1、Research ReinventedSmartkarma unites Independent Research Providers,Investors,and Investor Relations in one network.At Smartkarma,We Do Things DifferentlyWelcome to another Smartkarma eBook-a showcase of selected Insights from the Smartkarma network.These eBooks are meant to be an illustration of th

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6、ch piece.This helps independent Insight Providers monetise their research and incentivises them to produce truly high-quality,differentiated work that stands out from the rest of the market.In the following pages,you will be able to see for yourself a sample of the efforts of Smartkarma and the Insi

7、ght Providers publishing on our platform.If you want more such Insights delivered to you in real time on your desktop or mobile,visit .Cover Photo by Bruno on PixbayThematic(Sector/Industry)Asian Solar EnergySector:Powered bySubsidies and MovingDownstreamBy Aqila Ali|30 Sep 2020EXECUTIVE SUMMARYWhat

8、s Original?This insight is an in-depth research on the Asian solar energyindustry,covering the value chain and related companies in each keystage of the value chain.Our research includes the following:Industry Background:This includes an in-depth analysis onthe solar energy sector,which includes an

9、overview on the keytypes of solar technologies(Photovoltaic-PV,ConcentratedSolar Power-CSP and Solar Heating and Cooling-SHC),and theleading Asian countries(India,Japan and China)in the sector.We provide our thoughts on which solar technology lookspromising and compare the technology used across the

10、 leadingAsian countries.Value Chain Analysis:We detail the value chain for PV,highlighting the critical stages of the value chain(systemintegration assembly and installation,and manufacturing ofcells,modules,polysilicon ingot,and wafer)and the leadingplayers in those stages(includes listed and unlis

11、ted companies).Background Analysis on Key Players-This includesresearching the key Asian listed/unlisted solar energycompanies and analysing the key contributing factor/product toeach of them in the sector.Investment opAnalysis on the key revenue and margin drivers Wecompare and contrast the key rev

12、enue growth and profitabilitydrivers for the listed companies.We have also provided a shortinvestment thesis on the key listed players and looked at theirvaluation.Asian Solar Energy Sector:Powered by Subsidies and Moving Downstream3Aqila AliEquity Analyst|LightStream ResearchAqila Ali has over five

13、 years of experience in investment research covering multiple industries including auto components,MLCCs,telecommunications,and CASE trends.Areas of Expertise Primary Asset Class:Equities Geography:Asia Pacific Countries:Japan Sectors:GeneralistContent Verticals Equity Bottom-Up,Thematic(Sector/Indu

14、stry)The Insight is structured as follows:A.Solar Energy Industry BackgroundB.A Deep Dive into the Three Key Solar TechnologiesC.A Look at the Leading Asian Countries in the Solar Market:China,Japan,and IndiaD.Value Chain AnalysisE.A Look at the Key Asian Solar PlayersDETAILA.Solar Energy IndustryBa

15、ckgroundSolar energy has been one of the fastest growing renewable energy sourcesover the last few decades(the solar energy market size grew at a CAGR of49.0%globally over the past decade,while renewable energy power capacitygrew at a CAGR of 8.3%).According to the International Energy Agency(IEA),s

16、olar power generation increased by 22%(+131 TWh)in 2019,representing the second largest absolute generation growth of all renewabletechnologies,second to wind generation.Using solar power instead of fossilfuels allows a reduction in carbon footprint and helps combat climatechange,and is a comparativ

17、ely more efficient power system than producingenergy from coal and oil.In 2019,a total of 720TWh was generated.Source:IEAAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali4Bloomberg New Energy Finance expects solar technology to represent morethan 40%of global electricity

18、capacity by 2050,which would be a significantincrease from its current penetration of c.5%of global capacity.Energymarkets usually consider three main factors when deciding on powersources:cost of energy,ancillary services,and ability to dispatch power ondemand.Given that solar energy satisfies all

19、three of these factors,consensus estimates are for the sector to grow at a CAGR of 20.5%globallythrough 2019-2026.Three main technologies have now emerged as the frontrunners in the solarenergy field:photovoltaic cells(PV),concentrated solar power(CSP),andsolar heating and cooling(SHC),which we will

20、 discuss in detail below.B.A Deep Dive into the Three KeySolar TechnologiesSummary:Currently,while PV is largely used for residential and industrialpurposes and is commercially developed,SHC is also widely used but forsmaller scale purposes.SHC usage is not reflected in the number of jobscreated,due

21、 to requiring a lower number of people to operate solarheating and cooling technologies.CSP is currently the least usedtechnology due to the costs and challenges in building the systeminvolved.When considering the above three technologies,we have observed thatthe three technologies are suitable for

22、distinct purposes.Whileconcentrated solar power and photovoltaics are most suitable for largerscale projects,solar heating and cooling can best be used for smallerscale applications such as residential homes and small businesses.Although plants with thermal storage(such as CPS)have greateroperationa

23、l and capacity value,they are more costly and take a longertime to build,as opposed to photovoltaic systems.When choosing which of the technologies to use,consideration must bepaid to the energy requirement,the cost that investors are willing toincur,and the scale of the project.While this is a gene

24、ral rule forselecting a technology,having looked at the three technologies,we feelthat CSP technology is yet to develop completely and appears to havepotential for growth in the sector,while PVs will continue to be themainline technology.Asian Solar Energy Sector:Powered by Subsidies and Moving Down

25、streamAqila Ali5Photovoltaic(PV)A photovoltaic cell is commonly called a solar cell,and is a nonmechanicaldevice which converts sunlight directly into electricity.Some PV cells alsohave the ability to convert artificial light into electricity.A PV cell is made ofsemiconductor material so that once p

26、hotons(particles of solar energy insunlight)strike a PV cell,they may pass through the cell,reflect off the cell,or be absorbed by the semiconductor material.The absorbed photons wouldthen release electrons.These free electrons can then be captured to producean electric current,which can be used to

27、produce electricity.PV cells were first developed by Bell Telephone researchers in 1954,and wereused to power US space satellites beginning in the late 1950s.PV panelswere then used to provide electricity in remote or off-grid locations towardsthe late 1970s,and since 2004,the use of PV cells has gr

28、eatly expandedowing to technological advances,lower costs for PV systems,and variousfinancial incentives and government policies.An individual PV cell can only produce 1 or 2 Watts,which allows onlysufficient electricity for small tasks such as powering calculators orwristwatches.However,these cells

29、 can be electrically connected to generatehigher amounts of electricity,wherein they can be used for much largertasks such as to power communications equipment and to supply electricityfor a single home or business.Although the efficiency at which PV cellsconvert sunlight to electricity varies based

30、 on the type of semiconductorAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali6material and PV cell technology,the efficiency now approaches c.20%forstate-of-the art modules.However,nearly 50%efficiency has been achievedfor experimental PV cells and PV cells for niche mar

31、kets such as spacesatellites.Solar PV is highly subsidised by governments worldwide,and the chart belowshows the types of market incentives and enablers provided for solar PVworldwide in 2018.Source:StatistaConcentrated Solar Power(CSP)CSP is based on the principle that a temperature of around 550C

32、can begenerated using a parabolic mirror that concentrates the suns rays on asingle point called the“fire”point.A pipe is run through at the fire point,through which a fluid with the ability to store heat flows,before passingthrough an exchanger.This fluid can then be used to generate industrialstea

33、m or to run a turbine and produce electricity.The CSPs can be used togenerate electricity during cloudy periods or for the hours after sunset orbefore sunrise,hence making it a more flexible source of solar energy.TheCSP plants can use fossil foil to supplement the solar output during periodsof low

34、solar radiation,and can also be integrated into existing thermal-firedpower plants.There are four types of CSP technologies.Parabolic Trough Systems concentrate the suns energy usingparabolically curved,trough-shaped reflectors onto a receiver pipe(theheat absorber tube which runs along about a mete

35、r above the curvedsurface of the mirrors).Heat energy,which is generated when thetemperature of the heat transfer fluid(usually thermal oil)increases,isthen used in the thermal power block to generate electricity in aconventional steam generator.As of 2018,90%of the CPS plants incommercial operation

36、 were troughs.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali7Power tower systems use sun-tracking mirrors(heliostats)to focussunlight onto a receiver at the top of the tower.Electricity is thengenerated using a conventional turbine-generator,which is powered bysteam ge

37、nerated when the heat transfer fluid in the receiver is heatedto c.600C.Although the earliest power towers used steam as the heattransfer fluid,companies are now operating with water,molten salts,and other heat transfer materials in order to improve efficiency andreduce costs.Linear Fresnel Systems

38、use the same principles of the trough system,butconsist of a large number of collectors in parallel rows,and mirrors arelaid flat on the ground to reflect the sunlight to the pipe above.Parabolic Dish Systems have mirrors distributed over a parabolic dishsurface to concentrate sunlight on a receiver

39、 fixed at the focal point.Parabolic Trough SystemsPower Tower SystemsSource:SolarPACESAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali8Solar Heating and Cooling(SHC)Systems which change sunshine into usable thermal energy are referred toas solar heating and cooling(SHC)t

40、echnologies.According to the SolarEnergy Industries Association(SEIA),a single-family home with a solarwater heating system installed will reduce its CO footprint by an average of28%.Solar heating and cooling technologies include solar heat collectors,solar air heating,solar cooling,solar water heat

41、ing,and solar pool heating.The following are some examples of solar heating and cooling technologies.Solar Heat CollectorsA solar heat collector requires c.60sqft of roof space,and the energy neededto heat water for the average American home can be achieved with only oneor two solar heat collectors.

