China’s photovoltaic industry has gone through a period of fixed benchmark feed-in tariffs, a period of bidding, and the transition to parity. The subsidy support policy has played a significant role in promoting the demand for installed capacity and increasing the profitability of manufacturing enterprises in the early stage of the development of the industry. Chinese photovoltaic companies are supporting the policy Driven by technological progress and capacity expansion, the scale of the industry has expanded rapidly, and the cost advantages of each link have become more obvious, establishing a global competitiveness and leading position. According to calculations, from 2020 to 2025, the global new installed capacity of photovoltaics is expected to reach 120GW, 140GW, 160GW, 180GW, 200GW, and 220GW, respectively, up by 2.21%, 16.67%, 14.29%, 12.50%, 11.11%, and 10.00%. There is still much to do. Today we will review
1. Policy-driven shift to market-driven, the decline of LCOE is the main line of development
1.1 Both cyclicality and growth
The society’s demand for clean and cheap energy is the fundamental driving force for the development of photovoltaics: 1. Photovoltaic power generation is clean, low-carbon (or even zero-carbon), and sustainable, and is strongly supported by governments; 2. Photovoltaic has great potential for cost reduction and efficiency improvement, and it is expected to become the most Cheap energy, reducing the cost of electricity for the whole society.
The photovoltaic industry is cyclical and growing, and its market value is driven by expectations and supported by performance. The photovoltaic industry has a triple cycle of demand, supply, and technology. Due to the rapid decline in costs and huge room for development, the photovoltaic industry also has significant growth. The market value of the photovoltaic industry is driven by expectations and supported by earnings. Expectations are mainly affected by factors such as policy marginal changes, industry patterns, interest rates, and profit expectations; profitability is mainly determined by three factors: volume, price, and cost. The underlying influencing factors are subsidy policies, supply-demand relations, and technological development.
Policies, lighting resources, grid consumption, land resources and other factors restrict photovoltaic installations:
(1) Policies determine the feasibility of photovoltaics. Due to factors such as subsidy pressure and social electricity costs, some countries have introduced policies to limit the scale of photovoltaic installations. As photovoltaic economy improves, policy constraints are expected to weaken.
(2) Light resources determine the economics of photovoltaic power generation. The spatial distribution of solar energy is uneven, and the overall decrease is from the tropics to the frigid zone. Illumination resources directly determine the utilization hours of photovoltaic power stations, which in turn affects photovoltaic economy. A certain amount of light resources is a precondition for the development of photovoltaic power generation. Africa, the Middle East, Australia and other regions have the most abundant sunlight resources, with peak sunlight hours generally exceeding 2,000 hours, and photovoltaics have become one of the cheapest sources of electricity in the region.
(3) The grid absorption capacity determines the short-term development space. In countries with weak grid dispatching capacity and poor thermal power deep peak shaving capacity, physical defects of photovoltaic intermittent, volatility, and unpredictability have caused the upper limit of its installed capacity or power generation to be at a very low position (such as 1/3 of installed capacity and 1/6 of power generation). Power grid dispatching and peak shaving capacity building require time, which imposes constraints on photovoltaic installed capacity in the short term.
(4) Land resources determine long-term development space. The energy density of solar radiation is low, and photovoltaic power generation requires a large area of land. The sun’s radiant energy reaching the earth’s land surface per second is equivalent to 35,000 times the global annual energy consumption. Currently, the global desertification land area is 36 million square kilometers. Assuming that 0.1% of the desert area is used to build photovoltaic power plants, the power generation can reach global energy. 1.7 times the consumption. In some areas, the scarcity of land resources is an important condition that affects the cost of photovoltaic construction and restricts photovoltaic installed capacity. However, from the perspective of global total, photovoltaic development has a vast space.
The reduction in the cost of electricity per kilowatt-hour is the main theme of the development of the photovoltaic industry, and technological progress is the main theme of promoting cost reduction and efficiency enhancement. Construction cost and power generation are the fundamental factors that affect LCOE. Technological advancements have brought about improvements in conversion efficiency and production efficiency. The increase in conversion efficiency can not only increase the gain in power generation but also dilute the construction costs related to the area. The increase in production efficiency can be achieved through scale effects. Realize the optimization of component cost. Over the past ten years, the photovoltaic industry has shown a continuous trend in cost reduction. The cost reduction brought by the early-stage economies of scale has been relatively large. As the marginal diminishing scale of the effects of scale superimposes the large-scale early-stage profits, the rate of cost reduction has slowed down. With the emergence of new technologies such as diamond wire, RCZ and PERC, technological progress has become the main theme of cost reduction and efficiency increase in the photovoltaic industry.
