 and 0.6 percentage points year-on-year respectively, resulting in a decrease of 32 hours and 103 hours in their utilization hours.

Fitch Ratings expects that due to the significant decrease in unit capital expenditure caused by declining equipment prices, it will offset the pressure on returns from lower electricity prices and utilization hours, and China's new solar and wind power installed capacity may remain at high levels. China plans to add approximately 300 gigawatts of wind and solar power generation capacity in 2024, a scale similar to the massive additions in 2023. Fitch believes that the high curtailment rates may continue to put pressure on the utilization hours of solar and wind power until significant increases in energy storage capacity and inter-provincial transmission capacity provide effective relief after 2025.

Fitch estimates that in 2024, the average non-hydro renewable energy power consumption responsibility weight of each province will be 4 percentage points higher than in 2023