With the disclosure of the first quarter report of 2024, the entire photovoltaic industry is not as prosperous as in the past. According to data from Oriental Wealth Choice, 30 companies in the A-share photovoltaic equipment industry will have negative net profits in the first quarter of 2024; The net profit in the first quarter was not as good as that of the same period last year, accounting for most of the enterprises, with 52 companies. Among them, there are many leading enterprises such as Tongwei Co., Ltd., LONGi Green Energy, and TCL Zhonghuan.
In 2023, the well-deserved profitability of the photovoltaic track Wang Tongwei's performance in the first quarter was cold, with a big loss of nearly 800 million yuan; LONGi's net loss in the first quarter reached 2.35 billion yuan, making it the largest loss of photovoltaic equipment companies in the first quarter of the A-share market, and the first time that LONGi Green Energy has suffered a net loss since 2013.
At the same time, the sharp drop in polysilicon prices has had an impact on the performance of polysilicon manufacturers, including Daqo Energy and Tongwei, reflecting the pressure on the entire PV industry. In order to explore the reasons for the "collective anxiety" of the photovoltaic industry, the Beijing News Zero Carbon Research Institute interviewed Zhang Juntao, deputy secretary-general of the China Energy Conservation Association and executive deputy secretary-general of the Carbon Neutrality Professional Committee.
Zhang Juntao said that the decline in the performance of photovoltaic enterprises in the first quarter was mainly due to the rapid expansion of the photovoltaic industry, which brought about the decline in the price of the industrial chain and the asset impairment loss caused by the iteration of technology.
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Wafers, cells, and modules hit the "bottom of the cycle"?
In the first quarter, the photovoltaic industry as a whole faced the dual pressure of the traditional off-season, including the continuous decline in the price of the industrial chain and the lack of significant increase in installed demand caused by the "involution" of the industry. This is related to the continuous decline in prices in the industrial chain, especially the prices of wafers, cells and modules have reached record lows, resulting in the compression of corporate profit margins, which has also triggered discussions about wafers, cells and modules encountering a "bottom of the cycle" in the industry.
Before responding to this question, Zhang Juntao traced the development of photovoltaic in recent years, especially after the dual carbon goal was proposed, because the photovoltaic industry has high income, large growth space has attracted a large amount of capital to enter, and photovoltaic production capacity has expanded rapidly.
In 2023, the domestic production capacity of polysilicon, silicon wafers, cells, and modules will increase by nearly 400%-500% compared with 2019, respectively. On the demand side, the domestic market has limited installed capacity, and the cumulative domestic installed capacity in 2023 will be close to 610GW, compared with 204GW in 2019, an increase of only 300%, especially from the first quarter of 2024, the growth of new domestic photovoltaic installed capacity has slowed down, looking at the data in March alone, the country's new photovoltaic installed capacity is 9.02GW, down 32% from the same period last year.
Data source: Photovoltaic Industry Association Drawing: Tao Ye, researcher at the Beijing News Zero Carbon Research Institute
Zhang Juntao said that due to the continuous decline in the price of the photovoltaic industry chain, this also means that there will be an expectation that the installed price will be cheaper in the future than now. As a result, there has been a decline in installed capacity. In this case, the supply-demand ratio of the industrial chain has plummeted, from 1.02:1 in June 2023 to 2:1 at the end of the year. In 2023, polysilicon (polycrystalline density) prices will drop by about 70%, wafer and cell (PERC 182) prices will drop by about 60%, and module (PERC 182) prices will drop by about 50%.
Zhang Juntao said that silicon wafers, cells, and modules are indeed experiencing the "bottom of the cycle", and the profitability of photovoltaic companies may reach the bottom, waiting for the pattern to come out. In the polysilicon sector, wafer and polysilicon inventories have been prominent since April, and prices have fallen rapidly, basically falling to the cash cost line of polysilicon manufacturers. In the wafer sector, the inventory of the wafer sector has accumulated rapidly, and at the same time, the price and profit have declined significantly, and it is basically in the stage of losing cash. In the cell sector, due to the iteration of the P-to-N technology, cell manufacturers have made large asset impairments, resulting in a sharp decline in profitability, but N-type TOP Con still has more process optimization methods and will be more profitable in the future.
Industry reshuffle under a new round of technological iteration
Not only the financial performance, but also the capacity of the photovoltaic industry is worth studying. The increase in N-type production capacity is an important reason for the reshuffle of module manufacturers' shipment rankings, and the N-type technology route is changing the pattern of the PV industry.
The conversion efficiency of P-type cells is close to the theoretical limit, and the photovoltaic powerhouses in the field of P-type cells are no longer constant, while the cost advantage of N-type TOP Con technology is gradually emerging, and the trend of PV technology route change is gradually becoming clear.
With the development of technology, the process difficulty and cost barriers of N-type PV modules are being overcome, and the transformation of PERC production line to TOP Con production line has the advantage of cost savings, bringing more market space for TOP Con module production.
Zhang Juntao said that production capacity is indeed a topic worth studying in the photovoltaic industry. "From 2012, when the cost of photovoltaic panels plus batteries for power storage was about 3.9 yuan per kilowatt-hour, to 2023 it has reached 1 yuan, which means that the intermediate cost has been reduced by 80% in the process of almost 10 years, and it cannot be done without large-scale expansion of production capacity." Looking at the essence through the phenomenon, behind this is the process of gradual transition from technology iteration to high-quality production capacity. ”
Zhang Juntao, Deputy Secretary-General of the China Energy Conservation Association and Executive Deputy Secretary-General of the Carbon Neutrality Professional Committee, photo/Courtesy of the interviewee
Zhang Juntao added that a new round of technology iteration has begun. In 2023, the market share of P-type and N-type will be 70% and 27%, respectively, but in 2024, the market share of N-type technology will reach 79%, and the market share of P-type technology will fall off a cliff to 20%. In the past, the P-type production capacity, the main shipper, depreciated rapidly, and PV companies had to make impairment provisions for related assets mainly related to P-type production capacity.
