Li Honghui of Jiawo Capital: Seize new opportunities in green technology in the era of "involution".

"A word that is very popular now is volume, and the same applies in the new energy industry. In the face of the current situation of the new energy industry, Li Honghui, the founding partner of Jiawo Capital, still believes that in the next ten to twenty years, the new energy industry is still a big industry and a big track that is worth investing in.

In his view, the short-term supply and demand pattern and overcapacity cannot change the long-term development trend of the entire industry, but in this process, it is necessary to pay attention to the iteration of key technologies and the problem of "stuck neck".

In different subdivisions, different nodes, and for different technical routes, Jiawo Capital has different investment strategies. Li Honghui said, for example, such as the solar cell industry, the photovoltaic industry, the increase in the cumulative installed capacity of the entire industry, consumables are a very good investment opportunity. The entire energy storage industry should ring the alarm bell is safety, and low-temperature performance if the flow battery can be minus 20 degrees and almost not attenuated, is a very optimistic technical direction.

In addition to paying attention to the present, Li Honghui also proposed to pay attention to the technical route in the next three to five years, and even the technical route in the next ten or thirty years. "In the next three to five years and ten years, solid-state batteries and flow batteries will be more mature and gradually commercialized, while high-temperature/room-temperature superconducting materials, thorium-based molten salt reactors, controlled nuclear fusion and nuclear fusion miniaturization are still too early, and it is difficult to really go out of the laboratory for commercialization without ten or twenty years of accumulation."

At the "18th China Investment Annual Conference and Annual Summit", Li Honghui, founding partner of Jiawo Capital, delivered a keynote speech entitled "New Energy, Start Again". The following is a transcript of the on-site speech, which was compiled by ChinaVentures:

Thank you very much for the invitation of the organizers, the new energy re-start is very suitable for the current environment, photovoltaic and lithium batteries are currently at a relatively low point, and it is a very critical time to evaluate the experience of the past 10 or 20 years, and look forward to how to continue to make further investment and industrial layout in the future.

I would like to introduce to you Jiawo Capital, we were established at the end of 2015, the current asset scale is about 3 billion yuan, and has invested in more than 20 projects in the new materials and new energy industries, covering ternary and lithium iron phosphate cathode material precursors, anodes, copper foils, aluminum-plastic films, carbon fibers, silicon wafer cutting lines and energy storage and other fields, as well as vehicle-grade reducers, 4D imaging millimeter-wave radars, etc., through IPOs and mergers and acquisitions to exit 8 projects.

Jiawo Capital is one of the earliest teams to invest in new energy in China, I remember when we were in the US dollar fund, we witnessed the rise of Wuxi Suntech and Jiangxi Saiwei LDK, Wuxi Suntech from investment to exit in a year and a half 11.6 times, Jiangxi Saiwei LDK from investment to exit 9.9 times, they experienced crazy industrial expansion, and finally could not escape overcapacity, and finally were merged by state-owned enterprises. As for the relatively stable Chint, Trina, and Jinko, they were able to survive the trough of the industry and further develop when the industry began to recover.

Looking forward to the past 20 years, the entire photovoltaic industry has relied on subsidies from Germany and Spain, as well as the advantages of China's technology iteration and China's manufacturing industry, forming an absolute leader in the world and becoming the "new three" of China's exports, photovoltaic lithium batteries and new energy vehicles. On this leader's visit to France, Chint, Trina, Jinko, CATL, EVE, Geely Automobile and NIO accompanied the visit. Lithium batteries and new energy vehicles have also gone through a similar cycle. The past 20 years have been a process of ups and downs, and we believe that in the next 10-20 years, new energy will still be a very worthwhile segment to invest in.

The ups and downs of the entire industry and the reversal of supply and demand have driven the continuous technological iteration of the new energy industry, further improving the level of the entire industry and reducing costs. Now a very popular word is volume, in the new energy industry this word is also applicable, the result of the volume is that in the past few years, photovoltaic and lithium battery industry, all the way forward, the result of the overcapacity power appeared, the price began to fall rapidly. Taking photovoltaic as an example, in Q3 and Q4 of 2022, the maximum will drop from 300,000 tons to 50,000 tons now, and the materials in the lithium carbonate industry will drop from 600,000 tons to 8 to 100,000 tons now. At present, the whole industrial chain is vicious competition, and everyone is very volatile.

So there are no investment opportunities in the new energy industry? How should I invest in the future? We believe that in the next 10 to 20 years, the new energy industry will still be a highly determined big industry and a big track, and there will still be very good investment opportunities. However, there are different investment strategies for different technical routes at different nodes in different subdivisions.

For example, for lithium batteries and photovoltaics, it is impossible to invest in silicon wafers and cells with traditional routines, which is relatively risky. For hydrogen energy and liquid flow, we can focus on core technologies.

