Average LCOE decreases by 23% per year… Expected to decline by an additional 20% by 2030 due to falling module prices and oversupply in China
‘Solar energy’ is at the core of energy transition to respond to the climate crisis. As countries around the world make efforts to achieve carbon neutrality, the solar energy industry is receiving more attention, and Korea is also growing by increasing its competitiveness in the solar energy industry. However, due to supply chain issues, investment in technology development, and policy changes, the solar energy industry is somewhere between stagnation and growth potential. Accordingly, this paper will cover major issues in the solar energy industry and look at future prospects and areas for improvement through a series of issue reports by Myung Seung-yeop, solar energy producer at the Korea Institute of Energy Technology Evaluation and Planning. / Editor’s note
[한국에너지기술평가원 명승엽 PD] Last year, China’s production of polysilicon, wafers, solar cells, and modules each increased by more than 65% compared to 2022. The shipments of the top 10 module companies increased by 78% compared to 2022, and the top 4 companies’ market share was a whopping 60%.
Among the top 10 module companies, except for America’s First Solar, which is tied for 10th place, the remaining 11 companies are all Chinese. Hanwha Solutions, a domestic company, was pushed out of the top 10 for the first time in the 2020s, raising alarms about the competitiveness of the domestic solar energy manufacturing industry.
#One. China’s new solar power installation capacity expected to be 220GW in 2024… Installation boom expected to slow due to system saturation
China’s solar power production in 2023 (unit: GW) [자료=Taiyang News, 2024. 3.]
According to the latest statistics from China’s Ministry of Industry and Information Technology (MIIT), China’s production of polysilicon, wafers, solar cells, and modules in 2023 each increased by more than 65% compared to 2022. Despite a 50% annual decline in module and polysilicon prices, total production value exceeded $236 billion in 2023, an increase of 21% compared to $195 billion in 2022. In the case of modules, 499GW was produced annually, a 69% increase from 289GW in 2022, of which 212GW was exported overseas.
△ (Polysilicon production) 827,000 MT, market share 85% (2022); 1.43 million MT (2023, +67%); 2.1 million MT (2024e, +47%)
△ (Wafer production) 357GW, market share 97% (2022); 622GW (2023, +68%); 935GW (2024e, +50%)
△ (Solar cell production) 318GW, market share 84% (2022); 545 GW (2023, +65%); 820GW (2024e, +50%)
△ (Module production) 289GW, market share 78% (2022); 499GW (2023, +69%); 750GW (2024e, +50%)
Global solar module shipment ranking in 2022 and 2023 [자료=PV InfoLink, 2024. 2.]
According to the ‘2023 Global Solar Module Shipment Ranking’ announced by PV InfoLink, the shipments of the top 10 companies increased by 78% compared to 2022. The top four companies have a whopping 60% market share. Except for America’s First Solar, which is tied for 10th place, the remaining 11 companies are all Chinese.
Hanwha Solutions, a domestic company, was pushed out of the top 10 for the first time in the 2020s, raising alarms about the competitiveness of the domestic solar energy manufacturing industry. Among the shipments of p-type single-crystalline silicon PERC modules (including rectangular wafers), which dominated the solar energy market, the M10 (182mm) and M12 (210mm) area-based modules accounted for 70%, of which M12 and G12R accounted for 22%. occupied. The market share of n-type single crystal silicon modules was 26%.
Based on the early conversion to n-type TOPCon modules, Jinko Solar showed signs of reclaiming first place, with shipments in the first half of 2023 increasing by 74% compared to the same period in 2022. On the other hand, LONGi, which had held first place for several years, achieved GW-scale shipments of HPBC rear electrode module products, but fell to second place due to its annual growth rate of 48%, which was lower than that of Jinko Solar. Trina Solar tied for second place with a shipment difference of less than 5% from Longi Solar. It recorded an annual growth rate of 55% with the launch of the G12R rectangular wafer-based module product.
JA Solar maintained its 4th place, recording an annual growth rate of 46% based on a stable business plan, cost management, and overseas channel management. Tongwei (TW) showed remarkable performance by entering the top 5, recording a high annual growth rate of 262% compared to 2022. Canadian Solar has maintained its top 5 position for over 5 years based on stable operating principles and first place in overseas shipments.
Astronergy ranked second in n-type TOPCon module shipments and maintained its seventh place position with its annual growth rate greatly increasing to 108% and its market share in China also increasing significantly. On the other hand, Risen Energy shipped both n-type TOPCon and HJT products with a diversified product offering strategy, but its annual growth rate slowed and it fell two places to 8th place. DAS Solar, GCL, Yingli, and DMEGC entered the top 10.
