Introduction
➢ Combined with the current situation of overcapacity and declining demand in the PV industry in 2023, the following three development paths will be formed in 2024 to affect the long-term development of the PV industry:
In the past, the bottom of the cycle was accompanied by major technological changes, and technological progress can finally realize the first principle of cost reduction and efficiency increase in the photovoltaic industry;
In the context of slowing domestic demand, enterprises will definitely seek a variety of market channels to eliminate excess capacity, and if there are opportunities for mergers and acquisitions, they can also accelerate the realization of global layout;
The lag in the construction of the power system has seriously affected the growth rate of distributed installed capacity, resulting in a downward demand, which is expected to accelerate in 24 years, and energy storage, as an important supporting facility, is also expected to benefit from this.
1. Analysis of supply and demand in the photovoltaic industry chain
1.1 The policy side actively guides the high-quality development of the photovoltaic industry
On the policy side, it actively responds to the cyclical decline caused by the rapid expansion of photovoltaic production capacity. On the one hand, the pace of IPO and refinancing will be tightened in stages, and the rapid expansion of the scale of the photovoltaic industry will be controlled, and some new players and enterprises with insufficient cash will be directly limited, and the hematopoietic ability of enterprises will be more important, the industry concentration is expected to increase, and the competition pattern will be further optimized. In addition, the mainland photovoltaic industry is highly dependent on the global market, and the export scale is larger than the scale of domestic installed modules in recent years, but the tariff policy of the United States on imported photovoltaic products changes frequently, such as anti-circumvention investigations and UFLPA landing.
1.2 Supply: The company has reduced the speed of production expansion, and the monetary funds are sufficient
The company limited the speed of expansion, and the supply-side pattern was gradually optimized. According to the data of Oriental Wealth, in the first and second quarters of 2023, 60 companies in the photovoltaic industry launched refinancing with an average quarterly value of more than 100 billion yuan, of which 45 listed companies raised 115.8 billion yuan through additional issuance, 11 companies issued convertible bonds to raise 53.1 billion yuan, and 3 new stocks were listed to raise 4.659 billion yuan. In the first half of the year, the financing and expansion of photovoltaic enterprises were in full swing.
However, with the gradual oversupply of polysilicon, the rapid compression of TOPCon cell excess profits, the downward shift of the profit center of the industrial chain, the decline in demand growth, and the phased tightening of IPOs For example, the financing of the photovoltaic industry in the third quarter was less than 50 billion yuan, and as of Q3, from the actual progress of the expansion projects announced by the industry, the progress of projects in all links of the photovoltaic industry chain since 2023 has been significantly slower than expected. It is expected that in the first half of 2024, the industry's overall willingness to expand production will decline significantly.
1.3 Demand: Q4 domestic installed capacity increased rapidly, and the export value and scale both declined
In the first three quarters of 2023, the scale of domestic module tenders increased significantly year-on-year. According to Gaitin Consulting, in the first three quarters of 2023, the domestic module bidding scale was 295.85GW, up 90% year-on-year, and the winning module bidding scale was 463.50GW, up 219.3% year-on-year, of which the domestic module bidding scale in September was 56.2GW, up 50.7% month-on-month, and the module winning scale was 39.1GW, down 35.8% month-on-month.
Module demand is expected to decline in Q4, with more than half of N modules purchased. According to SMM data, from September to October 2023, N-type module calibrations showed explosive growth, with the scale of calibrations exceeding 20GW, of which 22.91GW were awarded in October, accounting for 53% of N-type module purchases. Due to the first-mover advantage of TOPCon technology, it has accounted for more than 70% of the absolute share of bidding and centralized procurement of some central state-owned enterprises, indicating that the trend of N-type batteries replacing P-type batteries is gradually taking shape. As prices continue to decline in the value chain, module demand is expected to be lower than expected in Q4, and inventory will be the first priority, but N-type modules will still account for a high proportion.
