In 2023, as a leader in the field of new energy, the development of wind power and photovoltaic is still booming, with a significant year-on-year increase in new installed capacity, and the cumulative installed capacity of photovoltaic exceeds that of hydropower, and is promoted to the second largest power source in the mainland after thermal power.
Behind all these seemingly contradictory signs, what is the current situation of the wind power and photovoltaic industries, and where will they go in the future? It is still necessary to comprehensively sort out and analyze from multiple perspectives such as policies, markets, and enterprises.
1. Policy side: The regulations are detailed and the supervision is stricter, but the rules of the game have not changed
The new energy industry in mainland China is mostly policy-oriented, and as a typical representative, the development of wind power and photovoltaic power is particularly affected by the policy side.
At present, the mainland has built a "1+N" policy system for carbon peak and carbon neutrality, of which "1" refers to the "Opinions of the Central Committee of the Communist Party of China and the State Council on Completely, Accurately and Comprehensively Implementing the New Development Concept and Doing a Good Job in Carbon Peak and Carbon Neutrality" issued in October 2021, which not only sets the phased goal of not only reaching about 25% of non-fossil energy consumption by 2030, and the total installed capacity of wind and solar power generation reaching more than 1.2 billion kilowatts, but also clarifies the implementation of renewable energy substitution actions, and vigorously develops wind energy. Solar energy, adhere to the policy guidance of centralized and distributed simultaneously. The "N" in "1+N" is mainly included in the "Action Plan for Carbon Peaking Before 2030" issued on the same day, which proposes the "Ten Actions for Carbon Peaking", including green and low-carbon energy transformation actions, energy conservation, carbon reduction and efficiency improvement actions.
After the release of the two major policies, various fields and regions have also successively formulated and issued relevant policies according to the deployment. For wind power and photovoltaics, the most important industry top-level design is the "14th Five-Year Plan" for Modern Energy System and the "14th Five-Year Plan for Renewable Energy Development" released in 2022, which further refine the goals, paths and related measures, put forward the short-term goal of doubling wind and solar power generation during the "14th Five-Year Plan" period, and also deploy "nine major actions" such as new energy bases on seven continents, five offshore wind power base clusters, urban rooftop photovoltaic actions, and "photovoltaic +" comprehensive utilization actions. So far, the overall policy roadmap and framework in the field of new energy have been basically completed, and the subsequent policies have been carried out within its guidance and norms.
In general, 2021 and 2022 are the intensive introduction of relevant plans and action plans, laying the "rules of the game" for the development of the photovoltaic and wind power industries, and in 2023, there will be obvious changes in policy promotion ideas and focuses, reflecting the following characteristics:
(1) When the roadmap is basically drawn, more and more attention is paid to the design and formulation of standards and specifications. Compared with the various plans and action plans issued in the previous two years, the relevant policies issued by the State Council and its subordinate departments in 2023 will be significantly fewer, and only the "Implementation Plan for the New Industry Standardization Pilot Project (2023-2035)" issued by the Ministry of Industry and Information Technology and the "Action Plan for Accelerating the Integrated Development of Oil and Gas Exploration and Development and New Energy (2023-2025)" issued by the Energy Bureau during the year will be issued during the year, both of which are specific implementation plans focusing on subdivided or cross-cutting fields. At the local level, Guangdong, Sichuan and other places have successively issued carbon peak implementation plans, and Shanghai, Chongqing and other places have also successively issued carbon peak implementation plans or action plans in transportation, industry and other fields, and the policy roadmap and planning plan from the central to the local government have been basically complete. At the same time, the new policy guidance direction has begun to extend to the design of standards and the formulation of specifications, and the more representative documents include the "Guidelines for the Construction of Carbon Peak and Carbon Neutrality Standard System", "Photovoltaic Power Generation Project Acceptance Specifications", "Wind Farm Renovation and Upgrading and Decommissioning Management Measures" and a series of specifications and opinions on the electricity market. In addition, it is worth noting that the policy framework for new energy emerging industries represented by wind power and photovoltaic has been basically completed, while the future industrial planning represented by new energy storage and hydrogen energy is being accelerated, and the dividends of relevant industrial policies are gradually released;
(2) The regulations are becoming more detailed and the guidance is more specific. If the previous policy is mostly to lay the foundation, build the framework, and clear the direction, then this year's policy focus is obviously more specific, more like the design of the line, flooring, furniture, such as the previously mentioned photovoltaic power generation project acceptance specifications, as well as wind power, photovoltaic equipment retirement of a series of management measures, opinions;
(3) Supervision is becoming stricter, and multiple policies focus on finding problems and controlling risks. The rapid development of wind power and photovoltaic power has also given rise to many problems, such as the illegal occupation of photovoltaic land, pollution and waste of resources caused by fans of abandoned power stations. Many of the policies introduced this year are aimed at solving problems and risks that have not been paid attention to before, such as the Notice on Supporting the Development of the Photovoltaic Power Generation Industry and Standardizing the Management of Land Use to Solve the Problem of Illegal Land Use for Photovoltaics, the relevant management measures to cope with the "retirement tide" of hundreds of millions of wind power and photovoltaic equipment before 2040, and the Guiding Opinions on Strengthening the Stability of the Power System under the New Situation jointly issued by the National Development and Reform Commission and the Energy Administration Rectify deviations in the construction of new energy bases, explore policies related to green certificate trading and power market construction to solve the problem of new energy consumption, and so on. In addition to solving the problem, these policies also reflect the increasingly strict regulatory situation, this tendency to face the actual problems of the local, grassroots, often and will be "stricter", this year Hunan, Hubei, Liaoning and other places have issued interim measures to stop the development of many distributed photovoltaic projects, although it plays a role in controlling risks, but also has a certain impact on the development of the industry.
