China Photovoltaics: A new round of "high-speed rail" investment opportunities!

Polaris Solar Photovoltaic Network News:If there is an industry that is the cruelest and bloodiest in the past 10 years,Photovoltaic industryIt's definitely not far behind.

(Source: WeChat official account "Pingke Coffee")

This industry has produced the richest man with the most, and has also produced the most stories from the richest man to bankruptcy.

Photovoltaic power generationOnce linked to "subsidy fraud", Hanergy and Shangde's corpses remain warm.

And in a blink of an eye, this industry can immediately produce and grow within itself.

In the past 10 years, the technological progress and iteration of this industry have led to the cost of components from nearly 10 yuan/w in 2012 to 1.2-1.5 yuan/w this year, and the power has gone from mainstream 100-200w to 500-600w released by Zhonghuan Jinke/JinO/Tenhe/Longi and others this year. The rapid progress of the industry is shocking.

Ten years ago, the main value chain of this industry was still abroad.

Ten years later, Longi and Zhonghuan's silicon wafer production capacity accounted for 60-70% of the world, Xinyi Fulette's photovoltaic glass production capacity accounted for 60-70% of the world, Foster and Eva films accounted for 60% of the world's market share, and almost all silicon materials/cells/components and other links were contracted by Chinese manufacturers.

From silicon/wafers to battery cells/assemblies to upstream equipment. Almost all output value and core links of this industry are in China.

Two years ago, the National Development and Reform Commission, the Ministry of Finance and the National Energy Administration jointly issued the "Notice on Matters Related to Photovoltaic Power Generation in 2018" (hereinafter referred to as the "531 New Policy"): It is clear that the scale of photovoltaic construction will be controlled, and electricity prices and subsidies will be reduced again.

For a moment, the entire industry was wailing, and investors retreated one after another.

The media title at that time was "China's photovoltaic industry was forced to "adult" on Children's Day this year."

From the installation subsidy in 2007-08 to the power generation subsidy later, to the cancellation of subsidies of 531, I felt that the components were not good, the inverter was not good, and the equipment was not good, and I thought this industry was over.

Unexpectedly, the domestic photovoltaic industry has made rapid progress in the past two years. If the subsidies are cancelled, nothing will be possible. It has become the two years of change and progress, no doubt. The role of subsidies is to "help the horse and give it a ride". At present, at least the phased purpose has been achieved, and it is really "a long-term view of the scenery."

I also have to sigh at the foresight of policy makers.

From the perspective of the depth of the industrial chain, Chinese companies have a considerable voice in the five major links of silicon materials, silicon wafers, batteries, modules, and systems. China ranks more than five in the world's top ten companies in all aspects.

Especially on the equipment behind you, even the battery manufacturing equipment with the highest technical content, domestic companies have begun to dominate.

A few years ago, the investment of 800 million or 1 billion in one line (GW) has been achieved by Chinese equipment manufacturers to 230 million and 300 million -- the performance may be better.

Regarding photovoltaic equipment, a summary of a seller's report can be borrowed:

"...The localization of production equipment in the industrial chain follows the general process of localization of industrial equipment: first, enterprises on the production side either purchase advanced overseas equipment at high prices or purchase second-hand overseas equipment at low prices, first strive to produce qualified products and accumulate process experience in the production process.

After the mature production line has a certain competitiveness, it has begun to gradually replace non-core equipment parts with domestic products. After the domestic equipment companies gradually mature, they will gradually try to use domestic whole equipment with similar performance but lower costs.

In this way, feedback and exchanges and cooperation are carried out to further promote the localization of core equipment and even the entire production line equipment.

Finally, after domestic equipment companies have accumulated enough production line data and process experience, they can enter the innovation stage - especially industrial application-oriented innovation, achieving a reverse over all aspects of the performance of overseas traditional equipment manufacturers' products. ”

In 10 years, the photovoltaic industry has been a classic Chinese manufacturing paradigm: the technical principles have been broken, and the rest is large manufacturing and large users to run-in.

