Policy, technology, and market forces together open a window for vehicle-grid interaction to scale up commercially

Overview

This report focuses on the vehicle-grid interaction theme in the battery and energy management sector. It defines vehicle-grid interaction as the interaction of energy flow and information flow among electric vehicles, charging equipment, and the power grid, mainly including managed charging and V2G bidirectional charging and discharging. The report demonstrates the necessity of vehicle-grid interaction from the perspectives of growth in new energy vehicle ownership, rising charging power, stressed distribution networks, increased volatility in renewable power generation, and stronger demand for flexible regulation on the demand side. It concludes that policy, technology, and market mechanisms are jointly driving its scaling and commercialization.

Core views

The core views are as follows: First, uncontrolled charging will stack on top of normal load and create new demand peaks, causing transformer capacity overload, poorer power quality, and greater grid losses. Second, managed charging and V2G can break the bottleneck of insufficient grid capacity for charging pile connections by shaving peaks and filling valleys. Third, new energy vehicles have both transportation and energy-device attributes and are a large-scale, low-marginal-cost, highly flexible distributed storage resource on the demand side. Fourth, vehicle-grid interaction has historically been constrained by scale, incentives, technology, standards, and market mechanisms, but policy pilots, hardware and software progress, and the opening of electricity market trading categories are improving commercialization conditions. Fifth, the main investment opportunities lie in resource aggregation and charging equipment upgrades.

Analysis framework

The report adopts a framework that combines industry-chain analysis with policy drivers: it first defines the vehicle-grid interaction model, then analyzes its necessity from the perspectives of EV charging load and the storage needs of the new-type power system, then dissects commercialization barriers such as scale, incentives, technology, standards, and market mechanisms, and finally proposes investment directions by combining policy targets, technological maturity, electricity market returns, and industry-chain segments.

Methodology notes

• Industry-chain analysisVehicle-charger-grid-aggregation platform framework

  Vehicle-grid interaction chain

  The report treats vehicle-side discharge capability, charger-side bidirectional power modules, grid-side dispatch and metering capability, and the aggregation platform’s resource access and forecasting capability as key links for judging the maturity of vehicle-grid interaction.

• Demand-side resource analysisDual load-storage attribute analysis

  New energy vehicles as distributed storage

  The report views new energy vehicles simultaneously as a power load and an energy storage resource, and analyzes their potential value in peak shaving, frequency regulation, reserve services, and congestion relief.

• Business model analysisPolicy-technology-market tri-factor framework

  Drivers of scaled commercialization

  The report argues that top-level policy design, maturity of vehicle-charger-grid technologies, and the opening of electricity market trading categories are the three main drivers behind the bullish view on vehicle-grid interaction commercialization.

• Return calculationV2G peak-valley arbitrage and regulation return calculation

  Cost-benefit analysis

  Using typical scenarios such as peak shaving and valley filling, the report estimates the profit space for V2G participation in the power market through low-price charging and high-price discharging.

Asset mapping & comparison

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

• TGOOD (300001.SS)

  Charging-operator leader and a potential natural load aggregator

  Strengths

  The report believes it has advantages in qualifications, resources, and operations, making it well positioned to benefit from the load aggregation segment.

  Weaknesses

  Profit realization depends on power market reform, pilot scale, and owner participation.

  Comparison

  Compared with pure equipment manufacturers, load aggregators are closer to dispatchable resources and electricity trading returns.

  Risks

  Policy rollout falls short of expectations, market participant access is slower than expected, and user incentives are insufficient.

• Star Charge (unlisted)

  Charging-operator and load-aggregation-related company

  Strengths

  The report lists it as one of the charging-operator leaders to watch and notes its potential for resource aggregation.

  Weaknesses

  As an unlisted company, direct allocation in the secondary market is limited.

  Comparison

  It belongs to the same load-aggregation direction as TGOOD, but investment accessibility differs.

