Data center power consumption accelerates as Deutsche Bank raises China AI power demand forecast

Overview

This report is Deutsche Bank's monthly update on China's utilities sector, focusing on the boost to power demand from AI and data center expansion, while tracking April 2026 power demand, generation mix, utilization hours, new installed capacity, electricity prices, coal prices, and gas demand. The report believes that China's data center capacity expansion and IT-related electricity usage growth are exceeding previous expectations, and therefore raises its 2030 data center power demand forecast.

Core views

The core views include: first, data center and AI-related loads are becoming a structural incremental source of China's power demand, with data center electricity consumption growth in 2025-2030E expected to accelerate further; second, nationwide electricity consumption and service-sector electricity consumption maintained relatively fast growth in April, with particularly strong growth in power use by internet and data services; third, the sharp YoY drop in new solar installations in April was mainly due to a high base driven by 2025 policy support, and the full-year forecast remains at 215GW; fourth, market-based thermal power tariffs weakened YoY while coal prices rebounded, which may compress thermal power profitability; fifth, gas demand is weak, but China Gas is preferred among gas utilities due to its relatively high dividend yield and equity incentive targets.

Analysis framework

The report adopts a monthly sector-tracking framework, combining data from the National Energy Administration, the Ministry of Industry and Information Technology, local power prices, and coal prices with company valuation comparisons. It first updates macro power demand and data center capacity assumptions, then maps them to the generation mix, utilization hours, capacity growth, dividend yields, and preferred sector names.

Methodology notes

• Demand forecastingData center power demand forecast

  Re-estimating 2030 data center power consumption based on standard rack capacity in data centers, monthly growth in IT-related electricity usage, and assumptions for total national electricity consumption.

  The report raises its 2030 data center power demand forecast by 46% to 805 billion kWh, mainly reflecting 39% YoY growth in data center capacity in 2025 and 1Q26, as well as strong growth in electricity use by internet and data services.

• Monthly sector trackingPower supply-demand and utilization hour monitoring

  Breaking down monthly changes in the power sector by electricity-consuming sector, generation type, new installed capacity, and utilization hours.

  The report tracks April total electricity consumption, service-sector and IT electricity usage, output from thermal/hydro/wind/solar/nuclear power, as well as changes in utilization hours for each power source, to assess short-term supply-demand conditions and profit pressure.

• Valuation comparisonDividend yield and relative valuation comparison

  Using dividend yield, forward valuation, and the spread versus government bond yields to measure the attractiveness of utility names.

  The report prefers utility companies with higher visibility of cash flow and dividends, such as China Resources Power, China Yangtze Power, and China Gas.

Asset mapping & comparison

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

• China Resources Power (0836.HK)

  One of the preferred names among China power utilities, benefiting from AI-related power load growth driven by data center expansion.

  Strengths

  Dividend yield is higher than power-sector peers, above 5%; if data center expansion continues to drive electricity demand higher, the company has additional upside potential.

  Weaknesses

  Weaker market-based thermal power tariffs and rebounding coal prices may pressure margins.

  Comparison

  The report lists it as one of the preferred names among Chinese renewable energy operators.

  Risks

  Renewable power tariffs weaker than expected, power demand weaker than expected, and interest rates or financing costs higher than expected.

• China Yangtze Power (600900.SS)

  One of the preferred names among China power utilities, with the core attribute of stable earnings and dividend visibility from hydropower assets.

  Strengths

  Hydropower business has strong cash flow stability; FY26E dividend yield is about 4%.

  Weaknesses

  The key short-term variable is water inflow during the summer peak season.

  Comparison

  Its FY26E dividend yield is about 230 basis points above China's 10-year government bond yield, close to the high end of the past five years, versus a historical average premium of about 110 basis points.

  Risks

  Summer water inflows below expectations, fluctuations in power generation, and rising financing costs.

• China Gas Holdings (0384.HK)

  The top pick among gas utilities.

  Strengths

  FY26E dividend yield is about 6.7%, the highest among gas peers and also among the higher levels in Deutsche Bank's covered utility stocks; the new equity incentive plan sets relatively high profit growth targets.

  Weaknesses

  Natural gas consumption in mainland China and Hong Kong declined YoY, and industry demand trends are weak.

