Under the dual-carbon target, why does the installed capacity of photovoltaics not rise but fall?

The deeper challenge is how to reduce the non-technical cost of photovoltaics.

The goal of carbon neutrality gives the photovoltaic industry a bright future, but this year’s new photovoltaic installations may not rise but fall.

Many industry insiders recently told the Caijing reporter that from the situation in the first half of the year, China’s total new photovoltaic installed capacity this year will be lower than expected at the beginning of the year, and the best situation may be the same as last year’s installed capacity.

Since the Chinese government put forward the “dual carbon” goal in September last year, the photovoltaic industry has seen unprecedented enthusiasm for investment, and major power central enterprises and local governments have been ambitious for the development of photovoltaic power generation. At the same time, on the basis of more than ten consecutive years of decline in photovoltaic costs, photovoltaic power generation has entered the era of parity. Under the dual favorable factors, why did the new PV installed capacity not rise but fall?

The main reason is the overall price increase of photovoltaic upstream manufacturing. Since March of this year, the price of silicon material, which is the upstream raw material for photovoltaics, has continued to rise. The price of silicon material at the end of June has increased by more than 100% compared with the beginning of the year; the price of mid- and downstream products has also risen, with the price of silicon wafers rising by more than 50%. Cells and modules The price increase is between 5%-20%.

In addition to rising prices across the entire photovoltaic industry chain, rising global commodity prices have also increased the construction costs of photovoltaic power stations. According to the reporter of Caijing, some photovoltaic power plant projects in China and some overseas regions have postponed the bidding or construction process.

However, the industry expects that the price increase has reached its peak and will enter a price decline cycle in the second half of the year, and it is expected to fall back to the level at the beginning of this year at the beginning of next year.

After the price drops, the photovoltaic industry is still facing the challenge of how to reduce non-technical costs. After photovoltaic subsidies are removed, relevant powers are delegated to local governments. Due to differences in land costs, tax and fee standards, and requirements for industrial supporting investment in some places, the non-technical costs of photovoltaic projects have risen rapidly in the short term.

In general, this round of price increases has not shaken the prospects of the photovoltaic industry, but it has further increased the concentration of the photovoltaic industry, and some small and medium-sized enterprises have been or are about to be eliminated.

01 

Newly installed photovoltaic capacity drops

According to statistics from the China Photovoltaic Industry Association, in 2020, the world’s new installed photovoltaic capacity will be 130 GW, an increase of 13% year-on-year; China’s new installed photovoltaic capacity will be 48.2 GW, an increase of 60% year-on-year.

In early 2021, China Photovoltaic Industry Association China this year is expected to add between 55-65 GW of PV installed capacity, Bloomberg New Energy Finance, Wood Mackenzie forecasts and other international energy information is hereby given by the company in more than 60 GW.

In the first five months of this year, the total installed capacity of new photovoltaic installations still achieved a year-on-year growth, but entering June, the industry is pessimistic about the growth prospects of photovoltaic installations. Peng Peng, secretary general of the New Energy Power Investment Alliance, told the Caijing reporter that the new photovoltaic installed capacity in June is expected to be only about 1 GW, about a quarter of last June. If the module continues to maintain the current high prices, it is expected that the total installed photovoltaic capacity this year will be between 40-45 GW, which is lower than last year’s level.

The China Photovoltaic Industry Association has lowered its forecast for this year’s installed capacity in the face of the sharp rise in the prices of raw materials such as silicon and steel. Liu Yiyang, deputy secretary-general of the association, told the Caijing reporter that this year’s photovoltaic installed capacity may only reach the lower limit of the expected value at the beginning of the year. If you follow the installation speed from January to May, the total new photovoltaic installations this year will probably be between 40-50 GW.

Liu Yiyang said that after June, the upstream and midstream prices should gradually decrease. If the decline is rapid, the installed capacity in the second half of the year may still grow rapidly. The construction period of photovoltaic power plants is only about one quarter, so the fourth quarter of this year is still likely to usher in the peak of new installations.

However, Bloomberg New Energy Finance analyst Jiang Yali told the Caijing reporter that there has not been a large-scale postponement or cancellation of the project. It is expected that China’s photovoltaic installed capacity this year will reach 69 GW, which is only a slight decrease of 2% from the figure expected at the beginning of the year. .

Not only has China’s new photovoltaic installations been affected, but the growth of photovoltaic installations in other countries so far this year has also been lower than expected. A person engaged in the EPC business of overseas photovoltaic power plants told the Caijing reporter that many photovoltaic projects that were delayed in construction last year due to the epidemic have been postponed to this year. Coupled with the market’s good expectations for the photovoltaic industry, I thought that the installed capacity would increase this year. quickly. However, since the second quarter of this year, most of the foreign projects have been difficult to advance. Some need to re-conduct business negotiations, and some directly suspend their implementation.

