The shifting landscape of the PV market can be attributed to the escalating demand in the market.
The second half of 2017 witnessed a significant boost in the market, primarily driven by favorable domestic distributed policies. This resulted in the surpassing of expectations in distributed installed capacity and the expansion of PV application scenarios. Subsequently, from the second half of 2018 to 2019, the market saw considerable momentum following the cancellation of the European anti-dumping and anti-subsidy legislation, gradually leading PV into an era of parity. Between 2020 and 2022, the market’s driving force predominantly stemmed from the attainment of PV parity across all aspects. Furthermore, numerous countries began setting ambitious targets for carbon neutrality and carbon peaking, further bolstering the demand for sustainable energy solutions. Consequently, the surge in demand in a relatively short period of time led to an increase in raw material prices. Undoubtedly, demand serves as the core driver influencing stock prices, both in cyclical and growth sectors. It also forms the crucial foundation for the relationship between cyclical and growth phases. As demand rises, growth strengthens, expanding the industry’s growth rate and space, resulting in the coveted Davis double-killing effect of enhanced performance and valuation.
Power: The Era of PV and Energy Storage Parity is on the Horizon
To forecast the integration of energy storage with PV in various scenarios, we first analyze the power configuration requirements in different places. The majority of provinces mandate a power configuration of 10%-15% with a storage duration of 2 hours. However, certain provinces demand higher configurations. Moving on to the U.S., the power ratio stands at approximately 30%, with power reserve times fluctuating between three to four hours. Looking ahead to the medium and long term, flexibility resources are projected to account for 10% to 30% of total demand within a day, with a measured power reserve duration of 7 hours.
Our assessment of photovoltaic storage power generation costs is based on advancements in technology and reductions in lithium and photovoltaic costs. The anticipated price reductions in polysilicon and lithium carbonate are expected to drive down the costs of modules and storage batteries, respectively. In the medium term, the EPC (engineering, procurement, and construction) cost of lithium storage is forecasted to reach 1.3 yuan/Wh, while domestic and overseas photovoltaic EPC costs are expected to decline to 3.4 and 5.7 yuan/W, respectively. In the long term, the EPC cost of lithium storage is projected to further decrease to 1.1 yuan/Wh, and domestic and overseas PV EPC costs will reach 3.2 and 5.2 yuan/W, respectively.
Based on the calculations presented above, we can observe distinct scenarios for the domestic and overseas markets regarding the integration of PV and energy storage.
In the short term, if achieving a low proportion of energy storage configuration in the domestic market is required, the economics of PV and energy storage projects can be achieved through cost reduction in the the industry chain. This approach leads to the phased PV and energy storage parity. However, looking towards the medium and long term, the proportion of energy storage configuration is expected to increase. To address this, a focus on creating additional value for energy storage solutions becomes paramount.
On the other hand, in the overseas market, the ongoing cost reductions enable the offsetting of increased energy storage configuration, setting the stage for PV and energy storage parity. In the medium and long term, the projected cost of PV and energy storage LCOE is $0.034/KWh, showcasing significant progress. The U.S. market has already realized PV and energy storage parity, and this trend indicates the potential for achieving global parity in the future.
Space: Accelerated Growth of Installed Capacity Points Towards TW Scale by 2028
Looking ahead to 2060, we estimate the global PV installed demand to surpass an impressive 45TW. The pace of new installations will naturally depend on the prevailing development environment. Based on a comprehensive evaluation of economic factors, consumption patterns, and policy dynamics, we anticipate that after 2025, the growth rate of PV installed capacity will further increase, reaching around 20% annually compared to the previous 15%. Consequently, wind and solar power generation will together account for approximately 25% of the global energy mix after 2025. Considering these projections, it is expected that PV installed capacity will achieve TW scale around 2028. Beyond that milestone, the trend of PV and energy storage parity will continue to advance, accompanied by the realization of PV and hydrogen parity, and ultimately, the PV, energy storage, and hydrogen parity. With grid renovation and system optimization, the annual PV installation capacity is expected to steadily improve. Looking forward from 2028 to 2060, we anticipate an average annual PV installed capacity of approximately 1400GW. Moreover, when considering annual replacement demand, the average module demand is projected to reach an impressive level of 3000GW, representing a substantial increase of 5 to 6 times compared to the levels observed in 2023.