In addition to these policies that have been introduced, the administrative guidance of the competent authorities is also noteworthy. For example, in view of the problems faced by the photovoltaic equipment manufacturing industry, the Ministry of Industry and Information Technology has been understanding the situation and seeking solutions through guidance and interviews in the past two years. In 2022, the high price of upstream polysilicon disrupted the market, and the Ministry of Industry and Information Technology (MIIT) issued notices, interviewed key enterprises, and strengthened regulation and control, which curbed the trend of price increases. In the fourth quarter, the Ministry of Industry and Information Technology first held a symposium, and then guided the industry self-discipline work, and promoted the formulation of the "Photovoltaic Module Power Specification Integrity Calibration and Traceability Self-Discipline Convention", and publicized the list of enterprises that meet the "Photovoltaic Manufacturing Industry Standard Conditions" and the list of enterprises that intend to revoke the photovoltaic manufacturing industry standard announcement, and it is expected that in the future, relevant measures will be implemented one after another.
In addition, as the main increment at the current stage and the main energy source in the future, wind power, photovoltaic and other fields of policy also interact with each other. In addition to the previously mentioned land policy and future industrial policies such as the electricity market, new energy storage and hydrogen energy, it also includes industrial energy, buildings (such as photovoltaic rooftops), transportation, trade, natural resources and other fields, while looking at the policies related to wind power and photovoltaic power in other fields, the level of support for vigorous promotion has not changed, but the relevant regulations and risk control have also become significantly stricter.
As mentioned above, the new energy industry has a certain dependence on policies, and when the industry encounters a crisis, people in the bureau will expect targeted policies to be introduced to alleviate the dilemma. From the recently held 2023 annual conference of the photovoltaic industry, a number of leading enterprise leaders and experts suggested that the next policy increment should be found in the field of power grid consumption, and the construction of smart grids and new power systems should be promoted with more perfect top-level design.
Second, the supply and demand side: overcapacity, the whole chain price reduction, new energy again encountered old problems
Although the "rules of the game" have not changed, the development of the industry this year is very different from the situation of the previous two years. Looking back on 2023, "overcapacity" and "price reduction" have become the keywords of the wind power and photovoltaic industry chains, and behind this is the imbalance and change of supply and demand, which is the logical main line throughout the year.
According to the data released by the Photovoltaic Industry Association, from January to October this year, among the four main links in the middle and upper reaches, the output of polysilicon was about 1.14 million tons, a year-on-year increase of 86%, the output of silicon wafers was about 460GW, a year-on-year increase of 79%, the output of cells was about 404GW, a year-on-year increase of 74%, and the output of modules was about 367GW, a year-on-year increase of 72%. On the demand side, in the first 11 months of this year, the new installed capacity of PV was about 163.88GW, and the PV Industry Association estimated that the new installed capacity in China this year was 160-180GW, which was double compared with 2022, but it was still far lower than the capacity supply in the middle and upper reaches of the year, and even if we looked at the world, the new installed capacity of PV is expected to be only between 345-390GW. Although the supply of midstream and upstream equipment and the number of downstream installations have reached a record high, the growth rate of downstream demand is significantly lower than the speed of capacity expansion at the manufacturing end.