Centralized new installations are expected to maintain growth in the fourth quarter. From January to October 2023, 142.6GW of new PV capacity was added in mainland China, a year-on-year increase of 145%, of which 13.6GW was added in October, a year-on-year increase of 142% and a month-on-month decrease of 14%, which may be due to the impact of the holiday. From the perspective of installed capacity, the distributed installed capacity exceeded 50% in 23 years, and the centralized installed capacity grew rapidly year-on-year. Among them, the distributed installed capacity in Q3 was 26.2GW, accounting for 51.8%, and the centralized installed capacity was 24.3GW, accounting for 48.2%. With the recent continuous decline in prices in all links of the industrial chain, centralized installed capacity is expected to maintain growth from November to December.
In October, the value and scale of PV product exports declined. From January to October 2023, the mainland achieved a cumulative export value of photovoltaic products (silicon ingots, silicon wafers, cells, modules) of US$43.766 billion, a year-on-year decrease of 2.6%, of which the total export value in October was US$3.094 billion, a year-on-year decrease of 24.7% and a month-on-month decrease of 19.2%, which was the lowest monthly in the past two years, mainly due to the high base last year that led to greater pressure on some regions to destock. According to InfoLink data, the cumulative module export scale of mainland China from January to October 2023 was 174.1 GW, up 30.6% year-on-year, of which module exports in October were 16.5 GW, up 39.8% year-on-year and down 16.7% month-on-month. In the last two months of this year, due to foreign holidays and inventory pressure, it is expected that both the export value and scale will decline.
A large number of goods in the first half of the year led to a decline in demand in the European market in the fourth quarter. From January to October 2023, the top five countries in terms of module exports were the Netherlands, Brazil, Spain, India, and Saudi Arabia, with Saudi Arabia and Belgium seeing significant year-on-year growth. At present, the European market is one of the most important countries in the export of photovoltaic products on the mainland, from January to October, Europe imported 91.6GW of photovoltaic modules, a year-on-year increase of 22.6%, of which, in October, China exported 6.2GW of photovoltaic modules to Europe, down 10% year-on-year and 18% month-on-month, mainly due to the accumulation of inventory caused by a large number of goods in the first half of this year, and the overall European demand is expected to decline significantly in the fourth quarter of the traditional off-season.
The growth rate of new installed capacity in the world and China is expected to reach a new high in 23, and the growth rate is expected to decline sharply in 24-25. From January to October this year, the new installed capacity of PV in mainland China reached 142.56GW, a year-on-year increase of 144.78%, of which the new installed capacity of PV in October was 13.62GW, a year-on-year increase of 141.49%. Due to the expansion of polysilicon production in the first three quarters of 23, resulting in an imbalance between supply and demand, the price center of photovoltaic products continues to decline, which is expected to stimulate a large increase in the scale of centralized installed capacity in the fourth quarter, and the annual growth rate of photovoltaic installed capacity at home and abroad is expected to hit a new high, but due to factors such as overcapacity and slowing demand in some regions, the global growth rate may be around 20% in 24-25. Overall, it is expected that the global new installed capacity is expected to increase from 380GW to 547GW from 2023 to 2025, with an average annual compound growth rate of 12.91%, and the new domestic installed capacity is expected to increase from 180GW to 304GW, with an average annual compound growth rate of 19.09%.
2 PV industry trends in 2024
Combined with the current situation of overcapacity and declining demand in the PV industry in 2023, we believe that the following three development paths will be formed in 2024 to affect the long-term development of the PV industry: 1) Technology leadership and through the cycle. In the past, the bottom of the cycle was accompanied by major technological changes, and technological progress can finally realize the first principle of reducing costs and increasing efficiency in the photovoltaic industry. In the context of slowing domestic demand, enterprises will definitely seek a variety of market channels to eliminate excess capacity, and if there are opportunities for mergers and acquisitions, they can also accelerate the realization of global layout; 3) the development of new energy supporting systems and equipment. The lag in the construction of the power system has seriously affected the growth rate of distributed installed capacity, resulting in a downward demand, which is expected to accelerate in 24 years, and energy storage, as an important supporting facility, is also expected to benefit from this.