42、Types of solar collectors include flat plate,evacuated tube,Integral Collector Storage(ICS),thermosiphon andconcentrating collectors,where flat plate collectors are the most commontype of collector in the US.Type of SolarCollectorDescriptionFlat platecollectorsHave copper plates attached to an absor

43、ber plate contained in an insulated box that iscovered with a tempered glass or polymer cover plate.EvacuatedtubecollectorsConsist of rows of parallel,transparent glass tubes that have been“evacuated”of air,creating a highly efficient heat insulator for the fluid that runs inside the length of the t

44、ube.Generally used when higher temperatures or higher volumes of water are needed,as wellas for process heating and solar air conditioning systems.SimpleunglazedcollectorsUsually used to heat pool water or preheat large volumes of industrial process water inwarm climates.ConcentratingcollectorsUsefu

45、l in industrial and manufacturing processes due to their ability to produce heat inexcess of 300F-400FSource:Solar LoveSource:Solar LoveSolar Air HeatingAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali9Solar heating systems have been found to produce a number of heat uni

46、tsequivalent to c.80%of the available solar energy,hitting the surface of thecollector where it can produce 45,000-102,000 kWhth(kilowatthoursthermal)per square foot of installed collector area per year.These systemsusually transfer heat from the solar collector using a non-toxic liquid,water,or air

47、.Solar CoolingAbsorption chiller systems and desiccant systems are two types of solarcooling systems,with absorption chiller systems being the most commontype.Absorption chiller systems generate air-conditioning using solar waterheating collectors and a thermal-chemical absorption process.In a desic

48、cantsystem,the air is cooled by passing it over a common desiccant such as silicagel,which draws out the humidity in the air.Solar Water HeatingActive solar water heating systems rely on an electric pump to circulate thewater while passive solar water heating systems use thermodynamics tomove the wa

49、ter.These solar water heaters consist of three main elements:the solar collector,insulated piping and a hot water storage tank,and whensolar radiation hits the solar collector,it absorbs the heat and transfers it topotable water in the system.Source:Solar LoveAsian Solar Energy Sector:Powered by Sub

50、sidies and Moving DownstreamAqila Ali10The Round-Up:The Three Technologies ServeDistinct PurposesMeasurePhotovoltaicConcentrated Solar Power(CSP)Solar Heating&CoolingTechnologies Uses sunlight through thephotovoltaic effect to generatedirect electric current(DC)in adirect electricity productionproce

51、ss.This DC then has to beconverted to alternative current(AC)with the use of inverters to bedistributed on the power network.Concentrates solar radiation to heat aliquid substance which is then used todrive a heat engine and an electricgenerator.Generates AC,which can beeasily distributed through po

52、wernetworks.Uses the sunsthermalenergy tochange thetemperatureof air andwater.Energystorage andefficiencyDo not produce or store thermalenergy as they directly generateelectricity which cannot be easilystored especially at large powerlevels.Capable of storing energy usingThermal Energy Storage techn

53、ologies(TES)and using it at times of no or lowsunlight,hence increasing thepenetration of solar thermaltechnology in the power generationindustry,as it helps overcomeproblems such as environmentalfluctuations.Has a highlevel ofefficiency,butsupplementalenergysources orstoragerequired forlong sunless

54、stretches.CostCan be built at a lower costcompared to CSP plants.Requires higher investment andinvolves greater risk(challenges withthermal storage,cooling).Lower costinvolved.Ease inbuildingEasier to build compared to CSPplants.Comparatively difficult to build.Easiest tobuild andadoptespecially ons

55、maller scale.Direct andIndirect JobsWorldwide(000 jobs)3,60534801Source:Helioscsp,International Renewable Energy Agency(IRENA)s 2019 reportAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali11C.A Look at the Leading AsianCountries in the Solar Market:China,Japan and IndiaSu

56、mmary:China leads the solar market globally.India,we believe has highpotential for growth.However,uncertainty in government policies andlack of investment has restricted growth thus far.Japan,with itsinnovation has been continuously developing its renewable energymarket,but is yet to make its mark.H

57、owever,the countrys lack ofsunlight and mountain terrain makes it difficult to erect large solarplants,when compared to India and China and other emerging marketsin Asia.In terms of technology used,China targets towards 20 CSP plants,webelieve that China currently has a larger focus on CSP.In India,

58、we feelthat policies and subsidy provisions are provided to develop all threetechnologies equivalently,and no specific technology is targeted.Japansproposals for its long-term emission reduction are focused more on thetransport sector and zero-emission buildings.Thus,the country is likelyto resort t

59、o PVs and its R&D in CSP to achieve its aim.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali12Until recently,the US and Europe led the renewable and solar energymarkets.However,this situation has largely changed in the past decade andaccording to data from Statista and E

60、qual Ocean,in 2019,China was thelargest solar market,having a cumulative solar power capacity of 185 GW.This was followed by the US and Japan,while India was fifth in terms ofsolar power capacity.Source:EqualOceanFurthermore,according to a new report by EY,seven Asian countries rankamong the worlds

61、most attractive markets for renewable energy sourcesincluding wind power,hydropower,and solar energy.According to the EYsRenewable Energy Country Attractiveness Index ranking,China has been inthe top position for years,although the country was ranked second to the USthis year.India holds the seventh

62、 place this year,compared to its previousthird position,which is now held by France.Japan holds the tenth place,twoslots down from its previous eighth place,with Denmark now holding theeighth place.Currently,a large number of new projects and investments arein emerging economies.Asian Solar Energy S

63、ector:Powered by Subsidies and Moving DownstreamAqila Ali13The Round-UpChinaIndiaJapanSolar powercapacity-2019(Gigawatts)1853864Ranking inEYsRenewableEnergyCountryAttractivenessIndex-20192710ExpectedTargetIncrease shareof renewable-based powergeneration to28.2%in 2020.Produce 175GW ofrenewable energ

64、yby 2022 of which100GW is to befrom solar.Have renewable resourcesaccount for 22-24%ofnational electricity generationby 2030,nuclear power20-22%,and fossil fuels 56%.Cut its GHG emissions by26%compared to 2013levels.StrategyGovernmentinvestment and policysupport,Attract foreign investors tothe count

65、ry.Policy supportCurrentlyfocusedtechnologyCSPAll three technologies.SHCOpportunities in the three tech typesPVOutperformancein the nationalsolar PV target.Increase inChinas solar PVshare of totalelectricitygeneration fromgrid-connectedsources.Emergence ofnew futuregrowth areasfor solar PVwhere feed

66、-in-tariffs(FiTs)arenow offered forPV combinedwith electricalenergy storagein Jiangsu.The creation of26 power-trading centresspecifically fordistributedgeneration isdriving demandand theemergence ofnew businessmodels for solarPV in thecountry.Anunderpenetratedsolar market.High growth forrooftop sola

67、rinstallation whichare deemedcleaner andcheaper energysolution forcustomers.World Banksupport financially.Subsidy to promote thedevelopment of rooftop solarPV installations.Attempt to lower solar pricescould boost demand.Demand from beyondresidential use(self-consumption,electricvehicles(EVs)or batt

68、eries,retrofitting storage,sale ofsurplus electricity via one-on-one contracts with utilities orpower producers andsuppliers(PPSs).Support from Japan ElectricPower Exchange(JEPX)toissue tenders for non-fossil-fuel certificates and is alsoplanning to introduce futurecontracts.For the non-residential

69、sector,the Japanese Ministry ofEconomy,Trade and Industry(METI)has set a three-yeardeadline for the completionof projects over 10kW in size.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali14CSPVarious projectsto expandcapacity are inplace.India was the onlyother country

70、inAsia to have CSPcapacity underconstruction by theend of 2018.Early hands ontechnologicaldevelopment and isranked fourth interms of number ofSolar Heat forIndustrialProcesses(SHIP)additions in 2019.Subsidyprogramme forconcentrating onsolar thermalsystems.Japan has made plans to useCSP plants in the

71、 worldssunny regions such asAustralia in order to generatefuel which can then beshipped back to the country.SHCChina is one ofthe key marketsfor SHC with aninstallation ratestronger thanthe US.In 2019,Chinaled the rankingfor newinstallations ofglazed andunglazedcollectors,accounting forc.73%of theto

72、tal.Rural areademand stillexists.Positivegovernmentspolicies.Governmentsupport andsubsidies drivespopularity of solarwater heaters inthe country.Limited growth potentialgiven a currently decliningmarket.Threats in the three tech typesPVPolicyUncertaintyEconomicslowdown,tariffcaps,paymentdelays andch

73、allenges relatedto land acquisitionand access to gridconnections led toa slowdown in2018.Expectedslowdown in 2020as well,though arebound isexpected in 2021with capacityadditionsexceeding 2019levels.Grid constraints,lack ofavailable land and low-costfinancial resourcesHigh labour costs and highprices

74、 of solar generation,where Japans prices aresome of the worlds highest.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali15CSPHigher price perkilowatt incomparison tophotovoltaicpowerLack offinancingmeans.The links in theCSP industrialchain remainweak and no on-grid power

75、priceof CSP projectshas yet beendetermined,slowing downthe progress ofCSP.India lags peersdue to low investorconfidence,unreliable solardata,lowavailability ofskilled labour,and ahigh cost for CSPcompared to PV.Countrys rocky terrain makesit difficult to erect CSP plantswithin the country.SHC-Declin

76、ing subsidies for solarenergy.Our ThoughtsThe country has beenlargely focusing on PVsand is the global leaderof the PV market.The countrys PV andSHC markets arealready well developed,which we believe to bethe driver behind recentprojects being moreCSP-focused(piloted20 CSP projects to becompleted).W

77、e feel that policies andsubsidy provisions areprovided to develop allthree technologiesequivalently and nospecific technology istargeted still.Rooftop solarenergy solutions is atargeted produced acrossthe three types oftechnology.Japans proposals for its long-termemission reduction are focused moreo

78、n the transport sector and zero-emission buildings.Given the declinein subsidies for SHC,whilecontinuously investing R&D for PVand CSP,we believe Japan might belooking to use the latter twotechnologies to achieve its renewableenergy aims.In DetailChina:The Current Leader GloballyFrom less than 10%so

79、lar and wind in the overall power mix in 2018,Chinasgovernment aims to increase the total share to c.30%by 2030.The Belt andRoad infrastructure initiative provides businesses opportunities to exportclean-energy technology and take on large-scale electricity projects inemerging countries,helping to p

80、ower Chinas renewables sector.Since 2008,China has been the worlds largest manufacturer of solar panel technology,and accounts for the production of over 60%of the worlds solar panels,according to IEA.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali16Strategy to Achieve

81、Renewable Energy AimsIn order to increase the countrys share of renewable-based powergeneration,nine provinces and regions have been ordered to generate morethan 15%of power from non-hydro sources,and 10 provinces and regionsshould generate at least 30%of power from renewable sources.Furthermore,the

82、 country has pledged to invest CNY2.5trn in renewablepower generation over 2017-2020.Below,we shall discuss whether any of thethree technologies are specifically being targeted towards achieving thesegoals.Photovoltaic(PV):Dominant PositionChina is the single largest market for solar PV and dominate

83、s the globalsolar PV market,and accounted for c.26%of capacity additions in 2019.Thecountry has the largest solar PV employment in the world,with c.2,194,000direct and indirect jobs,and accounts for c.54%of renewable energy jobs inChina.However,Chinas annual solar PV market(newly installed capacity)

84、declinedby nearly 32%YoY in 2019 despite the countrys year-end rally,with morethan 12 GW brought online in December.This was largely due to policyuncertainty,as China was restructuring its renewable energy market leadingto a decrease in energy feed-in-tariffs(fixed electricity prices which are paidt

85、o renewable energy producers for each unit of energy produced and injectedinto the electricity grid).Another contributing factor to the decline was thecontinuous addition of coal-fired power capacity.However,towards the end of 2019,Chinas cumulative grid-connectedcapacity was c.2x the national solar

86、 PV target,which was established in2016,of achieving 105 GW by 2020.However,reduced curtailment andincreased capacity led to Chinas solar PV share of total electricitygeneration from grid-connected sources increasing to 3%in 2019 comparedto 2.6%in 2018.Asian Solar Energy Sector:Powered by Subsidies

