Mar 09, 2021
Photovoltaic polysilicon industry research report: low cost and financing ability are two-wheel drive, the strong will be strong
1 Summary of the report:
Industry growth is determined, silicon material has a CAGR of 10% in the next 30 years
As the most upstream of the photovoltaic industry, mainstream countries in the world have shown a positive attitude towards new energy in the short and medium term. This year, as the beginning of the "14th Five-Year Plan", industry demand will usher in an explosion; in the long run, the cost of photovoltaics will increase. The lower the rate of return, the higher the yield rate of the power station, and the higher demand. Given the relatively low share of photovoltaics, there is huge room for growth in the future. It is estimated that the average annual growth rate of the photovoltaic industry will be around 10% by 2050, and the demand for silicon materials will increase accordingly.
The supply-demand relationship is affected by the expansion cycle. In the long run, the price drop will help the industry develop
There is a certain mismatch between silicon supply and photovoltaic demand. Mismatches mainly come from:
1) The silicon material capacity expansion cycle is long, and there may be a shortage of supply in some expansion stages;
2) The production of silicon materials needs to maintain a high operating rate, and the quarterly output is relatively stable. However, the seasonal fluctuation of photovoltaic demand is relatively large, and there is a certain mismatch. In the long run, the supply shortage caused by the expansion cycle cannot be avoided; the mismatch of quarterly demand, downstream can smooth out price fluctuations by changing the purchasing rhythm. The tight supply of silicon materials this year is mainly due to the fact that the new production capacity is mainly concentrated in the second half of the year. It is expected that the price of silicon materials will maintain a high level of 85-90 yuan/kg this year. It is expected that the supply will return to normal next year, and the price will fall back compared to this year.
Energy costs are the key to cost reduction, and there is still room for reduction in the future
Raw materials and energy are the main costs, accounting for about 70% of the total. Since the cost of raw materials is relatively rigid, the main way to reduce costs is to reduce energy costs. At present, the improved Siemens method has matured, and the fluidized bed method has made great progress in recent years, and it will become an effective supplement in the future.
Low electricity prices and economies of scale form a virtuous circle, and financing ability becomes the key
At present, leading companies have basically completed the low-price regional layout, and current production capacity has become a core asset. As the company continues to expand its production, as the company continues to expand its production, the demand for electricity will increase significantly, which will prompt silicon companies to negotiate lower power supply prices and form a virtuous circle.
2 The growth of the industry is determined, and the CAGR of silicon materials is 10% in the next 30 years
2.1 In 2050, the demand for new photovoltaic installations will reach more than 2000GW
Since 2003, the share of global renewable energy power generation has been steadily increasing, and the current share of renewable energy power generation is about 26%. Among them, photovoltaic power generation accounts for approximately 2.3%. In general, after years of development, the proportion of renewable energy power generation including photovoltaics has continued to increase every year, but the current proportion is still low, and there is huge room for improvement in the future.
As energy consumption increases year by year, renewable energy can resolve the shortage of fossil energy. At the same time, new energy power generation has practical effects on energy conservation and emission reduction in various countries. Under the trend of gradual reduction in the cost of new energy power generation, under the big goal of carbon neutrality , It will be an inevitable trend for new energy to replace fossil energy. Based on the carbon emission targets of major regions such as China, the United States, and the European Union, as well as the long-term plans for new energy, it is assumed that photovoltaic power generation will account for 55%-70% in 2050, and the annual power generation growth rate will be 1.8% in 2020-2050- 2.4%, and assuming that the average power generation hours of photovoltaic power plants remain unchanged, the future photovoltaic power generation will be positively correlated with the growth rate of total power generation and the proportion of photovoltaic power generation. It can be calculated that the average annual growth rate of photovoltaic power generation is 12.1%-13.9 %. If you consider that the average power generation hours of photovoltaic power stations will gradually increase, the annual new installed capacity of photovoltaics will be slightly lower than the growth rate of power generation. On the whole, it is expected that the annual growth rate of new photovoltaic installations will be about 10% in 2020-2050. .