Average solar price trend (polysilicon (top), module (bottom))
*Single crystal silicon wafer sizes: M4 (161.75mm), M6 (166mm), M10 (182mm), M12 (210mm), N (182mm)
[자료=PV Insights]
In 2023, the average price of solar polysilicon recorded $7.28/kg as of December 21 last year, showing a historic plunge. Solar module prices also continued to hit historic lows. The market-leading M10 (182mm) area p-type PERC solar module has entered the $0.10/Wp range.
When the Ministry of Trade, Industry and Energy announced the solar power R&D strategy of the 4th Energy Technology Development Plan in 2019, the module manufacturing unit price goal of reaching $0.10/Wp by 2030 was set defiantly, but the technical goal was achieved as much as six years early due to market conditions. It’s an abandoned situation. Entering 2024, solar power prices are temporarily stabilizing as factory operation rates in China are lowered due to global oversupply and the Lunar New Year holiday.
The average price of polysilicon rebounded slightly to $8.22/kg, then stagnated for a month around the Chinese New Year, then decreased to $7.62/kg as of March 20. On the other hand, the decline in module prices appears to have stopped. M10 (182mm) area p-type PERC solar modules are maintained at $0.105/Wp, and M12 (210mm) area p-type PERC solar modules are maintained at the level of $0.111/Wp. In the case of M10 (182mm) area n-type TOPCon solar modules, the price is stagnating at the level of $0.113/Wp. However, if the polysilicon price drop at the end of March is not temporary, it is predicted that it will only be a matter of time before it is reflected in modules.
The China Photovoltaic Industry Association (CPIA) predicted that the growth in China’s new solar power installed capacity will peak at a rapid increase of more than 147% annually in 2023, and then slow to 190-220 GW (AC) in 2024. The global new installed capacity in 2024 is also expected to be 390 to 430 GW, which is somewhat more conservative than BNEF. It is expected that China’s new solar power installation capacity in 2025 will only increase slightly to 205-237GW (AC). This analysis attributes the increase in solar power installation to the effects of grid saturation and ESS shortage in China.
As the module production plans of China’s top 10 module companies in 2024 are approximately 700GW, global oversupply is expected to intensify and competition to become fiercer. Survival of the fittest is inevitable for companies in fierce competition, so there are concerns about price dumping in the market. For reference, as of the end of 2023, China’s polysilicon production capacity is 1.88 million MT, wafer production capacity is 892GW, solar cell production capacity is 844GW, and module production capacity is more than 861GW. In February 2024, which includes the Lunar New Year, the factory operation rate of the top nine module companies recorded 49%, while the overall operation rate of the Chinese module industry was only 23%.
Reflecting this sentiment, BNEF expects many plans for solar plants announced in the U.S., Europe and other regions this year to be canceled or postponed. Recently, when BNEF reported that Longi was pursuing a restructuring plan to lay off 30% of its employees to reduce costs and regain competitiveness in a global oversupply situation, there was an immediate response that Longi was planning to reduce jobs by up to 5%.
According to CPIA’s ‘2024 Solar Industry Roadmap’, despite global oversupply, China’s production in 2024 is expected to increase by 50% annually across all value chains. In the case of wafers, thinning is continuously promoted to reduce unit costs and carbon emissions, and with the rise of rectangular wafers, the proportion of M10 (182mm) wafers, which were previously strong, is expected to decline sharply.
The only positive news is that China’s National Development and Reform Commission (NDRC) has called for accelerating the construction of large-scale solar and wind power farms and integrated development and construction of solar, hydro, and wind power projects in major river basins. NDRC classifies power generated from renewable energy projects into guaranteed purchased power and market traded power. In accordance with the national renewable energy consumption guarantee mechanism and ratio target, from April 1, 2024, electricity market participants will be able to fully collect guaranteed renewable energy power. announced that it must be purchased.
It is expected to be similar to Korea’s RPS system, which requires power generation companies to purchase mandatory amounts of renewable energy power. The market-traded power segment is similar to our solar spot market, where prices are determined by market mechanisms and power generation companies, power users and other relevant market participants can trade power.
#2. EU building roof solar energy mandatory legislation for visibility… Module manufacturers struggling to come up with self-rescue measures
Changes and forecasts in new solar power installation capacity in China by year (unit: GW) [자료=CPIA, 2024. 3.]
Share of solar power production capacity by country at the end of 2023 [자료=S&P Global, 2024. 3.]