87、and Moving DownstreamAqila Ali17Source:evwindChina has also seen the emergence of new future growth areas for solar PVsuch as the combination of EVs,residential solar and storage.A recentreport from the US-based Institute for Energy Economics and FinancialAnalysis(IEEFA)argues that batteries and EVs

88、 can improve the economics ofhousehold solar due to their ability to allow households to use more of thesolar power they generate,hence leading to electricity bill savings.Chinahas recognised the effectiveness of these combinations and feed-in-tariffs.(FiTs)are now offered for PV combined with elect

89、rical energy storage inJiangsu.Furthermore,the creation of 26 power-trading centres specificallyfor distributed generation is driving demand and the emergence of newbusiness models for solar PV in the country.Chinas 14thFive-Year Plan(2021-2025)by the National EnergyAdministration(NEA)outlines the d

90、evelopment of wind and solar PV grid-parity projects over the period,and action has been recommended for thecountry to aim for 300 GW of new solar PV power generation capacity.Concentrated Solar Power(CSP):IncreasingFocusAs of January 2020,China had eight large-scale concentrated solar powerprojects

91、 with total capacity of 500MW in operation across China.Five of theseven projects use the power tower system,two use the parabolic troughsystem,while the other uses the linear Fresnel system with molten salt asboth heat transfer and thermal storage fluid.The power tower system isgenerally favoured o

92、ver the trough system due to its higher temperatureoperation,which allows for greater efficiency.Source:CSP FocusIn September 2016,the National Energy Administration issued the firstbatch of CSP pilot project allocations.The CSNP Royal Tech Urat 100MWParabolic Trough CSP Project was one of the first

93、 batches of 20 pilot CSPAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali18projects,and is the countrys largest parabolic trough CSP plant.The plant isexpected to generate c.350GWh of electricity annually.The status of thepilot projects as of January 2020 is as follows.So

94、urce:CSP FocusIn May 2020,the Supcon Solar Delingha 50MW Molten Salt Tower reportedthat it had exceeded six-month output targets and recorded average outputfulfilment rates above 100%since January 2020.The plant has come up withinnovative measures,combining equipment learnings with AI technology tor

95、educe weather risks and improve performance.Furthermore,the DunhuangDacheng 50MW Molten Salt Linear Fresnel Project is the first molten saltthermal power generation project in the world,which uses molten salt as theheat transfer fluid and thermal storage medium.However,Chinas CSP market faces a few

96、key development problems.Thehigher price per kilowatt in comparison to photovoltaic power generationrestricts the development of Chinas CSP industry and Chinas CSP projectslack financing means.The links in the CPS industrial chain remain weak andno on-grid power price of CSP projects has yet been de

97、termined,slowingdown the progress of CSP.Solar Heating and Cooling(SHC):Policy toSupport Strong Growth RatesChina is one of the key markets for SHC and towards 2013,the country wasinstalling SHC systems at a rate of c.10 x that of the US.In that year,c.50-60m households in the country used solar wat

98、er heating.According toIRENA,China employs 670,000 people(16%of renewable energy jobs inChina)in solar heating and cooling.Towards the end of December 2017,there was 35.4m sqm of solar thermal products installed in China.In 2019,China led the ranking for new installations of glazed and unglazedcolle

99、ctors,accounting for c.73%of the total.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali19Source:IEA-SHC;Solar Heat Worldwide 2019Given that solar water heaters can save the conventional fuel fee in ruralareas without natural gas and centralised heating systems,the conven

100、ienceand cost of solar water heaters acts as the main market driver.Furthermore,the Chinese governments policies towards increasing the proportion ofrenewable energy has led to the promotion of solar heating and cooling inurban markets.China also contains solar energy buildings known as the“passive

101、house”which contain large southern windows and the possibilityfor attached sunspace.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali20Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali21India:Needs Continuous Supportfrom the GovernmentIn May 20

102、19,India was named the lowest cost producer of solar powerglobally.The country has traditionally relied on coal-fired power plants,which generated 72%of the countrys electricity in 2018-19.According tothe PV magazine India,the countrys total solar energy potential isestimated at c.750 GW.The country

103、 has a target of achieving 100GW ofsolar power by 2022,but had only installed a total of 36.6GW at the end of1Q2020.India prioritises the expansion of solar over other renewabletechnologies,and the government has launched a reverse auction system forsolar capacity,increased the availability of fundi

104、ng to the renewables sector,and allocated concentrated zones of development for solar power facilities,hence driving down the implementation time and cost of projects.India hasthe fourth-largest number of renewable energy jobs globally,and employed719,000 people directly and indirectly in the sector

105、.According to the UnitedNations Sustainable Development Goals partnerships platform,India plansto produce 175GW of renewable energy by 2022,of which 100GW is to besolar.Strategy to Achieve Renewable Energy AimsA key part of Indias strategy in achieving its renewable energy aims was toattract investo

106、rs to the country,for which it had taken numerous measuresincluding the following:The introduction of the Power Purchase Obligation(PPO)under whichstate power-distribution companies and certain other private firms arerequired to procure part of their power requirement from renewablesources.A revisio

107、n of the tariff policy,which includes penalties for unscheduledpower cuts and removing custom barriers to provide incentives to solarand wind energy manufacturing equipment.Awarding power purchase agreements using reverse bidding.Alsoknown as a reverse auction,this allows sellers who meet certainmin

108、imum criteria to submit non-negotiable price bids.The buyer thenselects winning sellers based on the lowest priced bids first and signsnon-negotiable standard contracts with the winning sellers.Inrenewable energy projects,an auction is held where developers ofsystem-side renewable distributed genera

109、tion projects bid the lowestprices which they would be willing to accept to develop renewableenergy projects.Providing many direct and indirect subsidies.In FY19,the majorsubsidies provided for solar were:Support for solar parks and large solar power:INR2,778 croreSolar rooftop and other application

110、s:INR1,667 croreAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali22Viability Gap Funding Scheme under the Jawaharlal NehruNational Solar Mission(JNNSM)Phase II:INR1,335 crore.TheJNNSM,launched by the Indian Prime Minister in January 2010,aims to install 20,000 of grid-con

111、nected solar power by 2022.Accelerated depreciation for wind and solar:INR 2,778 crore.Thisis a tax benefit which allows companies to write off c.80%ofinvested capital in the first year.The government,in September 2019,also reduced the general corporate taxfrom 30%to 22%for Indian companies,adjustin

112、g the rate to thoseapplicable in other South Asian countries,making the country morewelcoming for investors.However,Indias installed capacity for all energy sources towards the end ofJanuary 2020 was c.369GW,of which renewables accounted for c.86.3GW.Although Indias solar capacity has increased from

113、 less than 1GW in 2010 toc.36.6GWFS5 GB6 of solar power currently,we believe it would bedifficult for India to meet its 2022 target.According to Buckley,a director ofEnergy Finance Studies for South Asia at IEEFA,the country also struggleswith state-centre conflicts and national policy objective con

114、traventions,which makes it more difficult for it to achieve these goals.An examplewhich was cited was Indias goal to“accelerate low cost renewable energyinstallations”,“whilst at the same time raising costs by the imposition ofimport duties in order to underpin the Make in India manufacturingstrateg

115、y.”Photovoltaic(PV):Untapped Market OpportunityOver 200m people in India do not have access to electricity and theinstallation of solar PV units on rooftops is expected to be a cleaner andcheaper energy solution for customers.Rooftop solar has been the fastestgrowing renewable energy sub-sector in I

116、ndia,with a CAGR of c.116%over2012-2018.To achieve the 100GW target of the Indian government,theWorld Bank provided US$625m in financial support for a grid connectedrooftop solar project,and the project is expected to finance the installationsof at least 400 MW of grid connected solar photovoltaic u

117、nits across India.Indias rooftop solar PV costs are among the lowest in the world.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali23Source:Mordor IntelligenceFollowing these trends,Indias solar PV sector became its second-largestrenewable energy employer,where it support

118、ed c.115,000 direct andindirect jobs.However,the countrys installations declined in 2019compared to 2018 due to economic slowdown,tariff caps,payment delaysand challenges related to land acquisition and access to grid connections.According to a report by the International Energy Agency,Indias solar

119、PVdeployment is set to decrease by 23%in 2020 compared to 2019,but arebound is expected in 2021 with capacity additions exceeding 2019 levels.Concentrated Solar Power(CSP):Cost Factorand Low Investor Confidence Limits GrowthIndia was the only other country in Asia to have CSP capacity underconstruct

120、ion by the end of 2018.The 25 MW Gujarat Solar One facility(9hours TES)was expected to enter operation in late 2019,and the 14 MWDadri Integrated Solar Combined-Cycle plant was also under construction.The total installed CSP capacity in India is c.228.5 MW with a majority ofupcoming CSP plants in In

121、dia being PTC based and being expected to add275 MW of capacity.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali24Source:CurrentscienceFurthermore,in May 2020,researchers at the Indian Institute ofTechnology-Madras(IIT-M)developed a low-cost Solar PTC system forconcentra

122、ting solar energy in areas such as desalination,space heating,andspace cooling.India also ranked fourth in terms of number of Solar Heat forIndustrial Processes(SHIP)additions in 2019.Source:Solar PaybackIndia had an investment subsidy programme for concentrating solar thermalsystems until March 202

123、0.In 2018 and 2019,the subsidy amount remainedat 30%of the benchmark or actual investment cost,whichever is lower.However,India lags behind other global leaders such as Spain and theUnited States.Challenges which slow down the growth of CSP in Indiainclude low investor confidence,unreliable solar da

124、ta,low availability ofskilled labour,and a high cost compared to PV.Solar Heating and Cooling(SHC):GovernmentPolicy Drive PopularityDue to government support and subsidies,solar water heaters are nowbecoming quite popular and are affordable.A 100-litre per day water heatercan save yearly electricity

125、 units in various parts of the country as follows.Source:Bijli Bachao!A subsidy is provided for the installation of a solar water heater,and theamount and procedure of subsidy varies from state to state.Where somestates provide a subsidy of 30%up to 200 LPD(litres per day)capacity,others provide a R

126、s.100/month subsidy in the energy bill.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali25Japan:Government Yet toCompletely Support Sectors GrowthJapan started embracing new power generation technologies particularlyafter the earthquake and nuclear disaster in Fukushima i

127、n 2011,where theshutdown of the countrys nuclear fleet resulted in higher electricity prices.In 2019,renewables accounted for c.19%of Japans power generation,whichincluded c.8%wind and solar.The annual increase in figures for renewableenergy has reached almost double-digit units until 2017,after whi

128、ch a morestable growth rate was witnessed.Japan announced in 2019 that its originalFITs initiated in 2009 would be coming to an end,and the country plans toreduce its greenhouse emissions by 26%compared to 2013 levels,whilstdoubling its renewable energy production by 2030.The Japanese government aim

129、s to have renewable resources account for22-24%of national electricity generation by 2030,nuclear power 20-22%,and fossil fuels 56%.Strategy to Achieve Renewable Energy AimsIn 2017,Japan introduced new legislation aimed at increasing the countryspercentage of renewable resources.Furthermore,analysts