1.2 Historical review: The explosion of volume is the key to driving the market rise
The development of the photovoltaic industry can be divided into three stages. Economic enhancement drives the industry from a policy-driven period to a transitional period, and will gradually enter an economically-driven period in the future. The initial stage of photovoltaic development is costly, economically uncompetitive with thermal power, and rely on government subsidies. As each link in the photovoltaic industry chain continues to reduce costs and increase efficiency, the development of photovoltaics has entered a transitional period, gradually achieving parity on the use/generation side, but the overall power cost is still higher than that of thermal power (considering peak shaving), and it still relies on implicit policy support (protective Acquisitions, etc.). In the future, with the advancement of photovoltaic power generation and energy storage technology, the comprehensive power cost of photovoltaic power generation will gradually be lower than that of thermal power, and economy will become the core power of installed capacity.
Policy-driven period: The policy determines the demand cycle, and the burst of volume drives the market to rise. Limited by higher power generation costs, historically, photovoltaic installations were mainly driven by policy subsidies. From 2004 to 2011, high subsidy policies drove the outbreak of photovoltaic installation demand in the European market represented by Spain, Germany, and Italy. From 2013 to 2017, my country’s photovoltaic subsidy policy was determined, leading the global demand for photovoltaic installations. Through the historical review of this stage, it is found that the increase in demand is the core driving force for the industry’s profit growth, and the explosion of demand growth is the core driving force for the increase in valuation. In terms of trends, the growth rate of domestic photovoltaic cell production, global photovoltaic capital expenditure growth rate and photovoltaic equipment index trends are also highly matched.
Transitional period: Weakening of subsidy policy and increasing economic drive. The development of the European photovoltaic market was superimposed by the 2008 financial crisis. Spanish subsidies declined sharply in 2009, followed by a gradual decline in subsidies in Germany and Italy. The European photovoltaic market subsidy policy gradually weakened. In 2018, the “531 policy” was strong Release the signal of a decline in subsidies in my country. As the price of the photovoltaic industry chain continues to fall, some regions with good light resources in the world, such as Spain and Italy in southern Europe, have taken the lead in achieving power-side parity, and the global photovoltaic industry is gradually transitioning to a market-driven transition. The review history found that the growth of installed capacity has stabilized, the profitability of the industrial chain has been structurally differentiated, and technological advancement has led to a significant increase in the profitability of some links. The unexpected changes in the volume have led to the rise and fall of the market, and the profitability of the stock price has become more supportive .
Economic-driven period: policy disturbances exit, and industry growth is prominent. In the short term, we can see the realization of parity on the photovoltaic power generation side, and industry growth will get rid of subsidy dependence and move towards endogenous growth. During the period of parity, the pressure of lowering prices in all links of the manufacturing industry is small, and profit margins are expected to increase; in terms of downstream photovoltaic power plants, we need to focus on the resolution of consumption and land issues. Power grid dispatching and peak shaving capacity building are the keys to solving the problem of consumption , And the land issue concerns the long-term development space of the industry. In the long run, “photovoltaic + energy storage” comprehensive electricity cost parity is the ultimate goal of achieving photovoltaics as a new generation of human energy in the next 100 years. The development of battery technology and energy storage technology has become the key to solving the problem. The conversion efficiency of the N-type technical route has a large room for improvement, and it is expected to achieve rapid promotion.
2. Policy-driven period: the policy determines the demand cycle, and the burst of volume drives the market to rise
2.1 The policy stimulates the outbreak of installed capacity and the shift in the focus of demand growth
Subsidy policies have driven three peaks in global installed capacity:
From 2007 to 2008, the Spanish market emerged under high subsidies. In 2008, Spain achieved 2.89GW of photovoltaic installations, accounting for 44.53% of the global photovoltaic installations, which promoted the rapid growth of photovoltaic installations in Europe and the world. In 2009, Spanish subsidies dropped sharply, and installed capacity plummeted by 99%. After the outbreak of the financial crisis, the finances of various countries tightened, and the global photovoltaic installed capacity growth rate dropped to 30%.
From 2010 to 2011, the gradual decline of subsidies led to the outbreak of rush to install in the Italian and German markets, which promoted the increase in global installed capacity. In 2012, under the European debt crisis, Italy substantially tightened its subsidy policy, which led to a 62% decline in installed capacity. With the addition of factors such as the slowdown in the growth of newly installed capacity in Germany and the double opposition of Europe and the United States to China, the global photovoltaic industry fell into a trough.
From 2013 to 2017, China’s photovoltaic installed capacity increased significantly, and the proportion reached 57.41% in 2017, leading the global installed capacity to enter the 100GW level. At the same time, the global photovoltaic installed capacity growth rate entered a downward channel, with a decrease of 35 in 2017 compared to 2016 percentage point. In 2018, affected by policy changes, the share of domestic installed capacity dropped to 45.44%. The global market is developing towards diversification, with the United States, Japan, and India as representatives of many countries in the world gradually increasing their share under the support of policies and economics.
