Oriental Securities: new Energy and New Kinetic Energy may boost Copper demand by 7% in 2025

"carbon neutralization" will have an extensive and far-reaching impact on the energy industry. Copper, as an important raw material for high-quality economic development, will usher in development opportunities under the adjustment of industrial structure. As stated in "Neutralization of Nonferrous carbon 1: new Energy and New Kinetic Energy, Copper and rare Earths will meet the growth of demand-Wind Power and New Energy vehicles" released on March 25, copper has excellent electrical conductivity and is closely related to "electricity". It is more widely used in the field of new energy, and the demand for copper and rare earths driven by wind power and new energy vehicles, which are the "motor brothers" in the new energy industry, are quantitatively analyzed. This paper will continue to take photovoltaic and energy storage as the foothold, combined with the research results of "colored carbon neutralization 1", to judge the impact of the development of four new energy large-scale industries, namely, wind power, photovoltaic, new energy vehicles and energy storage, on the increment of copper demand.

Core point of view

By 2025, the incremental demand for copper for photovoltaic and energy storage will account for 3% of the apparent consumption in 2020. The demand for copper in photovoltaic and energy storage may reach 66,139 and 2.89 million tons in 2020, 2025 and 2030. Based on 2020, the incremental demand for copper will reach 73 and 2.23 million tons in 2025 and 2030, accounting for about 3 and 9 per cent of global copper consumption in 2020.

The demand for copper from new energy is obviously driven, and the demand for copper from new energy may increase by 1.81 million tons by 2025, accounting for 7% of the apparent consumption of copper in 2020. Combined with the conclusion of "colored carbon neutralization 1", the demand for copper in wind power, new energy vehicles, photovoltaic and energy storage may reach 137,318 and 6.09 million tons in 2020, 2025 and 2030. Based on 2020, the incremental demand for copper will reach 181 and 4.72 million tonnes in 2025 and 2030, accounting for about 7 per cent and 19 per cent of global copper consumption in 2020.

First, photovoltaic

The demand for photovoltaic copper may reach 1.35 million tons in 2025, with a compound growth rate of about 16% in five years. 1 trend: affordable relay subsidies, photovoltaic new equipment speed-up photovoltaic has become the fourth largest green energy, the growth rate of new equipment has slowed down slightly in the past three years. According to Ember, a climate think tank, global solar power generation reached 669 TWH in 2019, an increase of 12% over the same period last year and accounted for 2.71% of the energy supply that year, making it the fourth largest green energy. By the end of 2020, the cumulative installed scale of global photovoltaic has reached 757GW, with a ten-year compound growth rate of 34%. In terms of the new scale, the newly installed capacity in 2020 reached 130GW, an increase of 13% over the same period last year, which is still resilient in the context of the epidemic, but there is still a gap compared with the rapid development period from 2015 to 2017.

The German market took the lead in parity, ushering in a double-growth curve. Photovoltaic is similar to new energy vehicles, the rapid development of the industry begins with policy subsidies, and then falls silent because of subsidies. After several twists and turns, the final establishment of market position still depends on the reduction of the cost of electricity per kilowatt hour. It forms a competitive advantage over traditional energy in price. Take Germany as an example, Germany is a global leader in the layout and development of the photovoltaic industry, with an installed capacity of 3.83 GW in 2012, accounting for 52.3% of the world's total installed capacity that year. In 2019, Germany's renewable energy accounted for about 43% of the total electricity generation, and the original target of "35% of renewable energy" in 2020 was completed ahead of schedule, of which photovoltaic power generation accounted for nearly 20%. Reviewing the development history of German photovoltaic industry, Germany has also experienced a stage of explosive growth under policy incentives and a decline in the industry brought about by the decline of subsidies. As shown in the following figure, the photovoltaic grid price decreased rapidly with the installation cost from 2006 to 2011, and although it was always higher than the residential power consumption cost, the growth rate of photovoltaic power generation and new installed capacity in Germany continued to rise under the incentive of subsidies. From 2013 to 2017, the German photovoltaic industry began to fall into a five-year silent period, with a significant decline in new installations. at the beginning, European countries reduced photovoltaic subsidies due to the European debt crisis in 2011, while battery prices fell to a plateau in the same period. German photovoltaic new capacity fell off a cliff in 2013, down 52% from the same period last year, and did not exceed 2GW in the following four years. By 2018, benefiting from the widespread application of diamond wire slicing technology, large-scale mass production of PERC cells has brought about a substantial improvement in product efficiency, component prices have finally gone down again, the grid price of photovoltaic power generation in Germany has basically achieved parity, and the photovoltaic market has returned to high growth again, with electricity generation exceeding 45GWhh and new installed capacity of about 3GW.

