Sustained Growth on the Demand Side, Optimized Supply Side Expected
Demand Side: Global Photovoltaic Installations Continue to Grow, but Growth Rate Will Slow
China’s Photovoltaic Installations Maintain Steady Growth: since 2024, thanks to improvements in China’s photovoltaic manufacturing capabilities, the prices of components have decreased globally to varying degrees. Different regions have become more inclined to build photovoltaic power plants based on their own electricity demand and green transformation goals. According to data from the National Energy Administration, from January to October 2024, China’s photovoltaic installations reached 181.30 GW, a year-on-year increase of 27.17%. We expect the total photovoltaic installation capacity in China to reach 260 GW in 2024, a year-on-year increase of 20%, and the installation capacity in 2025 is expected to reach 300 GW, a year-on-year increase of 15%.
Steady Growth in Centralized Installations and Rapid Expansion of Commercial and Industrial Photovoltaic Capacity: the share of centralized photovoltaic installations in China has remained around 50%. Since 2024, the share of photovoltaic installations in the commercial and industrial sectors has gradually increased to approximately 40%. According to the “Measures for the Development and Construction of Distributed Photovoltaic Power Generation” (Draft for Comments) released by the National Energy Administration on October 9, 2024, large-scale commercial and industrial distributed photovoltaic projects must adopt a self-generation and self-use model. The project investment entity must ensure that the generated electricity is entirely self-consumed through the installation of anti-backflow devices. The scarcity of high-quality assets in distributed photovoltaic projects is expected to increase further.
The scale of photovoltaic installations in Europe and the United States is expected to diverge: according to EIA data, the United States is expected to add about 38.40GW of centralized photovoltaic installations and 5.80GW of distributed photovoltaic installations in 2024, with a total installed capacity of 44.20GW, a year-on-year increase of 64%; in 2025, the United States is expected to add about 23.00GW of centralized photovoltaic installations and 6.90GW of distributed photovoltaic installations, with a total installed capacity of 29.90GW, a year-on-year decrease of 32%. According to the European Photovoltaic Industry Association, Europe is expected to achieve 63.90GW of photovoltaic installations in 2024, a year-on-year increase of 5%; in 2025, Europe is expected to achieve 71.80GW of photovoltaic installations, a year-on-year increase of 12%.
Economic Viability as the Core Driver of Photovoltaic Installation Growth, Global Installations Expected to See Steady Increase: due to the decline in module prices, the cost of photovoltaic power generation has become highly competitive worldwide. According to IRENA data, the average levelized cost of electricity (LCOE) for utility-scale photovoltaic power plants globally dropped to $0.044/kWh in 2023, with costs continuing to fall. However, due to regional differences in power system capacity, energy consumption needs, energy policies, and the existing stock of renewable energy installations, the growth rate of photovoltaic installations varies across different regions. We expect global photovoltaic installation capacity to reach 530 GW by 2025, representing an 11% year-on-year growth. Considering a 1:1.2 ratio for capacity matching, module demand is expected to exceed 636 GW. We believe global photovoltaic installations will enter a new phase of relatively rapid growth, with an annual growth rate of 10%-20%.
Supply side: the existing overcapacity continues, and it is expected to be optimized in 2025. The main industry chain of silicon materials and batteries is full of production capacity, which can meet 1000GW of photovoltaic installations, far exceeding industry demand: According to data from the China Photovoltaic Association, by the end of 2023, my country’s annual production capacity of polysilicon, silicon wafers, batteries, and modules will be 2.3 million tons, 953.6GW, 929.9GW, and 920GW, respectively. my country’s silicon materials, silicon wafers, and module production capacity increased by 97.2%, 46.6%, and 66.7% year-on-year, respectively. Since my country’s photovoltaic main materials will still have new production capacity in 2024 and overseas photovoltaic manufacturing capacity construction will be promoted, the scale of photovoltaic production capacity will be further increased by the end of 2024. We believe that the production capacity of the photovoltaic industry chain will exceed 1000GW by the end of 2024, which can meet the demand for 1000+GW photovoltaic installations.
LiFePO4 Growth Continues to Outpace NCM Materials
Lithium Demand Primarily Driven by the Battery Sector. According to the USGS, in 2023, batteries accounted for 87% of global lithium demand. Among these, traditional LiFePO4 batteries, due to their higher safety and cost-effectiveness, continue to see an increasing share in the power batteries for new energy vehicles and will maintain their dominance in energy storage batteries. According to SMM, as of October, the production of ternary materials reached 570,000 tons, a year-on-year increase of 11%, while LiFePO4 production reached 1.73 million tons, a year-on-year increase of 63%.