2.2 “Scale + technology” drives cost reduction and efficiency enhancement, and supply-demand relations dominate excess profits
The superposition of scale effect and technological progress drives the industry to reduce costs and increase efficiency. The photovoltaic industry is showing a continuous trend of cost reduction and conversion efficiency improvement. From 2007 to 2019, the cost reduction of photovoltaic systems was mainly contributed by modules, and the proportion of modules in the system cost decreased from 60% in 2007 to 38.5% in 2019. From 2007 to 2012, photovoltaic power generation has gradually moved from experimental technology to industrialization, and the cost reduction brought by scale efficiency is relatively large. This is also the fundamental reason for the frequent disconnection between policies and the market during the period. The marginal diminishing returns of scale are combined with too much early gains, and the system and component prices have fallen slightly in 2013-2014. After 2015, the penetration rate of diamond wire, RCZ, and PERC technology has increased. Driven by technological progress, the photovoltaic industry once again ushered in a wave of cost reduction and efficiency enhancement.
The relationship between supply and demand determines the price and profit space. Changes in the supply and demand pattern of the entire industry will lead to an increase or decrease in the profitability of the entire industry, and changes in supply and demand in the sub-links of the industry chain will affect the distribution of the value chain.
From 2005 to 2008, the demand for the photovoltaic industry chain broke out. The price of polysilicon products with higher technical barriers and slower expansion speed once soared to US$500/kg (only US$100/kg-200/kg in 2006). The gross profit margin exceeds 90%. In 2009, the global installation contraction combined with the initial production of new production capacity, triggered the first round of severe overcapacity in the photovoltaic industry, and the price of polysilicon quickly fell to US$60/kg.
From 2010 to 2011, European installed capacity exceeded expectations, leading to a reversal of the supply-demand relationship, and industry prices rose sharply. In 2012, the subsidy tightened production capacity was overcapacity again. During the same period, the United States and Europe initiated a “dual reverse” investigation on Chinese photovoltaic companies, and the profit margin of domestic photovoltaic companies fell to the bottom. Highly leveraged companies are exposed to financial risks. Leading companies such as Wuxi Suntech, LDK and Yingli may declare bankruptcy and reorganization or be acquired. In 2013, Conergy, Europe’s largest solar energy group, also declared bankruptcy.
From 2013 to 2017, the overall price of photovoltaic products declined moderately, and the gross profit margins of Longi and Zhonghuan, which were the first to achieve technological breakthroughs and mass production in silicon wafers, increased significantly.
2.3 Market review: market expectations drive the market to rise, and earnings support is weak
During the policy-driven period, my country’s photovoltaic market has experienced three significant rounds of rising prices. From December 2006 to January 2008, the photovoltaic equipment index rose by 356.38% from 2000.96 to 9131.91. During the same period, the Wonderfull A index rose by 163.55% from 1415.79 to 3731.35; from November 2008 to March 2011, the photovoltaic equipment index rose from 2039.51 Increased by 534.38% to 1,2938.3, the Wonder Quan A index rose by 130.58% from 1242.52 to 2865.00 during the same period; from December 2012 to June 2015, the photovoltaic equipment index increased by 384.30% from 3,035.57 to 14,701.16, and the Wonder Quan A index increased from 1905.13 in the same period 279.20% to 7224.26.
From 2007 to 2008, the profit growth of domestic companies was limited, and market expectations raised the valuation. Domestic photovoltaic companies mainly deploy cells and modules, with low added value and limited profit growth. However, the outbreak on the demand side has greatly increased the capital market’s expectations of the industry’s future growth rate. The PV equipment index PE increased from 36.93 on December 28, 2006 to 203.82 on January 24, 2008 (the PE of the Wonderfull A index only From 37.1 to 43.8). At the beginning of 2008, the global financial crisis broke out and the PV equipment index remained basically unchanged. PE quickly dropped from 203.82 on January 24, 2008 to 33.30 on November 3, 2008.
From 2009 to 2011, valuation restoration and profit enhancement have been realized. At the end of 2008, the four trillion plan superimposed the central bank’s strong interest rate cut, and the valuation was the first to be restored. From November 2008 to April 2009, the PV equipment index PE increased rapidly from 33 to around 120. In 2010, Germany and Italy rushed for installation, the photovoltaic market was fully recovered, and domestic production capacity expanded rapidly. From 2008 to 2011, domestic photovoltaic cell production increased by 707%, and polysilicon production increased by 1766%. Benefiting from the high downstream demand, the price of polysilicon increased by 37.64% from March 2010 to March 2011. With both volume and price rising, the PV equipment index PE increased from around 90 in early 2010 to over 300 in September 2011. In November 2011 and September 2012, the United States and Europe successively implemented the anti-dumping policy. The photovoltaic equipment index suffered a Davis double kill, and the 2012 annual decline exceeded 40%.
