J.P. Morgan: Bullish on China’s Energy Storage and Offshore Wind; Highlights 4 Core Picks

Overview

This report synthesizes insights from J.P. Morgan’s participation in the 'Energy Evolution Journey' and 'Global China Summit,' noting a significant resurgence of investor interest in China’s renewable energy sector amid heightened geopolitical tensions and power supply constraints for data centers in developed markets. The report outlines the latest trends across four sub-sectors—energy storage, offshore wind, photovoltaics (PV), and power generation—and presents four key investment themes, favoring segment leaders with technological moats or policy certainty.

Core views

The energy storage sector is driven by dual catalysts. First, Sungrow Power disclosed it has received energy storage orders linked to AI data centers (AIDC) from data center developers. Management believes aging grid infrastructure and high reliability requirements naturally position storage to support 'grid-friendly' data centers and enable fast-start capabilities. Second, distributed generation (DG) energy storage demand has surged in emerging markets—particularly Southeast Asia—following energy supply disruptions caused by Middle East conflicts. Given shorter order-to-delivery cycles compared to utility-scale projects, some distributed storage orders have already achieved cost pass-through, which benefits Deye Inverter, recently initiated coverage. Offshore wind policy visibility has improved significantly. In March 2026, China’s State Council announced a national target of 100GW offshore wind capacity by 2030 for the first time. Historical data shows China’s actual renewable installations have averaged ~90% above official targets, and this top-down policy push substantially enhances growth visibility for Orient Cable. Among offshore wind components, submarine cables are viewed as a premium segment due to high market concentration and entry barriers, supporting the Overweight rating on Orient Cable. Power operators face an asymmetric policy landscape. Power market reforms introducing spot pricing mechanisms are pressuring tariffs for wind and solar farms. In contrast, provinces like Guangdong, Liaoning, and Guangxi have implemented policies stabilizing nuclear power prices, while hydropower maintains tariff stability thanks to its cost advantage. Although 'computing-power–electricity synergy' provides some support for green power prices, data centers account for less than 2% of China’s total electricity demand—a still modest scale. Thus, the report favors exposure to nuclear (CGN Power) and hydro (Yangtze Power), maintaining a Neutral stance on Longyuan Power and Datang New Energy. PV industry consolidation remains ongoing. While the central government has signaled direction for industry consolidation, execution strategies remain unclear, and 'anti-overcapacity' policies are slow to roll out. In this context, the report recommends selecting cost leaders with differentiated technology (e.g., GCL Technology) and valuation-attractive names (e.g., Daqo New Energy, trading at negative enterprise value), suitable for patient investors.

Analysis framework

The report employs a hybrid approach combining 'top-down policy analysis' with 'bottom-up micro validation.' It first identifies structural demand shifts through macro geopolitical risks (Middle East conflicts) and technology trends (AI data center power consumption). Then, it assesses policy certainty on the supply side using long-term government capacity targets (e.g., 2030 offshore wind goal). Finally, direct management interactions during the summit validate order execution (e.g., AIDC storage orders) and cost pass-through capabilities (e.g., distributed storage), enabling selection of specific alpha-generating stocks.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Supply-Demand Framework

  The report analyzes energy security concerns triggered by Middle East conflicts (demand-side shock) and domestic policy-driven installation targets (supply-side guidance) to assess sentiment shifts across sub-sectors.

• Competitive Strategy FrameworkEconomic Moat/Competitive Advantage

  Economic Moat/Competitive Advantage

  In the offshore wind segment, the report emphasizes the 'high entry barriers' and 'high market concentration' of the submarine cable segment as the core rationale for selecting Orient Cable, reflecting a focus on competitive dynamics and moats.

• Event-Driven & Behavioral FinanceExpectation Gap/Expectation Management

  Expectation Gap/Expectation Management

  The report notes that the State Council’s first-ever 2030 offshore wind target—combined with historical over-delivery (~90% above targets since 2020)—has shifted market expectations on growth visibility, enhancing valuation appeal.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Sungrow Power (300274.SZ)

  Beneficiary: Secured AIDC-related storage orders; benefits from global energy storage deployment growth

  Strengths

  Technology leadership; entry into new data center applications

  Weaknesses

  Long contract-to-revenue cycle for utility-scale storage; Q2 cost pressures persist

  Comparison

  Highest investor attention

  Risks

  Near-term cost pressure

• Deye Inverter (605117.SS)

  Beneficiary: Surging distributed storage demand in emerging markets; short delivery cycles facilitate cost pass-through

  Strengths

  High elasticity in distributed storage business

  Comparison

  Recently initiated coverage

• Orient Cable (603606.SS)

  Beneficiary: 2030 offshore wind target improves growth visibility; high barriers in submarine cable segment

  Strengths

  High market concentration; high entry barriers

  Comparison

  Preferred pick in offshore wind supply chain

• Goldwind-H (2208.HK)

  Beneficiary: Potential acceleration in utility-scale renewable deployments in emerging markets

  Strengths

  Gaining market share from Western OEMs in emerging markets; margin expansion

• CGN Power (1816.HK)

  Beneficiary: Supported by stable nuclear power pricing policies

  Strengths

  Stable tariffs; superior to wind/solar

  Comparison

  Preferred over Longyuan Power and Datang New Energy

• Yangtze Power (600900.SS)

  Beneficiary: Hydropower’s cost advantage supports tariff stability

  Strengths

  Low cost; stable tariffs

  Comparison

  Superior to wind/solar operators

• GCL Technology (3800.HK)

  Beneficiary: Cost leader in PV industry consolidation

  Strengths

  Differentiated technology; cost leadership

  Weaknesses

  Slow implementation of industry consolidation policies

  Comparison

  Preferred among cost leaders

  Risks

  Policy execution uncertainty

• Daqo New Energy (DQ)

  Beneficiary: Highly attractive valuation (negative enterprise value)

  Strengths

  Low valuation

  Weaknesses

  At industry cycle trough

  Comparison

  Suitable for patient investors

Key data

• 2030 Offshore Wind Target100GWFirst announced by the State Council in March 2026
• Sungrow Power Stock Price Gain14%Since May 15 (as of report date)
• Deye Inverter Stock Price Gain20%Since May 15 (as of report date)
• Data Center Power Consumption Share<2%Share of China’s total electricity demand; still small in scale
• Historical Installation Overachievement Rate~90%Average excess of actual renewable installations over national targets since 2020

Impact & implications

The report argues that investment logic in China’s renewable energy sector is shifting from pure scale expansion to structural opportunity identification. For equipment makers, overseas expansion (especially into emerging markets) and new application scenarios (e.g., AIDC storage) are key to mitigating domestic overcapacity. For operators, tariff mechanism reforms make nuclear and hydro—with stable cash flows and cost advantages—defensive preferences. Overall, offshore wind (with high policy certainty) and globally competitive energy storage leaders are expected to command valuation premiums.

Risks

• Slow implementation of PV industry 'anti-overcapacity' policies due to lack of clear, executable strategies
• Power market reforms pressuring wind and solar farm tariffs
• Near-term cost pressures for utility-scale energy storage projects (e.g., Sungrow Power)
• Limited current impact of data centers on green power prices (<2% of total electricity demand)

What to watch

• U.S. Department of Energy (DOE) decisions on grid interconnection priority for data centers
• Sustainability of distributed energy storage demand in emerging markets (especially Southeast Asia)
• Expansion of provincial nuclear power price stabilization policies
• Rollout of concrete execution strategies for PV industry consolidation