(Yicai) Nov. 13 -- Swiss banking giant UBS has raised its forecast for the growth of China's electricity demand to 8 percent a year between 2028 and 2030 because of the increasing number of artificial intelligence data centers, robust exports, and speeding electrification.

"AI data centers, exports, and electrification are the main growth engines," Ken Liu, head of China Energy Transition and Renewables Research at UBS, said at a media briefing yesterday.

UBS' latest power growth projection for China exceeds the market consensus of a 4 to 5 percent increase over the same period.

The construction of AI data centers alone will contribute about 2.3 percentage points to power demand growth, up from an earlier forecast of 0.5 point, Liu noted. In addition, export-oriented manufacturing and electrification will add 1.4 points and 1.2 points, respectively, he said.

China's planned AI data center capacity of 5 to 6 gigawatts over the next three years remains far below the United States' 40 to 45 GW, making it "too early to talk about a bubble," he pointed out.

Stronger-than-expected demand means China's power sector is entering a new capital-expenditure upcycle, Liu noted, adding that UBS expects power investment in the country's upcoming 15th Five-Year Plan to expand at a compound annual rate of around 12 percent, roughly double the market consensus of 5 to 6 percent.

UBS expects the trend to benefit multiple areas, Liu added. Annual approvals for nuclear plants may rise from 10 units to 14 or 15, while wind-power installations could reach 130 to 140 GW a year, and even coal-fired electricity generation is likely to keep growing as a stable baseload source, he said.

Another investment theme is the global shortage of power equipment due to more AI and infrastructure projects, so Chinese manufacturers are expected to gain as component suppliers or direct exporters, particularly regarding transformers and gas-turbine parts, where overseas demand is soaring, Liu stressed.

The photovoltaic industry has passed its worst phase as supply-side reforms take effect, according to Yan Yishu, China utilities and renewables analyst at UBS Securities. "The sector is undergoing a deep 'anti-involution' transformation," with stricter energy-efficiency standards and the revised Pricing Law set to eliminate outdated capacity and stabilize prices, she said.

Although solar installations in China may dip due to grid bottlenecks and market-based bidding next year, strong growth from emerging markets such as the Middle East and Latin America will provide support, Yan noted, adding that leading producers could return to breakeven by late this year or early next year.

In addition, Yan remains "very optimistic" about the energy storage sector, with global storage demand expected to surge more than 40 percent next year thanks to new opportunities brought by AI and renewable expansion.

Editor: Martin Kadiev