According to calculations, it is estimated that the newly installed capacity in 2050 will reach about 2000-3500 GW, with an average annual increase of about 2700 GW, an increase of about 22 times compared with 2019.
2.2 As the most upstream of photovoltaics, polysilicon pricing power is shifting to the domestic market
The photovoltaic industry chain is divided into upper, middle and lower reaches. The upstream raw material is silicon material, also known as polysilicon, polysilicon material, etc. The midstream includes silicon wafers, cells and modules, and the downstream is mainly used in photovoltaic power plants in various scenarios. The photovoltaic industry chain also includes other auxiliary materials, such as silver paste, film, backplane, glass, inverters, and brackets. Polysilicon is the most upstream of the photovoltaic industry.
Solar-grade polysilicon generally refers to polysilicon with a purity between 6N-9N. In order of purity, silicon materials are further subdivided into dense materials, cauliflower materials and coral materials.
In 2019, global polysilicon production was about 508,000 tons, of which domestic production was 342,000 tons, accounting for 67%. In 2020, due to the continued deterioration of the overseas epidemic situation, the price of silicon materials continued to fall in the first half of the year, and overseas silicon material manufacturers continued to stop production, leading to an increase in the proportion of domestic production. It is expected that the domestic proportion of silicon materials will reach over 85% in 2020. In 2021, due to the tight supply of silicon materials, the price of silicon materials will remain at a relatively high level, and overseas production capacity will resume production. This ratio is expected to remain around 80%. In the long run, the pricing power of silicon materials is shifting to the domestic market.
2.3 Technological advancement drives the decline in unit silicon consumption, and industry demand drives the demand for silicon materials
The consumption of silicon material mainly comes from the demand for downstream silicon wafers, including the consumption of single silicon wafers and the loss of silicon rods during slicing. Judging from the past few years, the comprehensive silicon consumption per watt is gradually decreasing. The unit silicon consumption in 2019 was about 4.3g/W, a 69% decrease from 2009.
The main ways to reduce silicon consumption are: 1) reduce the thickness of the silicon wafer; 2) reduce the slicing loss. Historically, the thickness of silicon wafers is gradually decreasing. In the long run, if the N-type technology breaks through, the thickness of silicon wafers is expected to further decrease in the future. If HJT technology is promoted, the thickness of silicon wafers in the future is expected to be 120 microns or less, which is more than 30% thinner than the current thickness.
It is expected that the average silicon consumption will gradually decrease in the future, and the demand of the photovoltaic industry will gradually increase. In general, the demand for silicon materials will gradually increase. It is estimated that in 2050, the global demand for polysilicon will reach 4.34 million tons, an increase of about 9 times compared with the current one, with an average annual growth rate of nearly 10%.
3 The supply-demand relationship is affected by the expansion cycle. In the long run, the price drop will help reduce the cost of photovoltaics
3.1 The new production capacity will be concentrated in the second half of the year, and the mismatch of supply and demand has led to tight supply this year
2021 is the first year of the "14th Five-Year Plan" in China. The installed capacity is expected to maintain rapid growth, and domestic demand is expected to reach 50-55GW. The negative impact of the overseas epidemic is gradually weakening, and the demand for installed capacity will be restored, and the growth rate is expected to be 110-120GW. The global demand will reach between 160-170GW, and the corresponding polysilicon demand will reach 500,000 tons.
From the perspective of supply, the overall supply of silicon materials this year is tight. In 2020, the production capacity of first-tier/second-tier/overseas companies will reach 33, 10, and 110,000 tons, respectively, and it is expected that the production capacity will reach 48/13/11 million tons by the end of this year. Taking into account factors such as new production capacity contributing less output that year, and possible suspension or reduction of overseas production capacity, it is expected that the actual output this year will be 500,000 tons or less. On the whole, this year's supply is tight, and this situation will become more prominent during the peak season for installation.
3.2 From a historical point of view, silicon material prices are in a downward phase
Polysilicon belongs to the most upstream of the photovoltaic industry. The silicon material industry has taken a long time to expand and has the largest investment. Therefore, in the early stage of photovoltaic development, the supply of silicon materials has been unable to keep up after the explosion of demand, and the price of silicon materials remained high in the initial stage.