The financial report shows that in 2023, Tongwei Co., Ltd. provided for asset impairment of 6.236 billion yuan, including 1.305 billion yuan for inventory impairment and 4.391 billion yuan for fixed asset impairment loss, LONGi Green Energy provided for asset impairment of 7.025 billion yuan, including 5.170 billion yuan for inventory decline loss and contract performance cost impairment loss, and 1.586 billion yuan for fixed asset impairment, TCL Zhonghuan provided for 1.993 billion yuan of inventory impairment loss, and 8.164 billion yuan for inventory, an increase of 1.74 billion yuan over the same period last year.
Zhang Juntao said that for now, the industry's expectations for the global installed capacity demand in 2024 are basically between 400GW-500GW, and the current output of photovoltaic modules in China has reached 499GW, but the production capacity of all links at the manufacturing end is approaching 1000GW in all aspects, of which more than 60%, that is, 600GW of production capacity is the production capacity of the past four years. But in fact, in the entire photovoltaic industry, advanced production capacity and technical talents are still in a state of shortage. Improving efficiency, reducing costs and increasing efficiency is the eternal theme of the photovoltaic industry, with the emergence of more advanced technology and more efficient products, it will inevitably squeeze backward production capacity, "but the efficient and high-quality production capacity is not only not excessive, on the contrary, there is a big gap." ”
The decline in module prices poses a challenge to PV companies. If module prices continue to fall, it could put financial pressure on companies, especially when prices fall to cost. The PV industry is experiencing fierce competition and industry reshuffle.
Zhang Juntao said that the photovoltaic industry has accelerated technology iteration since 2021, from large silicon wafers in the silicon wafer sector, N-type silicon wafers to N-type TOP Con cells, and then to the iteration of large-size modules. In particular, the rapid development of TOP Con, HJT, and BC cell industrialization technologies is gradually replacing the current mainstream PERC technology. Because the conversion efficiency of PERC cells is close to the theoretical limit value (24.5%), it cannot further meet the goals and requirements of "cost reduction and efficiency increase" of PV. The TOP Con battery in the N-type branch has become the core position of many traditional manufacturers and new players because of its high compatibility with existing PERC production lines and low cost of industrial upgrading. At present, the conversion efficiency of the mass production of TOP Con of the mainstream player manufacturer has exceeded 25.5%, and is in the process of continuous improvement.
The PV industry is poised for a turnaround in mid-2024
Despite the challenges faced by the photovoltaic industry, the installed capacity of solar power generation in 2023 will be about 610GW, officially surpassing the installed capacity of hydropower of about 420GW and becoming the second largest form of power source in the country, second only to coal power, and further climbing its position in the power energy mix.
According to the 2024 National Energy Work Conference of the National Energy Administration, the new installed capacity of wind power and photovoltaic power in the country is about 200 million kilowatts. In the first quarter of 2024, China's new PV installed capacity reached 45.75GW, compared with 33.66GW in the same period last year, and China's PV continued to maintain a growth trend. At the same time, there is still a lot of room for growth in non-fossil energy consumption in 2023 compared with the targets of 20% in 2025 and 35% in 2030.
In addition, the market value of the photovoltaic equipment industry reached 1.48 trillion yuan on March 31, which also shows the market's long-term confidence in the photovoltaic industry. For the full year, declining module prices, increased tenders, and potential market demand are likely to support domestic PV installations. Some giants in the photovoltaic industry still choose to expand production, and China's photovoltaic industry has entered the trillion-dollar track.
Zhang Juntao is also optimistic about China's PV industry and is optimistic about the long-term demand for new technology capacity. He said that photovoltaic has the characteristics of cyclical development, and periodic shocks are the natural attributes of industry development. In the past 10 years, PV has experienced ups and downs, but judging from the results, the mainland PV industry has been moving forward. Overall, with the continuous progress of technology in the photovoltaic industry, the competition is becoming more and more fierce, and through the rapid elimination of the survival of the fittest and backward production capacity, excellent enterprises can win from the market competition.
With the elimination of outdated production capacity and the recovery of market demand, the photovoltaic industry is expected to usher in a turnaround in mid-2024.
"In the long run, the outlook for PV is bright." Zhang Juntao stressed that at the domestic demand level, photovoltaic is the mainstay of energy transition, and as the country strengthens the connection between green power certificates and energy-saving and carbon-reduction policies to vigorously promote non-fossil energy consumption, the demand for photovoltaic will further increase in the future.
At the global level, according to TrendForce, the neutral expectation for new global PV capacity in 2024 is 474GW, up 16% year-on-year. It is worth noting that according to the "historic agreement" reached at COP28, there is a worldwide consensus to "get rid of" fossil fuels. The agreement also calls for a twofold increase in global renewable energy capacity by 2030, which has a clear boost to PV development.
Image source: bp World Energy Outlook (2023 edition)
The road is tortuous, but the future is bright. Finally, Zhang Juntao reminded that the insufficient capacity of the power grid and the problem of wind and solar consumption have become a key point restricting the high growth of photovoltaic demand in various countries, and the global photovoltaic installation potential can be further released after the power grid completes a phased upgrade or energy storage installation.
Tao Ye, a researcher at the Beijing News Zero Carbon Research Institute
Edited by Yue Caizhou
Proofread by Liu Baoqing