The era of photovoltaic parity in China has begun and is expected to become the growth engine of the global photovoltaic market again. Affected by the "531 policy" in 2018, China's photovoltaic market slammed on the brakes and declined for two consecutive years to 44 and 30GW respectively in 2018-2019, leading to the first negative growth in global installed capacity in 2018. We believe that the Chinese photovoltaic market is in the stage of the German photovoltaic market from 2016 to 2018, with the rapid decline of subsidies and the partial realization of the parity target, and the development of the photovoltaic market is still sensitive to the change of subsidy policy. According to the data of the National Development and Reform Commission, in June 2019, the average electricity price of residential users in China was 0.5135 yuan / kWh, while the electricity price of industrial and commercial users was in the range of 0.5379-0.6948 yuan / kWh. The average photovoltaic cost in China has dropped from 1.08 yuan / kWh in the first half of 2014 to 0.3 yuan / kWh in the second half of 2019, basically achieving user-side photovoltaic parity. However, on the power generation side, only some areas and advanced leading base projects can be realized. On May 20, 2019, the National Energy Administration announced the first batch of photovoltaic power grid projects. Guangdong, Guangxi, Shaanxi and other 16 provinces with good lighting conditions have launched affordable projects one after another, covering 168 projects, with an installed capacity of 14.78 million kilowatts, accounting for 49% of the new installed capacity that year. The era of photovoltaic parity in China has begun. According to the "Photovoltaic Industry Research Series report" released by Dongfang Securities Power equipment and New Energy Industry, the silicon and non-silicon costs of photovoltaic systems still have room to decline by 30% and 40-50%, and the price of batteries is expected to be between 0.6 and 0.7 yuan / W. the price of the module is expected to reach less than 1.5 yuan / W, and the investment in the battery system will be reduced to less than 4 yuan / W at that time. Basically meet the demand for affordable access to the industrial chain price, the development of the photovoltaic industry will change from policy-oriented to market-oriented, which will release the potential growth space of photovoltaic installation and pull the new scale of global photovoltaic back to the fast track.

It is expected that the new photovoltaic installation will return to high-speed growth in the next five years, with a compound growth rate of 15%. Combined with the forecast of China Photovoltaic Industry Association for the new installation of photovoltaic in the next five years, the cumulative installed capacity of photovoltaic may reach 1807 GW by 2025, and the compound growth rate will reach 19% in the next five years. In the long run, in the New Energy Outlook 2020, BNEF expects photovoltaic cumulative installed capacity to account for 38% in 2050, reaching 7749GW, equivalent to a compound growth rate of about 8.1% in the next 30 years. We assume that the annual growth rate of new installed capacity will be maintained at 15% in 2025-2030, corresponding to 3838GW in 2030, and the new installed capacity will reach 543GW, 4.2 times that in 2020.

2 copper demand: focus on the balance system, increase copper consumption by 3% by 2025, the copper demand of the photovoltaic system is concentrated in the balance system, limited by the battery technology path. The photovoltaic system consists of a photovoltaic module and a balance system (BOS). The module converts solar energy into electrical energy, which is converted into direct current and then converted into AC power through the balance system, and then connected to Electroweb or directly used for the load. Cells are the core of photovoltaic modules, which can be divided into crystalline silicon cells and thin film cells according to the technical route. The crystalline silicon battery industry chain is more mature and occupies the mainstream of the market, accounting for 95% of the output in 2019, of which crystalline silicon accounts for 66%. Thin film cells have developed more than a dozen technical routes, but only amorphous silicon thin film cells, copper indium gallium selenium (CIGS) thin film cells and telluride Ge (CdTe) thin film cells have been industrialized. However, both thin film and non-thin film batteries contain almost no copper, and only indium gallium selenium (CIGS) thin film cells contain a small amount of copper with a capacity of about 50 kg per megawatt, so the future development and changes of battery technology will have little impact on copper demand, we will not repeat the contents related to battery technology here, for specific research, please refer to the "Photovoltaic Industry Research Series report" issued by Oriental Securities power equipment and new energy industry. Balancing system is other equipment and systems except photovoltaic modules, such as cables, inverters, batteries, bus boxes, connectors, distribution cabinets and other accessories. Copper is in the balancing system on the application basis of photovoltaic systems, especially cables. According to the "The Energy Transition" report released by Sailing Stone Capital in July 2020, photovoltaic systems consume 5 tons of copper per megawatt.