China's photovoltaic industry is following this path to grow into one of the industries with the most hidden champions in the world in China.

Chinese equipment manufacturers even directly transformed foreign equipment leaders such as Meyer Burge, and began to consider becoming vertically integrated, self-produced and used component manufacturers; India began to consider supporting local component manufacturers or imposing high tariffs on Chinese components.

The photovoltaic industry has become a footnote to China's high-efficiency and low-cost manufacturing, just like high-speed rail.

The downstream of photovoltaics are mainly centralized power stations, industrial and commercial and household use, and are relatively sensitive to component price/efficiency.

In order to meet the demanding market demands, photovoltaic people's pursuit of efficiency and cost has almost reached the extreme. Anyone who knows the history of this industry will probably admire and sigh from the bottom of their hearts.

Silicon wafer link: The introduction of diamond wire cutting, the silicon wafer size has ranged from 156.75 to 182 and 210 today, and the thinning of silicon wafers and gallium-doped silicon wafers reduce optical decay; cell technology iteration: from BSF to the mainstream perc+, topcon, industrialization is rapidly advancing hit; component links, various packaging methods, fragmentation, half-piece, stacked tiles, and stacked welding.

All aspects of the industry are undoubtedly committed to an industry-first issue - reducing costs and increasing efficiency, and reducing the final cost of electricity kilowatt-hours.

In order to reduce every cost and improve every percentage point of efficiency, countless Chinese enterprises, entrepreneurs, engineers, and technical customer service are constantly destroying innovation and ultimately polishing, and then ruthlessly revolutionizing itself.

This is no longer enough to describe it as "competition", but the rebirth of the eagle.

The advantages of each technological progress spread rapidly, allowing the benefits created by technology to flow quickly to the whole society.

Standing at the current point in time, photovoltaics has moved towards a coming-of-age ceremony.

Photovoltaic power generation is already the most competitive and lowest-cost clean energy in the world.

In Saudi Arabia's latest bid, the electricity price has already hit a minimum price of 1 cent per kilowatt-hour. Photovoltaic power generation has become the most mainstream energy supply in many European countries except coal-fired power.

In China, 80-90% of regions (except Sichuan/Chongqing/Guizhou, etc.), photovoltaic power generation is already lower than the local benchmark coal-fired electricity price. It is no wonder that the country has the confidence to clean up small hydropower stations and restore the river ecology.

In Shandong, Henan, Hebei, etc., where lighting resources and electricity prices are relatively ideal, even if subsidies are not considered, the return cycle for industry, commerce and household use is basically 4-7 years.

For the people, photovoltaic power stations are visible financial products and pension insurance.

A dealer in a certain place in Liaoning said that the yard he rented and the photovoltaic power station he installed could basically make a profit in three years. The returns are very tempting.

The future technology path reserves of the photovoltaic industry are very complete. From hit to ibc to perovskites, the industry's cost reduction and efficiency improvement have been on the way.

Affordable Internet access has arrived, and it has even crossed the parity and entered the bidding stage directly.

Next year, the photovoltaic industry will usher in a new technological advancement (equivalent to the evolution of LCD to OLED), and battery efficiency will be further improved, and the roadmap for the next few efficiency advancements has been basically determined.

Chinese companies in the industrial chain will rise to a new level.

If shale oil/gas on the other side of the ocean ten years ago was the energy revolution of the last decade, then China's photovoltaics are no less than that.

After crossing the singularity of cost efficiency, the industry's penetration rate will also increase significantly.

Recently, the National Energy Administration issued the "List of Projects to be included in the 2020 National Bidding Subsidy Scope of Photovoltaic Power Generation".

There are 434 projects to be included in the bidding subsidy scope this time, with a total scale of 25.97 GW, a year-on-year increase of 14%, exceeding market expectations (20 GW).

In terms of subsidy intensity, the minimum subsidy intensity of a single project is 0.0001 yuan/kWh, and the weighted average electricity subsidy intensity is about 0.033 yuan/kWh (reduced by 0.032 yuan/kWh from the same period in 2019).