From 2013 to 2015, domestic installed capacity increased explosively and industry expectations supported the emergence of large markets. 13 years later, domestic photovoltaic policies have been intensively introduced. With strong policy support, industry growth expectations have been improved, and valuations have taken the lead in repairing. From 2013 to 2015, the domestic PV on-grid electricity price has always remained unchanged, while the price of PV modules dropped by about 20% during the same period. The investment yield of photovoltaic power plants continues to increase, leading to a continuous increase in the growth rate of domestic installed capacity. From November 2013 to August 2016, the risk-free interest rate continued to drop from 4.7222% to 2.6401%, resulting in a decline in the expected stock yield. In the background of the 2015 bull market, investors’ risk appetite increased and the risk premium decreased, which further lowered the expected return of stocks. The photovoltaic equipment index also rose rapidly, driven by the increase in valuation. The subsidy retreat policy in 2015 led to the overdraft demand of the 630 rush for installation in 2016. The demand fell sharply in the third quarter, the price of the industrial chain plunged rapidly, and the relative income of the photovoltaic equipment index continued to decline.
3. Transitional period: weakening of subsidy policy and strengthening of economic drive
3.1 Weakening of subsidy policy and economical promotion of diversified demand
Subsidy policies of various countries have withdrawn, and the development momentum of photovoltaics has gradually shifted from policy-driven to market-driven. Since 2008, countries such as Spain, Germany, and Italy, which started photovoltaics earlier, have successively introduced policies for the decline of photovoltaic subsidies. In 2018, my country’s photovoltaic industry experienced a substantial subsidy decline and installed capacity restrictions, and the industrial chain prices ushered in a round of rapid decline. In the context of the gradual withdrawal of subsidies, economy has become the main driving force for demand growth. The growth rate of photovoltaic installations began to move towards endogenous growth driven by economy after experiencing a sharp rise and fall due to subsidy policies.
Photovoltaic economy has driven the explosion of overseas diversified installations, and demand growth has slowed down. From May to October 2018, the comprehensive photovoltaic price index fell by more than 30%, and the economics of photovoltaic power generation became prominent. After the “531 policy” in 2018, the growth rate of my country’s photovoltaic installed capacity has dropped sharply. In some overseas markets with higher electricity prices, better lighting conditions, and lower non-technical costs, photovoltaics have become the cheapest source of electricity. The cost of photovoltaic power generation in Germany, Zambia, India, Brazil and other countries has been lower than the local thermal power price, and economy has become the main factor driving the growth of installed capacity in some overseas parity markets. The global photovoltaic market presents two major characteristics: (1) Subsidy withdrawal and a high base have led to a gradual decline in the growth rate of global new installed capacity; (2) The driving force for new photovoltaic installations shows a diversified trend, the United States, Japan, India, Vietnam, and Australia The proportion of demand has increased.
3.2 Technological progress has led to a decline in prices, and the industry has a light asset and high ROE attribute
Technological progress has become the main driving force driving the cost reduction of all links. The technology update and iteration speed of each link of photovoltaic is extremely fast, from polycrystalline to monocrystalline, to PERC, PERC+, and the N-type route in the stage of industrialization. Each round of technological innovation has spawned a wave of large-scale industry expansion. Production capacity has advantages in terms of cost and efficiency, and it has a strong substitute for old production capacity. With the decline in global photovoltaic demand growth and the basic realization of the localization of superimposed equipment, the downward trend in the cost of photovoltaic links tends to be flat, and technological progress has become the main factor driving the decline in costs.
The localization of equipment in each link has been basically achieved, and the investment cost has been greatly reduced. (1) Silicon material link: The production equipment technology and process have been continuously improved. In 2019, the investment cost of the polysilicon production line of the trichlorosilane Siemens method has dropped to 110 million yuan per thousand tons, a year-on-year decrease of 4.35%; (2) The silicon wafer link: In 2019, the equipment investment costs for rod and ingot casting (including the machining process) were 61,000 yuan/ton and 26,000 yuan/ton, respectively, down 6.15% and 7.14% year-on-year; (3) Cell link: China’s conventional The key equipment of the battery production line has basically been localized. In 2019, the investment cost of the PERC battery production line has dropped to 303,000 yuan/MW, a year-on-year decrease of more than 27%; (4) The component link: The domestic component production equipment has been fully localized in 2019. The investment in new production line equipment is 68,000 yuan/MW, basically the same as in 2018. In the future, with the continuous improvement of equipment performance, single production capacity and cell efficiency, the investment cost of each link of the production line is expected to be further reduced.
The trend of large-scale silicon wafers has helped improve the production efficiency of the entire industry chain, and the effect of reducing costs and increasing efficiency is obvious.
1) Wafer link: The drawing cost of large-size silicon wafers per unit mass square rod is lower, and the total cost is advantageous. Benefiting from the cost advantage of the crystal pulling process, the non-silicon manufacturing cost of large-size silicon wafers is lower. Taking M9, M10, and M12 as examples, the three types of silicon wafers are expected to achieve a non-silicon cost reduction of 1.80 cents/W, 2.13 cents/W, and 2.60 cents/W respectively (compared to 156.75 full square wafers). Considering that large-diameter crystal pulling will lead to increased silicon material loss to a certain extent, the cost of single-watt silicon material for large-size silicon wafers will increase slightly. Taken together, the total cost of M9, M10, and M12 large-size silicon wafers is 3.73%, 4.37%, and 5.25% lower than that of 156.75 full square wafers, respectively.