According to the above new photovoltaic installation progress, photovoltaic copper demand is expected to increase from 650000 tons in 2025 to 135 and 2.72 million tons in 2030, with a compound growth rate of 15.7% and 15.4% in the next five and ten years.

Second, energy storage

The demand for copper in energy storage may reach 40,000 tons in 2025, with a compound growth rate of about 39.9% in five years: the renewable energy market and allocation storage are higher than those of Synchronize, and the energy storage market will meet the rapid development of renewable energy growth prospects, and the energy storage market will usher in development opportunities. As shown in the following figure, energy storage is widely used in power system, especially in the application field of wind power and photovoltaic on the generation side. Although the power battery of new energy vehicle also belongs to the main application of energy storage battery on the user side, it is rather repetitive. The energy storage batteries we discuss here do not include new energy vehicle batteries. In the "Neutralization of Nonferrous carbon 1: new Energy and New Kinetic Energy, Copper and rare Earth will meet the demand growth" released on March 26 and in the previous section, we have made a quantitative and qualitative judgment on the future development trend and scale of wind power and photovoltaic. It can be seen that the proportion of new energy on the generation side in the electricity market will increase rapidly and will play an important role in the power system. However, compared with traditional fossil energy, renewable energy such as wind power and photovoltaic is more volatile, random and regional. new requirements are put forward on the basis of previous energy storage systems, on the one hand, it is necessary to increase energy storage capacity. on the other hand, the requirements for fast response performance and dynamic regulation ability have also been improved.

The electrochemical energy storage technology is mature and the response speed is fast, so it will become the mainstream of new energy storage. According to different energy conversion modes, there are two kinds of mainstream energy storage technologies in power system: pumping energy storage and electrochemical energy storage, both of which have the characteristics of high technological maturity and large scale of energy storage. The demand of traditional power system for energy storage is heavy capacity and light frequency. Because of its low cost and large scale, pumping storage has become the largest type of installed capacity. However, with the improvement of the importance of new energy in the power system, its own volatility and uncertainty may lead to the dynamic imbalance between the system active power output and load, resulting in system frequency deviation, and in serious cases, it will lead to system frequency exceeding the limit, thus endangering the safe operation of Electroweb. Due to the relatively slow response speed (minutes), pumping energy storage can not properly solve this problem. The most important advantage of electrochemical energy storage over pumping energy storage is that its fast response characteristic (millisecond) can improve the stability of new energy power system, so new energy matching electrochemical energy storage has become a consensus solution. especially lithium-ion battery, with its excellent energy density and cyclicity, has occupied a dominant position in the field of electrochemical energy storage, and will usher in the development opportunity with the installation of new energy.

The proportion of allocated storage and the duration of charge and discharge of Synchronize have increased, and the cumulative installed capacity of energy storage may grow at a compound rate of 23-25% in the next 20 years. In 2020, the newly installed energy storage battery has reached 5.3GW GWh 10.7GW, an increase of 55.9% and 57.4% over the same period last year, and the cumulative installed capacity has reached 17.7 GW/ 34.5GW. Although the growth rate is relatively fast, the allocation ratio is still low when it comes to the installed capacity of new energy units. According to the cumulative installed capacity of photovoltaic and wind power at the end of 2020, it can be estimated that the current allocation-storage ratio of new energy generation is less than 1%, and the energy storage time is about 2 hours. There is still a lot of room for improvement. Bloomberg New Energy Finance (BNEF) estimates that the cumulative installed capacity of energy storage will reach 1095 GW / 2850 GWh, by 2040, equivalent to a compound growth rate of about 23% and 25% over the next 20 years. According to this growth rate, it can be inferred that the cumulative installed capacity may reach 350 GW / 911GWh by 2030. We cross-validate this from the forecast data of wind power and photovoltaic installed capacity. according to the previous analysis, the cumulative scale of wind power and photovoltaic is expected to reach 5853GW in 2030, compared with 4368GW in 2020. according to BNEF's forecast for the installed scale of energy storage, from 2020 to 2030, the energy storage will increase by 332.3 GW 876.5GW, which is equivalent to 7.6% of the new wind power and photovoltaic energy storage ratio, and the energy storage time is about 2.6 hours. It is consistent with the current configuration ratio requirements of some provinces (between 5% and 30%), and also consistent with the general electrochemical energy storage full power continuous charge and discharge time (between 1 and 4 hours). We will use this as the basis for calculating the copper demand in the field of energy storage.