The wind power industry also faces the problem of imbalance between supply and demand, but the specific situation is different. Compared with the "soaring surge" with a record high growth rate in all aspects of photovoltaic industry year by year, the high point of new installed capacity of wind power appeared in 2020, when it was affected by the imminent decline of subsidies, triggering a large-scale "rush to install tide", when the new installed capacity of domestic wind power reached 71.67GW, and then fell rapidly in 2021 and 2022, with new installed capacity of less than 50GW. According to estimates by the China Wind Energy Association, the country's new wind power capacity this year will be between 70GW and 80GW, which may exceed the level of 2020. The recovery in demand is good for the development of the industry, but it is not enough to absorb the excess capacity. In the past two years, the annual production capacity of domestic wind turbines has reached the level of about 100GW, which is significantly higher than the scale of new installed capacity, and the manufacturers still tend to consolidate their market share by expanding production, resulting in an increasingly severe problem of overcapacity. In addition, the mainland's wind power manufacturing capacity accounts for more than 50% of the world's production capacity, but the market share in overseas markets is less than 20%, and a large amount of production capacity is piled up in China, exacerbating the seriousness of the supply and demand problem.
Supply is much higher than demand, and price wars and price reductions ensu.
According to the statistics of the Silicon Branch of the China Nonferrous Metals Industry Association, the prices of various types of polysilicon such as dense materials and re-feeding materials were close to 250,000 yuan/ton in February at the beginning of the year, but in December, the prices were below 80,000 yuan/ton, and the transaction price of monocrystalline dense materials even fell below 60,000 yuan/ton, a decline of more than 70% during the year. film, the latest weekly average price announced in December fell to 1.92 yuan / piece, a decrease of nearly 70%; The highest weekly average price of G12 wafers reached RMB 8.2/pc in March, and the latest weekly average price of cells and modules fell to RMB 3.02/pc in December, a drop of more than 50% According to statistics from the PV Industry Association, the winning bid price of modules was below RMB 1/W from November to December, and although it rebounded slightly in late December, it was close to halving compared with the beginning of the year.
In terms of wind power, according to the statistics of the Wind Energy Professional Committee of the China Renewable Energy Society, the price of onshore wind turbines has entered a downward trend since 2021, falling by about 5% in two years, and the price fluctuations are small this year, but they have always been at a low point, while the average bidding price of offshore wind turbines has dropped from about 7,000 yuan/kW to the current low of about 3,500 yuan/kW within one year.
The slow consumption of production capacity and the sharp reduction of the price of the whole industry chain have led many companies to lament that the market price has fallen below the cost line, believing that malicious competition is becoming more and more serious, which is detrimental to the healthy development of the industry. At the end of the year, there was a news in the photovoltaic industry that the operating rate continued to decline, and companies including the leading companies planned to lay off employees on a large scale and reduce production.
At present, the production capacity problem of wind power and photovoltaic is difficult to solve in the short term, and the momentum of price reduction is still continuing.
(1) The growth rate of overall demand. This year's G20 summit, the China-US Sunnyland Statement on Climate Crisis and the COP28 climate conference all emphasized the goal of tripling the global installed capacity of renewable energy by 2030, and the International Energy Agency is also optimistic about the growth rate of clean energy investment in the future, which undoubtedly forms a strong support for the medium-term demand for wind power and photovoltaics. However, it should also be noted that the international situation is constantly turbulent, and there is a resurgence momentum of gas and oil investment in some regions.
(2) Overseas market development. At a time when domestic production capacity and prices are caught in "involution", it is necessary to look overseas, but at present, the situation faced by mainland enterprises going overseas is also more complicated. The export of wind power and photovoltaic equipment this year is still on the rise year-on-year, but due to the impact of high overseas inventory, the unit price has fallen rapidly, and the total export value has also weakened. Moreover, with the wave of localization of new energy industries in Europe, America, India and other places, the overseas trade restrictions faced by mainland export products may also be more stringent, this year the EU has several times to protect local photovoltaic enterprises through subsidies or tariffs and other measures, anti-dumping or anti-subsidy investigations on Chinese wind turbine equipment manufacturers, although the current rumors have not come true, but also intensified domestic manufacturers' concerns about the risk of going to sea in the future;
(3) Policy adjustment of the competent authority. In addition to the above-mentioned regulatory and regulatory policies, the introduction of policies related to green certificate trading and carbon market can also play a role in "replenishing blood" for the wind power and photovoltaic industries, which are plagued by price reductions. In addition, the guidance effectiveness and follow-up measures of the Ministry of Industry and Information Technology and other competent departments mentioned earlier are also worth paying attention to.
In fact, in policy-led industries, rushing, overcapacity, and low-price competition are already "old problems", and even wind power and photovoltaics, which are regarded as emerging industries, have experienced similar crises more than once. However, each crisis is different due to its different backgrounds and nodes, and it is difficult to directly refer to previous examples whether the industry will overcome difficulties and move towards stable development, or whether it will encounter a concentrated outbreak of risks and greatly damage its vitality. But as long as the crisis breaks out, a number of related companies will inevitably fall, which is the so-called "big reshuffle". As the main body in the market, enterprises (especially the manufacturing private enterprises in the middle and upper reaches) are not only deeply affected by the environment, but also directly affect the development and change of the industry. In recent years, with the rapid development of wind power and photovoltaic industries, many leading enterprises and star enterprises have also been born, and the operation of related companies is also an important indicator to observe the industry.
