Photovoltaic full parity helps the world achieve carbon neutrality: The photovoltaic industry will maintain high prosperity in 2021, with a global installed capacity expected to reach 160GW next year, a year-on-year increase of over 30%.

　　On one hand, as the cost of photovoltaic power generation decreases year by year, it can now achieve grid parity, so the demand for the photovoltaic market is expected to experience a greater explosion.

　　In 2021, the global photovoltaic power generation cost is expected to decrease by 43% compared to 2019, reaching $0.04/kWh, and all regions of the world will usher in the era of parity.

　　On the other hand, the penetration rate of photovoltaic power generation is low, and it will become the mainstream source of power generation globally in the future, with huge market space. The green and clean attributes of photovoltaic power generation also align very well with the sustainable development goals of countries around the world, and each country has corresponding green development plans.

　　Our country aims to peak carbon emissions before 2030 and achieve carbon neutrality before 2060. During the 14th Five-Year Plan, it strives to peak coal consumption or even achieve negative growth; the proportion of non-fossil energy is expected to reach around 20%, and the total energy consumption is controlled within 5.5 billion tce. Based on this calculation, the average annual installed capacity of photovoltaic during the 14th Five-Year Plan can reach 70GW+.

　　In Europe, emission reduction targets are continuously being raised. The "2030 Climate Target Plan" released in September 2020 states that the proportion of renewable energy in final energy consumption will reach 38% to 40% before 2030.

　　In the United States, after Biden's election, he will announce the rejoining of the Paris Agreement. On November 18, 2020, the American Solar Energy Industries Association suggested to Biden to cancel the tariffs imposed by Trump on imported equipment and proposed to extend a critical federal tax credit policy for the solar industry through legislation.

　　Overall, under the policy expectations of China, the U.S., and Europe, it is estimated that the global photovoltaic installed capacity growth rate will reach 34% year-on-year in 2021, achieving the highest growth in nearly a decade, with the share of photovoltaic installed capacity in China, the U.S., and Europe expected to reach 67%.

　　On December 9, the deputy director of the New Energy Department of the National Energy Administration stated, "The photovoltaic space during the 14th Five-Year Plan far exceeds that of the 13th Five-Year Plan, which is a significant opportunity for everyone present." The photovoltaic association provided the official "14th Five-Year Plan" guidance—an average of 70 to 90GW, while our country's photovoltaic installed capacity is expected to be around 35-40GW this year, meaning the official guidance for the "14th Five-Year Plan" has at least doubled year-on-year.

　　1. Silicon material: Prices are expected to remain high.

　　Silicon material: In 2021, supply will be limited, and under price support, leading companies are expected to exceed profit expectations.

　　Looking ahead to 2021, there is still no clear capacity release on the supply side, maintaining a tight balance between supply and demand, with silicon material prices having significant support. It is expected that next year's prices will remain in the high range of 80,000 to 100,000 yuan, and companies are expected to maintain high gross profit margins.

　　Although the production capacity of granular silicon will be established quickly next year, with about 50,000 tons, it will still take time to completely replace the Siemens method, so the supply-demand tension for silicon material (Tongwei Co., Ltd.) still exists.

　　In addition, next-generation battery technologies such as HJT and TOPCON based on N-type silicon material technology are accelerating capacity transformation, and companies that complete layout first are expected to gain excess returns.

　　Tongwei Co., Ltd. is a leader in the silicon material industry, with existing silicon material capacity of 80,000 tons (accounting for about 16% of the industry's existing capacity), firmly positioned in the industry tier.

　　The company, relying on excellent cost control capabilities, has controlled the production cost of silicon material at 39,500 yuan/ton, while the average production cost of future new capacity is 36,500 yuan/ton, which is at the lowest level in the industry.

　　Based on the current price of silicon material at 82,000 yuan/ton, the gross profit margin can reach over 50%. With silicon material prices expected to remain high in 2021, it is expected to provide strong driving force for the company's performance growth.

　　2. Glass: Structural supply-demand tension.

　　Glass: In 2021, the overall supply-demand will be in tight balance, but there will be a structural supply-demand gap for wide glass.

　　As the peak season of the industry arrives in Q4 2020, insufficient supply has led to a rapid increase in photovoltaic glass prices, with an increase of 75% compared to the low point. In 2021, new production capacity will be around 3,000 tons/day each quarter, maintaining a tight balance overall, with price support. However, there may be excess white float glass capacity entering this segment, and equipment conversion can be completed in one quarter, providing support for supply. If downstream acceptance of excess white float glass increases, it may lead to a decline in photovoltaic glass prices.

　　With the trend of module large-scale development, there will be a structural supply-demand gap for glass next year.

　　According to the current expansion plans disclosed by various manufacturers for 2021, assuming that all newly commissioned furnaces can produce the wide glass required for 182/210 modules, and considering the replacement of some backsheet glass with float glass, theoretically, it can support the maximum output of 182 and 210 modules at 56.26GW, while the total planned capacity for large modules is 95GW, resulting in a wide glass gap of 48.74GW.

　　Since the construction of new furnaces and the transformation of existing furnaces take about 0.5 to 1.5 years, the structural gap may improve in the second half of next year.

　　3. Silicon wafers: Prices may decline.

　　Silicon wafers: In 2021, supply will be released at an accelerated pace, and prices may decline, affecting corporate profits.