2) Cell link: Large-size silicon wafers increase equipment production capacity, reduce the consumption of consumables per watt, and save single watt manufacturing costs. Taking 156.75 full square wafers as a benchmark, M9, M10, and M12 specification silicon wafers reduced the non-silicon cost of the cell segment by 15.23%, 18.52%, and 22.53%, respectively. If comprehensively consider the cost reduction of raw material silicon wafers (integrated calculation), the M9, M10, and M12 specification silicon wafers will reduce the total cost of the cell link by 8.67%, 10.41%, and 12.63%, respectively.
3) Components and system links: The packaging density of large-size silicon wafers is higher, which helps further reduce the cost of components and system links. There is a certain gap between the cell and the cell when the conventional module is packaged. The use of large-size silicon wafer can reduce the amount of cell in the module of the same power level, thereby reducing the gap and improving the packaging density. In addition, a small amount of cells can reduce the difficulty of aligning the main grid during series welding, and it is also convenient for the production and management of the enterprise. If large-size silicon wafers are used to produce high-power components, the cost of junction boxes, labor, and depreciation can also be diluted, and the BOS cost can be significantly reduced. Take M12 silicon wafer 50-type module as an example, its power can reach 480W, and the BOS cost can be reduced by 19.77%.
“Equipment localization + large-scale silicon wafers” promotes the whole industry to present the attributes of light assets and high ROE. Taking the cell segment as an example, assuming that the residual value rate of fixed assets is 5%, the management expense rate is 4%, the sales expense rate is 4%, the discount rate is 5%, and the income tax rate is 25%, we have calculated the return rate of the 1GW mono PERC battery project Happening. When the loan ratio is 50%, when the initial investment cost is 800 million yuan/GW, the ROE level in the third year of the project is about 10.5%, the project IRR is about 8%, and the investment payback period is 6.6 years; the initial investment costs are reduced to 600 million yuan respectively /GW, 400 million yuan/GW, 200 million yuan/GW, ROE levels reached 14.3%, 20.5%, 32.4%, project IRRs were 10.6%, 15.5%, 28.2%, and the payback periods were 5.9 years, 4.9 years, 3.2 years. When the initial investment cost is in the range of 200 million yuan/GW-500 million yuan/GW, the profitability of single W is about 0.04-0.05 yuan/W.
Industry barriers and the speed of technological iteration have led to structural differentiation in the profitability of each link. The silicon material link and the silicon chip link have relatively high technical and financial barriers, and the production capacity construction cycle is relatively long, so it can maintain a high level of profit; the solar cell link and the module link have relatively low technical barriers, and the production capacity construction cycle is relatively low. Shorter, showing a lower level of profit. Due to the rapid iteration speed of photovoltaic technology, within a single link, companies with leading technological strength and the first to achieve breakthroughs in product efficiency can achieve profitability higher than the industry average. Taking the silicon wafer link as an example, the profitability of Longi, the first to realize the monocrystalline circuit, was significantly higher than the industry average.
3.3 The advantage of latecomers weakens and the industry structure improves
The semiconductor properties of the high-efficiency route are enhanced, the threshold for scale effect is raised, and the advantage of latecomers is weakened. The high-efficiency route greatly improves the quality and production process requirements of silicon materials:
(1) The higher the efficiency of the battery, the higher the purity requirements of the silicon material. The requirements of the N-type single crystal on the silicon material are close to the electronic level. At the same time, RCZ, CCZ and other multiple-investment processes require the silicon material to be smaller in size and require internal feeders. The size of silicon material is less than 60mm, and the external feeder requires a size of less than 30mm, and the quality of silicon material is required to be improved;
(2) Most of the high-efficiency battery technology adopts the N-type route. Compared with the traditional P-type battery, the amorphous silicon and crystalline silicon deposition links of the N-type battery have strict requirements on the process environment, and the phosphorus diffusion process needs to meet the cleanliness requirements and be effective. Passivation requires a significant increase in the difficulty of the production process. Based on the existing PERC production line, upgrading to an N-type production line requires the addition of a variety of key equipment, and the cost of upgrading the production line is high.
Leaders in each link have advantages in scale and technology, low-cost expansion and consolidation of scale advantages, and the industry structure is gradually improving.