Third, the fundamentals of the enterprise: growth stalled, performance under pressure, and the industry crisis hung overhead
As the first new energy industry to go through commercialization, wind power and photovoltaic enterprises, especially the leading companies, have been in a period of rapid growth in recent years. However, in 2023, due to various reasons such as overcapacity, price wars, and obstruction of going overseas, many companies are facing the pressure of stalling revenue and net profit growth.
Let's take a look at the most affected PV upstream polysilicon companies. The sharp rise in polysilicon prices last year drove related companies to make a lot of money, but this year's sharp decline in prices combined with last year's high base effect led to a sharp increase in Daqo Energy (688303. SH) and other companies that are highly dependent on polysilicon sales have experienced year-on-year declines in revenue and net profit. After the semi-annual report was announced, Daqo Energy's decline further intensified, and the larger Xinte Energy (01799. HK), GCL Technology (03800. HK) net profit also fell by more than 10% year-on-year, and in the third quarter, the situation became more severe, and Tongwei (600438. SH) also experienced a "big decline" in performance, with the net profit attributable to the parent company in the quarter falling sharply by 68.11% year-on-year, and the year-on-year net profit performance in the first three quarters also turned from positive to negative, down 24.98%, and the year-on-year growth rate of revenue in the first three quarters was also squeezed to 9.15%. Overall, compared with last year's net profit growth of more than 160% year-on-year, the net profit of the four leading polysilicon companies this year is rather bleak, with a year-on-year decline of more than 20%. Although the performance of polysilicon companies is inevitably under pressure due to the impact of price reductions in their main business, the performance of polysilicon companies shows that those with relatively diversified polysilicon business categories and a high degree of vertical integration of the photovoltaic industry chain still show stronger resilience to pressure.
Photovoltaic wafer companies are also affected by price cuts, silicon wafer leader TCL Zhonghuan (002129.SZ) in the first three quarters of revenue fell 2.39% year-on-year, net profit still maintained a year-on-year growth of 23.75%, but only look at the third quarter, the company suffered the first single-quarter revenue and net profit in a decade fell year-on-year, and the decline was more than 20%. For related performance, TCL Zhonghuan explained in the financial report that in the first three quarters, the terminal installed capacity and upstream supply of the photovoltaic industry were unbalanced, supply and demand and industrial chain prices fluctuated to a large extent, the expansion of production capacity in the industrial chain manufacturing link led to the intensification of the competitive game, the rapid iteration of N-type technology products, the industry production capacity faced structural adjustment, and the backward production capacity faced suspension and clearance. In addition to TCL Zhonghuan, the previously mentioned integrated leaders such as GCL Technology and LONGi Green Energy, which will be mentioned later, also have in-depth layout in the silicon wafer sector, and their performance has also been greatly affected by the decline in silicon wafer prices.
The performance of photovoltaic cells and module leaders has been significantly differentiated. LONGi Green Energy (601012. SH) revenue in the first three quarters increased by 8.55% year-on-year, net profit increased by 6.54% year-on-year, although it still maintained a positive value, but compared with the growth rate of more than 60% in previous years, it is difficult to say the same. In particular, LONGi's revenue fell by 18.92% year-on-year and net profit fell by 44.05% year-on-year in the third quarter. Trina Solar (688599. SH), JA Solar (002459. SZ) is in a similar situation, with revenue in the first three quarters increasing by more than 20% year-on-year, and net profit doubling year-on-year, but compared with the same period last year, the revenue growth rate has halved. Moreover, the performance growth rate of the two companies this year continued to decline quarter-on-quarter, which can be described as "one quarter is not as good as the other", and the fourth quarter is also facing greater pressure. Among the big four modules, the best performer is JinkoSolar (688223. SH), the company's revenue in the first three quarters increased by 61.25% year-on-year, and net profit increased by 279.14% year-on-year. Judging from Jinko's financial report and related investor exchanges, the company seized the opportunity of cell and module iteration, and its earlier N-type production capacity was very popular in the process of "changing the dynasty", which supported the company's good performance. Overall, however, the intensification of the contradiction between supply and demand and the continued decline in prices in the fourth quarter will also bring greater challenges to the shipments and profitability of cell and module companies.
