Lookback of November 2022

Dear readers, so many thanks to your patience for our latest issue of OnSolar, where we talk about the market and important happenings during the last month in the renewable energy sector. Now let's get started.

First, things worth mention in China

1.1 Module-Level Instant Shutdown Function is gaining attention from Authorities.

As the DG-PV became more and more popular on rooftops while the power and voltage of the system components are getting higher for a better energy yield, the safety and reliability of a PV system is a major concern to all involved parties. In a recently published exposure draft about the Reinforcement to the DG-PV Safety, the National Energy Administration of China (NEA) has put up the requirements for the instant shutdown function embedded in the solar modules.

1.2 Renewable Energy Certificate (REC) is now part of the National RE Consumption Calculation Scheme and is more profoundly tied to the Energy Quota

The renewable energy consumption, which is proved by the REC, could be deduced from the total energy consumption when doing the key performance assessment over the local government. On the other hand, the REC serves as the way of balancing the energy consumption quota between companies, governments. However, the REC is only transferable and no reselling is allowed.

1.3 The Energy Spot Market Principles Draft published, BESS Projects may become more economically feasible

It is for the first time that a marketized Capacity Compensation Scheme is proposed by NEA and more detailed regulations are to be specified by local Authorities. The Spot Market experiment would continue with more cities in next year. The deployment of Auxiliary Services is to be improved all provinces. The realization of Spot Market in China will contribute to a better consumption by the RE and a more flexible market scheme will bring more benefits to the projects equipped with BESS.

1.4 58.24GW new PV Projects commissioned this year until the end of Oct

As per information from NEA, from January to October of 2022, there are in total 58.24GW newly added PV capacity commissioned, representing a YoY growth rate of 99%.

1.5 19GW Solar Module Tenders concluded recently

In the period of late October to late November, tenders for solar modules totaling about 19.3GW have reached the final conclusion. In terms of price, the average is 1.96RMB/w, which is slightly lower than last month. Among the Top5 tenderer, the highest price was 2.035RMB/w and the lowest 1.845RMB/w.

Second, the global markets:

2.1.  The freights continue going down

The downward trend of freights continues this month. From Asia to US-East is now quoted 4,585 USD, Asia to US-West is 1,935 USD; From Asia to EU is quoted 4,074 USD and Asia to Mediterranean 4,423 USD. According to IMF, the prediction on the economy is not getting any better and the growth rate is adjusted to 2.7%, plus the over 1 million idle containers, the freights are yet to go down.

2.2.  The exportation of Solar Module from China until October this year

According to Gessey, the solar module exportation in October is 11.699GW, MoM dropped 7.5% due to weak demand from overseas markets and YoY climbed 14.3%. Netherlands continues to be the No.1 among all countries of destination with 3.535GW imported and Brazil second with 1.456GW imported. Spain and Japan 745MW and 733MW respectively.

2.3.     As per info published by BNEF, we have elaborated a map indicating all the places with policies such as trade barriers or domestic production required

2.4.  EU is imposing windfall tax over surplus energy price

Impacted by the energy crisis in EU, the Authorities of the member countries plan to impose the windfall tax over the high energy prices to generators, natural gas companies, oil companies and other companies related to the energy industry. Some countries already have the plan announced and some implemented. It is believed to redistribute the profit gained by energy companies and balance the cost of the energy bill of commoners.

2.5.  EU countries encourage more rooftop PVs

Being part of the REpowerEU, EU countries are encouraging more PV application on rooftops, for example the the French government is asking all the outdoor car parking lot with over 80 positions to install PV system as a mandatory regulation.

2.6.  Malaysia extended the PPAs of LSS4 to mitigate the impacts to the project bankability caused by the high costs of raw materials

The high costs related to the PV equipment is posing threats to the economical feasibility of new projects in Malaysia and the local Authority is planning to extend the PPA time to improve the bankability. As per Apricum, at the moment Malaysia has 2165MW PV installed, to meet the 40% share in total energy structure by 2035, an additional 8.53GW is required and the funding is the top priority for this target.

 In the last part, let's have a look at the supply chain

 3.1.  Polysilicon's price will keep going down

The polysilicon has a very slight price drop comparing to last month. We believe that the trend is going to last because of 3 major reasons: 1. New production capacities are ready to release by the end of this year (1.17 million tons) and beginning of the next year (2.4 million tons by the end of 2023); 2. Producer are expecting to recover the cash flow to close the fiscal year; 3. Q4 and Q1 are traditional off-season and the low demand won’t support a high price.

3.2.  Wafer price dropped slightly

The recent adjustment guided by policies, pressure from high stock and new capacity release are the 3 key factors containing the wafer price. On the other hand, the limited production capacity of solar cell is another reason for the price drop of the wafer since the demand is being withheld.

3.3.  Solar cells maintained the price level

Even the upstream processes are having lower prices, the solar cells are having more stable prices because of the capacity utilization is at peak and the demand is high. Anyway the long term trend is going down but at a steady pace.

3.4.  Solar module is expected to drop in the coming off-seasons

Q4 is the traditional peak season, that’s why we saw a slight increase in prices accompanies by higher prices of auxiliary materials. However the coming Q1, as off-season, together with the wait and see strategy in the overseas markets would definitely cause an obvious drop in the module prices.

3.5.  During the last 12 months, the polysilicon capacity has getting more concentrated and the Top 6 companies have taken almost 90% of the global capacity

As per information from the Silicon Industry of China Nonferrous Metals Industry Association, by the end of 2023, the Top 3 players with the largest production of polysilicon in China would be Yongxiang, CGI and Xinte, with 470k tons, 360k tons and 301k tons respectively while the Top 2 players outside China would be Wacker and OCI, with 80k tons and 30k tons respectively. The market share taken by the Top 6 companies in China would be increased to 90% (compared to the 66.3% share in 2017).

3.6.  The total wafer production capacity in China in the last 10 months has increased over 50%, YoY

As per information from Antaike, the total mono wafer produced from January to October in China is 257.1GW, representing a 51.48% YoY growth.

3.7.  The 4 possible solutions for the TOPCON solar cell cost control

As reported by PV-Infolink, the cost of N-type Topcon cell is of 0.08-0.12 RMB/w at the moment than the P-type mono cell, while the difference was 0.4 RMB not long before. There 4 key solutions that lead to the cost control, which are: 1. Bigger and thinner wafer for less material loss and lower unit cost; 2. The alternative to High Temperature Silver Paste, such as Silver-Aluminum mix paste or electroplate copper; 3. The nationalization of production equipment to cost down the initial investment; 4. Increase the cell conversion rate.

3.8.  Solar glass capacity further released

According to the Sublime China Information, until the end of October 2022, there are 44 solar glass producers in China, accounting for a total production capacity of 70,810 tons/day with a YoY growth of 64.44%. As the supply is further released, there won’t the shortage happened in the first half of this year.

3.9.  The missing piece of the puzzle: Low Temperature Silver Paste

The Low Temperature Silver Paste is the key auxiliary materials used in the HJT cells. Unlike the High Temperature Silver Paste whose production is almost nationalized in China, the LT Silver Paste is largely dependent on importation from Japanese company. Apart from this, the silver powder is another missing piece of the puzzle which may bring risks to the whole supply chain in case of trade conflicts.

OK, so much for the information we would like to share, next month we will have a thorough review of 2022.

See you next time!