(1) Silicon materials: Domestic manufacturers are fully pressing, overseas high-cost production capacity is gradually withdrawing, and the degree of localization and industrial concentration have increased. In the silicon material link, Eastern Hope, Tongwei, GCL Xinjiang, Xinte Energy, and Daquan New Energy are in the first echelon with variable costs and production capacity. Variable costs are all less than 50 yuan/KG. Eastern Hope and Tongwei (Baotou), Tongwei (Leshan) variable costs have been lower than 40 yuan/KG. The variable costs of traditional overseas polysilicon giants such as OCI, LDK, and Wacker are significantly higher than those of domestic enterprises, which are about RMB 62/KG, RMB 70/KG, and RMB 80/KG respectively. At present, OCI has confirmed the closure of two photovoltaic-grade polysilicon plants in South Korea, and WACKER’s polysilicon business in Germany will turn from profit to loss in 2019. In the future, it is expected that with the gradual withdrawal of high-cost polysilicon production capacity from overseas and domestic second-tier manufacturers, domestic low-cost production capacity with cost and scale advantages will gain more market share, and the polysilicon industry will eventually become an oligopoly.
(2) Silicon wafer: The duopoly structure is stable, and the clearing of backward production capacity is accelerated. At present, the silicon material segment has formed a duopoly structure of Longji and Zhonghuan, and the market structure is relatively stable. In 2019, LONGi and Zhonghuan’s monocrystalline silicon wafer production capacity reached 45GW and 30GW respectively, far ahead of the second-tier enterprises such as JinkoSolar and JA Solar. In the future, as the advantages of latecomers further weaken, the pattern of silicon wafer links is expected to be maintained, and the market share of leading players will further increase.
(3) Cells: The scale advantage of the first echelon has basically been established, and the leading market share is expected to increase. As of the first quarter of 2020, the non-silicon cost and capacity of Tongwei’s cell business are in the first echelon, with an effective capacity of 24GW, of which the PERC cell capacity is 21GW, and the non-silicon cost of monocrystalline cells is 0.2-0.25 yuan/W; The second-tier manufacturers include Runyang, Sumin, Shanxi Lu’an, Pingmei, Jinzhai Jiayue, etc., with non-silicon costs reaching 0.25-0.3 yuan/W. Among the vertically integrated manufacturers, LONGi’s monocrystalline cell non-silicon cost and production capacity are in a leading position, with an effective capacity of 15GW, and a non-silicon cost of 0.25-0.3 yuan/W; Risen Energy follows closely behind with an effective capacity of 5.4GW. The non-silicon cost reaches 0.3-0.35 yuan/W. The first tier has obvious advantages in cost and scale, and its market share is expected to further increase.
(4) Modules: The competition pattern in the module sector is relatively fragmented. JinkoSolar, JA Solar, Trina Solar, Longji, and Canadian Solar are among the top five. Relatively speaking, the technology and capital barriers of the component link are relatively low, and the market structure is relatively fragmented. From 2018 to 2019, the ranking of global module shipments was relatively stable, with JinkoSolar, JA Solar, Trina Solar, Longi and Canadian ranked in the top five. It is expected that in the future, leading component manufacturers with leading technology and cost and strong market development capabilities will have an advantage in fierce competition. In 2020, the proportion of CR5 is expected to increase to 57.25%.
3.4 Market resumption: Expectations drive the overall ups and downs, and profitability becomes more supportive
During the transition period, my country’s photovoltaic market has seen two rounds of relatively obvious rises so far. From June 2017 to November 2017, the photovoltaic equipment index increased by 47.16% from 6272.93 to 9231.5. During the same period, the Wandequan A index rose by 16.15% from 4106.64 to 4770.05; from October 2018 to July 2020, the photovoltaic equipment index increased from 4,110.36 It rose by 176.35% to 12188.10, while the Wonder All A Index rose by 65.22% to 5,253.30 from 3179.54.
Expectations drive the overall market ups and downs, and profitability has increased. From June 2017 to November 2017, my country’s photovoltaic industry was in a boom cycle of rising volume and price. Under the dual support of expectations and profitability, the new policy of 531 photovoltaic equipment index in 2018 hit domestic demand and industry confidence. After the introduction of the new policy, Both the volume and price of the industry fell. From May to October 2018, the PV equipment index PE was lowered from 26.33 to 16.18, and the PV equipment index was lowered from 7,589 to 4410. With the explosion of overseas photovoltaic demand, the fundamentals of the photovoltaic industry have improved significantly. Superimposed on the photovoltaic symposium held by the National Energy Administration on November 2, 2018, boosted market expectations, and the photovoltaic equipment index PE began to rise accordingly. From October 2018 to July 2020, the PV equipment index PE increased from 16.18 to 37.50.