In terms of wind power, most enterprises have seen revenue and net profit growth stall in the first two years, and the situation is not optimistic this year, the net profit performance of the five major wind power listed companies in the first three quarters of the A-share market has been lower year-on-year, and the electric wind power (688660.SZ) has also suffered losses, and the gross profit margin of each company has also shrunk significantly 601615.SH; With the leading Goldwind Technology (002202. SZ) for example, the company's revenue growth began to decline in 2021, and the net profit in 2022 also changed from increasing to declining year-on-year, although the revenue in the first three quarters of this year achieved a year-on-year increase of 12.06%, but the net profit was only 1.261 billion yuan, a sharp decline of 46.59% year-on-year. In the face of investors' doubts, Goldwind said that the decline in wind turbine prices has led to a decline in the gross profit of the company's delivery units and pressure on performance, and it will still adhere to long-termism in the future, and its tone is quite helpless.
Whether it is a photovoltaic company or a wind power company, the performance in the fourth quarter of this year may be further pressured, and in addition to the operating performance, as the "darling" that has been hyped in the secondary market, the company's stock price performance and financing road constitute another pole to observe the industry situation.
4. Valuation and financing: Stock prices have fallen, IPOs have tightened, and market expectations have become increasingly pessimistic
As a new economic driving force with high hopes, the new energy industry was once a keen investment target in the secondary market, especially photovoltaics, which has grown into a global industrial chain leader.
In 2021, the photovoltaic industry has entered the era of grid parity, and the stock prices of photovoltaic companies have also ushered in a highlight moment, becoming a well-known "money-making weapon" for investors. However, due to the gradual revelation of photovoltaic production capacity problems, especially the significant slowdown in the performance growth rate of related enterprises this year, coupled with the impact of many factors such as low expectations for new energy development, environmental problems, stock market fluctuations, profit-taking, etc., the stock prices of most photovoltaic companies have been falling since the second half of 2022, and now it has become a "pain in the heart" of many shareholders.
According to the statistics of Titanium Media App, at the end of 2021, the total market value of the top 100 enterprises in the photovoltaic sector was as high as 3.88 trillion yuan, and by the end of this year, this figure had shrunk by more than 1 trillion yuan. The market value of Trina Solar, JA Solar, and Halcyon Silicon, which were once promoted to the "100 billion market value club", also fell below 80 billion yuan. LONGi Green Energy, which has the highest market capitalization, once hit a market value high of 528 billion yuan in November 2021, but it has fallen below 200 billion yuan in August this year, and as of December 26, it has closed less than 160 billion yuan. At present, two other companies with a market value of more than 100 billion yuan in the photovoltaic equipment sector, Sungrow Power Supply (300274. SZ) and Tongwei shares, both of which fell more than 50% from their previous highs. The retracement of PV ETFs that have emerged since 2021 is generally close to 40% in a year.
From the peak to the bottom, so that the stock price of many photovoltaic companies has become far more concerned than the company's operation, publicity, etc., in the stock discussion area, industry news comment area, photovoltaic shareholders of the voice of the voice, the intensity of emotions, can be described as "the existence of the only file". Therefore, in the case of this year's stock price not improving for a long time or even showing a downward trend, many corporate executives said that the valuation is unreasonable and the stock price is undervalued, and therefore changed some previous financing resolutions, such as Tongwei shares announced in September this year that it would terminate a plan to raise 16 billion yuan, and the reason given in the announcement is: based on the changes in the current capital market environment, the company's value is significantly underestimated.
In terms of wind power equipment, similar to photovoltaic companies, after the end of the decline of electricity price subsidies and the rush to install, the industry has entered a period of economic downturn since 2022, and the stock price highs of most companies appeared in 2021 and 2022, and began to fall sharply in the second half of 2022. With the highest market capitalization in the sector, Sany Renewable Energy (688349. SH), Goldwind Technology, Mingyang Intelligent (the market value of the three companies is currently between 25 billion yuan and 35 billion yuan), Sany Renewable Energy landed on the Science and Technology Innovation Board at a price of 29.80 yuan per share in June 2022, and the stock price once rose to a high of 56.14 yuan in July of that year, but then entered a downward channel, and as of December 26, 2023, the closing stock price was only 28.62 yuan, which was in a state of breakage In November 2021, the stock price reached as high as 20.58 yuan, but it continued to fall from the second half of 2022, and began to be below 10 yuan for a long time in the fourth quarter of this year, and the closing stock price was only 7.68 yuan as of December 26, down more than 60% from the previous high; In mid-2022, it broke through 35 yuan twice, and the previous high was 35.68 yuan in July 2022, but it has also fallen all the way since then, and the stock price closed at 11.90 yuan as of December 26, also down more than 60%.
