Energy Security Goes Mainstream: How to Invest in "Electricity" Assets?

How does AI and geopolitical conflicts catalyze energy security into an investment hotspot?

Recently, the concept of energy security has gained strong attention, becoming one of the core investment themes in the market. Power-related sectors have risen across the board, and the trend of capital allocation to “electric-inclusive” assets is becoming more evident.

The next question is: why has the long-dormant energy security concept suddenly come to the forefront? Is the rise of “electric-inclusive” assets a short-term hype or a long-term trend? How should investors position themselves now to capitalize on the power industry benefits under energy security?

Overall, the emergence of the energy security concept is driven by escalating geopolitical conflicts, leading to a restructuring of the global energy landscape. This is the result of high demand and strong industry trends resonating with capital voting with their feet. As the core carriers of energy security, “electric-inclusive” assets are now entering a long-term allocation window.

Why has the energy security concept suddenly gained prominence? Geopolitical conflicts are forcing change, making power assets central to alternative energy

Energy security has become a global consensus, primarily due to the escalation of geopolitical conflicts triggering a worldwide energy supply crisis. Currently, ongoing conflicts are exceeding expectations, with markets predicting prolonged durations. The continuous de facto closure of the Strait of Hormuz has caused sharp increases in international oil and gas prices, deeply alerting countries to the significant risks of relying on a single energy supply source.

Against this backdrop, countries worldwide have elevated energy security to a strategic priority. Accelerating the development of alternative energy systems has become a shared goal. Among these, power assets—represented by new energy generation—stand out as the most benefited sector due to two core advantages:

1. Distributed nature, enabling local production and consumption, significantly reducing transportation-related safety risks and costs;

2. Low resource endowment requirements, as renewable energies like wind, solar, and hydro are widely available and not confined to specific resource regions. Countries can develop these independently, reducing dependence on geopolitical factors and effectively ensuring energy autonomy.

From an industry perspective, energy security has shifted from a “supplementary consideration” to a “core development principle.” Power assets, as the main carriers of energy security, have their long-term demand fully activated. This is the underlying logic behind the energy security concept gaining traction and the capital chase for “electric-inclusive” assets.

What are the key opportunities under energy security? What should investors buy in “electric-inclusive” assets?

The core demand for energy security ultimately manifests across the entire power industry chain—from generation and transmission to storage. The entire “electric-inclusive” industry chain is poised for growth, with power generation, transmission, and storage being the most critical areas for strategic deployment, each supported by clear industry logic and performance fundamentals.

【Generation Side】: Power plants become value hotspots; offshore computing opens new monetization avenues for power; Green Power ETFs like E Fund (562960) attract attention

Power plants are the starting point of the power industry and the most direct beneficiaries of energy security. Currently, they offer a dual advantage of being undervalued and high-growth.

Green power is a value hotspot in the industry chain. The current green power index’s P/E ratio is below 20x, at the 54th percentile over the past five years, significantly lower than the global energy-related sector average, with clear valuation repair potential driven by energy security needs.

China maintains a leading position in global power supply. Its installed capacity and power generation volume rank among the top worldwide, with over one-third of global power generation and total capacity exceeding the combined capacity of G7 countries. The advantage in total power supply is evident, and the share of renewable energy like wind and solar continues to rise, steadily enhancing power supply capacity.

More importantly, offshore computing has opened a new monetization channel for power assets, further highlighting their value. Previously, China’s power was abundant but difficult to monetize. Besides domestic electricity supply, power is hard to export across oceans. However, the rapid development of computing power has changed this.

Leveraging China’s vast, stable, and cost-effective power supply system, power is converted into AI computing capacity. Through large model APIs, inference power is exported overseas, enabling “exporting intelligent services with Chinese electricity”—overseas users call domestic AI APIs, with computations completed in domestic data centers, consuming domestic electricity but creating cross-border value. This innovative monetization model extends power demand from domestic consumption to the global computing market, significantly boosting the growth potential of power generation companies.

【Transmission Side】: Global surge in grid equipment demand; Chinese companies go global; Grid ETF like E Fund (560390) gains attention

Efficient power transmission is vital for energy security. Amid global power shortages, countries are accelerating grid infrastructure upgrades, leading to explosive growth in demand for grid equipment, including transmission and distribution, smart meters, and automation devices.

Chinese companies are seizing this opportunity to expand overseas. China’s grid construction technology is globally advanced, with mature TGV (ultra-high voltage) and smart grid technologies, supported by a complete industrial chain. Their products offer high cost-performance and precisely meet the needs of grid upgrades worldwide, gradually becoming the “preferred choice” for global grid development.

How are current valuations for grid equipment? Whether the sector is expensive depends on whether it is overvalued. Rising domestic and international demand is shifting the industry from a “cyclical valuation” to a “growth valuation.” Previously, the 20x P/E ratio was based on the understanding of grid investments as a three-year small cycle and a five-year large cycle. Today, AI-driven power demand is structural and trend-based, not cyclical. When industry drivers change fundamentally, valuation centers shift upward, leaving room for growth.

【Storage Side】: Energy storage shifts from “optional” to “essential”; industry chain remains robust; Storage Battery ETFs like E Fund (159566) attract attention

In the new power system era, energy storage is no longer optional but a necessity for ensuring stable power supply and energy security. Its role has evolved from a “supplementary option” to a “must-have” component, driven by the instability on both supply and demand sides in the new energy era.

On the generation side, renewable energy is the main power source, with its intermittency demanding higher grid standards. On the consumption side, AI has become a major electricity user, with high volatility and peak demand characteristics that challenge traditional grids. To address these fluctuations, energy storage has become a key solution and a “necessity” in the new power landscape.

Industry data confirms the strong demand for storage: Although Q1 is traditionally a slow season for storage, this year’s activity defied seasonal norms, with many storage companies doubling their production and shipments in March. Some inverter manufacturers increased production from 50,000-60,000 units in February to around 150,000 units. In the US, large storage installations doubled YoY in January; domestically, January installations doubled YoY, and February project awards also doubled, supporting high industry prosperity.

3. How to view the future space and allocation logic of “electric-inclusive” assets?

This round of energy market rally far exceeds the geopolitical shocks of 2022. Looking back at the 2022 energy sector rally following geopolitical conflicts, energy-related stocks surged due to conflicts. Currently, the energy security logic is even stronger—2022’s crisis was mainly due to Europe’s natural gas shortage, whereas today’s conflicts in the Middle East threaten the global oil and gas supply system. Coupled with normalized conflicts, the urgency of global energy security surpasses previous levels. Countries are more determined and active in building alternative energy systems, implying that demand for “electric-inclusive” assets will be more sustainable.

The core upward logic for “electric-inclusive” assets is clear and hard to reverse: escalation of geopolitical conflicts → increased global energy security needs → accelerated renewable energy development → benefits across the entire power chain → sustained high performance + valuation recovery. China, undoubtedly, is the country most benefiting from this chain.

As global energy security becomes a strategic focus, investing in “electric” assets is no longer a short-term gamble but a long-term reassessment of energy revolution value. Amid ongoing geopolitical conflicts and rapid restructuring of energy systems, energy security will be a long-term investment theme. “Electric-inclusive” assets, as the core carriers, will continue to demonstrate their allocation value, making long-term positioning worthwhile.

Related products: 【Generation】Green Power ETF E Fund (562960, connect A/C: 019058/019059); 【Transmission】Grid Equipment ETF E Fund (560390); 【Storage】Energy Storage Battery ETF E Fund (159566, connect A/C: 021033/021034)