Huayuan Securities: The energy storage sector remains strong, and PetroChina's pipeline gas contract prices are stable from 2026 to 2027.

On March 23, Huayuan Securities released a research report on the utilities industry, indicating that electricity consumption grew by 6.1% in January-February, with continued prosperity in energy storage. China National Petroleum Corporation’s pipeline gas contract prices for 2026-2027 remain stable.

Specifically, the National Energy Administration recently published data showing that total social electricity consumption in January-February 2026 reached 1,654.6 billion kWh, a year-on-year increase of 6.1%. Breakdown by industry shows: primary industry electricity use was 22.3 billion kWh, up 7.4%; secondary industry 1,027.9 billion kWh, up 6.3%; tertiary industry 323.1 billion kWh, up 8.3%; urban and rural residents’ electricity consumption was 281.3 billion kWh, up 2.7%. The electricity growth rate in January-February 2026 exceeded expectations, likely due to stable electricity demand in traditional high-energy-consuming industries and rapid growth in emerging sectors such as high-end manufacturing, digital economy, and new energy. Looking ahead, based on the China Electricity Council’s February 2026 forecast report, the nationwide electricity consumption is expected to increase by 5%-6% year-on-year in 2026.

Thermal power switched from decline to growth in January-February, hydropower accelerated, while nuclear, wind, and solar power growth slowed. The National Bureau of Statistics recently released energy production data for January-February 2026, showing that industrial electricity generation above designated size increased at a faster pace, reaching 1,571.8 billion kWh, up 4.1% year-on-year, accelerating 4.0 percentage points compared to December 2025; daily average generation was 26.64 billion kWh. By power source, industrial thermal power increased by 3.3% YoY in January-February (down 3.2% in December 2025); hydropower grew by 6.8%, faster by 2.7 percentage points; nuclear power increased by 0.8%, slowing by 2.3 percentage points; wind power grew by 5.3%, slowing by 3.6 percentage points; solar power increased by 9.9%, slowing by 8.3 percentage points. Considering that in 2025, wind power installed capacity grew by 22.9% and solar capacity by 35.4%, the full-year growth in wind and solar capacity far exceeded the YoY growth in January-February 2026, suggesting that wind and solar utilization rates may not be optimistic in early 2026.

Domestic demand remains strong, with overseas orders increasing significantly. In January-February 2026, domestic lithium-ion battery production for energy storage grew by 84%. We believe that, besides the short-term boost from export tax rebate policies and improved overseas tariffs, the sustained prosperity of energy storage is driven by factors such as increased penetration of new energy, improved business models, grid connection of data centers, and energy security projects.

1. Domestic: In January-February 2026, new energy storage tender volume reached 136.7 GWh, a YoY increase of 120.8%. The total new energy storage installed capacity was 24.18 GWh, up 472.06% YoY.

2. Overseas, Chinese companies secured 30 energy storage orders in February 2026, totaling 35.71 GWh. Among these, 25 orders explicitly involved supply or procurement of energy storage batteries or systems, with major companies including: Trina Storage, Chuen New Energy, TBEA (600089.SH), BYD (002594.SZ), Haichen Storage, NARI Group, CATL (300750.SZ), and Sungrow (300274.SZ).

China National Petroleum Corporation’s pipeline gas contract prices for 2026-2027 remain stable, maintaining the national gas source cost base. The policy for pipeline gas purchase and sale contracts for 2026-2027 has been announced, with unchanged pricing mechanisms from 2025-2026, and a 7% floating volume linked to the CLD spot gas price. Our analysis indicates that the low-cost domestic gas production and increased share can sustainably optimize overall costs, effectively hedging against rising oil and gas prices, supporting the stability of the latest pricing scheme. In 2024, CNPC’s natural gas supply accounted for 53.5% of the country’s apparent natural gas consumption, and stable pricing is expected to help maintain the national gas source cost base.

Rising gas prices have widened the price gap between regions and between long-term contracts and spot markets globally, potentially increasing profits in resale trading of low-priced long-term contracts. According to Reuters, Iran’s attack caused 17% of Qatar’s LNG export capacity to be paralyzed, with repairs expected to interrupt 12.8 million tons per year of LNG capacity for 3-5 years. Affected countries include China, South Korea, Italy, and Belgium. As of March 20, European TTF and Asian JKM prices have increased by 81.6% and 102.4%, respectively, compared to pre-conflict levels on February 27. Brent crude oil and US Henry Hub prices increased by 64.7% and 8.3%, respectively. Our estimates show that as of March 20, 2026, the spread between Asian JKM spot prices and HH-linked long-term contracts widened by $10.71 and $6.61 per million British thermal units, respectively.