2.1 With the advancement of N-type battery technology, the market share of TOPCon is expected to increase significantly in 24 years
N-type cells have reached an efficiency of 24.5% and will gradually become a mainstream technology. Technological innovation is an important means for photovoltaic enterprises to pass through the cycle, and higher conversion efficiency can increase product premiums and reduce product costs, which is the core of enterprise competition. At present, the conversion efficiency of P-type PERC cells has reached 23.1%, which is close to the theoretical limit efficiency of 24.5%, and the upside is limited. N-type TOPCon cells have shown economics on both the module side and the system side, with an average conversion efficiency of 24.5%, and are ready for mass production. According to the Industrial Development Roadmap Report of the Photovoltaic Association, the conversion efficiency of N-type cells may exceed 25.5% in 2030, which is more than 1 percentage point higher than that of P-type cells.
The N/P type price spread is only 0.1 yuan/W, which makes N-type batteries more favored by the market. According to SMM data, since the beginning of this year, the winning price of photovoltaic modules has been declining, among which the average price of N-type modules has fallen from 1.7-1.8 yuan/W at the beginning of the year to 1.058 yuan/W in November, and the N/P type price spread has been greatly reduced since July, and according to the winning bid of central state-owned enterprises in 2023, the N/P type price difference will remain at about 0.1 yuan/W, which makes enterprises more favored N-type products with lower LCOE.
Most of the leading companies focus on the N-TOPCon technology route. From the perspective of the N-type cell expansion plans of major enterprises in 2023, there are currently three main technical routes: TOPCon, HJT and BC, among which JinkoSolar, Trina Solar, JA Solar and other companies are focusing on the TOPCon route, and TOPCon can be upgraded on the basis of the Perc production line to save costs; Risen Energy and Runsolar can focus on HJT technology at the same time, with the highest HJT conversion efficiency of 25.9%; LONGi Green Energy and Aiko Co., Ltd. focus on the BC battery route, BC It is a platform-based technology that can be applied to other technologies. It is expected that TOPCon battery technology will continue to be the first choice for major companies to expand production in 24 years.
The rapid expansion of TOPCon production capacity accelerates the clearing of production capacity. According to TrendForce, N-type cell production capacity has continued to expand since the beginning of this year, with TOPCon expanding capacity the most, with an estimated TOPCon cell production capacity of about 441GW in 2023 and 726GW by 2027.
The market share of TOPCon batteries continues to increase. In terms of market share, SMM expects that the PV cell production capacity may reach about 1,000GW in 2023, of which the market share of N-type cells will exceed 30%. At the same time, according to the CPIA forecast, by 2027, TOPCon cells will become the most mainstream battery technology, and the PERC production line will face transformation and elimination.
2.2 Overseas market development is at the right time, and industrial concentration is increasing
The global photovoltaic installed capacity market has a huge space and strong urgency. According to the World Energy Transition Outlook 2023: 1.5°C published by the International Renewable Energy Agency (IRENA), the share of renewables in primary energy will increase from 16% to 77% from 2020 to 2050 under the 1.5°C scenario. According to the agency, if the 1.5°C target is to be achieved, it will be challenging to triple the installed capacity of renewable energy in 2022 by 2030, which means that it will be challenging to achieve an average of 975GW of new capacity per year over eight years.
At the same time, the agency has also sharply raised its forecast for PV installations by 30% to 18,200GW in 2050, which would require an average of nearly 600GW of new PV capacity per year to be realized. At present, countries around the world are highly motivated by photovoltaic installations, and in recent years, the actual installed capacity has repeatedly exceeded expectations, although photovoltaic installations are greatly affected by the imbalance between supply and demand in all aspects of the industrial chain, but the photovoltaic market space is huge, with the gradual clearing of backward production capacity, the arrival of a new balance between supply and demand, photovoltaic is expected to usher in high growth. At the same time, the release of this report makes it clear that the urgency of maintaining the 1.5°C target has intensified, and countries are expected to introduce more favorable policies to accelerate the construction of photovoltaic installed capacity.
Trade barriers and subsidy conditions are frequently introduced in various countries, and overseas production capacity is rising. At present, the production capacity of all links of the photovoltaic industry chain is highly concentrated in China, with the concentration of polysilicon, silicon wafers and cells all higher than 90%, and the concentration of modules higher than 80%. However, due to the strengthening of energy security awareness in various countries in recent years, they have begun to restrict the origin of photovoltaic products, and trade barriers have taken various forms, resulting in an increasingly complex international trade environment and intensified international competition. At the same time, countries have successively issued subsidy policies to promote their own photovoltaic expansion plans. According to InfoLink, overseas module production capacity is expected to reach 270 GW in 2024, up about 78% year-on-year.