130、 at energyconsultancy Wood Mackenzie have stated that they estimate over US$100bnof solar and wind power investments in Japan between 2020 and 2030,alongside a decline of c.30%in wind and solar generation costs.Source:Long Term Emission Reduction ProposalJapans proposals for its long-term emission r

131、eduction are focused more onthe transport sector and zero-emission buildings.Japan is also one of thefirst countries to announce a hydrogen strategy and is currently the sixthlargest hydrogen market.Hence,the country would also focus on hydrogenalongside solar and wind to achieve its renewable energ

132、y goals.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali26Photovoltaic(PV):Government Policies UpliftGrowthFollowing the Great East Japan Earthquake of 2011,Japan initiallyintroduced a high FiT of 40/kWh in 2013,to kick-start the solar PV market.Solar PV Generation is no

133、w becoming competitive with grid electricity in2019,solar PV accounted for c.7.4%of Japans total electricity generationcompared to 6.5%in 2018.Japan has set a solar installation target of 64GW by 2030,and despite thecountrys progressive decline in PV installation,since peaking in 2015,consensus beli

134、eves that the country would be able to achieve its target in2020,10 years ahead of schedule.The following measures are expected to drive solar rooftop installation inJapan over the next few years.Residential consumers are now looking atoptions beyond self-consumption,in combination with electric veh

135、icles(EVs)or batteries,retrofitting storage,sale of surplus electricity via one-on-one contracts with utilities or power producers and suppliers(PPSs),and anewly formed power distribution business under Japans electricity marketreform.Additionally,in 2018,the Japan Electric Power Exchange(JEPX)issue

136、d tenders for non-fossil-fuel certificates,and is also planning tointroduce futures contracts.For the non-residential sector,the JapaneseMinistry of Economy,Trade and Industry(METI)has set a three-yeardeadline for the completion of projects over 10kW in size which had signedcontracts with a utility(

137、an organisation supplying the community withelectricity,gas,water or sewerage)after 1stAugust 2016.Source:PV MagazineHowever,Japans PV market continues to suffer from grid constraints,lack ofavailable land,high labour costs and high prices of solar generation,whereJapans prices are some of the world

138、s highest.In 2017,a tender program wasAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali27introduced to reduce the high solar power price in Japan.Furthermore,withthe spread of the adoption of renewables,problems have emerged with theFiT.These include increasing surcharges

139、 on the renewables and difficultieswith receiving power generated by renewables on the grid side.The METIreduced the FiT by 22%YoY in 2019 for installations between 10kW and500kW and a decision has been made to overhaul the FiT by the end ofFY2020 to allow renewables to become an economically self-s

140、ustaining coreelement of the power generation mix.Japan hopes to integrate large solarpower generation and wind power generation to the electric power marketthrough making them more competitive sources.Concentrated Solar Power(CSP):ContinuousR&D in Attempt to Broadly Commercialises theTechnologyJapa

141、n began to research CSP in the 1970s,and Japanese companies havelong since claimed many patents in the field of CSP.However,the countryspoor Direct Normal Radiance(amount of solar radiation received per unit bya surface that is always held perpendicular to the rays that come in a straightline from t

142、he direction of the sun at its current position in the sky)and littlespace makes it difficult to erect CSP plants within the country,but Japan hasmade plans to use CSP plants in the worlds sunny regions such as Australiain order to generate energy FS7 GB8 which can then be shipped back tothe country

143、.Source:MDPI;showing main CSP patent applicantsThe Japanese company Chiyoda Corporation is among the key players in theglobal-concentrating solar power market,and the company is promoting anew Molten Salt Parabolic Trough CSP(MSPT-CSP)technology,whichAsian Solar Energy Sector:Powered by Subsidies an

144、d Moving DownstreamAqila Ali28currently has a demo plant in Italy which was built in 2013.The MSPT-CSPtechnology has the ability to operate at temperatures of up to 550C bychanging only the heat transfer fluid from hot-oil to molten salt.In August 2014,a pilot CSP plant based on parabolic trough sol

145、ar collectors,binary power generation unit and biomass boilers started its operations inAugust 2014.The main specifications of the plant included a power outputof 70kW and an output ratio of 1:1 between solar and biomass.Source:SciencedirectSolar Heating and Cooling(SHC):CurrentlyDeclining on the Ba

146、ck of Reduced SubsidiesTowards the end of 2011,Japan was among the 12 countries in the worldwith significant capacity of solar water heating systems in operation.UnderJapans“Sunshine Project”,solar heating and cooling technology and solarthermal power generation have been promoted since 1974.However

147、,thenumber of solar heating systems installed in Japan has decreased over2015-2018,alongside declining subsidies for solar energy.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali29Source:StatistaD.Value Chain AnalysisSummary:Of the three technologies we have discussed ab

148、ove,the most elaboratevalue chain is that of solar photovoltaic(PV)cells.Hence,we will discussthe stages of the PV value chain below.We will also discuss thesignificant market conditions affecting the overall PV industry along withkey players at each stage of the value chain(where such information i

149、savailable).Our key points are:-Of the different types of solar PV cells,only wafer-based crystalline PVcells and thin film cells have been commercialised on a large scale.-The solar PV value chain involves silicon purification,which areconverted into ingots,and are then cut into wafers.The solar ce

150、lls arethen produced,assembled into a solar panel and installed.-Silicon purification,ingots and wafer manufacturing form theupstream,while cell production,module assembly for solar panels arethe mid-stream in the value chain.Installation and electricity generationform the downstream.-Downstream pla

151、yers enjoy a relatively high margin.-Chinese players dominate the solar market at each stage of the valuechain.Types of Solar PV CellsWe mentioned earlier that PV cells were first developed by Bell TelephoneResearchers in 1954.After many years of development,the currently existingPV cell types can b

152、e categorised into four main types.Wafer-based crystalline PV cells,which are produced using solar waferswith a thickness of 160-190m(micrometers),are further divided intomonocrystalline PV cells(PV cells produced using a single crystalgrowth method)and multi-crystalline PV cells(a cast solidificati

153、onprocess which produces multiple,smaller crystals).Thin film cells are produced by depositing very thin layers of semi-conductive PV material onto cheaper backing materials such as glass,plastic,or stainless steel.High efficiency cells are made of gallium arsenide and were firstdeveloped for space

154、applications.The efficiency of the cells is increasedusing either one PV cell(single p-n junction)or two types of PV cells(multi-junction)to capture a greater range of wavelengths of light.PV cells(made of organic materials).Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila A

155、li30Of the above four types,only wafer-based crystalline PV cells and thin filmcells have been commercialised on a large scale.To provide an overview ofthe general uses of PV cells,below are some categories of PV market typesalongside possible applications.CategoriesApplicationsGrid-connectedSize of

156、 PV systemGrid-connectedOff-gridUtility DistributedGrid-connected,utility-scalegenerationPower generators,industrial usersXXGrid-connected,distributedenergyResidential&commercial buildingsXXOff-grid,utility-scalegenerationIndustrial users;remote communitiesXXOff-grid,distributedenergyResidential&com

157、mercial buildings,including withremote communities;remote,niche applications(ranging from small calculators,to offshore oil rigs,tospace applicationsXXSource:World Intellectual Property Organisation:Economic Research WorkingPaper No.40The Solar PV Value ChainThe solar PV value chain involves many ch

158、emical processes andmicroelectronic techniques.Starting off with purifying the silicon found inquartz(a hard,crystalline mineral composed of silicon and oxygen atoms),the value chain ends once the solar PV cells have been installed andelectricity is generated using it.Source:World Intellectual Prope

159、rty Organisation:Economic Research WorkingPaper No.40The following image provides a basic overview of the PV solar value chain.Although the writing is illegible,we will discuss each of the stages in detailbelow;the diagram has only been included to provide a clear picture on howthe entire value chai

160、n functions.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali31Source:Total Solar ExpertStage 1:Silicon PurificationPolysilicon wafers are a major PV cost component and account for c.40-50%of the finished modules cost.Producing solar-grade polysilicon is complexand capita

161、l-intensive,as the minimum purity required is 99.999999%andusing lower quality polysilicon can decrease PV efficiency.Any cost savingswhich can be gained from using polysilicon of a lower quality can be offsetby even a small decrease in PV efficiency resulting from using lower qualitypolysilicon.Sil

162、ica found in quartz sand needs to be purified alongside a mixture of coaland wood in a high temperature furnace to create metallurgical gradesilicon,which is c.99%pure(trichlorosilane).However,further purificationis needed for the solar PV industry,which is done by cracking thetrichlorosilane at hig

163、h temperatures in a reactor to form purified nuggetscalled“chunks”that are called polysilicon.Polysilicon is also used for the semiconductor industry,but is highlydemanded for crystalline PV,and in 2016,the PV industry accounted for c.90%of the polysilicon demand.Large investments in the expansion o

164、f solarcapacity have led to unprecedented growth in the polysilicon market.Stage 2:Conversion of Ingots to WafersAn ingot is a cylinder or brick of silicon which is grown from pure silicon andcan be in the form of a single crystal(monocrystalline silicon/monosilicon)or multiple silicon crystals,whic

165、h are smaller.The following steps are thenundergone to convert the ingot into a wafer.Crystallisation of the silicon in ingots:Monocrystalline is obtainedthrough growth or pulling of a cylindrical ingot from a monocrystalthrough the Czochralski process,and the melting point is reached at1414C.Tailin

166、g,cylindrical grinding and cutting of the ingots:the extremes of theingot and external surface corrugations are eliminated.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali32Shaping of the monocrystalline ingots:the ingot is shaped into a square,which allows optimisation

167、of the space when creating the module.Stage 3:Wafer ManufacturingA wafer is a thin slice of semiconductor such as crystalline silicon which isused to fabricate integrated circuits and manufacture solar PV cells andaccounts for up to 40-50%of crystalline module cost.The ingots are sliced into wafers

168、using wire saws using high precisioncutting,given that the wafers are no more than 0.18mm thick and can crackeasily.The wafers are then treated in different ways to clean the debris fromprevious processes,and a first selection is made to remove defective wafers.Stage 4:Cell ProductionWafers texturin

169、g:the wafers are placed in a bath to remove the surfacedamaged by sawing and to texture the surface,which enhances theabsorption of sunlight.Doping by diffusion:in order to obtain semiconductor diffusion,in afurnace heated to 800C,the wafers are doped in surface withphosphorous or boron by thermal d

170、iffusion.Anti-reflection coating ensures more effective photon absorption andsurface passivation.Cells are also given their blue colour at this stageusing a vapor deposition process.Metallisation:an electric circuit is screen-printed onto the front or rearsurface of the wafer to carry the collected

171、current.Connecting cells:the cells are assembled and welded together to formmulti-cell strings.Stage 5:Module AssemblyCell encapsulation:The cells are interconnected with a sheet of glass,two foils for EVA resin and an impermeable film.The module is thencooked in a laminating machine.Source:Total So