Lithium batteries occupy the mainstream, with a market share of 92%. Lithium-ion battery and lead-acid battery are two main energy storage technologies of electrochemical energy storage. Compared with lead-acid battery, lithium-ion battery has the advantages of lower battery life cycle electricity cost, high energy density, high cycle times, better energy loss and toughness, and environmental protection, so it has become the mainstream choice of electrochemical energy storage. According to BNEF data, 92% of the installed power of electrochemical energy storage batteries in 2020 is lithium-ion batteries, and lithium-ion batteries are expected to remain mainstream. We continue to use the expected demand for energy storage lithium batteries in 2021-2024 in "supply and demand of high-end lithium copper foil will improve, and industry leaders have medium-and long-term investment opportunities" released in February 2020. assuming that lithium batteries remain at 92% permeability of energy storage batteries, the cumulative installed capacity of energy storage will reach 155GWh by 2024. Combined with the above, the cumulative installed capacity of energy storage is expected to reach 911GWH by 2030, which is equivalent to a compound growth rate of about 33% between 2024 and 2030. Assuming that the annual growth rate remains unchanged during this period, the demand for lithium batteries is expected to reach 26,81GWH in 2025 and 2030, of which the demand for lithium batteries will reach 50,206GWh, 14,57.3 times that of 2020.

2 copper demand: used in the negative electrode of battery, increase copper consumption by 0.1% by 2025, copper foil is the carrier and current collector of negative active material for lithium battery, and the amount of copper foil for typical lithium-ion battery is about 0.83kg/KWh. The typical structure of lithium-ion battery mainly consists of four parts: positive electrode, negative electrode, electrolyte and diaphragm. When the lithium battery is charged, the potential added to the two poles of the battery forces the positive lithium intercalation compound to release lithium ion, which is embedded in the graphite negative electrode of the lamellar structure through the diaphragm; in Discharge, the lithium ion is precipitated from the lamellar graphite and re-combined with the lithium intercalation compound of the positive electrode, and the lithium ion moves to produce an electric current. Because of its good conductivity, flexibility and moderate potential, resistance to winding and rolling, mature manufacturing technology and relatively low price, copper foil acts as a carrier of negative active materials such as graphite and as a negative current collector at the same time. The current generated by the battery active material is collected to produce a larger output current. As we said in "the supply and demand of high-end lithium copper foil will improve, and the industry leaders have medium-and long-term investment opportunities", the consumption of typical 8-micron lithium-ion battery lithium copper foil is about 0.83 kg KWh.We will use this as the basis for calculating the copper consumption of energy storage lithium batteries in the future.

According to the above-mentioned new installation progress of energy storage lithium batteries, it is estimated that the demand for energy storage copper will increase from 8000 tons in 2020 to 2025 tons, 4.2 tons and 171000 tons in 2030, and the compound growth rate will reach 38.6% and 35.5% in the next five and ten years.

III. Investment suggestions

In 2025, wind power, new energy vehicles, photovoltaic and energy storage will boost copper demand by 7%. Combined with our "colored carbon neutralization 1" and the above analysis, we can see that copper, as an excellent conductive material, is closely related to "electricity". In the field of new energy, the application range is wider and the application intensity is greater. According to our estimates, in the four new energy large-scale industries, namely, wind power, new energy vehicles, photovoltaic and energy storage, the demand for copper may reach 137,318 and 6.09 million tons in 2020, 2025 and 2030. Based on 2020, the incremental demand for copper will reach 181 and 4.72 million tons in 2025 and 2030, accounting for about 7.2 per cent and 18.6 per cent of global copper consumption in 2020. It can be seen that with the promotion of "carbon neutralization", the new energy industry will lead copper to usher in a new round of development opportunities, and grow into the main application field of copper. New energy is expected to become the next lasting driving force of the copper market after China's economic take-off.