　　In the first half of 2020, mainstream manufacturers maintained a gross profit margin of over 30%, continuing to improve compared to 2019. High profits and expectations for future demand growth have led various manufacturers to actively expand production, resulting in oversupply in 2021. However, it is estimated that first-tier manufacturers will still maintain a relatively full order volume due to product quality, keeping their operating rates at a high level.

　　In addition, the trend of larger silicon wafers has been established, bringing technological benefits.

　　Taking 210 silicon wafers and 166 silicon wafers as examples, for downstream terminal photovoltaic power stations, using 545W modules with 210 silicon wafers saves about 0.136 yuan/W in BOS costs compared to 445W modules with 166 silicon wafers, which is highly attractive for photovoltaic power stations operating with economic efficiency as the starting point.

　　Considering the capacity expansion in the silicon wafer industry, the production capacity of monocrystalline silicon wafers may reach 210GW in 2021, far exceeding the annual photovoltaic installed demand of 160GW, leading to an oversupply situation in the industry.

　　However, the current capacity of large-size silicon wafers is still low. If downstream demand for large-size modules exceeds expectations, the silicon wafer industry may experience a structural shortage, benefiting companies with better large-size layouts.

　　4. Battery cells: Structural capacity tension.

　　Battery cells: In 2021, overall capacity will be sufficient, but there will be structural tight balance for large battery cells.

　　The battery cell industry is facing technological iteration, and HJT will become the mainstream battery technology in the future.

　　However, within 2-3 years, monocrystalline PERC batteries will still be the mainstream in the industry due to the strong economic benefits brought by mature processes.

　　In the context of the trend towards large-scale photovoltaic industry, it is expected that the battery industry may experience a structurally tight balance in 2021, and manufacturers that layout large-size batteries first will benefit more.

　　Currently, battery cell companies Aiko and Tongwei are transforming towards large-scale production:

　　It is expected that in the first quarter of 2021, Aiko's battery production capacity is expected to reach 36GW, with the capacity compatible with 180mm and 210mm expected to increase to about 70%.

　　Tongwei's production capacity in 2021 is around 42GW, with the 210 capacity scale between 22.5-30GW, accounting for 54-71%.

　　5. Film: Profitability Improvement

　　Film: In 2021, supply and demand will be in tight balance, and profitability in high-quality tracks will improve.

　　Due to strong downstream demand and the rising price of raw material EVA resin, film prices are rising rapidly. In the case of tight supply and demand in 2021, if raw material prices do not change significantly, film prices are expected to remain high. On the other hand, the price difference between film and EVA resin is increasing, which is expected to continue to enhance the gross profit margin of enterprises. Foster's gross profit margin reached nearly 30% in Q3 2020, an increase of nearly 9 percentage points compared to the previous quarter. Product structure optimization supports profitability.

　　Due to the increase in the penetration rate of bifacial modules and the impact of white EVA on the power generation efficiency of monofacial modules, POE and white EVA are expected to become the main products in the future. These products are more profitable, helping leading enterprises further enhance their profitability.

　　In addition, Foster's market share continues to rise, reaching 57% in 2019, effectively preventing competitors from entering the industry. Therefore, it still maintains a tight supply and demand balance in 2021.

　　6. Inverters: Benefiting from the Recovery of Overseas Demand

　　Inverters: Under the recovery from the pandemic, it will benefit from the improvement in global installed capacity.

　　Domestic inverters have made rapid progress in recent years with the improvement of the domestic market. Currently, in terms of cost performance, they are about 60% cheaper than overseas companies, making them very attractive.

　　In 2019, Huawei and Sungrow's combined market share reached 35%, while other manufacturers' shares were relatively dispersed, ranging from 3% to 8%.

　　Although domestic manufacturers' products do not have a price advantage, their profitability is not inferior to that of overseas competitors, with gross profit margins reaching over 30% in 2019. On the other hand, under the impact of the pandemic, domestic manufacturers are accelerating the export of products, and the increase in the proportion of overseas revenue helps improve profitability and expand market influence.

　　String inverters highlight cost performance, and high profitability increases the company's performance elasticity. String inverters, due to more MPPTs, increase power generation and provide good operational convenience, gradually becoming the mainstream trend in inverters. The penetration rate of string inverters was 60% in 2019 and is expected to reach over 80% in the future. On the other hand, string inverters have a large premium space and high gross profit margins, increasing the shipment ratio of string inverters is beneficial for enhancing profitability.

　　7. Tracking Brackets: Gradually Increasing Penetration Rate

　　The benefits of tracking brackets for photovoltaic power stations are reflected in the increase in power generation. Compared to traditional fixed brackets, single-axis tracking brackets can increase power generation by 7%-37%, which is considerable.

　　Looking ahead to 2021, as the cost of photovoltaic tracking brackets decreases, adopting tracking brackets will become one of the important measures to reduce the cost of electricity and improve the returns of photovoltaic power stations.

　　From the data, the combination of bifacial modules (future module trend) and tracking brackets can achieve the lowest cost of electricity in 93% of global regions, and is expected to become the mainstream combination of future power stations.

　　In 2019, the market share of tracking brackets in China's photovoltaic power station market was 16%, and it is expected to rise to over 25% by 2025, with the market size expected to increase from 20 billion yuan to about 65 billion yuan.

　　Source: Photovoltaic News