Under this circumstance, according to the reporter of Caijing, central enterprises and some photovoltaic power plants with higher return rates are still continuing to promote projects, some local state-owned enterprises have slowed down the pace of construction of photovoltaic projects, and some private enterprises are speeding up the sale of power plants or roads. (Project Pass).

The relevant person in charge of the Huaneng Group, a central electric power company , told the Caijing reporter that he has not yet considered adjusting the annual photovoltaic installation target. If the subsequent raw material prices continue to rise and the investment boundary conditions undergo subversive changes, Huaneng may appropriately adjust the 2021 photovoltaic mission target. However, looking at the overall situation of the “14th Five-Year Plan”, Huaneng Solar’s installed capacity target will not be adjusted.

A local energy state-owned enterprise in the eastern region told the Caijing reporter that the company’s annual new energy installation target in the first half of this year was less than half completed, and the completed projects were mainly wind power, and the new photovoltaic projects were far below expectations. The second half of PV installed machine intelligence condition could rise, depending on changes in market conditions.

02 

Causes and consequences of price increases in the photovoltaic industry chain

The core reason for the decline in new photovoltaic installations is the sharp rise in the price of photovoltaic products. Different from the link between the cost of fossil energy and resource endowment, the photovoltaic industry has typical manufacturing attributes with obvious scale benefits. At the same time, the photovoltaic manufacturing industry is a fully market-oriented industrial form, and price fluctuations are greatly affected by the market.

In the past ten years, with the increase in the scale of photovoltaic installations, the cost of photovoltaic modules and the cost of power station construction have continued to decline. Although there are occasional price fluctuations in individual links, this year’s situation of general price increases in the photovoltaic manufacturing industry chain is really rare.

Cost reduction of photovoltaic modules and systems (construction) in China

Under the dual-carbon target, why does the installed capacity of photovoltaics not rise but fall?

Source: China Photovoltaic Industry Association 

According to PVInfoLink, a photovoltaic information agency, as of June 16, 2021, the average price of polysilicon dense materials is 206 yuan/kg, which is an increase of more than 145% from the beginning of the year. In terms of silicon wafers, different types of monocrystalline silicon wafers have increased compared with the beginning of the year. The price has exceeded 50%; in terms of cells, the price of various types of cells has increased by 9% to 55% from the beginning of the year.

The price of the most downstream modules in the photovoltaic manufacturing industry has risen the least. According to PVInfoLink data, as of June 16, 2021, polycrystalline modules and monocrystalline modules have increased by 19.23% and 4.71% respectively from the beginning of the year.

This round of price increases started from the most upstream silicon material to the downstream components because of the structural imbalance between upstream and downstream supply and demand. In 2020, silicon wafer, cell and module companies will expand their production significantly, but the growth of silicon material production capacity will be slower, and the new supply of silicon material will be less than the demand for capacity expansion in the middle and lower reaches.

According to calculations by Lu Jinbiao, deputy director of the Expert Committee of the Silicon Industry Branch of the China Nonferrous Metals Industry Association, the output of silicon materials for Chinese photovoltaic enterprises is expected to be 480,000 tons this year, and the silicon materials that can be produced by international companies are 100,000 tons, and the total production capacity is 193 GW. Components. The global installed capacity of photovoltaics is expected to be between 160-200 GW this year, and supply and demand are basically balanced. However, the production capacity of silicon wafers and modules has expanded rapidly, and the production capacity of silicon wafers has approached 400 GW.

Prior to this round of price increases, the price of silicon materials has fallen for more than three consecutive years, from the highest price of 150,000 yuan/ton to last year’s lowest of more than 50,000 yuan/ton, and many small and medium-sized silicon companies have closed down as a result. The silicon material industry also has characteristics such as high technical thresholds, long production cycles, and difficult production control, which have led to slower expansion of enterprises in the past two years.

At present, a number of silicon material expansion plans have been implemented. Lu Jinbiao expects that the tight supply of silicon materials will ease next year, but then the supply of silicon materials will exceed terminal demand.

The impact of this round of price increases on the photovoltaic manufacturing industry is not small, and the industry has begun a new round of reshuffle.

Figure 2: Changes in the market share of the top five companies in the photovoltaic industry

Under the dual-carbon target, why does the installed capacity of photovoltaics not rise but fall?