In 2024, the industry will be cleared, which will increase the concentration of the industry. According to data from the China Photovoltaic Industry Association (CPIA), from 2021 to 2022, the concentration of CR5 in all links of the photovoltaic industry chain is high, and most of the patterns are relatively stable. In terms of CR5 concentration, the polysilicon segment has the highest concentration of CR5 at around 87%, while the concentration of cells and modules is around 60%, and only the wafer segment has seen a 12% decline, mainly due to the large investment of new manufacturers such as Shuangliang, Gaojing, and Tonghe, and the continuous promotion of industrial integration, while the average annual output of polysilicon is about 140,000 tons, the average output of silicon wafers is about 41GW, and the average output of cells and modules is 35GW In terms of the number of enterprises, there are 10 enterprises with an annual output of more than 10,000 tons in the polysilicon sector, and 10-20 enterprises with an annual output of more than 5 GW in the wafer, cell, and module sectors. In 2024, with the slowdown in industry expansion and the liquidation of some old production capacity, mergers and acquisitions may increase, and the concentration of all links in the industrial chain is expected to be further improved.
Overseas market development is expected to become the main theme of the photovoltaic industry in 24 years. With the increasingly fierce competition in the domestic photovoltaic market, overcapacity has caused product prices to continue to decline, and the industry is facing cyclical adjustments. In order to accelerate the digestion of excess capacity, more companies are looking at overseas markets, and accelerating the global layout has become an inevitable choice through the cycle. In recent years, there have been new changes in the form and market selection of "going overseas", the form has gradually developed from export products to heavy assets to build factories overseas, and the strategic goal of globalization has become increasingly clear; Chinese photovoltaic enterprises have built factories in the United States and Southeast Asia, the Middle East has become an emerging photovoltaic market, and Europe is still the largest photovoltaic exporter on the mainland.
For example, there are support and subsidy policies for building factories in the United States, which can effectively break trade barriers; building factories in Southeast Asia has cost advantages and can enjoy a relatively stable policy environment; Europe's own power generation costs are high, the demand for photovoltaics is growing rapidly, and the product income space is huge; the Middle East has sufficient sunshine and is facing urgent pressure to reduce carbon emissions, and Chinese enterprises can enjoy the advantages of the "Belt and Road" policy when building factories in the Middle East, which has become an important emerging market for mainland photovoltaic enterprises. However, at the same time, photovoltaic companies are also facing many challenges, such as the uncertainty of international trade policies, high construction costs and labor costs. Overall, in the context of domestic overcapacity, it is expected that photovoltaic companies will seize the opportunity of overseas layout and actively explore more emerging markets in 24 years.
2.3 The construction of new energy supporting power systems lags behind, affecting the growth of distributed installed capacity
The mismatch between the construction cycle of new energy and power systems will affect the growth of distributed installed capacity in 24 years. In 2023, the cost of photovoltaic products will drop sharply, the price of photovoltaic modules will hover around 1 yuan/W, and the economics of photovoltaic power generation projects will improve, stimulating the installed demand for centralized and distributed power stations. However, due to the rapid development of distributed installed capacity in the past two years, the construction of new energy supporting power systems is lagging behind, and distributed photovoltaic power grids have been difficult to connect to the grid one after another, which directly affects the increase of distributed installed capacity in 24 years, for example: on October 31, 2023, the Guangdong Energy Bureau released the difficult situation of grid connection and consumption, and 11 counties in the province have no distributed access space, and 13 counties have less than 50MW of space.
The main reason is that the construction cycle of new energy power generation projects is short, and the construction period of power system transformation is long, and the intelligent level of distribution network is not high, so it is necessary to carry out power system transformation and upgrading in advance, and at the same time improve the power auxiliary service market and make full use of the existing flexible power supply. In the face of the current situation, it is expected that some provinces and cities will suspend distributed access on the one hand, and strengthen energy storage supporting measures on the other. It is expected that the growth rate of distributed photovoltaic installed capacity in 24 years will be affected by the lag of the power grid, and the energy storage segment is expected to benefit.
Selected report source: Yinchuang Think Tank
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