The stock prices of listed companies have been hit, and companies that have "queued" for IPO and financing this year have also suffered setbacks, and photovoltaic companies, which were previously regarded as "upstarts" by capital, have borne the brunt. The most important node in this regard appeared on August 27, when the China Securities Regulatory Commission issued a document to tighten the pace of IPOs, after which the progress of PV companies' listing and financing slowed down suddenly. According to the statistics of the photovoltaic industry association, there will be at least 15 newly listed photovoltaic companies in 2022, and in 2023, this number will shrink to 5, and more than 40 photovoltaic industry chain related companies have been updated for IPO, but they have been unable to go public.
In addition, the pace of fundraising and expansion, which can be called "crazy" in previous years, has also slowed down this year, and the termination of the private placement of Tongwei shares mentioned above is a typical representative. Compared with the "grand occasion" of nearly 100 companies in the first half of 2022 to the first half of 2023, nearly 10 companies such as Qianjing Garden, Letone Co., Ltd., and Royal Group have announced the suspension or even termination of photovoltaic-related business.
There is a view in the PV industry that the cause of overcapacity is attributed to the irrational influx of capital and operations that only focus on short-term interests, and Zhong Baoshen, chairman of LONGi Green Energy, recently expressed his opinion that "the essence of overcapacity in the industry is non-market-oriented resource allocation", including the "push-exit-cash-out" routine of excessive IPOs and private placements. In addition, the competitive preferential policies and "rush to sign" measures introduced by local governments have also contributed to the situation of "rushing to the top". According to this line of thinking, the tightening and standardization of policies at all levels are undoubtedly conducive to the healthy development of the industry, but the "cooling" is so fast, it will inevitably lead to some enterprises interested in long-term development can not survive the "cold winter". Trina Solar's director Gao Jifan recently said that if the industry wants to achieve sustainable development in the future, it needs to avoid the problem of "overheating" and "overcooling".
5. Corporate strategy and technology trends: The battle over the technical route of photovoltaic cells and the development of offshore wind power have attracted much attention
Since the first half of this year, the problem of new energy production capacity has gradually been revealed, and the industry's expectations for the future prospects have become more and more pessimistic, especially for photovoltaic with rapid outbreak of problems. Some observers in the wind power sector also said that the situation at this point in time is very similar to the "big reshuffle" caused by overcapacity in the early 2010s.
With the reality of the dilemma and the pessimistic picture ahead, it is important for companies to choose a response strategy at this moment, whether it is for the company itself, investors or the industry.
The first thing to focus on is the strategy in terms of capacity and price. In the first three quarters of this year, especially in the first half of the year, although the problem of overcapacity has been revealed, many wind power and photovoltaic leaders have chosen to continue to expand production, the reason is nothing more than "grabbing turf", occupying a larger market share, and letting themselves survive until the end of the "war" in the stage of risk clearance. This strategy has made the problem even more severe, with the aggravation of the aforementioned imbalance between supply and demand, and the sharp price reduction of the entire industry chain, and the leading companies have to join the "price war". At the end of the year, PV cell and module leaders have stated that they will increase their efforts to eliminate outdated production capacity and promote high-quality development. However, at the same time, there are also rumors of a high shutdown rate of photovoltaic leaders in the fourth quarter, or large-scale production cuts and layoffs, if such a situation really occurs, it will also have a greater impact on the industry. For example, Tongwei Co., Ltd. announced on December 25 that it would invest in the construction of a polysilicon project with a total investment of about 28 billion yuan in Ordos, which caused great controversy among investors, but many observers believed that this move was to reserve new production capacity for the next upward cycle after the reshuffle period. Different companies have different considerations, and which strategy is more effective may not be seen until the tide recedes.
In addition, as an important strategy to enhance the ability to resist risks and increase profits, the layout of each enterprise in terms of integration and diversification is also very important. At present, LONGi Green Energy and JinkoSolar have made in-depth layouts in the fields of silicon wafers, cells and modules, with production capacity and market share in the forefront after continuing to promote the integration strategy. In addition, TCL Zhonghuan, GCL Technology, JA Solar, Trina Solar, Canadian Solar, etc. have also continued to promote their integration strategies this year. Soochow Securities has taken silicon wafers as an example to make statistics, due to the integrated layout of the head enterprises, resulting in silicon wafers from the "duopoly" pattern to the battlefield of "competing for the deer", the previous market share of TCL Zhonghuan and LONGi Green Energy, which was once nearly 8 percent, has dropped to about 5 percent. This situation will lead to further refinement of the game strategy, which will have a series of chain reactions. In terms of diversification, companies under pressure are also looking for ways to do so, and the aforementioned Daqo Energy announced that it would extend the industrial chain to semiconductor silicon materials horizontally after the release of its third quarter report to create strong financial statements. LONGi Green Energy, Sungrow and other enterprises are accelerating the expansion of hydrogen energy business, Sungrow said in October in the survey of institutions, in the past two years in the field of hydrogen energy investment has been very large, this year won the bid of many projects, is expected to improve the income of related business next year; In addition to increasing the development and operation of wind farms, Canadian Solar and other companies are also making great efforts to enter the field of energy storage to further establish cost advantages, and wind turbine manufacturers are also actively looking for new performance growth points, in addition to increasing the development and operation of wind farms, they are also carrying out diversified layouts in photovoltaic, zero-carbon, hydrogen energy and other fields, such as Mingyang Intelligence's two N-type photovoltaic cell and module production bases in Yancheng and Shaoguan, Goldwind's "zero-carbon partner" plan, wind power to green hydrogen project planning, and the green methanol mining and supply agreement signed with shipping giant Maersk.