The European Parliament (MEP) has officially adopted the revised Energy Performance of Buildings Directive (EPBD), which mandates solar installation on most building roofs by 2030 in accordance with EU solar standards. Public and non-residential buildings will be installed gradually when deemed technically and economically appropriate depending on their size.
New commercial and public buildings will need solar power installation by 2026, and existing buildings undergoing renovation will also need solar power installation by 2027. Residential buildings need to install solar power by 2029, and existing public buildings need to install solar power by 2030. However, it does not apply to agricultural and cultural heritage buildings. Buildings of architectural or historical value, temporary buildings, churches and places of worship may be excluded.
Solar wafer trends (thickness (top), area and shape (bottom)) [자료=CPIA, 2024. 3.]
Currently, the EU buildings sector accounts for 40% of energy consumption and 36% of greenhouse gas emissions, with a zero-emission building mandate for all new buildings occupied or owned by public authorities by 2028 and all new buildings by 2030. A zero-emission building mandate for buildings is implemented.
For reference, EU building roof solar power accounted for a high proportion of 37GW (54% increase from 24GW the previous year) out of 56GW of new solar power installation capacity in 2023, and this proportion can continue to grow. Now, only the formal approval process at the Cabinet meeting remains before the EPBD is enacted into law.
EU Energy Commissioner Kadri Simson announced that there are no plans to impose trade tariffs on imported solar modules. In order to slow down the pace of supply amid a shortage of EU-made modules, possible alternatives were proposed to further support solar manufacturing in the EU. It includes strengthening non-price standards in renewable energy auctions, focusing on high-quality products with high environmental and labor standards, along with cybersecurity and data security.
In the case of the recently agreed Net-Zero Industry Act (NZIA), a 40% allocation is provided to domestic energy conversion technologies to meet demand, including solar power. Solar modules are not currently subject to RoHS regulation, but considering the trend toward strengthening eco-friendliness, there is a possibility that they will be subject to RoHS regulation in the future.
RoHS regulations limit the lead content standard of products to 0.1wt% or less, which is less stringent than the 0.005wt% (50ppm) lead content standard for highly durable and eco-friendly modules applied to domestic floating photovoltaic modules. Currently, the six major hazardous substances in EU RoHS include cadmium, hexavalent chromium, lead, mercury, PBB, and PBDE, and the number of hazardous substances is expanding to include DEHP, BBP, DBP, and DIBP. Eco-design guidelines are also being discussed to impose a carbon border adjustment tax (CBAM) based on the life-cycle carbon emissions (LCA) of solar modules.
According to the German Federal Ministry for Economic Affairs and Climate Action (BMWK), EU member states recorded 56GW of new solar power installation capacity in 2023 and are expected to install 80-90GW annually in the future. However, the EU’s current module production capacity is less than 4GW. Self-sufficiency in ingots, wafers, and solar cells is much more serious, so unless manufacturing expands, dependence on imported products will continue.
EU Energy Commissioner Kadri Simpson speaking at the SolarPower Summit 2024 [자료=SolarPower Europe]
Meanwhile, the EU Council and Parliament reached a provisional agreement to ban products made with forced labor from being brought across borders or imported into EU markets. The country leading the investigation makes the final decision on banning, recalling, or destroying products found to have involved forced labor. This is similar to the Uighur Forced Labor Prevention Act (UFLPA) introduced by the United States to ban the import of products made in the Xinjiang and Uyghur regions, including polysilicon for solar cells. The agreement, first proposed by the European Commission in September 2022, requires approval and formal adoption by both the Council and Parliament to become law.
Support is also being provided for EU countries to stimulate their own solar energy manufacturing. The EU has approved a €2.9 billion French state aid plan to support the production of net-zero equipment in France. The plan, approved under the EU State aid provisions of the Temporary Crisis and Transition Framework, supports the production of key components and key raw materials for solar modules, batteries, wind turbines and heat pumps in France.
Spain’s Ministry of Ecological Transition and Demographic Challenges (MITECO) proposed providing more than $810 million in subsidies for renewable energy and ESS manufacturing. Funded from the Recovery, Transformation and Resilience Plan (RRTP), it aims to encourage the production of essential equipment and components for the renewable energy value chain.
It covers five areas and their respective essential components: solar modules, batteries, wind turbines, heat pumps and electrolysers, and supports the establishment of new industrial facilities for manufacturing and the expansion of currently operating facilities through new production lines. The Spanish government is also seeking public consultation on a draft regulatory mechanism to provide incentives.