New Energy Vehicles: Growth Rate Slows, Focus on Plug-in Hybrid Share and Solid-State Battery Developments
Maintain a high growth rate in China. In 2021 and 2022, the sales growth rate of new energy vehicles in my country reached 150% and 100% respectively. After experiencing rapid growth, the growth rate in the past two years has remained at 30-40%. As of September 2024, the sales volume of new energy vehicles in my country reached 8.32 million, a year-on-year increase of 32.5%, of which the sales volume of plug-in hybrid vehicles reached 3.33 million, accounting for 40%. The domestic exemption of purchase tax continues, but from June 2024, models that do not meet the relevant technical requirements will no longer enjoy the purchase tax exemption policy. At the same time, the old-for-new policy is constantly increasing. It is estimated that the sales volume of new energy vehicles in my country will reach 12 million and 15 million in 2024 and 2025, a year-on-year increase of 26% and 25%, still maintaining a relatively high growth rate;
The overseas market has slowed down. In the United States, due to the decline of the Inflation Reduction Act (IRA) starting in 2024, some models will no longer enjoy subsidies of US$7,500 or US$3,500. As of September 2024, the sales of new energy vehicles in the United States reached 1.17 million, a year-on-year increase of 7.6%, and the sales of new energy vehicles in Europe reached 1.99 million, a year-on-year decrease of 6%. The global sales of new energy vehicles reached 11.52 million, a year-on-year increase of 22%, and the growth rate in the same period last year was 39%. It is estimated that the global sales of new energy vehicles in 2024 and 2025 will reach 16.6 million and 19.2 million, a year-on-year increase of 21% and 16%, respectively, which roughly corresponds to the overseas growth rate of 4% and 3%.
Energy Storage: Continued High Growth, Focus on Wind and Solar Grid Integration Challenges
According to CNESA, the cumulative installed capacity of the global power energy storage market in 2023 will be 289.2GW, a year-on-year increase of 22%, of which the cumulative installed capacity of new energy storage will be 91.3GW, a year-on-year increase of 100%. The proportion of new energy storage in 2023 will increase from about 6% five years ago. % increased to 31.6%. In 2023, the cumulative installed capacity of China’s power energy storage market will be 86.5GW, a year-on-year increase of 45%, of which the cumulative installed capacity of new energy storage will be 34.5GW, a year-on-year increase of 164%, and the proportion of new energy storage will increase from about 5% five years ago to 40% .
China: New energy storage installations, mainly lithium-ion batteries, still maintain high growth. In 2024, the growth rate of energy storage installed capacity will be significantly higher than the growth rate of energy storage cell production. As of October, energy storage cell production reached 244GW, a cumulative year-on-year increase of 53%. As of August, the newly installed capacity of new energy storage reached 49GW, a cumulative year-on-year increase of 106%. However, the year-on-year growth rate of solar installed capacity will decline significantly in 2024, which may slow down the growth of energy storage installed capacity. As of September, solar installed capacity grew 48.3% year-on-year, down from 55.2% at the end of last year.
United States: Continued high growth. At present, energy storage in the United States is dominated by front-of-meter energy storage. Although the delay in grid connection has restricted its growth rate, it still maintains a high growth rate. The main reasons for the grid connection delay are the cumbersome grid connection process and the high cost of grid transformation. In July 2023, the U.S. Federal Energy Regulatory Commission (FERC) reformed the relevant grid connection procedures and simplified the renewable energy grid connection process. As of September this year, the newly installed capacity of energy storage in the United States was 6,820MW, a year-on-year increase of 55%.
Europe: The demand for household savings has declined, and the incremental portion may gradually shift from household savings to large-scale savings. According to the “European Energy Storage Market Outlook 2024-2028” recently released by the European Photovoltaic Industry Association, the European energy storage market will have newly installed capacity of 17.2GWh in 2023, an annual increase of 94%, with market shares of Germany and Italy being 33% and 18% respectively. The incremental household energy storage, industrial and commercial energy storage, and grid-side storage were 12GWh, 1.6 GWh, and 3.6 GWh respectively, accounting for 70%, 9%, and 21% respectively. It is expected that newly installed capacity will be 22.4GWh in 2024, a year-on-year increase of 62%. The incremental household energy storage, industrial and commercial energy storage, and grid-side storage are 8.7 GWh, 2.7 GWh, and 11 GWh respectively, accounting for 39% and 12% respectively. % and 49%.