In the past nearly 20 years, the cost of the entire photovoltaic module has been reduced by 95%, or even more than 99%, the current photovoltaic power generation cost is about three cents a kilowatt-hour, we expect to cut half in 2030, to reach a dime and a half kilowatt-hour of electricity, after the cost of photovoltaic is reduced, the downstream demand can rise rapidly, by 2030, it is expected that the annual new installed capacity will continue to grow, and the cumulative installed capacity is expected to still have 4 times the space.

The core driving factor of the lithium battery industry is new energy electric vehicles, about 10 million cars in the world in 2022, and we expect nearly 50 million cars in 2030, which is nearly 5 times the space in the whole logic. In this process, the energy density of lithium batteries is expected to increase from 180 Wh/kg to about 500 Wh/kg in 2030, of which materials and technologies continue to iterate, lithium iron phosphate, lithium manganese iron phosphate, ternary eight series nine series, semi-solid-state batteries, lithium metal batteries/lithium sulfur metal, etc., continuously improve energy density and cost performance.

The demand for renewable electricity consumption derived from the development of wind power generation and photovoltaic power generation has promoted the vigorous development of hydrogen production from water electrolysis, and we expect that green hydrogen will have a large room for cost reduction, from the current 38 yuan per kilogram to 5 yuan per kilogram. With the promotion of policies, such as subsidies for hydrogen buses and subsidies for hydrogen energy heavy trucks, as well as the improvement of superimposed infrastructure, the demand has been further exploded, and the hydrogen energy industry will usher in a market share of nearly one trillion yuan in the future.

Energy storage is also in a similar situation, with geopolitics, such as the demand spawned by the Russia-Ukraine war, policy factors, such as the qualitative requirements of wind power generation and photovoltaic distribution and storage, of course, there are also market factors, such as the peak-to-valley price difference in Zhejiang and Guangdong, and the superposition of the three driving factors, the entire energy storage industry will usher in an explosion. Of course, there are many technical routes for energy storage, from lithium battery energy storage to sodium ion and sodium battery energy storage, as well as liquid flow energy storage, such as vanadium liquid flow, zinc bromine, iron-chromium battery and zinc-based flow battery, etc., the entire energy storage path shows a state of blooming, but the most critical here is actually two points, the first is safety, and the second is cost performance.

In summary, we believe that in the next ten to twenty years, the new energy industry is still a big industry and a big track that is worth investing in, and the short-term supply and demand pattern and overcapacity cannot change the future development trend of the entire industry, but this process should pay attention to the iteration of key technologies and the problem of "stuck neck".

From the perspective of investment, we have different investment logic for different technologies, such as relatively mature technologies, such as TOPCON and HJT cells in the photovoltaic industry, etc., with the increase of the cumulative installed capacity of the entire photovoltaic industry, consumables are very good investment opportunities. For example, the circulating gas project we invested in last year is mainly to provide downstream silicon wafer and cell customers with circulating helium, circulating hydrofluoric acid, silane, laughing gas, etc., as long as the company starts to start using key gases, in the current environment, the entire market capacity gradually increases in the process, there will be explosive sub-categories.

In the field of hydrogen energy and energy storage, we care about some projects with unique technologies, such as the hydrogen energy enterprises incubated by the team of Academician Zou Zhigang of Nanjing University that we recently invested, and the catalyst and membrane electrode are all developed by ourselves, with a power density of 1.65 watts per square centimeter, and the research and development of a high-temperature proton membrane of 120 degrees Celsius has been completed;

There is also the zinc flow battery we recently invested in, the team of Tsinghua University and the Chinese Academy of Sciences, the cost of mass production is almost 0.3 yuan per watt, the main advantage is safety, the explosion in Nanjing after the Spring Festival, sounded the alarm for the entire energy storage industry, the core is safety, second, its low-temperature performance is very good, the flow battery can be at minus 20 degrees Celsius, the entire battery is almost not attenuated, which is a very optimistic technical direction.

In addition to focusing on the present, pay attention to the technical route in the next three to five years, and also pay attention to the technical route in the next ten or thirty years. From our point of view, in the next three to five and ten years, solid-state batteries and flow batteries will be more mature and commercialized, while high-temperature/room-temperature superconducting materials, thorium-based molten salt reactors, controlled nuclear fusion and nuclear fusion miniaturization are still too early, and it is difficult to really go out of the laboratory for commercialization without ten or twenty years of accumulation.

Just as our slogan, technology leads the future, innovation drives value, and the new energy industry is a large industry and track with high certainty, but in this process, we must pay attention to its technological iteration trend, and at the same time dig deep into the materials and core equipment that are stuck in the neck. As long as you dig hard and dig deep into these industries, you can always find some good investment opportunities.

Back to the topic, we still think that this industry is good, it is worth digging deeper, stick to new energy, and start again hand in hand, thank you!