The list of bidding projects this year was announced earlier, and some provinces with strong certainty were preparing early. Moreover, most areas of the country have basically achieved parity, and demand has recovered significantly.

Not only will the domestic demand market usher in a positive release, but the export situation is not pessimistic.

It is estimated that global photovoltaic demand in 2020 may be between 120 and 130 GW, the market demand side.

In 2019, the global proportion of my country's silicon materials, silicon wafers, batteries and module production reached 66.9%, 97.8%, 82.7% and 76.9% respectively.

The cost of photovoltaic system is composed of components, inverters, brackets, construction and construction costs, among which components account for the highest proportion, currently about 41%.

With the realization of parity in the Internet access system, the impact of policies on the photovoltaic industry has weakened, and there is pressure to reduce prices in all links. "Technology + capital" has become a key factor affecting the profit structure of the photovoltaic industry chain. Eliminating backward production capacity and concentrating market share into leaders will become a major trend.

The costs of components, battery cells, silicon material links, etc. have basically bottomed out, and all links of the photovoltaic industry chain are expected to usher in a period of upward prosperity.

The relevant leading targets will inevitably take the lead by relying on their scale advantages, which will benefit the continued stability of their performance.

Photovoltaic industry chain: upstream silicon materials, ingots (pull rods), slices; midstream battery cells, battery modules, and downstream application systems.

Silicon material link: Poly GCL Energy, Sichuan Yongxiang, Xinte and Daquan New Energy are among the top 4 in the world. Then there are German WACKER, Korean OCI, and American Hemlock. In 2019, the world's top five silicon material companies had a market share of 61.3%.

Silicon wafer link: Single crystal products have obvious economic advantages, and their market share has reached 80-90%.

Longi Green Energy Technology Co., Ltd.: Leading the manufacturing leader in solar monocrystalline silicon wafers, with a global market share of 24.3% in 2019, and its market position has increased.

GCL Energy: the world's second largest silicon wafer supplier for ingot monocrystalline silicon wafers, with a global market share of 18.9%. Due to decision-making errors, polycrystalline conversion is transformed into single crystals, resulting in huge sunk costs and a decline in market position.

Zhonghuan Co., Ltd.: Solar monocrystalline silicon wafers are the third largest in the world, with a global market share of 17.8% in 2019, and their market position has increased.

Battery Cell Link: The market is still relatively scattered, and independent third-party battery companies are emerging.

Tongwei Co., Ltd.: It shipped 13.4GW in 2019, with a global market share of 10.1%, making it the world's largest photovoltaic cell manufacturer.

Component link: The pattern is scattered, and the market is concentrated towards leading enterprises with obvious trend.

Jinko Technology, as well as the unlisted Jinko and Trinhe, are still the top three component suppliers in the world.

Longi Green Energy Technology Co., Ltd., through vigorously promoting single crystal modules, its global market share quickly increased to 7.6% in 2019, ranking fourth.

While shocking the rapid progress of local photovoltaic manufacturing companies, we must also see some hidden worries in the industry.

A photovoltaic senior said that the biggest obstacle to the future development of photovoltaics is no longer itself, but will inevitably touch the interests of traditional energy such as coal-fired power in the future.

The friendliness of the power grid and the consumption space directly determine the installation scale of the 14th Five-Year Plan.

Energy storage technology currently relies on pumped storage and battery storage. Before a major breakthrough is achieved, the power grid transmission capacity is a big problem.

Photovoltaic land use is also a big problem.

The fearful debts and accounting period problems in the entire photovoltaic industry have dragged down many affiliated enterprises, and the profits made by technological iteration are immediately invested in the funds forever.

Of course, this is true in the high-tech industry, so Buffett doesn’t like high-tech.

PS: It is China that has such a large number of high-level manufacturing capabilities that determines the exchange rate (and house prices).

Similar stories are also happening in the domestic new energy vehicle industry chain, which requires observation and thinking.

If the industry's installed capacity reaches 1000gw in 10 years, I think I will open a bottle of champagne to pay tribute to every diligent, pragmatic and innovative photovoltaic person!