China Galaxy Securities released a research report stating that it is estimated that China Southern Power Grid's investment scale during the "16th Five-Year Plan" period may reach around 1 trillion yuan, implying an average annual national grid investment of approximately 1 trillion yuan during that period. For 2026, State Grid and Southern Grid investments are expected to reach 700 billion yuan and 189 billion yuan, respectively, representing year-on-year increases of 7.6% and 8.0%. Accelerated global electrification, economic recovery, rapid AI development, coupled with the need for new energy grid integration and grid upgrades, are driving strong demand for AI-related electrical equipment. Future grid investment is expected to accelerate, while overseas supply is struggling to meet demand; delivery lead times for power transformers and high-voltage cables in Europe and the US have nearly doubled, and waiting times for high-voltage direct current systems are projected to extend into the 2030s, ushering in a golden development period for the overseas expansion of Chinese power equipment companies. The main views of China Galaxy Securities are as follows:
Domestic grid investment during the "16th Five-Year Plan" period is estimated at an average of 1 trillion yuan annually, focusing on strengthening the main grid, optimizing the distribution network, and promoting transformation. State Grid's fixed asset investment during the "16th Five-Year Plan" is projected to reach 4 trillion yuan, a 40% increase from the "14th Five-Year Plan" investment. The firm estimates China Southern Power Grid's investment scale during the same period may be around 1 trillion yuan, resulting in an average annual national grid investment of approximately 1 trillion yuan. For 2026, State Grid and Southern Grid investments are expected to be 700 billion yuan and 189 billion yuan, respectively, representing year-on-year increases of 7.6% and 8.0%.
(1) Ultra-High Voltage (UHV): Acceleration at the start of the "16th Five-Year Plan" period, with synergistic growth of AC and DC. By the end of 2025, State Grid had cumulatively completed 42 UHV projects comprising 20 DC and 22 AC lines. In 2025, China approved 2 DC and 3 AC projects, commenced construction on 1 DC and 3 AC projects, and put into operation 4 DC projects. The firm believes that in 2026, State Grid is expected to approve and commence construction on 4-5 DC projects (e.g., Shaanxi-Henan, Badain Jaran-Sichuan, Southern Xinjiang-Sichuan-Chongqing, Kubuqi-Shanghai, Qinghai-Guangxi) and 3-4 AC projects (e.g., Dalat-Inner Mongolia Western Grid, Panxi-Southern Sichuan-Tianfu South, and Zhejiang Loop), with DC interconnections and loop networks driving demand for AC construction.
(2) Main Grid: Urgent need to enhance the power system's carrying capacity, with strong demand for core equipment upgrades and new construction. In 2025, State Grid's bidding volume for transmission and transformation equipment reached 91.88 billion yuan, up 25.3% year-on-year. This included gas-insulated switchgear (25.0 billion yuan, 27.2% share, +34.8% YoY), transformers (19.5 billion yuan, 21.3% share, +20.5% YoY), and power cables (15.8 billion yuan, 17.2% share, +43.0% YoY). The firm believes the main grid construction will maintain high activity in 2026.
(3) Distribution Network: Unleashing potential through capacity expansion and efficiency gains. In 2025, the bidding volume for distribution network regions and joint tenders reached 124.57 billion yuan. This included 42.60 billion yuan for 10kV power cables (34.2% share), 22.61 billion yuan for low-voltage power cables (18.2% share), and 21.26 billion yuan for aerial insulated conductors (17.1% share). The firm believes that with the advancement of intelligent upgrades in 2026, demand for primary and secondary distribution network equipment will continue to be released.
(4) Electricity Meters: Volume and price increases expected in 2026 under new standards. The total winning bid amount for State Grid's metering equipment in 2025 reached 13.50 billion yuan (the third batch failed to attract bids), down 49% year-on-year. Southern Grid's first batch framework winning bid data for metering products in 2025 was 3.5 billion yuan, with the second batch expected to reach 3.7 billion yuan, totalling approximately 7.2 billion yuan, a decrease of about 20% year-on-year. The firm believes that State Grid's release of new smart meter standards indicates a price recovery trend, making 2026 a year of volume and price increases.
(5) Power Trading: Marketization accelerates, highlighting demand for services and systems. As power sector reform progresses, with multiple provinces entering formal operation of spot markets, growth in total societal electricity consumption is generating demand for trading services and system construction.
AI load growth highlights North American power shortages; global grid investment accelerates. North America faces a significant overall power deficit, exacerbated by growing AI data center demand. The US Department of Energy predicts that AI data centers consumed 176 TWh of electricity in 2023, accounting for 4.4% of total US demand. Starting from 2023, this is projected to reach 325-580 TWh by 2028, representing 6.7%-12% of US demand. Specifically, AI server power demand is expected to increase from about 40 TWh in 2023 to approximately 165-325 TWh in 2028, a 4-8 fold increase. Constraints on traditional rapid capacity additions make energy storage paired with AI data centers economically attractive and faster to deploy, likely increasing its share.
Accelerated global electrification, economic recovery, and rapid AI development, combined with the need for new energy grid integration and grid upgrades, are fueling strong demand for AI-related electrical equipment. From a demand perspective, IEA data indicates global electricity demand is expected to grow over 40% by 2035, with AI data center electricity consumption tripling. The share of renewable energy generation is projected to be nearly 55% (installed capacity 13,700 GW vs. 4,900 GW in 2024), with solar and wind accounting for over 50% of new power capacity. Battery storage is forecast to reach 1,700 GW by 2035 (77 GW in 2024). Regarding power and grid investment, global power/grid investment hit record highs of $1.5 trillion/$390 billion in 2024 and is expected to exceed $1.55 trillion/$400 billion for the first time in 2025. By 2035, power/grid investment is projected to surpass $3.3 trillion/$650 billion for the first time, with a CAGR of 8%/5% from 2025 to 2035.
Power equipment exports are expected to continue experiencing volume and price increases in 2026. Future grid investment is anticipated to accelerate, while overseas supply remains tight. Delivery lead times for power transformers and high-voltage cables in Europe and the US have nearly doubled, and waiting times for high-voltage direct current systems are projected to extend into the 2030s, creating a golden period for the overseas expansion of Chinese power equipment companies. According to General Administration of Customs data, from January to November 2025, cumulative exports of transformers/electricity meters/high-voltage switches/low-voltage switches/wires and cables were $8.08 billion/$1.32 billion/$4.79 billion/$33.33 billion/$29.10 billion, representing year-on-year changes of +35.3%/-8.4%/+29.4%/+11.3%/+22.9%, respectively. Power equipment exports are expected to continue seeing sustained volume and price increases in 2026.
Risk提示: Risks include grid investment falling short of expectations and rising raw material costs.
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