172、lar ExpertFinishing and mounting the modules:the PV solar module is framed andequipped with a junction box for power connection.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali33Testing:Modules are tested in calibrated artificial light to measure theirelectrical characte

173、ristics.Stage 5:Formation of Solar Panel SystemsTo deliver electricity to the loads(electricity consumption devices or to theelectricity grid),the modules are combined with complementary equipment(such as batteries or inverters).Stage 6:InstallationThis final stage of the overall manufacturing proce

174、ss contains two aspects:A mechanical integration of the solar module into its chosen arraystructure andThe electrical integration of the solar module with the rest of thesystem,matching the equipment to the electrical load required by thecustomer.Segregation of the Solar PV ManufacturingProcess:Sign

175、ificant Disparities BetweenUpstream and DownstreamThe above processes have been segregated into upstream,midstream anddownstream as follows.UpstreamSilicon purificationIngot&wafer manufacturingMidstreamCell productionModule assemblySystemsDownstreamInstallationElectricity generationSource:World Inte

176、llectual Property Organisation:Economic Research WorkingPaper No.40Although the solar industry was initially upstream focused,solar PVmanufacturers have increasingly started to move to the downstream parts ofthe value chain,with the reduction of the cost of solar panels,which pushedmanufacturing cos

177、ts towards near equivalence with installation costs.Thisshift to the downstream parts of the value chain has been noticeable sincethe financial crisis of 2008/2009,where there was cancellation of orders,owing to the inability of solar PV project developers to obtain financing frombanks.Asian Solar E

178、nergy Sector:Powered by Subsidies and Moving DownstreamAqila Ali34Higher Margins for Downstream Companies?Solar manufacturing is generally considered a low-margin business.Upstream companies are usually chosen by customers on the basis of brandand involve a higher running cost,thereby limiting the m

179、argins.Downstream product services,in contrast,allow manufacturers to retainhigher margins.A recent trend that can be observed is that PVmanufacturers across the value chain,especially those players in the mid-stream are increasingly involving themselves with downstream services.Having said that,we

180、also note that,there are significant barriers of entry tothe downstream market,due to requirements such as financing and otherpermits,inspections,suppliers of inverters,and parts and crew labour.We have compared the margins of Vivint Solar,a company specificallycatering to the downstream of the sola

181、r PV value chain,with those of twoupstream and midstream companies,JA Solar and JinkoSolar.AlthoughVivint Solar made losses over 2013-2016,over the last few quarters,despitethe large fluctuations,Vivint Solars margins have remained higher thanthose of the other two companies.Source:CapIQChinas Domin

182、ance of the Solar PV Value ChainThe reported production of solar cells globally ranged between 110-120GWin 2018 and is estimated to be between 120-140GW in 2019.Since 2000,theproduction of solar PV devices has grown at a CAGR of c.40%,driven by arapid increase in annual production in China and Taiwa

183、n in 2006 and atrend towards increasing production capacities in Asian countries includingIndia,Malaysia,Thailand and Vietnam since 2014.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali35Source:European Commission PV Status Report 2019Although,initially most of the deman

184、d and supply was located in developedeconomies,particularly the U.S.,Japan and Germany,by c.2010,China wasdominating the global solar PV value chain,driven mainly by subsidies andincentives provided by the Chinese government.However,though China has the competitive advantage on scale,America hasthe

185、advantage in innovation.With China lowering corporate taxes,providingtax breaks and incentives,and streamlining approval processes,local solarmanufacturing was encouraged.However,downside risks also exist frombadly targeted government incentives.Although sector-specific policyincentives can be benef

186、icial,the Chinese governments encouragement hasled to overcapacity and global spill over effects.As was evident during thefinancial crisis,the access to large amounts of credit against smalldifferences in interest rates allows companies to grow and scale productionwhen their competitors are unable t

187、o do so.Key PV Manufacturers in ChinaSince China accounts for the largest proportion of solar PV production,wewill be discussing the top component manufacturers/wholesalers in China.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali36CompanyDescriptionWebsiteDMEGC SolarSpe

188、cialises in developing,manufacturing and marketingboth monocrystalline and polycrystalline silicon wafers,cells,and modules.As of August 2019,the company hadan annual production capacity of 6,000 MTA(polysilicon),500 MW+(wafer),1.6 GW(solar cell),and 900 MW+(modules).http:/ SolarHoldingsA manufactur

189、er of high-performance photovoltaicproducts,such as silicon,batteries,components,andphotovoltaic power plants.http:/ GroupProvides polysilicon,silicon wafers,solar cells,and othersolar components alongside other products catering tothe electrical and rail transportation fields.http:/ EmeiSemiconduct

190、orMaterialsProvides semiconductor materials for many industrialsectors and research fields including electronicinformation,energy,transportation,machinery,andelectricity.http:/ SolarOne of the largest and most innovative solar modulemanufacturers both in China and all over the world.As ofMarch 2019,

191、Jinko Solar has an integrated annualcapacity of 10.5 GW for silicon wafers,7 GW for solarcells,and 11 GW for solar modules.https:/ NewEnergyTechnologyA manufacturing company that has been in the industryof photovoltaic technology for more than ten years now.http:/ LuanPhotovoltaicsTechnologyProduces

192、 silicon wafers,cells,modules and PV powerplants and as of May 2020,the company had anintegrated PV production capacity of 7.5GW.This wascategorized as 5GW for high-efficiency PERC cellproduction,1GW double-glass bifacial half-cell moduleproduction,500MW dense grid conventional moduleproduction,500M

193、W chip production and 500MW crystalingot production capacity.MJ1 GB2http:/ high-tech enterprise that aims to provide siliconmaterials for scientific research,the information industry,and the new energy industry.As of August 2019,the company could produce 1.12m5-inch circuit-grade silicon polishing w

194、afers and 3.6m6-inch circuit-grade silicon polishing wafers.Additionally,it can develop and produce 50,000 8-inch siliconpolishing wafers per month.http:/www.ly- EnergyScience andTechnologyMainly engages in R&D,production,and sales of solarenergy batteries and components and has a completeindustrial

195、 chain of the production of polycrystalline siliconwafers,solar energy batteries,and components,as wellas the investment and construction of photovoltaicstations.http:/ GroupEngaged in the manufacturing of solar photovoltaicwafers and has two manufacturing bases and six-corecompanies.As of right now

196、,its wafer manufacturingscale is 10 GW:6 GW for single crystal,3 GW forpolycrystalline,and 1 GW for cast single crystal.http:/www.ht- FeedsAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali37However,global leading manufacturers differ slightly,as just six of the 10companie

197、s in the top 10 PV manufacturers listed by shipments(2019)areChinese.As of 2019,Tongwei(China),LONGi(China),Jinko(China),Canadian Solar(Canada),and Aiko Solar(China)are the top 5 leadingplayers in the market.Over 2010-2019,shipments from the top 10 PV manufacturers grew from11GW to 78GW-a CAGR of 24

198、.3%.Only four companies from the top 10 listin 2010 remained in 2019s top 10 list.These included First Solar,Trina Solarand JA Solar,which moved to the bottom half of the top-ten list,with newcompanies moving to the top spots.Despite new companies moving into themarket,China continues to dominate th

199、e PV manufacturing industry,givenits already-established market presence.Global leading PV manufacturers,by shipments:Source:NREL 4Q2019/1Q2020 Solar Industry UpdateLeading Companies in Each of the Stages of theSolar PV Value Chain and Their MarketConditionsSilicon PurificationThe polysilicon indust

200、ry underwent numerous changes in the past few years.Back in 2004,China accounted for a fraction of the global polysilicon output.However,with the country introducing duties on polysilicon imports in2013,by 2018,the countrys output contributed 54%of the total output,andreached 63%in 2019.Asian Solar

201、Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali38Source:Bernreuter ResearchHowever,it is not only the country-wise distribution which changed.Until2005,only seven companies ruled the polysilicon market:HemlockSemiconductor Corp,Wacker Chemie AG(XTRA:WCH),REC Silicon ASA(OB:REC),Tok

202、uyama Corporation(TSE:4043),MEMC Electronic Materials,Mitsubishi Materials Corporation(TSE:5711),and OSAKA Titaniumtechnologies Co.Ltd.(TSE:5726).However,in 2013,with China introducingduties on polysilicon imports,the countrys polysilicon productionexpanded,alongside which four companies moved to th

203、e forefront of theglobal polysilicon industry.Xinte Energy Co.,Ltd.(SEHK:1799),Daqo NewEnergy Corp.(NYSE:DQ),Tongwei Co.,Ltd(SHSE:600438)and East HopeNew Energy.GCL-Poly Energy Holdings Limited(SEHK:3800),along with thepreviously mentioned four companies,is now among the leading companiesin the poly

204、silicon market.OCI Company Ltd.(KOSE:A010060),although thethird-largest polysilicon manufacturer in 2018 and the second in 2019,shutdown its Korean factory in February 2020,succumbing to the price pressurefrom low-cost Chinese plants.We also note that,the polysilicon industry hashigh barriers to ent

205、ry in the form of the high capital expenditure required toestablish a polysilicon production plant.Polysilicon capacities of the Big Six in 2020:No.ManufacturerCapacity(MT)1Tongwei96,0002GCL-Poly90,0003Wacker84,0004Daqo New Energy80,0005Xinte Energy80,0006East Hope80,000Total510,000Source:Bernreuter

206、 ResearchAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali39Ingots and Wafer ManufacturingThe most commonly used bulk material for solar cells is crystalline silicon,the market for which is expected to grow at a CAGR of 7%over 2020-2027,according to Data Bridge Market Res

207、earch.Based on various searches,thebelow companies can be considered some of the leading players in the ingotmanufacturing market.Company NameRegionMaterial TypesPanasonic Corporation(Sanyo)JapanPolycrystalline ingotSharpJapanMonocrystalline ingotJA SolarChinaPolycrystalline ingotLDK SolarChinaMonoc

208、rystalline ingot,polycrystalline ingotDaqo GroupChinaPolycrystalline ingotJinko SolarChinaMonocrystalline ingot,polycrystalline ingotSUMCOJapanMonocrystalline ingotHT-SAAChinaPolycrystalline ingotTopray SolarChinaMonocrystalline ingot,polycrystalline ingotRietechChinaMonocrystalline ingot,polycrysta

209、lline ingotSornid Hi-TechChinaMonocrystalline ingot,polycrystalline ingotOCI CompanyKoreaPolycrystalline ingotSource:ENF SolarThe wafers are produced similarly for both semiconductors and solar PVcells,as solar PV cells are also a type of semiconductor device.However,thelevel of quality control and

210、cleanliness required by the solar PV cells is lessthan that required for semiconductors.The market share of wafer producersworldwide in 2017 and 2018 was as follows.Source:StatistaAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali40CompanyLocationDescriptionSK SiltronSouth