  Risks

  The pace of business model realization, policy pilot coverage, and the degree of electricity trading opening all remain uncertain.

• Tonghe Technology (300491.SS)

  Charging equipment manufacturer

  Strengths

  The report recommends it as a charging equipment manufacturer with forward-looking deployment that can benefit from V2G equipment upgrade demand.

  Weaknesses

  Equipment demand depends on vehicle-grid interaction project implementation and unified technical standards.

  Comparison

  Compared with load aggregators, equipment makers benefit more directly from hardware upgrades and new construction demand.

  Risks

  Charging equipment technology iteration falls short of expectations, price competition intensifies, and demand release is slower than expected.

• Lvneng Huichong (600212.SS)

  Charging equipment manufacturer

  Strengths

  The report includes it among the recommended names in the V2G-related charging equipment direction.

  Weaknesses

  Profit elasticity needs to be judged in light of actual orders, product competitiveness, and project rollout pace.

  Comparison

  It benefits together with peer equipment companies from bidirectional charging and discharging equipment iteration.

  Risks

  Technology upgrade costs, market demand volatility, and policy execution uncertainty.

• Shenghong Co., Ltd. (300693.SS)

  Charging equipment and power electronics-related company

  Strengths

  The report lists it as one of the beneficiaries of charging equipment upgrades.

  Weaknesses

  The degree of benefit depends on V2G penetration, product compatibility, and order conversion.

  Comparison

  Within the equipment chain, it may benefit from bidirectional charging power modules and system integration demand.

  Risks

  Changes in equipment technology routes, intensifying competition, and lower-than-expected market-based returns.

• Megmeet (688612.SS)

  Vehicle-side and charging-related equipment company

  Strengths

  The report includes it in the watchlist of equipment manufacturers with forward-looking V2G deployment.

  Weaknesses

  The pace of vehicle-side V2G adoption and automakers’ configuration strategies will affect demand.

  Comparison

  Compared with charger-side companies, its benefits may depend more on upgrades to vehicle-side bidirectional charging configurations.

  Risks

  New energy vehicle sales fall short of expectations, and vehicle-side technology iteration is slower than expected.

• Woer Heat-Shrinkable Material (002130.SS)

  Charging equipment and related materials/components direction

  Strengths

  The report lists it as a name to watch in relation to charging equipment upgrades for vehicle-grid interaction.

  Weaknesses

  Its direct revenue contribution from V2G needs to be verified against its specific business structure.

  Comparison

  Compared with system-level equipment makers, it may benefit more at the component or materials level.

  Risks

  Uncertainty in industry-chain order realization and slower-than-expected equipment upgrade pace.

