Price decline drives up demand for photovoltaic systems, and the problem of grid connected consumption is gradually emerging

　　The significant decrease in component prices has significantly driven demand growth in 2023. While component prices remain high in 2022, many projects have been forced to delay or cancel. This year's rapid decline in component prices has led to the start of deferred projects in the early stages, and new projects are also rapidly developing due to increased returns. Global component demand is expected to reach approximately 412-455 GW in 2023, with a growth rate of about 53% compared to last year.

　　Despite the rapid increase in component shipments, there has been a serious inventory accumulation problem in some overseas markets such as Europe and Brazil this year. This indicates that although the price decline is favorable for the investment rate of photovoltaic projects, the actual growth rate of installation demand is not as fast as the growth rate of output due to factors such as insufficient installation manpower, policy changes, and project planning time. In the face of severe inventory backlog, many manufacturers are forced to sell at lower prices or export to other countries, Causing huge losses to the enterprise. The actual installed capacity demand is expected to increase further in 2024, but the corresponding increase in production capacity is still insufficient. The continued oversupply situation will impose certain restrictions on the expansion of new production capacity. After accumulating inventory in 2023, manufacturers need to be more cautious in production scheduling, shipping planning, and sales strategies next year.

　　In addition, the limitation on demand growth comes from the carrying capacity of the power grid. With the rapid growth of installed capacity, the access capacity of power grids in various regions is beginning to be tested. In Brazil and some European countries, there has been a problem of grid capacity approaching saturation, forcing distributed projects to be delayed or even cancelled. China, where household installed capacity is growing rapidly, is particularly noteworthy. With the emergence of power grid access problems, At present, various provinces in China have successively introduced relevant policies and begun to evaluate the carrying capacity of the power grid. However, short-term measures are still limited to suspending the access of distributed generation projects and mandatory distribution and storage. In the long run, it is still necessary to increase investment in the power grid, mainly to increase its capacity and strengthen its regulation capacity, in order to ensure the stable growth of distributed photovoltaics.

　　Although the growth rate is expected to slow down compared to this year due to factors such as a higher base period, grid capacity, and localization wave, driven by a significant decrease in component prices, we are still optimistic about the growth of the photovoltaic market next year. It is expected that component demand will continue to grow by about 15-20% in 2024.

　　Overcapacity leads to fierce competition and severe compression of profit margins

　　With the implementation of a large number of expansion plans in various links of the photovoltaic supply chain this year, the upstream silicon material supply bottleneck since 2022 has been solved. The rapid growth of production capacity has led to serious overcapacity, resulting in a significant decline in overall supply chain prices since 2023. The upstream silicon material price has dropped from over 300 yuan per kilogram at the end of last year to about 69 yuan per kilogram currently, The prices of components that have a direct impact on terminal demand have also rapidly declined from $0.245 per watt at the beginning of the year to about $0.135 per watt currently; Although there may still be short-term fluctuations in future prices due to changes in supply and demand in upstream and downstream links, there is still an excess of installed demand relative to the terminal. Therefore, it is expected that supply chain prices will not rebound significantly again, and the industry's discourse power will further approach the demand side and become a buyer's market.

　　The increase in overall industry production capacity is beneficial for industry development, but it also makes competition between enterprises increasingly fierce. Many enterprises, whether existing or new players, are eyeing the rapid growth of the market and announcing large-scale expansion plans with relatively good profits while the overall supply chain prices remain high in 2022. This has intensified competition and led to a rapid decline in prices. After a significant decline in supply chain prices, many manufacturers now have very little profit space left and must adjust their productivity to meet market demand, Therefore, in addition to accelerating the elimination of some old production capacity, in a state where new production capacity is almost unprofitable, some new production capacity plans have been cancelled, and it is expected that more expansion plans will be cancelled next year. Photovoltaic companies with backward cost control capabilities and insufficient sales channels may also be forced to exit the market.

　　The trend of supply chain decentralization is clear, and overseas production capacity is starting to rise

　　In recent years, some countries have begun to impose restrictions on the origin of photovoltaic products and attempt to establish local production capacity to ensure their energy autonomy. Specific policies such as the US Inflation Reduction Act (IRA), Southeast Asian anti circumvention investigations, India's BCD tariffs, ALMM lists, and Production Linked Incentive Scheme (PLI) have been implemented, Europe has also begun to re-examine the necessity of restrictions on imported products due to the price shock of Chinese components; However, at present, the production capacity of various photovoltaic links is still highly concentrated in China, with the concentration of silicon materials, silicon wafers, and batteries reaching 93%, 97%, and 90% respectively, and modules still accounting for 82%. From the perspective of existing non Chinese production capacity, it is still difficult to meet the demand of various markets. If large-scale restrictions are imposed on imports before a certain supply source is guaranteed, it will make it difficult to meet the potential demand and lead to a decline in installed capacity, After the United States banned the import of components made of silicon materials from Xinjiang due to UFLPA in 2022, the installed capacity dropped by 16% that year, seriously affecting the development process of photovoltaics.

　　However, driven by various subsidy policies, there will be a large number of overseas expansion plans in 2023, especially in the United States and India. Many new production capacities will be implemented in 2024. According to incomplete statistics from InfoLink, by the end of 2024, overseas component production capacity will grow by at least 78% to 270 GW compared to the beginning of 2023. Some manufacturers are still evaluating the possibility of expansion in Europe, the Middle East, and other regions, which will change the competitive pattern in which Chinese components almost monopolized the market in the past.

　　It is worth noting that considering various industry entry barriers such as capital investment amount and technological difficulty, the current overseas expansion plans are highly concentrated in the component sector. There are a few expansion plans for batteries, but compared to components, there are still shortcomings. Upstream silicon materials and silicon wafers are currently very few. For these new battery and component factories, it is still difficult to completely break away from their dependence on the Chinese supply chain in the short term of two to three years.

　　Overall, the photovoltaic industry will continue to grow in 2024. Even though limitations such as grid carrying capacity and installation manpower may have an impact on growth, capacity expansion and price constraints will effectively boost demand, which has a promising prospect for power station development. For the supply side, it will be more challenging. With a significant increase in production capacity, fierce price competition, and product technology iteration, it will further challenge manufacturers' ability in cost control, technological research and development, and sales strategies. The overall supply pattern will also become more complex due to the landing of overseas production capacity, and the overall industry dynamics will be more diverse and rapid.