211、KoreaManufactures and sells semiconductors and provides polished wafers,whichare used to make semiconductor devices.Silronic(XTRA:WAF)Germany Manufactures and sells silicon wafers with diameters of up to 300mm.GlobalWafers(GTSM:6488)TaiwanManufactures and sells semiconductor ingots and wafers.Sumco(

212、TSE:3436)JapanManufactures and sells silicon wafers and monocrystalline ingots.Shin EtsuJapanProvides polyvinyl chloride(PVC)and semiconductor silicone products.Source:CapIQHeavy investment is required to enter the wafer market;hence,there arehigh barriers to entry,with the market being controlled b

213、y the five strongplayers mentioned above,leading to limited competition in the market.We have mentioned above that the prices of ingots and wafers fell partiallydue to process improvements.For ingots and wafers,the productionequipment installed in factories has been improved.For ingots,this wasdone

214、by growing larger sized crystals and improving the seed crystals neededto improve process time and increase yield.Cutting ingots into thinnerwafers,reducing loss of unused ingot material,and increasing recyclingrates are other production equipment improvements which enabled costsaving.Other process

215、innovations include finding ways to reduce theamount of metallisation pastes/inks containing silver and aluminium.Cell ProductionThe top-10 cell producers by volume in 2018 were the following companies.RankingCell Producer1JA Solar2Tongwei3Trina Solar4Hanwha Q-CELLS5JinkoSolar6LONGi7Shunfeng(incl.Wu

216、xi Suntech)8Canadian Solar9Aiko Solar10First SolarSource:PV-TechJA Solar,Trina Solar,JinkoSolar and Canadian Solar can be viewed asglobally recognised integrated cell/module producers who produce multi-GW levels of cells in-house while using domestic Chinese third-party cellsupplies from companies s

217、uch as Tongwei and Aiko.LONGi solar is the onlycompany which covers the full solar PV value chain.The industry containslow entry barriers and is therefore highly competitive.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali41Module ProductionBased on own-brand shipped mod

218、ule MWp-dc volumes in 2017 and 2018,the top 10 module suppliers were as follows,with Jinko Solar continuing tohave a clear lead in the market.There were clear changes in the competitiveposition of many of the companies in 2018.JA Solar was placed second inthe market,while Canadian Solar lost its thi

219、rd place to Trina Solar.RankingSolar Module Manufacturer201720181Jinko SolarJinko Solar2Trina SolarJA Solar3Canadian SolarTrina Solar4JA SolarLONGi Solar5Hanwha Q-CellsCanadian Solar6GCL System Integration TechnologyHanwha Q-Cells7LONGi SolarRisen Energy8Risen EnergyGCL System Integration Technology

220、9Shufeng Photovoltaic InternationalTalesun10Yingli GreenFirst SolarSource:PV-TechSimilar to the solar cell production industry,the solar module industry alsohas low barriers to entry,hence is highly competitive.Distribution and InstallationThese are the downstream activities of the value chain,with

221、a large numberof wholesalers,many of whom do not operate globally.While some of thewholesalers have exclusive rights to distribute a specific module,there arevery limited distinguishing features.While small installations for residentialrooftop applications can be directly done by local installers an

222、d electricians,larger projects need to undergo various stages of development beforeconstruction can even begin.A few examples of companies who carry out solar PV projects include thefollowing.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali42Cyprus Creek Renewables is in

223、volved in the development,financing,andoperating of utility-scaled and distributed power plants across the US.The company has developed more than 8GW of solar and has more than2.5GW under management,making it one of the countrys leading solarand storage companies.GreenYellow Thailand is an energy ma

224、nagement company with morethan 1,000 energy efficient projects commissioned and more than 150solar plants under operation worldwide,constituting more than250MWp.AMP Clean Energy is a distributed energy company funding anddeveloping low carbon heat and power solutions including solar PV andflexible e

225、nergy plants.E.A Look at the Key Asian SolarPlayers:Survival Depends onSubsidiesAs discussed in the section above,a recap of the top few globally leadingplayers in the solar PV industry and across the value chain is as follows:Solar Module ManufacturersSolar CellManufacturersIngot ManufacturersPV Ma

226、nufacturersJinkoSolar Holding(JKS US)(China)JA Solar(China)Panasonic Corp(6752 JP)ViaSanyo Electric(Japan)Tongwei(China)Ja Solar Holdings Co.,Ltd.(Ads)(JASO US)(China)Tongwei(China)Sharp Corp(6753 JP)(Japan)LONGi(China)Trina Solar(TSL US)(China)Trina Solar(China)JA Solar(China)Jinko Solar(China)LONG

227、i Green EnergyTechnology(601012 CH)(China)LONGi(China)Canadian Solar Inc(CSIQ US)(Canada)Suntech(China)Source:Various SourcesHaving considered these leading players and conducting research on theleading companies in China,Japan,and India specifically,we shortlisted afew Asian solar energy players th

228、at we think are important players in theindustry.Our ShortListed Asian Solar PlayersSolar ModulesSolar CellsIngotManufacturersPV ManufacturersCSP FocusedManufacturersJinko Solar(China)JA Solar(China)Sharp(Japan)Sanyo Electric(Japan)Tongwei(unlisted inChina)Chiyoda(Japan)Trina Solar(China)Suntech(Chi

229、na)LONGi(listed inChina)CGN New Energy Holdings(China)Kyocera(Japan)Yingli Green Energy(China)Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali43Vikram Solar Private Ltd(unlistedin India)Adani(unlisted-India)Having looked at these players quite closely,we take you through

230、 ourconclusions first about the similarities and differences across these players,followed by summarised company profiles.Key conclusions about Asian players in the industryIncreasing downstream presenceMost of the leading solar energy players on our list are starting tofocus increasingly on the dow

231、nstream rather than the upstream.Ingot and wafer manufacturers are exceptional as they are part of theupstream,but are attempting to increase downstream presence.Theupstream players witness lower profitability than the downstream(asdiscussed in the section above).The reason for this could be thatdow

232、nstream players benefit more from subsides than the upstream,alongside the fact that the upstream has more exposure to supply-demand volatility,which in turn impacts profitability.This explainsplayers increasing focus on an integrated supply chain model.However,there are certain exceptions like Tong

233、wei.Apart from this,the other leading players on our list are trying to increasedownstream presence,especially via the Engineering,Procurementand Construction(EPC)model.ASEAN and developing market focusedThese Chinese,Japanese and Indian players aim to capture thepotential demand in developing count

234、ries,especially in ASEAN.Webelieve that this is a key long-term driver for the players,given thepotential for growth in the developing countries when compared tocountries like China and Japan,where demand growth has slowed.We also highlight the need for governmental policy support in thesedeveloping

235、 countries to make it easy for solar energy players tomaintain their pricing and profitability.Similar basic technology:mono and multi-crystalline;some have a competitive edge by adopting slightlydifferentiated technology such as HJT and Shingled Moduletechnology.Crystalline technology is widely use

236、d across these Asian players.Certain players like JA Solar,Suntech,Vikram Solar,Tongwei andLONGi also adopt a varied type of these crystalline technologies,likehalf-cut modules,Shingled Module,Mono Passivated Emitter andRear Cell,and Heterojunction technology(these technologies arediscussed below)fo

237、r incremental increases in energy efficiency.Itappears that the Heterojunction technology(HJT)and shingledmodule types allow the highest potential for increase in efficiency.These technologies will lead to an incremental increase in efficiency,Asian Solar Energy Sector:Powered by Subsidies and Movin

238、g DownstreamAqila Ali44though not a completely revolutionary change in the solar energyproduct.Companies like Suntech and Tongwei on our list have aslight competitive edge over the other players,given their head startin these technologies.We believe that as these players capitalise onthe HJT and Shi

239、ngled technologies,the other Chinese and Indianplayers might quickly follow.On the other hand,thin-filmtechnology,which is mainly used for small-scale purposes,isadopted by Japanese companies like Sharp and Sanyo.This alsoexplains why Japan lags behind India and China in the solar energyrace.The key

240、 differences in operational performances amongstthe Asian players:The Chinese players generate relatively low profitability orare making losses despite their leading position globally.Moreover,the Chinese leading players are mostly listed companies,except for Tongwei,Suntech,and Yingli.We note that

241、Suntech and Yingli were also listed,but have bothbecome unlisted now,due to increased debt burdens.The Indian players,however,are mostly private companiesand generate attractive profitability(according to availableinformation).The reason for this appears to be theattractive government policies in th

242、e country.With regard to the Japanese players,we note that theseplayers do not solely focus on solar energy products likethe Chinese and Indian players,but instead operate solarenergy as a business segment for which they expect long-term growth prospects.The Japanese players are alsorelatively less

243、profitable when compared to the Indianplayers,and they aim to price higher and increase producttypes in order to maintain profits.Provision of subsidies is key for players to operateIt should be noted that provision of subsidies is a key factor thatinfluences the profitability of these leading playe

244、rs across Asia.TheChinese players enjoyed good profitability in the past,but haverecently been struggling with their financial performance,mainlydue to the governments decision to reduce subsidies for solar energyproducts.As of now,the Indian players appear to be the mostattractive in terms of finan

245、cial performance.So,the question is,would the Indian players also find themselves in a situation similarto that of the Chinese players when subsidies are removed?Firstly,we note that India is unlikely to remove its solar energy subsidiesuntil at least the medium term,given that the industry is still

246、 at theearly stages of development.As such,the Indian players are likely tobenefit for some time.However,over the long term,subsidies couldbe removed and could impact the Indian companies in a similar wayAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali45to the Chinese pl

247、ayers.We feel that the Indian companies are lookingto move towards other developing markets,and as such,could caterto other markets where subsidies are available as the market in Indiamatures.We also feel that since most of these Indian solarcompanies are part of large conglomerates,they are unlikel

248、y to gopublic until they become much larger,thereby not giving rise tomuch of an investment opportunity.Regardless,we feel that theIndian companies in their domestic market alone have high potentialfor growth when compared to certain other leading players.Althoughthe Japanese players are ranked amon

249、gst the top ten,they haventyet entirely focused on capturing growth in the solar market.Theirstrategy appears to be to operate via a more diversified business.Moreover,the less encouraging subsidy policy in Japan could also bea reason for this relatively low focus on solar energy.Our thoughts on the

250、 Chinese listed players:Our main aim here is to compare the listed pure solar players in which it ispossible to invest,which appears to be all Chinese companies.Indian playersare mostly still private companies,while the Japanese listed leading playersare not pure solar energy players.However,we have

251、 provided a briefoverview of these companies and their strategies in the solar business.Mostimportantly,we have provided an investment thesis for each of the leadinglisted Chinese players.We have summarised the investment positives andnegatives in the table below.CompanyInvestment PositivesInvestmen

252、t NegativesFinancialNumbersI.RevenueCAGRII.OP CAGRIII.OPMIV.PEMultipleJinkoM&A for growth and expansion offacilitiesContinuous expansion of plantskey for growthTrade wars and increasingsolar production affectpricing(upstream effect)I.25.0%(5-year)II.16.2%(5-year)III.5.5%IV.6.2x(NTM)TrinaSolarAn EPC