Key data

• New energy vehicle ownership24.72 million vehiclesAs of June 30, 2024, according to the Ministry of Public Security, up 53% year on year.
• Share of high-power DC chargers in 202326% above 250 kWAccording to actual sampled data collected by the China Charging Operating Conditions Project Team from January to October 2023, this was an increase of about 11 percentage points from 15% in 2022.
• Share of distribution network equipment investment in public charging stations24%-36%The report notes that distribution network equipment investment accounts for a relatively high share of charging-station investment, and that adding dedicated transformers will increase upfront investment pressure.
• Typical residential community load pressureWhen penetration exceeds 50% and the simultaneous charging rate is above 21%, the peak load exceeds the 80% loading-rate limitUsing a typical residential community calculation, the report points out that the short charging peak from 20:30 to 23:00 at night leads to low utilization of expansion capacity.
• Managed charging effectWhen 73% of EVs participate in managed charging, grid power demand is about half that of uncontrolled chargingThe report cites a study conclusion from the UK CENEX and notes that if another 26% of EVs participate in V2G, grid power demand could be reduced further.
• Renewable installed capacity1.05 billion kW, accounting for 36% of total installed capacityBy the end of 2023, the combined installed capacity of wind and solar power connected to the grid nationwide had exceeded 1 billion kW.
• Share of renewable power generation15.6%In 2023, the combined share of solar and wind power generation in China increased by 1.8 percentage points year on year.
• Neutral forecast for 2030 new energy vehicle ownership90 million vehiclesThe report assumes 60 kWh per vehicle and estimates total battery installed capacity of about 5.4 billion kWh.
• Long-term new energy vehicle battery capacity19.5 billion kWhIn the long-term scenario, the report assumes 300 million new energy vehicles and 65 kWh per vehicle, equivalent to 82% of China’s average daily electricity consumption in 2022.
• Dispatchable battery capacity2.93/4.88/6.83 billion kWhAssuming 50% of new energy vehicles participate in grid dispatch and battery SOC capacity for dispatch is 30%/50%/70%.
• Owner incentive demandMore than 60% of users hope to earn over RMB 20 each time they participate in V2GEquivalent to discharging 20 kWh and earning more than RMB 1 per kWh.
• Pilot policy targetAt least 5 cities and at least 50 V2G projectsA notice issued by the General Office of the NDRC on September 10, 2024 proposed promoting pilot demonstrations for scaled vehicle-grid interaction applications.
• V2G project pilot thresholdIn principle, total discharge power should not be less than 500 kW, and annual discharge volume should not be less than 100,000 kWhWestern regions may be allowed to be somewhat lower.
• 2030 bidirectional regulation capacity targetTens of millions of kWThe implementation opinions issued by four ministries and commissions in December 2023 proposed that vehicle-grid interaction achieve scaled application by 2030.
• 2030 V2G peak-valley arbitrage potentialRMB 108 billionThe report estimates the nationwide EV V2G peak-valley arbitrage space using a peak-shaving scenario.

Impact & implications

The investment implication of the report is that vehicle-grid interaction is expanding from simple charging infrastructure construction into flexible demand-side regulation and electricity market trading, which may reshape value distribution among charging operators, equipment makers, and virtual power plant service providers. In the short to medium term, managed charging and pilot projects are expected to roll out first, driving demand for charging equipment upgrades, bidirectional power modules, metering, and control systems. In the medium to long term, load aggregators with large-scale dispatchable resources, market participant qualifications, and operating capabilities are more likely to share in the gains from power market reform.

Risks

• New energy vehicle sales fall short of expectations, causing slower growth in ownership and affecting the foundation for scaled vehicle-grid interaction.
• Power market reform progresses more slowly than expected, limiting V2G profitability in electricity energy, demand response, and ancillary services markets.
• Vehicle-grid interaction policies are implemented more slowly than expected, and the number of pilot cities, project scale, and execution results fall short of expectations.
• Charging equipment technology iteration falls short of expectations, and existing and new charging piles cannot promptly meet bidirectional charging and discharging, metering, and control requirements.
• Owner participation is weaker than expected, and incentive mechanisms are not sufficient to mobilize users to participate in managed charging and V2G.
• The progress of standards systems and information interoperability is slower than expected, affecting coordination among vehicles, chargers, platforms, and the grid.

What to watch

• The list of 2025 vehicle-grid interaction pilot cities and V2G projects, their construction progress, and whether discharge volumes are achieved.
• The implementation of time-of-use charging tariffs and whether the share of off-peak charging electricity can reach policy targets.
• Whether electricity spot markets, demand response, ancillary services, green certificates, and carbon trading markets are further opened to aggregated resources.
• The technological maturity of bidirectional charging piles, vehicle-side external discharge functions, distribution network metering and protection devices, and aggregation platforms.
• Subsidies, revenue-sharing arrangements, and battery degradation compensation mechanisms for owner participation in V2G.
• V2G orders, product launches, and project implementation progress among related companies such as TGOOD, Tonghe Technology, Lvneng Huichong, Shenghong Co., Ltd., Megmeet, and Woer Heat-Shrinkable Material.