Source: China Photovoltaic Industry Association

Under the influence of high-priced raw materials, the operating rate of component companies has declined. According to reporters from Caijing, most component companies have 30%-50% of their production capacity vacated. Small and medium-sized component companies have a lower operating rate and are facing elimination. Leading companies are accelerating their vertical integration.

The relevant person in charge of JA Solar (002459.SZ), the world’s third largest module shipment, told the Caijing reporter that the company’s current module operating rate is relatively full, higher than the industry average, and will be adjusted according to market demand and module price changes. The production schedule of each production link is still full of confidence in the completion of the annual shipment target. In the face of industry difficulties, the company is accelerating the deployment of advanced production capacity and enhancing its integrated strategic competitive advantage.  

Affected by the price increase of raw materials, some power plant operators have also begun to consider building their own component foundries. The relevant person in charge of the aforementioned Huaneng Group stated that Huaneng is exploring a self-reliant component supply mechanism, that is, taking advantage of its own industrial chain, establishing a component processing mechanism, locking upstream product prices and quantities in advance, and stabilizing price fluctuations.

Seb Henbest, chief economist of Bloomberg New Energy Finance, said that if the price increase of the entire photovoltaic industry chain continues until the second half of 2021, it means that new renewable energy power projects will temporarily become more expensive, which is the first time in decades. .

03 

There are still challenges after prices fall

At the end of June, there was a turning point in this round of photovoltaic manufacturing price increases.

Silicon wafer leader Zhonghuan (002129.SZ) took the lead in lowering its price. On June 29, Zhonghuan released the latest product prices. Compared with a month ago, the prices of various types of silicon wafers have dropped by 8 to 10 percentage points . This is the first time the company’s silicon wafer prices have been lowered this year.

Immediately afterwards, Tongwei (600438.SH) slightly lowered the price of the cell on June 30, and the price of the cell with the largest decline fell by 7.41% from the previous month. However, as of press time, Tongwei, the leader in silicon materials, has not yet lowered the price of silicon materials.

Even if prices fall, the photovoltaic industry, which has just entered the era of parity, still faces challenges.

The challenge now is that the sequelae of price increases will take time to calm down. In the first half of this year, price increases led to widespread contract breaches in the photovoltaic industry, and the confidence of investors and developers was damaged.

Electricity experts Han Wenxuan “financial” reporter said that this round of price increases is a short-term phenomenon, does not change the power strategic investment enterprises to adjust energy structure, but the PV industry chain development uncoordinated contradiction once again exposed. Nowadays, power investment companies have realized the instability of the photovoltaic industry chain, and some central enterprises’ countermeasures are to establish industrial alliances or their own photovoltaic manufacturing.

The deeper challenge is how to reduce the non-technical cost of photovoltaics. The problem of high non-technical costs was concentrated in the first year of photovoltaic parity.

Among the non-technical costs of photovoltaic projects, the major volatile factors include: land costs, taxes, and operating expenses such as grid dispatching. With the continuous decline of hardware costs, the proportion of non-technical costs is on the rise. At present, most projects are between 20% and 30%.

After the subsidy was cancelled, the approval and development authority of photovoltaic projects was delegated to local governments. Due to the lack of clear implementation standards for related policies, the constraints and incentive policies for photovoltaic projects vary from place to place.

With the huge increase in investment demand for photovoltaic power plants, the cost of land rent for photovoltaic power plants is rising. On the other hand, many introduced in 2021 or twelve or fifteen photovoltaic project open spring pieces, the industry must be clearly stated terms of investment.

The work plan for the construction of new energy projects in Hubei for 2021 stated that the total investment in new equipment industry projects should be no less than 1 billion yuan, the construction period should not exceed 2 years, and the annual output value after reaching production capacity should not be less than 5 billion yuan. A county in Shanxi required photovoltaic power plant companies investing in the local area to pay more than 100 million yuan in farming tax and land fees, overturning the previous promise of exemption from related taxes and fees.

Photovoltaic companies have repeatedly complained about the high non-technical cost of photovoltaics in recent years. Cao Renxian, chairman of Sungrow Power (300274.SZ), the leader in the photovoltaic inverter industry, said at the Shanghai Photovoltaic Conference in early June that many places have mandated supporting industries, which has pushed up the cost of photovoltaic projects.

Industry associations call on the government to introduce policies to reduce non-technical costs during the 14th Five-Year Plan period. Liu Yiyang said that the price fluctuations of the photovoltaic manufacturing industry will become smaller and smaller as the industry matures, but the decline in non-technical costs cannot be controlled by the photovoltaic industry itself.

The author is a reporter from Caijing; Han Shulin, a reporter from Caijing, also contributed to this article 

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