253、model to capture growthin the smart energy marketEmerging market focus could be along-term driverReliance on subsidiesMounting competitionI.-5.5%(3-year)II.-18.3%(3-year)III.5%(3-year)IV.40.9x(LTM)Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali46JA SolarAcquisitions boo

254、st profit and allowthe exploration of new marketsCapacity expansion and productinnovation key for growthTrade wars and subsidyremovalI.8.8%(3-year)II.12.9%(3-year)III.8.6%IV.21.3x(NTM)LONGiSolarVertically integrated module makerincreasing presence in thedownstreamAcquisitions and collaborationswith

255、key rivalsAggressive capacity expansionand strong demand for bi-facial PVmodulesSubsidy removalI.55%(5-year,overallbusiness)II.76.3%(5-year,overallbusiness)III.19.1%IV.30.3x(NTM)CGNTargets high quality parity projectsto build revenue focus on CSPdifferentiates the companyExpanding and strengtheningc

256、ompetitive position throughacquisitionsReliant on governmentpoliciesI.53%(5-year)II.54%(5-year)III.49.6%IV.6.1x(NTM)Source:LSRAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali47Source:CapIQBased on our analysis,we feel that:While LONGi has been trading at a premium to its

257、 peers,in ouropinion,LONGis premium appears justified given its strong revenuegrowth rates alongside its differentiated strategy of collaborating withrivals to explore new markets.Moreover,despite the reduction insubsidies in the country,the company has still been able to maintain itsprofitability,w

258、hich we see as favourable for LONGi.Recently,JA Solar has been trading at multiples slightly below LONGi.We believe that JA Solar should continue to trade below LONGi,giventhe latters better earnings profile and strategies for growth.We note that JA Solars growth strategies are similar to that of Ji

259、nkos.However,given JA Solars increasing focus on downstream,it has beenable to generate higher profits than Jinko.This also explains Jinkosrelatively low multiple,which we feel is reasonable.Trinas Forward multiples are not available for the time period.However,looking at the companys PE based on LT

260、M EPS,which isaround 40 x,we feel that Trina looks quite expensive.We like Trinasability to maintain a diversified product base and target developingAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali48markets.However,it is possible that the companys profitability mightstru

261、ggle if subsidies do not exist.Thus,with an already lower EBITmargin when compared to peers,the downside risks are quite high forthe company.As such,the multiples make the company look quiteovervalued.CGN New Energy appears to be trading at a discount.The company isquite different to the other playe

262、rs,in the sense that it focuses solelyon CSP projects.Moreover,the company appears to be running ongovernment support.Thus,we feel that though profitability is high,itdoes not look as sustainable.In our opinion,the discount appearsjustified for CGN.Overall,we are more favourably inclined towards LON

263、Gi and JA Solarfor their attractive fundamentals and ability to capture opportunities inthe market.These players all face the risk of subsidy removal.However,as long as they can mitigate the effect by moving to developingcountries in time,the negative impact could be minimised.Our thoughts on the un

264、listed playersFor the unlisted players in our list,we have looked at the strategies theyfollow,their key opportunities,and risks in the market.We have summarisedthese in the table below.CompanyKey Product and TechnologyKey Strategies&OpportunitiesRisksTongweiTechnology:Mono-crystalline(PERC),poly-cr

265、ystallineA shingled module typeTargets:China&international marketsNot a vertically integratedproducerCaptures growth via differentmodule technologiesContinued growth in PV marketand demand for shingled moduletypesLimiteddownstream focusSubsidy riskSuntechTechnology:Crystalline technologyHeterojuncti

266、on technology(HJT)Targets:China&international markets,mainly EuropeInvestment in upstream,productsfocusing on downstreamCost-cutting and continuouscapacity expansionPremium as well as low-pricedproductsContinued growth in the PV marketPossibly targets the APAC regionCredit default riskYingliTechnolo

267、gy:Polysilicon andmonocrystalline technologyTargets:ChinaUSJapanVertically integratedmanufacturingDifferent strategies for each of itsfocus countriesGrowth in the integrated PVmarketCompany has filedfor insolvencyAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali49VikramSo

268、larTechnology:Mono Passivated Emitter andRear Cell(PERC)technology.Targets:IndiaAustraliaUSTaps markets beyond IndiaRuns an EPC modelFocuses on rooftop solar businessin IndiaRecovery in Indias PV industryGrowth expected for Mono PERCsDependent ongovernmentpoliciesSource:LSRKey points we highlight fo

269、r these companies are:The Indian companies that are private are doing relatively well.The keystrategy for the Indian players like Vikram Solar is the demand forrooftop solar in the country.However,these players generate strongrevenue and profit with the help of government support.Thus,ifgovernment s

270、upport reduces,these companies could also follow thepath of Suntech and Yingli.Suntech and Yingli,though leading the solar market,are strugglingfinancially.Suntech was delisted due to a bond default,while Yingli lastyear filed for insolvency.The reasons for this were their focus on theupstream while

271、 being dependent on subsidies.We consider Tongwei to be a rather attractive private company for itsbusiness model of purchasing wafers and slicing them to form solarpanels,and thus focusing on just part of the value chain.Moreover,thecompanys shingled module technology is likely to see growth in the

272、future.Subsidy removal or reduction in China is a risk for Tongwei,butwe believe that with the strong profitability position now and presencein over 20 countries,the company should be able to eliminate suchrisks.We like both Vikram and Tongwei,the former for its stronggrowth potential,and the latter

273、 for its business model and shingledmodule technology.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali50Summary of Listed Players that Are Not EntirelySolar-FocusedCompany Key Technology&Key Target MarketsKey Strategies&Growth DriversI.RevenueCAGRII.OPCAGRIII.OPMKyocera(

274、Japan)Technology:Silicon ribbon crystal andmulticrystalline silicon PV cellsusing casting technologyTargets:China&International marketsContinuous improvement intechnology alongside MLCCexpertiseTargets wider customer baseand broad product rangeFully-fledged distributionchannelContinued PV market gro

275、wthand possible need to downsizePV modulesI.-13.2%(5-year)II.Loss-makingSharp(Japan)Technology:Mono-crystalline,poly-crystallineand thin film technologyTargets:JapanEuropeASEANIncreasing downstreampresencePremium pricing strategy tosustain marginsIncreasing focus on ASEANContinued growth in PVmarket

276、,especially indeveloping countriesI.-5.6%II.+26.3%III.5.0%SanyoElectric(Japan)Technology:HIT solar cell technology based onmono-crystalline wafers,and thin film PV technologiesTargets:Japan&International marketsPanasonics support andstrong expertiseUse of renewable energy forvarious aspects of its o

277、therbusinessesA restructuring plan placingimportance on differentiatingits productsContinued growth in the PVmarketN/AChiyoda(Japan)Technology:CSP plant via Molten Salt ParabolicTrough CSP(MSPT-CSP)technologyTargets:Japan&International marketsEPC modelBuilding demonstrationprojects in new markets(in

278、itially)Support from subsidiaries andaffiliates overseas to targetinternational marketsPotential demand for CSPI.2.1%(5-year)II.N/AIII.N/AAdaniTechnology:Polycrystalline and thin-filmtechnologiesTargets:IndiaLong-term contracts withsecure counterpartiesEPC modelStrong assets allow rapidimplementatio

279、n of projectsUntapped demand in IndiaN/ASource:LSRAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali51In Detail:Listed Pure Solar Players:ChinesePlayersJinko SolarCompany BackgroundJinko Solar commenced operations in June 2006 and is one of the largestsolar module manufact

280、urers in the world.While a majority(95.8%in 2019)of Jinkos operations focus on solar modules,the company also produces andsells silicon wafers and solar cells.Product&TechnologyJinko Solar adopts the basic monocrystalline technology for its products.Together with this the company adopts three advanc

281、ed technologies whichare used to produce its product types:Half-cell module technology-halves the amount of electrical currentflowing in each busbar so the amount of internal losses in a half-cutmodule is of a full-sized cell module.The half-cell allows thegeneration of c.3%more power than a full ce

282、ll.Bifacial module has longer generation times compared to the standardmodule and features a transparent back sheet technology which allowsup to 20%power gain depending on albedo and PV system design.Thiscan be used in various applications including in a sunroom,in desert-covered circumstances,in a

283、highway,carport or on a sun-trackingmount.Tiling Ribbon,which is unique to the company is used to eliminate thecell gap in order to significantly increase module efficiency.Investment ThesisM&A for Growth and Expansion of FacilitiesJinko plans to grow through acquisitions,joint ventures or other str

284、ategicalliances with suppliers or other companies in China and overseas along thesolar power industry value chain.Given the continued growth in the PVindustry,Jinko expects strategic alliances and long-term purchaseagreement to secure growth for it.Asian Solar Energy Sector:Powered by Subsidies and

285、Moving DownstreamAqila Ali52Continuous Expansion of plants is considered key for growthAs of 31stDecember 2019,Jinko had agreed contracts of RMB1.73bn for thepurchase of additional manufacturing equipment and the expansion of itsproduction capacities.In order to retain its leading position,it is nec

286、essaryfor the company to continue its expansion,which the company appears keenin doing.Trade Wars and Increasing Solar Production are Possible Deterrents ofCompanys GrowthDue to the trade war between China and the US,certain additional dutieshave been imposed on CSVP cells and modules.Jinko besides

287、China is alsoexposed to Mexico and US markets.However,as a mitigation,the companyopened Ta manufacturing facility in the US and hence is expected to avoidthe majority of tariffs.Having said that,the company could still be exposedto tariff risks which could potentially hinder the companys margins.Apa

288、rtfrom this,the company is also directly affected by the oversupply in themarket,which results in price reduction and in turn profits.Jinko is exposedto upstream risks to a great extent still.Financial Analysis:A Growing Solar PV Market isThe Key Driver of Jinkos RevenuesJinko grew its revenues at a

289、 CAGR of 17.8%over 2015-2019,with the keydrivers of the companys revenues being the volumes of solar modules soldand the average selling price of these modules.Jinkos sales volumes ofsilicon wafers,solar cells and solar modules grew by a CAGR of 111.9%,29.0%and 35.6%respectively,over 2015-2019 which

290、 enabled revenuegrowth despite declines in the average selling price of the modules due tooversupply of solar power products in the solar PV market.The companys gross profits grew at a CAGR of 16.7%over 2015-2019 whileGross Profit Margins declined by 70bp over the period.After experiencingdeclining

291、margins in 2017/2018,margins improved in 2019 due to continuedreduction in production costs by using Jinkos integrated cost structure(positioned as Top 3 producer in terms of competitive cost structure)and anincrease in self-produced production volume due to a shift towards mono-based production.Asi

292、an Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali53Furthermore,while OP grew at a CAGR of 11.4%over the period,and OPMon average was c.4.6%.However,similar to GPM,OP margins also declinedby 140bp over 2015-2019.However,margins improved in 2019 owing todeclined investments in