  Comparison

  The company's dividend yield is above the roughly 5% level of gas peers.

  Risks

  Continued weak natural gas demand, the equity incentive plan still requiring shareholder approval, and potential dilution and under-delivery on profit targets.

Key data

• 2030E China data center power demand805 billion kWhRaised 46% versus the previous forecast, expected to account for about 6.0% of China's total electricity consumption.
• 2025 China data center power consumption196 billion kWhAccounting for 1.9% of total national electricity consumption; the CAGR in 2020-2025 was 16%.
• 2025-2030E data center power consumption CAGR27%Higher than 16% in 2020-2025, implying that by 2030 it will be nearly three times the 2025 level.
• Operating data center capacity in China in 1Q2614.45 million standard racksUp 39% YoY, continuing the accelerated expansion seen in 2025.
• China total electricity consumption in April 2026+6.0% YoYService-sector electricity consumption rose 8.9%, residential electricity consumption rose 6.0%, and industrial electricity consumption rose 5.3%.
• Internet and data services electricity consumption in April 2026+42.8% YoYContinuing the acceleration trend of above 30% in 2025.
• China power generation in April 2026744 billion kWh, +2.6% YoYHydropower rose 12.2% YoY, thermal power rose 3.1%, wind power fell 5.0%, and nuclear power fell 8.7%.
• New solar installations in April 20269.5GW, -79% YoYThe YoY decline was mainly due to the high base driven by 2025 policy support; the full-year 2026 forecast remains at 215GW, down 32% YoY.
• New wind installations in April 20265.5GW, +3% YoYDeutsche Bank expects China's new wind installations to be 110GW and 120GW in 2026E and 2027E, respectively.
• Market-based thermal power tariffs in January-May 2026-9% to -13% YoYEstimated based on grid companies' proxy power purchases, showing that power prices remain weak.
• Qinhuangdao 5,500 kcal thermal coal spot priceUp 15% from end-February, up 23% YTD in 2026The average price in the first five months of 2026 was 5% higher than in the first five months of 2025.
• Mainland China natural gas consumption in March 202634.1 billion cubic meters, -4.8% YoYHong Kong natural gas consumption fell 5.9% YoY in March, indicating weak gas demand.
• China Gas 2026 Share Award SchemeUp to 10% of issued shares; conditional grant of 462 million sharesVesting targets include annual profit growth of no less than 15% in FY26-FY31 and cumulative profit growth of no less than 101.14%.

Impact & implications

In terms of investment implications, the upward revision to AI and data center demand enhances the medium- to long-term certainty of power load growth, benefiting power utility companies with generation assets and dividend-paying capacity; however, the sector remains differentiated in the short term, as thermal power faces a profit squeeze from falling market-based tariffs and rebounding coal prices, new solar installations are disturbed by a high base, and gas demand remains weak. Therefore, the report places greater emphasis on cash flow resilience, dividend yield, and exposure to load growth, rather than simply betting on an upcycle across the entire sector.

Risks

• Renewable power tariffs weaker than expected.
• Power demand weaker than expected, especially if AI- and data center-related electricity consumption growth falls short of forecasts.
• Interest rates or financing costs higher than expected, weakening utility valuations and dividend appeal.
• Rebounding coal prices combined with falling market-based thermal power tariffs compress thermal power profitability.
• Summer water inflows lower than expected, affecting hydropower generation and earnings stability.
• Continued weak natural gas demand, dragging on gas utility sales and profits.
• China Gas's equity incentive plan still requires shareholder meeting approval, and there are dilution and performance target delivery risks.

What to watch

• Growth in standard data center rack capacity in China and subsequent disclosures from the Ministry of Industry and Information Technology.
• Whether monthly electricity consumption growth in internet and data services continues to remain high.
• Policies and statements from the National Energy Administration regarding incremental electricity demand from data centers.
• Whether the YoY decline in new solar installations narrows in 2H26 due to a low base.
• Summer hydropower inflow conditions and China Yangtze Power's generation performance.
• The scissors spread between market-based thermal power tariffs and Qinhuangdao thermal coal prices.
• National natural gas demand data for April and thereafter.
• Progress of shareholder meeting approval for China Gas's equity incentive plan and the path to achieving its profit targets.