The rapid penetration of the monocrystalline route promotes the profitability of monocrystalline leading companies to be better than the industry average. From December 2014 to May 2015, thanks to the initial maturity of the diamond wire application, LONGi increased its promotion of monocrystalline products by strengthening inter-industry cooperation and acquiring Leye Photovoltaic to penetrate downstream, and monocrystalline market The rate of increase, thus ushered in the first wave of rising market, the range rose to 322.77%, and the photovoltaic equipment index rose 134.38% over the same period. From September 2015 to November 2017, the single crystal penetration rate increased rapidly and superimposed on the photovoltaic installation cycle. The stock price of Longi Group ushered in a sharp rise, with a range increase of 429.01%, and the photovoltaic equipment index increased by 42.98% during the same period. The third wave of sharp rise in the market originated from the stock price restoration after the “531 Policy”. With the establishment of the monocrystalline route, the monocrystalline penetration rate exploded. As the leader of monocrystalline, LONGi’s technology and market reputation reached its peak. From October 2018 to July 2020, Longi’s share price rose by 376.59%, and the photovoltaic equipment index rose by 176.35% during the same period.
4. Market-driven period: policy disturbances exit, industry growth is prominent
4.1 Realization of online parity, profit margins in manufacturing are expected to increase
After the realization of parity, the whole industry will move towards an endogenous demand-driven growth model, and the global photovoltaic demand growth will tend to be flat. As the economics of photovoltaics become more prominent, more and more countries and regions around the world will achieve parity on the power generation side. We expect that the market demand contributed by new installed photovoltaic capacity in China, the United States, India, and Europe will show a steady growth trend. According to estimates, from 2020 to 2025, the global new PV installed capacity is expected to reach 120GW, 140GW, 160GW, 180GW, 200GW, and 220GW, respectively, with a year-on-year increase of 2.21%, 16.67%, 14.29%, 12.50%, 11.11%, and 10.00%.
The pressure of price cuts in the industry chain has been reduced, releasing the profitability of the manufacturing industry. As each link continues to reduce costs and increase efficiency, photovoltaics have entered the last mile before parity grid access. Affected by the withdrawal of the subsidy policy, the profitability of various links in the manufacturing industry has been squeezed. According to calculations, the gross profit margins of silicon materials, silicon wafers, solar cells, and modules are estimated to be 30%, 25%, 15%, and 13% respectively at parity. After the advent of the era of parity, the pressure to reduce the price of photovoltaic products is reduced. With the continuous advancement of cost reduction and efficiency enhancement and the optimization of the industry structure, there is still room for improvement in the profitability of each link.
4.2 Efficiency is king, N-type technical route is expected to be promoted quickly
High-efficiency batteries have a higher power generation gain rate: 1) higher conversion efficiency can dilute the area-related costs of downstream power stations, 2) low attenuation, double-sided power generation and other performances will perform better in the long term. The cost of transportation, installation, cables, brackets, operation and maintenance, and land of a photovoltaic power station are all positively related to the area. Therefore, the use of more efficient battery components can save the area of the photovoltaic power station and thereby save area-related costs. In addition, N-type batteries have the advantages of low temperature coefficient, low light attenuation coefficient, weak light response, high double-sided ratio, etc., and higher equivalent power throughout the life cycle, and this part of the power generation gain has not been reflected in current pricing. Compared with single crystal BSF, the power generation gain rate of P-PERC, Zhonglai TOPCon, and Junshi Energy HIT battery are about 3%, 8.29%, and 11%, respectively.
The N-type technical route has a large room for improvement in conversion efficiency and has the advantages of low light-induced attenuation and good response to weak light. The metal contact area at the laser groove on the back of the P-PERC battery adds extra composite current. Compared with the P-PERC process, the N-type battery technology does not require the use of a laser process, so the manufacturing process will not cause additional crystal damage to the silicon wafer. In 2019, the conversion efficiency of P-type PERC monocrystalline cells was 22.3%; N-PERT+TOPCOn, HJT and IBC monocrystalline cells reached 22.7%, 23.0%, and 23.6%, respectively, all exceeding P-type cells. It is estimated that by 2025, the efficiency of the P-type PERC can reach 24.0%, and the efficiency of the three main technical routes of the N-type can be increased to 24.5%, 25.5%, and 25.5%, respectively, which is greater than that of the P-type battery. In addition, the N-type battery uses an N-type silicon substrate instead of P-type silicon, which has the characteristics of zero light-induced attenuation, good low-light effect, and high component stability.
The industrialization of the N-type route is smooth and is expected to be promoted quickly in the future. In recent years, Zhonglai, Linyang Energy, State Power Investment and Yingli Group have begun to deploy N-PERT production capacity, but because N-PERT batteries are not cost-effective compared with double-sided P-PERC batteries, battery manufacturers have started to upgrade N-PERT to TOPCon. At present, Zhonglai is the only domestic manufacturer of mass-produced TOPCon batteries, with a mass-production conversion efficiency exceeding 22.5%. Traditional battery manufacturers such as JinkoSolar and Trina Solar have also joined the TOPCon camp. In addition, Panasonic has been researching and developing the HIT battery route for many years. New entrants in China, such as Junshi, Shangpeng, Jinneng, and Zhongzhi, choose the HIT technology route with higher laboratory conversion efficiency. The current mass production conversion efficiency is generally 22.5%. ~23.5%.