293、 R&D in 2019 as a large amount had already beeninvested in 2018.The large decline in margins in 2017 was largely due toincreased shipping costs and warranty costs.Source:Company disclosuresAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali54Trina SolarCompany BackgroundTri

294、na Solar was founded in 1997 in China.Some of the key milestones achieved by Trina Solar in the recent pastinclude:Trina Solar launched TrinaPro and Trinahome in 2018 while working onseveral high-profile projects in the commercial,industrial,and utilityscale sectors.Trinahome,which is recognised as

295、the ideal solar energy system forresidential and SME usage,was launched in India,Australia,Malaysia,SriLanka and the Philippines,giving customers the option to install safe,reliable,and cost-effective solar systems on rooftops.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila

296、 Ali55TrinaPro refers to the first smart PV solution that is a combination of TrinaSolars industry leading solar modules,solar tracker systems,and inverters.In 2018,Trina Solar built Indonesias first utility scale solar system.Last year,Trina Solars Photovoltaic Science and Technology(PVST)seta new

297、record of 25.04%total area efficiency for a large area mono-crystalline silicon solar cell type.Rolex Rings,an Indian automotive parts manufacturer,installed arooftop solar array in Gujarat using 2,079 Trina Solar Tallmax modules.Foursun Solar,an EPC company,worked together with Trina Solar todevelo

298、p a solution for connecting the modules to a power optimizer inorder to overcome environmental challenges with energy and carbonsavings.A major breakthrough and milestone for Trina Solar was when TrinaSolars Vertex 600 W/550 W series ultra-high-power modules passedthe comprehensive reliability test

299、conducted by TUV Rheinland.Thisconfirmed the reliability of Trina Solars products.In the beginning of 2020,Trina Solar announced that Trina Solars StateKey Laboratory(SKL)of PVST made a Passivated Emitter and Rear Cell(PERC)technology cell with 23.39%efficiency(generally PERCs areproduced with 20.3%

300、efficiency).Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali56In July 2020,Trina Solar became the first Chinese PV product,PVsystem and smart energy company to trade on the Shanghai StockExchange Science and Technology Board,also known as the STARmarket.In September 2020

301、,Trina Solar acquired Nclave Renewable S.L to makeNclave a wholly owned subsidiary of Trina solar.Key Product and TechnologyTrina Solars range of products are used for utility,commercial,andresidential applications.The companys modules(TallMax,AllMax,DuoMax)for each of these applications are based o

302、n the multicrystalline(i.e.made of polycrystalline silicon which is relatively low efficiency andpriced low)and monocrystalline(premium priced solar panels with higherefficiencies)PV technologies.PERC technology the company adopts isdifferent to standard solar cell technology.The former enables impr

303、ovementin light capture near the rear surface and optimization of electron capture;in other words,it helps achieve higher efficiency.The gain in efficiencyenables cost decrease.The challenge with this technology is to be able toscale up the technology while controlling the process.These technologies

304、are used to produce both bi-facial(transforms sunlight into electrical energyon both its top and bottom sides)and mono-facial types of products.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali57Source:Company DisclosuresInvestment ThesisAdopting an EPC Model to Capture G

305、rowth in the Smart Energy marketThe company operates a vertically integrated business model,beingthoroughly involved in both the upstream and downstream.Through its EPCmodel,and innovation in multi and mono crystalline technology,Trina hasstrengthened its position in the market.The company has devel

306、oped itssmart energy business via its EPC model during the last few years andexpects the growing trend for IoT will drive future growth of this segment.Trina is currently focusing on development of products in this areaprimarily,given the increasing global demand for energy IoT product-suchas smart

307、solar/energy solutions.The global Smart Energy market is expectedto grow at a CAGR of 15%over 2018-2025.In our opinion,with Trina beingamongst the top three for solar cells and modules,the company is likelycapture most of the expected growth in the market.Emerging Market Focus Could be a Long-Term D

308、riverThe companys Trinahome product was built mainly focusing the ASEANmarkets and developing countries like Sri Lanka.Thus,Trinas recent focusof appears to be to moving into emerging countries like the Maldives as well,where the solar panel is likely to see strong demand.Trina Solar proposed acusto

309、mised PV Power+Energy Storage+Diesel Power micro gridintegrated solution based on the electricity demands of 14 islands in theAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali58Maldives.Thus,Trina,while having a solid market share in China,could becapable of growing stron

310、gly over the long term if it becomes successful inother developing markets where potential for growth is high.Reliance on Subsidies is a Concern Alongside Mounting CompetitionTo begin with,we note that mounting competition in the solar industry is athreat for all players.With new players joining the

311、 market especially in thedownstream of the supply chain,pricing has become very competitive.Thus,growing competition and its possible effect on margins,is a common threatto all the players in the industry,especially the Asian players who dominatea majority of the solar market.In addition to this,our

312、 key concern for Trinais that the companys growth appears to be dependent on Chinas subsidypolicy for solar energy.Since 2018,the companys revenue and profitdeclined as a result of chinas subsidy removal.There is also recent newsabout China continuing to cut solar subsidies by 50%in 2020.This to ane

313、xtent explains Trinas intent to target developing markets,and utilise itsmodule expertise for new areas like smart energy products.Financial Analysis:QoQ Recovery is a Good SignSales declined during 2017-2019 at a CARC of-5.5%and OP decline at a CARof-18.3%during the same period.Th companys OPM duri

314、ng the three-yearperiod on average was around 5%.Source:Company disclosuresThe company operates three segments:PV Modules(81%of FY12/19revenue),PV System Products(5%of FY12/19 revenue),and Smart EnergySystems(3%of FY12/19 revenue).The PV Modules segments includes theupstream of the value chain,invol

315、ving wafer and ingots and cell modulemanufacturing.The PV System segment includes the companys one-stopsmart PV solution like TrinaPro and also the companys PV power plantbusiness.The Smart Energy segment involves Trinas energy cloud-platformAsian Solar Energy Sector:Powered by Subsidies and Moving

316、DownstreamAqila Ali59business,which continued to advance with a number of practical applicationscenarios and projects in industrial IoT,commercial IoT,and energy IoTsectors.Sales across PV and Smart Energy system segments declined during the lastthree years.PV segment revenue declined at a CARC of-7

317、.9%,while SmartEnergy Systems segmental revenue declined at-17.8%CARC.Chinas abruptremoval of solar subsidies during 2018 was the key reason for the decline inrevenue since 2017.The PV System Products segment,however,grew at aCAGR of 13.1%during the same period with the support of TrinaPro,whichthe

318、company introduced in 2018.Source:Company disclosuresDuring 2020,the company states that it actively responded to marketchanges involving the PV Module business,which saw the crystalline siliconindustry trending upwards.The company also took the lead and rapidlydeployed 210mm silicon wafer large-siz

319、e cell and increased moduleproduction capacity in Suqian,Yiwu,and Yancheng manufacturing bases inChina.The company plans to reach a total cell production capacity of about26GW by the end of 2021,of which the production capacity of the 210mmcell will account around 70%by the end of 2021.During the fi

320、rst half of2020,the companys module shipments reached 5,840MW during thereporting period,increasing 37%over the same period in 2019.Thecompany sells a majority of its products overseas,which has a higher grossmargin and thus supported net profit growth during the period.Sales and OPgrew QoQ during 2

321、Q FY2020,which we believe is a good sign for thecompany.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali60Source:Company disclosuresJA SolarFounded in 2005,JA Solar is a manufacturer of PV products including siliconwafers,cells,modules and PV power stations.The company h

322、as catered tomany global solar PV projects in Asia,Europe,North America,LatinAmerica,Africa and Oceania.Product&TechnologyJA Solar also produces large-scale ground-mounted power plants,commercial and industrial rooftop PV systems and residential rooftop PVsystems.Asian Solar Energy Sector:Powered by

323、 Subsidies and Moving DownstreamAqila Ali61Similar to certain other leading peers,JA Solar also sells half-cell modules,Multi Busbar(MBB-are assembled with multi-busbar PERC(PassivatedEmitter and Rear Cell)cells and offers higher power output,bettertemperature-dependant performance)half-cell modules

324、 and bifacial monoPERC double glass modules(i.e.a frameless solar module).Investment ThesisIncrease in Production Capacity and Innovative Products Drive GrowthJA Solar plans to promote the companys new high-efficiency battery andmodule projects whilst expanding its vertically integrated productionca

325、pacity.The company would also continue to invest in R&D,especially tooptimise its PERC+monocrystalline battery technology process and improveits conversion efficiency.Acquisitions and Partnership to explore new markets and boost growthJA Solar has entered into a partnership with Excel Solar,a leadin

326、g distributorof PV products in Mexico,where the company now has the ability to grow inthe Mexican market.Moreover,in 2018,the company Tianye Tonglian HeavyIndustry Co,which allowed JA solar to increase PV module shipments andreport strong profits in 2019.It appears that JA solar looks forward to dom

327、ore acquisitions this way and increase profitability while minimizing thedownside risks via expansion on scale.Trade War Impact and Subsidy RemovalSimilar to Jinko,JA Solar could also be adversely impacted by the trade warsbetween China and the US and the trade sanctions imposed therein.Thecompany a

328、lso provides to North America.Moreover,subsidies reduction isaffecting most of the Chinese solar energy company in terms of pricing andin turn profitability.Though the acquisition boosted JA Solars profits during2019,we feel that the company is still exposed to risks of subsidy removalunless it beco

329、mes successful with the Mexican marketsFinancial AnalysisAlthough JA Solar has been in operation since 2005,we will only be usingthe financial data of the companys recent years due to the inability to verifya majority of the information.Over 2016-2019,the companys revenues andOP grew at a CAGR of 8.

330、8%and 12.9%respectively driven by market growthand overseas expansions.JA Solars OPM was c.8.6%on average during thesame period and improved by 120bp to 10.9%in 2019.The companyimproved its margins during 2019,mainly due to the acquisition it madeduring 2018 alongside improving product efficiency us

331、ing new technologiesand a series of restructuring projects.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali62Source:CapIQJA Solar classifies its revenues into two key product segments.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali63LONGiCom

332、pany BackgroundLONGi group is a formation of two key companies-LONGi Green EnergyTechnology(formerly Xian LONGi Silicon Materials Co),which looked intoingot and silicon manufacturing and LONGi Solar(formerly LERRI Solar)which included solar cell and module manufacturing.According to industryestimate

333、s,LONGi accounted for 40%of the industrys monocrystallinesilicon wafer capacity in 2018,and was listed as a Tier I manufacturer byBNEF.YearMilestone2000Xian LONGi Silicon Material Corps was established2007-SeptemberLONGis wholly owned subsidiary-Ningxia LONGi completed a silicon ingot facility withannual capacity of 1000 tons2009-NovemberCompletion of a 350MW silicon slicing plant2012-AprilSucces