The supply of polycrystalline silicon initially mainly came from electronic grade silicon materials, and the supply of solar grade silicon materials only began to increase after 2010. In particular, the domestic supply of polycrystalline silicon only increased at a later time. In 2016, the domestic supply of polycrystalline silicon reached the global level of nearly 50%. Previously, the supply of silicon materials was mainly from overseas. The high cost of overseas manufacturing is also one of the reasons why the price of silicon materials remained high in the early stage.
3.3 The expansion cycle affects short-term supply, and prices will drop year-on-year next year
In the long run, the supply shortage caused by the expansion cycle cannot be avoided; as for the mismatch of quarterly demand, the downstream can smooth out price fluctuations by changing the purchasing rhythm. The tight supply of silicon materials this year is mainly due to the fact that new production capacity is mainly concentrated in the second half of the year, and the gains for that year are limited. It is expected that the price of silicon materials will maintain a high level of 85-90 yuan/kg this year.
After the capacity expansion is completed at the end of this year, the output of silicon materials next year is expected to be more than 700,000 tons, which can support the demand of 230-250GW. It is expected that the supply will return to normal next year and the price will fall from this year.
4 Energy costs are the key to cost reduction, and there is still room for reduction in the future
4.1 Raw materials and energy are the main costs, which together account for about 70%
The reserves of silicon element rank second in the earth, accounting for 26.4% of the total mass of the earth's crust. According to our calculations, the main costs of silicon production are:
1) The raw material of polysilicon is metal silicon, of which the cost of metal silicon accounts for about 35%;
2) The production of polysilicon is essentially a purification process, so it needs to consume a lot of energy, of which the cost of electricity accounts for 34% and the cost of steam is about 2%;
3) The equipment investment of silicon materials ranks first in all links, and the investment of 10,000 tons can reach 750 million yuan (excluding tax). Equipment depreciation accounts for about 13% of the cost;
4) Other costs include labor and other expenses.
In general, the current production cost of polysilicon newly put into production in China is about 40 yuan/kg or less.
4.2 Reducing energy costs is the main cost reduction method for polysilicon production
Based on the relatively rigid cost of raw materials, the price of silicon powder is stable. At present, the decline in silicon material costs is mainly due to the decline in energy costs. As one of the companies with the lowest production cost in the industry, Tongwei expects that the current production cost can be less than 40,000 yuan/ton, a cumulative decrease of 33% from 2016. From Tongwei's cost drop and sales volume change, we can see that the production cost of polysilicon is related to the scale. The larger the production and sales volume, the more obvious the effect, the more the energy cost is diluted, and the lower the unit cost.
Similarly, Daquan's polysilicon production cost has also shown a downward trend year by year. As of the third quarter of 2020, the company's polysilicon production cost was 40,300 yuan/ton. The company's production volume increased rapidly in 2019, and costs fell rapidly after the second quarter of 2019.
The main way of cost reduction in the future will still come from the reduction of energy costs. The reduction in energy costs is mainly due to the reduction in unit power consumption and the reduction in electricity prices. From the perspective of unit power consumption, the industry's average comprehensive power consumption in 2020 is 66.5 KWh/kg-Si, and the current power consumption of first-tier enterprises is already lower than 65 KWh/kg-Si. The China Photovoltaic Industry Association predicts that this indicator will be reduced to about 62/60 KWh/kg-Si in 2025/2030, which is a decrease of 6.8%/9.8% compared with the current level.
From the perspective of electricity price levels, most companies choose areas with lower electricity prices to build plants. For example, Tongwei initially established a factory in Sichuan, and then chose Inner Mongolia for expansion; Daquan moved its production base from Chongqing to Xinjiang in 2015. Some companies use other methods to reduce electricity prices, such as Tongwei's use of hydropower in Yunnan and Dongfang hopes to supply its own power plants. Overseas, WACKER and OCI have also selected low electricity price regions for their new capacity.