In addition to the expansion of the industrial chain and new business, the wind power and photovoltaic leaders have also been more active in their overseas strategies this year. In terms of photovoltaics, with the recovery of the photovoltaic industry in the United States at the beginning of the year, it has become a trend for mainland companies to build factories in the United States, with module leaders Trina Solar, JA Solar, LONGi Green Energy, Jinko Solar, Canadian Solar, etc., all announcing that they have set up or will set up factories in the United States, followed by Southeast Asia and the Middle East. However, as mentioned above, the market and trade policies faced by the overseas market are becoming more and more unstable and risky, and whether the corporate strategy can be effective is highly variable.
The biggest hot spot in the market this year is the choice of the technical route and related strategies of leading enterprises, especially the battle for the technical route of the third-generation photovoltaic battery, which once became the "most exciting drama" in the industry. On September 5, at the semi-annual performance exchange meeting of LONGi Green Energy, Chairman Zhong Baoshen officially announced that the company's future battery route will be based on BC technology, and said that the BC route can replace the most promising TOPCon technology route. On the other hand, Jinko, JA Solar, Trina Solar, and Yixin Energy in the TOPCon camp have also responded that although they will pay attention to various routes, they are firmly optimistic about the prospects of TOPCon. The cost performance is obviously better, and said that after a comprehensive comparison, Jinko will not make BC cells. From the demonstration of technology and test data to the "verbal confrontation" between the "air dialogue", and then to the real head-to-head showdown of products, production capacity, market share, etc., who is the new king of battery technology has become the focus of attention inside and outside the industry. From the perspective of production capacity progress, penetration rate and performance of related enterprises, TOPCon seems to be better at present, but BC supporters believe that the technology route has refreshed the conversion efficiency record many times this year, and the room for improvement is obviously greater, and 2024, when the production capacity is gradually released, is the real decisive moment. In addition, another third-generation technology route, HJT (i.e., heterojunction), is also favored by new and old players and cross-border players such as, Risen Energy, Huasheng New Energy, Mingyang Intelligence, etc., and the production capacity is also in continuous release, which is another major force that cannot be underestimated. In November, LONGi Green Energy announced that its self-developed crystalline silicon-perovskite tandem cell efficiency reached 33.9%, setting a new world record, which is also the first time that the Chinese team has set a world record in this field.
In the field of wind power, with the further clarification of target planning, the continuous introduction of supporting policies, and the resolution of approval and other issues, offshore wind power, especially in the deep sea area, has become a "must fight" (due to the large land occupation of onshore wind power and the easy to destroy the balance of the local ecological environment, the land space available for construction is becoming less and less, so offshore wind power is generally regarded as the main increment in the future). In addition to supporting the work of the deep sea, these technologies are also conducive to reducing the cost of electricity, during the year, Mingyang Intelligent, Sany Renewable Energy and other companies have successively launched new fan products in the name of "largest", and the entire industrial chain behind it has also shown a "fanatical" attitude towards the field. However, recently, there have been continuous sound reminders not to "use too much force", disrupt the rhythm of technological progress, sacrifice product reliability, and once again give rise to homogeneous excess capacity. In addition to large-scale, floating has increasingly become a high-profile new market for wind power potential, from equipment manufacturers to downstream power station operators, have accelerated the pace of layout, according to relevant policy planning, during the "15th Five-Year Plan" period floating is expected to enter the stage of large-scale development.
Most of the above-mentioned corporate strategies are still continuing, and in the context of the industry's great prospects, but the recent crisis, how to deal with the grand vision and response strategy of the "economic discrimination" is undoubtedly a big test for all enterprises.