Portugal also received approval from the European Commission (EC) for a plan to provide a total of $380 million in incentives to domestic manufacturing companies for net-zero strategic industries. Recovery and Resilence Facility (RRF) funds will provide full support to companies producing solar modules, wind turbines, batteries, heat pumps, electrolysers, and carbon capture and storage equipment. Portugal is aiming to achieve a cumulative solar power installed capacity of 20.4GW by 2030 according to the revised National Energy and Climate Plan (NECP), so the solar power manufacturing industry is expected to expand.
The Italian government published its National Recovery and Resilience Plan (NRRP) 2 in the Official Journal of the Nation on March 2, 2024, introducing a new financial allowance for the purchase of components for renewable energy projects worth €13 billion. . Financial deductions for solar power support up to 35% of the cost of solar modules, depending on the investment size. Through the introduction of the minimum efficiency system, new power plants that apply EU module products with a module efficiency of 21.5% or higher or a solar cell efficiency of 23.5% or higher are eligible for support. In the future, new power plants using HJT or two-terminal (2T) perovskite-silicon tandem modules, which account for more than 24%, can also benefit. Possible beneficiaries are defined as companies resident in the country, regardless of their legal form, economic sector of membership, size and tax system for determining company income, subject to projects invested in 2024 and 2025.
The European Commission (EC) also approved the use of funds from Italy’s $1.2 billion Recovery and Resilience Facility (RRF). Full support will be provided to companies producing solar modules, wind turbines, batteries, heat pumps, electrolysers, carbon capture and storage equipment, and core materials. Currently, Enel Green Power is expanding its 200MW n-type HJT solar module plant in Catania to 3GW. SoliTek announced plans to build a 600MW module production line in the Benevento region in 2023. EPC company Comal has been selected for a government tender to build a solar module manufacturing facility in the province of L’Aquila in January 2024.
The EU Council has adopted new amendments to European legislation on waste electrical and electronic equipment (WEEE), which includes computers, refrigerators and solar modules. The amendment states that electrical and electronic equipment (EEE) producers are responsible for the management and disposal costs of waste solar modules sold after August 13, 2012. The extended producer responsibility for EEE added to the scope of the 2018 Directive applies to electronic products placed on the market after that date. In addition, a review clause was introduced requiring the EU to assess the need to review the Directive by 2026 at the latest. The text of the amendment will now be published in the Official Journal of the European Union after being signed by co-legislators, and will enter into force 20 days later. Member States are obliged to apply the revised Directive into their national legal systems within 18 months of its entry into force.
#3. Utility-scale solar to become the cheapest energy source in Asia-Pacific by 2023
Comparison of average LCOE by new energy projects in Asia-Pacific 2020-2024 (unit: USD/MWh) [자료=PV Magazine, 2024. 3.]
Utility-scale solar has emerged as the cheapest power source in Asia-Pacific (APAC) by 2023, while onshore wind is expected to become cheaper than coal-fired power after 2025, according to the latest analysis from WoodMAC.
In the case of large-scale solar power generation, it emerged as the cheapest power source in 11 out of 15 countries in the region in 2023. Average LCOE decreased by 23% per year. Due to falling module prices and oversupply in China, the cost of new construction solar projects is predicted to decrease by an additional 20% by 2030.
Distributed solar costs will decline by 26% per year in 2023, making it an average of 12% cheaper than residential electricity prices in the region. China is leading the way in lowering the cost of renewable energy, with utility-scale solar, onshore wind, and offshore wind power costing 40 to 70 percent less than in other countries.
The cost of renewable energy was 13% cheaper than existing coal-fired power in 2023, and is expected to be 32% cheaper by 2030. For reference, according to a report published by Ernst & Young in December 2023, the global solar weighted average LCOE is currently 29% cheaper than the cheapest fossil fuel alternative. Despite low investment costs, concerns about deteriorating profitability of renewable energy after 2024, grid saturation, and lack of energy storage facilities such as ESS continue among investors.
2021-2023 Government-led global renewable energy bidding capacity [자료=PV Magazine, 2024. 3.]
According to Wood Mackenzie’s latest report, government-led global renewable energy bidding in 2023 is estimated to amount to 137GW, mainly solar and wind power projects. Despite construction cost headwinds, logistics challenges and the energy crisis, tendered capacity in 2023 increased by 10% compared to 2022’s 124 GW. Solar power led the way, accounting for 44% of the total at 61GW, but decreased by 15% points compared to the previous year. Then, onshore wind power recorded 34GW (24%), and offshore wind power recorded 31GW (23%).
