Public Utilities Industry Weekly report: Silicon prices meet the downward inflection point distributed installation is expected to increase speed and shift [agency review]

There is a mismatch between east and west power supply and demand, and the construction period of UHV is long, and distributed photovoltaic is complementary to it. Due to the characteristics of population and industrial distribution, the demand for electricity in the east of China is much larger than that in the west, but the power supply mainly comes from the west and north where the natural resources are endowed. The UHV construction cycle is long, while the distributed construction cycle is short, convenient and flexible, and does not occupy land resources, which can quickly alleviate the power shortage in the eastern region and form an effective supplement with UHV.

The dual control of energy consumption and the marketization of electricity prices enhance the willingness of industry and commerce to install machines. Under the double control of energy consumption, some areas and enterprises are faced with power restriction and production restriction, and high energy-consuming enterprises are willing to consume new energy in order to start work fully. At present, the electricity supply is in tight balance, and the rising trend of electricity price is basically determined. industrial and commercial owners are equipped with distributed photovoltaic, spontaneous self-use and residual power grid, which is helpful to reduce the cost of electricity consumption.

Silicon production expansion drives the industrial chain to reduce prices and release downstream installation demand. Due to the slow production expansion cycle of silicon material, production restrictions of silicon enterprises and other factors, the price from silicon material to components remains high since the beginning of the year, resulting in a lower than expected new installation in 2021. In December 2021, the output of silicon material was 49000 tons, an increase of 10% compared with the previous month. Prices in all links decreased. On December 30, the mainstream transaction prices of single crystal silicon materials, M6 silicon wafers and single crystal 166components were about 230,4.9yuan and 1.86yuan per watt, respectively, down 15.0%, 7.5% and 4.6% respectively from the beginning of December. It is estimated that under the constraints given in this report, the rate of return of the project will increase by about 1% for every 0.03 yuan decrease in the component price. It is expected that the price of components will usher in an inflection point in 2022, which will effectively promote the start of distributed photovoltaic enterprises and release the incremental installation and the previous record that the installation has not been started.

Compared with centralized power stations, distributed photovoltaic is more profitable. Distributed photovoltaic does not need to take up a lot of land resources, does not need to be equipped with booster facilities and long-distance transmission lines, and the unit power cost is about 10% lower than that of centralized power stations. In addition, despite the uneven distribution of solar energy resources in China, there is a strong demand for electricity in many areas where solar energy resources are relatively scarce, resulting in high electricity prices, so profitability is guaranteed. It is estimated that under the assumption of 3.5 yuan / W installation cost and sufficient consumption, the internal rate of return of distributed photovoltaic can reach more than 6.5% in most parts of our country, and there is room for further improvement as the installation cost decreases.

The whole county promotes the rapid expansion of the market. According to the calculation of the average installed 200MW of the county, the average annual installed capacity will reach 50GW in the next two years, the theoretical market capacity will exceed 1000GW, and the potential installed capacity of the whole county will be about 455GW. At present, the distributed cumulative installed capacity is only 94GW, and the growth space is very broad. With the promotion of the whole county, the share is more concentrated to the head, and the business model of "state-owned enterprises + private enterprises" to jointly develop and sell / buy existing power plant assets promotes the light asset transformation of private enterprises.

Investment advice: distributed photovoltaic is in line with the basic direction of China's new energy layout, silicon prices are declining, the policy continues to increase, we are optimistic about the future development of distributed photovoltaic, maintain the industry "recommended" rating. It is recommended to pay attention to the distributed photovoltaic enterprises with leading market share, business volume or profit improvement. In terms of specific targets, it is recommended to pay attention to [Jingke Technology] [Linyang Energy] [Zhengtai Electric Appliances], distributed state-owned enterprises [Southern Grid Energy] and deep ploughing Guizhou, the dominant EPC provider [Nenghui Technology] in the region, and [Skyworth Group] with the transformation of household appliance enterprises and leading channel advantages in the whole county with a large scale in the field of distributed photovoltaic. Pay attention to the modular small power station and BIPV integrated solution provider [enlightening design] and specialized industrial and commercial roof photovoltaic [core energy technology]; pay attention to the injection of photovoltaic assets, start the second growth curve of [Hong Kong China Gas] and increase the investment of subsidiaries to expand the photovoltaic business [Xing Shuai]; Focus on [Su Wen Electric], which is transforming from EPC to EPCO, and [Colin Electric], which is developing cooperatively from power distribution terminal business to distributed photovoltaic development; [Trina Photovoltaic], which simultaneously develops photovoltaic module production and distributed power station business; and [Qingyuan Co., Ltd.], which focuses on household photovoltaic bracket and EPC business with two-wheel drive.

Risk hint: focus on the risk that the company's future performance is lower than expected, the risk of policy change, the lower-than-expected demand for installed capacity, the risk of fluctuation in the price of raw materials upstream, the lower-than-expected progress of the whole county, the construction of distribution network can not meet the substantial growth of distributed installation, and so on.