6. Looking forward to 2024: The scenery should be long-term and new
At the 2024 National Energy Work Conference held at the end of December, the deployment of energy work still prioritized the importance of safe and stable supply, pointing out that it is necessary to "give full play to the role of coal as a backstop" and "take multiple measures to increase oil and gas supply" After that, it is to accelerate the green and low-carbon transformation of energy, maintain the good momentum of rapid development of non-fossil energy, and require the new installed capacity of wind power and photovoltaic in the country to be about 200 million kilowatts throughout the year (the total installed capacity of wind power and photovoltaic in the first 11 months of 2023 will exceed 200 million kilowatts, a record year-on-year growth rate). The radical withdrawal of coal power and the launch of new energy in order to "rush for results", which once had a negative impact, should die down in the short term. But on the other hand, whether demand growth will slow down has also become one of the most concerned issues in the industry.
In 2023, the manufacturing of photovoltaic and wind power equipment in the middle and upper reaches will face problems such as overcapacity and price wars as mentioned above, but this actually means that downstream power stations can get more relaxed supply and pay lower costs. Energy construction companies such as China Power Construction and China Energy Construction have also found more and more performance increments in the field of new energy. However, at the same time, in order to ensure supply and peak regulation, the approval of new coal-fired power units also picked up significantly during the year, and supporting policies such as coal-fired power capacity and electricity prices were finally introduced. In 2024, with the effect of favorable policies for traditional energy, the growth rate of demand for wind power and photovoltaic power may be impacted, taking photovoltaic as an example, in the forecast of Bloomberg New Energy, TrendForce and other institutions, the growth rate of photovoltaic demand in mainland China will slow down significantly in 2024. From a global perspective, the forecast for the growth rate of global photovoltaic installed capacity next year generally does not exceed 30% (it is expected to exceed 60% this year). If the excess capacity in the upstream cannot be properly accommodated, then the supply and demand problem may be further exacerbated, and the entire industrial chain and even the development of new energy and the construction of new power systems will be affected.
In addition to the overall supply and demand relationship, the future changes in the demand pattern within the industry are also worth paying attention to. In 2024, the distributed market may be further pressured by the lower demand growth rate and increasingly stringent policy regulations. Although offshore wind power is the future direction that has attracted much attention, in reality, it is expected that its share of the wind power market will not approach the level of 20% until the end of the "14th Five-Year Plan", and its current five-year new installed capacity is only about the same as the one-year increase of onshore wind power. In the latest "China Marine Energy Development Report" released by the Energy Economics Research Institute of CNOOC Group, it is predicted that the new installed capacity of offshore wind power will increase by more than 60% year-on-year in 2024, exceeding 10 million kilowatts for the first time. On the other hand, onshore wind power is facing problems such as the recycling and disposal of retired wind turbines, which is also promoting the growth of another recycling and circular economy market.
At the policy level, the general orientation may continue the trend of refinement of rules and stricter supervision mentioned above, while it remains to be seen whether the top-level design of smart grid and new power system construction expected by the industry can be further optimized. The development of the power market reform is expected to continue the momentum of this year's steady progress, in which how to deal with and deal with the difficulties in the consumption of new energy, the "old and new game" and other issues will also have a greater impact on the energy transition.
In terms of the secondary market, although many brokerages believe that wind power and photovoltaic have been at the bottom of the valuation in the outlook, it is difficult to conclude how long it will take to get out of the bottom;
In current forecasts, a slowdown in demand growth, or a slowdown in development, is more likely to happen. Many companies, researchers, and observers also believe that the reshuffle period will eventually come. However, there are still great variables as to whether the development of "gear shifting" can achieve high quality and sustainability, what kind of "washing" method is the reshuffle, and which enterprises can be retained. Judging from the development trend of the new energy industry this year and the current node, technology will play an increasingly important role in the future. In the previous "big reshuffle" (such as 2009-2012, 2016-2018 for photovoltaics, and 2012-2014 for wind power), the role of overseas markets, policies and capital is obviously heavier, but in today's era of the gradual elimination of backward production capacity and the acceleration of technology iteration and upgrading, the selection of different technical routes, the progress of product R&D and innovation, The exploration and satisfaction of differentiated needs may have a greater impact on the survival of enterprises and the development of the industry, so the battle for the third-generation technical route of photovoltaic cells and the attack of offshore wind power are still the most noteworthy story lines in 2024.
As the main power source of the future energy system, wind power and photovoltaic power are the "protagonist" script in the energy transition, and the support of policies and the favor of funds are the "protagonist halo" attached to it, but in order to realize the grand vision, the thorny road in front of us must also be crossed step by step.
The turbulent 2023 will become a thing of the past, and the 2024 of wind power and photovoltaic power is about to begin.
(This article was first published on the Titanium Media APP, author|Hu Jiameng, editor|Liu Yangxue)
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