4.3 The visibility of “photovoltaic + energy storage” has increased, and the vision of ultimate parity can be expected
“Ultimate photovoltaic technology + ultimate energy storage technology” creates a new generation of human energy in the next 100 years. Because the output power of photovoltaic power generation has strong volatility and randomness, photovoltaic energy storage technology can realize functions such as peak shaving, load tracking, frequency regulation and voltage regulation, and power quality management. The final combination of photovoltaic grid parity and energy storage grid parity is the true photovoltaic parity grid. The main purpose of the commercial development of photovoltaic + energy storage in the policy support stage is to improve the efficiency of the whole system of photovoltaic storage; as subsidies decline and enter the initial stage of marketization, photovoltaic power generation gradually tends to be self-contained, increasing energy storage to promote local consumption; After entering the stage of full marketization, the main purpose of optical storage and power supply is to reduce the cost of electricity.
The combination of solar storage and solar energy realizes all-day power generation, effectively reducing electricity costs. The grid-connected optical storage system realizes all-day power generation. Through 24 hours of uninterrupted power sales, the power station’s profitability will continue to increase. The self-generation and self-use mode of optical storage power stations effectively reduces electricity costs and helps advance the process of parity. According to a report released by the National Renewable Energy Laboratory (NREL) of the US Department of Energy, the cost of a 100MW single-axis tracking photovoltaic system is US$111 million, and the cost of a 60MW/240MWh battery energy storage system is US$91 million. The total cost of the two remote constructions is US$202 million. Using the combined optical storage model, the cost of an AC optical storage system of the same scale is US$188 million.
Benefiting from the favorable policies of optical storage, the domestic optical storage market is growing rapidly. In the past two years, various parts of the country have successively released relevant favorable policies for optical storage. Hefei, Northwest, East China, Tibet and other regions have mobilized market enthusiasm and vigorously promoted the synergy of “photovoltaic” + “energy storage” by adjusting solar storage subsidies, revising two detailed rules, encouraging solar storage ratios, and collecting solar storage demonstration projects. application. As of the end of 2019, the cumulative installed capacity of China’s energy storage projects that have been put into operation and built with photovoltaics was 800.1MW, an increase of 66.8% year-on-year, accounting for 2.5% of the total scale of China’s energy storage projects that have been put into operation. In 2019, the installed capacity of the newly commissioned optical storage project was 320.5MW, a year-on-year increase of 16.2%.
Centralized optical storage projects are mainly concentrated in the Three North areas, and the proportion of distributed industrial optical storage projects has increased. As of the end of 2019, the cumulative installed capacity of China’s centralized optical storage projects was 625.1MW, accounting for 78.1% of the total scale of all optical storage projects. From the perspective of regional distribution, the projects are mainly distributed in my country’s “Three Norths” area. Among them, Qinghai has the largest cumulative scale of operation with 294.3MW, accounting for 47.1%; the cumulative installed capacity of distributed optical storage projects is 175.0MW, It accounts for 21.9% of the total scale of all optical storage projects. Among them, the cumulative scale of operation of optical storage projects in remote areas is the largest, with 69.1MW, accounting for 39.5%, a decrease of nearly 14 percentage points from the same period last year, while the proportion of industrial optical storage projects has increased by nearly 8 compared with the same period last year. percentage point.
State Grid Comprehensive Energy and Ningde Times have jointly deployed the energy storage industry, and the bidding for photovoltaic + energy storage projects has opened. In April 2020, the State Grid Integrated Energy Service Group and Ningde Times successively established Xinjiang State Grid Times Energy Storage Development Co., Ltd. and State Grid Times (Fujian) Energy Storage Development Co., Ltd. In addition to project development, construction, operation and maintenance, they can also serve as storage Technical services such as energy R&D integration will support the construction of UHV projects with energy storage, promote the consumption of new energy, and achieve the balanced development of energy storage, new energy and the power grid. In terms of solar storage projects, Huaneng and Datang have taken the lead in opening the bidding for solar storage projects. Among them, Datang Inner Mongolia Tengger’s first phase of 100MW ecological desertification control photovoltaic power station project is equipped with an energy storage capacity of 5%, and the energy storage system duration is 1 hour or more; Huaneng Chifeng 300MWp photovoltaic + energy storage project, the energy storage configuration capacity has reached construction Scale 5% and above.
The cost of optical storage continues to fall, and the prospect of ultimate parity is expected. According to BNEF data, the cost of energy storage systems in 2019 is approximately US$331/kwh, a decrease of 9.1% compared with 2018. With the continuous progress of energy storage technology in the future, the cost of energy storage systems will show a continuous downward trend. It is estimated that by 2025, the cost of the energy storage system is expected to drop to US$203/kwh, a decrease of 38.7% compared to 2019, and by 2030, the cost of the energy storage system is expected to drop to US$165/kwh, a decrease of 50.25% compared to 2019 .
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