Other ways to reduce costs include:
1) Improve the hydrogenation level, increase the recovery rate of by-products, and reduce silicon consumption;
2) Reduce equipment costs, etc.;
3) By increasing per capita output, reducing unit labor costs, etc. These cost reduction methods are still the direction of future efforts, but the current industry technology has reached a relatively high level, and there is limited room for improvement in the future.
4.3 The Siemens method is basically formed, and the fluidized bed method will become an effective supplement
Improving the Siemens cooling hydrogenation process is a common technical route in the industry. The core of the Siemens method lies in the chemical deposition process (CVD). In the CVD furnace, the silicon core is heated to a certain temperature, and then the preheated high-purity raw materials are injected into the CVD furnace in a certain proportion, and the reaction raw materials occur on the silicon core. During the reaction, high-purity polysilicon is deposited on the silicon core, and the by-products are discharged. In the past few decades, companies in the industry have mainly optimized tail gas recovery and reuse, and the Siemens method has gradually evolved into the third-generation improved Siemens method.
In addition to improving the Siemens method, some companies are also actively developing other production methods and technologies, such as the fluidized bed method. At present, the proportion of granular silicon made by fluidized bed is very low. According to CPIA data, the output of granular silicon in 2020 will account for about 2.8%.
Compared with the Siemens method, the fluidized bed method has its own advantages and disadvantages. The advantage lies in low power consumption, high production efficiency, and can meet the re-investment requirements in the silicon wafer production process; the disadvantage is that the purity is lower than the Siemens method, there are hydrogen jumping problems, easy to block, and so on. Granular silicon is still in the trial stage. At present, the quality of granular silicon is equivalent to that of coral material, and the replacement ratio can reach 10%. In the short term, with the improvement of the fluidized bed process, it can replace 20%, and in the medium term, it is expected to reach 30%.
Currently, companies with fluidized bed method include Jiangsu Zhongneng and Overseas REC. The fluidized bed method and the Siemens method have basically begun to develop at the same time, but due to the purity of the Siemens method, the proportion has increased. Due to the shortage of polysilicon materials this year, fluidized bed granular silicon has become an effective supplement. At present, the purity of granular silicon products is not enough, and the quality is equivalent to coral material. The future quality improvement is still one of the directions of progress in fluidized bed production of granular silicon.
5 Low electricity prices and economies of scale form a virtuous circle, and financing ability becomes the key
5.1 Areas with low electricity prices are scarce, and existing production capacity will become a core asset. Capacity expansion and low electricity prices are in a virtuous circle
Electricity cost is the main cost of silicon material production. Generally, companies will first determine the electricity price of the plant before expanding production. Xinjiang and Inner Mongolia have inherent advantages in electricity prices. Yunnan has hydropower resources. At present, there are fewer regions with conditions for expansion. As there are fewer and fewer areas with low electricity prices and fewer areas for expansion, the location of the plant has raised the barriers to entry for the silicon material link, making the existing silicon material plants even more precious.
The leading company has basically completed the layout of the low electricity price area, and continues to expand production on the existing basis. As companies continue to expand production, demand for electricity will increase significantly, prompting silicon companies to negotiate lower power supply prices and form a virtuous circle. All in all, the advantages of energy cost will become more and more obvious for enterprises that have completed the layout of low electricity prices & larger scales.
5.2 Silicon materials are a capital-intensive industry, and financing capabilities have become an important link
The unit investment of silicon materials is the highest in the photovoltaic sector. At present, the average expansion of the industry requires 800 million to 1 billion yuan per 10,000 tons, and the minimum is 750 million yuan per 10,000 tons, which requires a large amount of funds. In addition, it takes a long time for silicon materials to be put into production, and it will take about 2 years from expansion to full production capacity. Large amount of funds demand makes the financing ability of enterprises become the key.
At present, most silicon material companies have been listed. Due to the different exchanges that companies log on, their financing capabilities are also different. In 2020, many companies have launched plans to go public or return to A. As these companies go public and raise funds, their production capacity will further expand and their competitive advantages will further increase. However, unlisted companies have poor fund-raising capabilities, and future expansion of production may be restricted.