By country, China conducted 49 bids and allocated 55GW, India conducted 55 bids and allocated 20GW, and Germany conducted 11 bids and allocated 19GW. By region, the Asia-Pacific region accounted for 67% of the total with 90GW. After that, the Middle East and Africa region recorded 37GW (27%), and the Americas recorded 10GW (7%).
In 2024, government-led global renewable energy bidding capacity is expected to decrease to 102GW. Government-led renewable energy bidding is necessary to achieve carbon neutrality and energy conversion policies, but competition with PPA contracts and private spot markets is inevitable, along with limiting factors such as global grid saturation and land costs. Trends worth paying attention to are the increase in the proportion of offshore wind power bidding, the increase in the ceiling price, and the setting of standards other than price.
#4. UV down-conversion technology development trend… Enables improved efficiency and durability of next-generation solar modules
Comparison of ultraviolet irradiation degradation rates by solar cell technology [자료=Hangzhou First, 2022. 11.]
Both n-type single-crystal HJT solar cells and perovskite solar cells, which mainly consist of perovskite-crystalline silicon tandem solar cells, which have recently attracted attention, have vulnerabilities to ultraviolet (UV) irradiation. In the case of HJT solar cells, ultraviolet rays may separate hydrogen from the amorphous silicon thin film (a-Si:H) or the amorphous silicon/crystalline silicon interface, reducing the passivation effect.
In the case of doped microcrystalline silicon (μc-Si:H) thin films, which have recently been applied to improve efficiency, this can be more serious because Si-H bonds are easily separated by ultraviolet rays. The perovskite light-receiving layer used as the upper cell of perovskite-crystalline silicon tandem solar cells is also severely deteriorated by ultraviolet irradiation. To solve this problem, the module was previously sealed by applying a UV cut-off filter or film to the front. However, it has the disadvantage of reducing short-wavelength characteristics and increasing manufacturing costs due to reduced transmittance due to UV blocking.
Concept and principle of ultraviolet down-conversion film [자료=Cybrid, 2023. 12.]
Structure of ultraviolet downconversion material [자료=Cybrid, 2023. 12.]
The ultraviolet downconversion material absorbs incident ultraviolet rays and enters an excited state, then releases some heat through Stokes shift and enters an excited state of relatively low energy. Afterwards, it emits blue light, which is a short wavelength of visible light, and switches to the ground state.
In 2013, Japan’s Nitto Denko developed and registered a patent for the first ultraviolet downconversion material with a molecular structure that is stable against ultraviolet rays, heat, and humidity. In 2014, China’s Cybrid, in collaboration with Nitto Denko, began developing an encapsulation material that integrated a down-conversion material into an EVA or polyolefin (POE)-based film under the product name RayBo. Starting in 2015, Nitto Denko began selling UV down-conversion POE film to Japan’s CHOSHU Industry.
Comparison of HJT solar cell quantum collection efficiency by encapsulation material [자료=Cybrid, 2023. 12.]
Comparison of HJT module output before and after outdoor exposure by encapsulant material [자료=Cybrid, 2023. 12.]
High temperature and high humidity test results (ultraviolet downconversion EPE (top) and ultraviolet downconversion EVA (bottom)) [자료=Cybrid, 2023. 12.]
In 2017, CHOSHU Industry began producing UV down-conversion materials and POE films after purchasing patents from Nitto Denko. And in 2020, Cybrid began production of RayBo film with support from CHOSHU Industry. In 2023, Cybrid also began commercial production of ultraviolet downconversion materials with permission from CHOSHU Industry.
Applying a UV down-conversion encapsulant can improve the efficiency and long-term reliability of the HJT module compared to existing high-transmittance encapsulants or encapsulants using UV blocking films. As the quantum collection efficiency (EQE) in the blue light region increases, the short-circuit current of the solar cell increases, and as a result of the one-month outdoor exposure test, the module output remained 1.5 to 2.0% higher than the UV blocking film encapsulant. And as a result of high-temperature and high-humidity tests, both UV down-converted EVA and EPE (EVA/POE/EVA) encapsulants showed good long-term reliability.
Korea Institute of Energy Technology Evaluation and Planning Myung Seung-yeop Solar Power PD
In order to strengthen the product competitiveness of next-generation tandem solar modules and n-type HJT modules in the future, it is necessary to develop local production of core materials to avoid dependence on China, and it seems that interest should also be paid to the development of ultraviolet down-conversion materials and encapsulant technologies that require patent avoidance.
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2024-04-03 05:45:00
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