Mei Xinyu: Photovoltaic "overcapacity" must be revisited

In the eyes of most market participants and analysts, the photovoltaic industry has become a negative example of “blind expansion” and “overcapacity” at present, both at home and abroad.

For China's photovoltaic industry, its annual growth rate exceeds 100% for five consecutive years. Under the background of a sharp drop in product prices, corporate profits have plummeted and even large-scale losses have resulted in huge debts that make the company even more burdensome. In 2010, the gross profit margin of the photovoltaic industry is still about 30%; in 2011 it fell below 10%, and if the gross profit margin of the enterprises in the industry is less than 10%, it will be difficult to achieve profitability; in the first half of this year, overseas listed Chinese PV industry Among the stocks, those with gross margins below 1% are already common, and some are even negative. According to the published financial report for the first half of this year, the net profit of 66 photovoltaic listed companies generally declined by more than 50%, their gross profit margin was below 10%, and more than 10 photovoltaic listed companies suffered losses. Under heavy pressure, leading companies such as Suntech and Seville were deeply in the bankruptcy crisis. LDK LDK suffered a loss of 6.5545 billion U.S. dollars last year, a loss of 1.08 billion yuan in the first half of this year, liabilities of 26.676 billion yuan, and an asset-liability ratio of 88%.

The United States and Europe have successively launched "dual anti-dumping" investigations (anti-dumping and countervailing) against China's photovoltaic industry. This has also been regarded by some domestic and foreign observers as an inevitable result of the radical expansion of China's photovoltaic industry. The dependence on China's PV module exports is extremely high. Before 2010, 98% of the products were exported to European and American markets. In 2011, this proportion was still as high as 90%. The US and Europe’s “double reverse” to China’s PV industry made it worse. Only the European Union announced on September 6 that it had launched an anti-dumping investigation against China's photovoltaic cells. According to data released by the Chinese Ministry of Commerce, in 2011, China's photovoltaic cells exported US$20.4 billion to the EU, accounting for 73% of the total exports of the product for the same period. Yingli Group believes that this case will directly result in more than RMB350 billion in output value loss, more than 200 billion yuan in non-performing loans and 300,000 to 500,000 jobs.

For the photovoltaic industry in the world, on the basis of data analysis of more than 300 photovoltaic panel manufacturers, the report of the GTM Research Institute for Renewable Energy released on October 16 stated that the average annual supply of photovoltaic products in the world in the next three years will be Exceeding the market demand of 35 million kilowatts, overcapacity is likely to cause 180 PV cell manufacturers to go bankrupt or be merged before 2015, which means that 60% of companies will withdraw from the market.

However, if we look at it again from the perspective of competition with traditional fossil fuels, it is not difficult for us to gain new insights into the “blind expansion” of the photovoltaic industry. What is the key to competition between the photovoltaic industry and its biggest competitor, traditional fossil energy? What is the background of the rapid growth of the photovoltaic industry in recent years? The key to competition between photovoltaic industry and traditional fossil energy is price and cost reduction. The photovoltaic industry has been able to achieve rapid growth in recent years. The main background is not the support of various countries and local governments, but this round of primary products in the bull market in the new century, oil, natural gas, etc. Fossil energy prices have continued to soar. The reason why countries and local governments make strong decisions to support new energy sources such as solar energy is also the reason for this. Solar power has so far been costly, and it cannot be compared with conventional thermal power stations in terms of supply stability. If fossil fuels such as oil, natural gas, and coal are kept at low prices, ruthless market rules will make it difficult for the photovoltaic industry to find sufficient demand; and if the demand is too small, the production scale will be too small to achieve economies of scale and the cost of the photovoltaic industry. It is difficult to reduce, it is even more difficult to open the market. It is the soaring prices of fossil fuels such as oil and natural gas that make the commercial competitiveness of solar power generation increase sharply, and this has won a large market scale, and the photovoltaic industry production can achieve a certain degree of scale economic benefits, thereby further enhancing its price. Competitiveness has formed a virtuous circle of “market expansion—scale economic benefits, cost reduction, and further expansion of demand”.

The key to the virtuous cycle mentioned above lies in high investment and the rapid formation of production capacity in order to promote the rapid reduction of production costs and prices, so as to establish a sustainable price competitiveness for fossil energy before the fossil energy market drops substantially. Looking back at the changes in the fate of alternative energy sources and energy-saving technologies before and after the oil crisis of the 1970s and 1980s, it is not difficult to understand why this is important for the photovoltaic industry.

From the 1970s to the early 1980s, the development of alternative energy sources such as hydraulics, nuclear power, and coal, and energy-saving technologies made great strides: During the World War II, the coal liquefaction technology developed in Germany that suffered from a lack of oil resources was long after the war. Turned out from the pile of papers and once shined; Brazil launched a large-scale alcohol fuel vehicle plan; Hammer’s Western oil company actually invested heavily in the development of Antaibao coal mine in China under the impact of the second oil crisis... The key to this is the two rounds of soaring oil prices from 1973 to 1974 and from 1979 to 1980. Measured by manufactured goods exported by industrialized countries, the actual price of oil in 1974 has risen nearly three times as much, so that Western economists have called OPEC’s two major rounds of increase in oil prices “the greatest victory in monopoly power in world history”. , "The most successful people have ever raised the price." However, after the mid-1980s, as actual oil prices fell significantly, many alternative energy sources and energy-saving technologies suffered a long period of cold weather until the bull market of the primary product in the new century was reborn.

For the photovoltaic industry, the above history of alternative energy sources is entirely likely to repeat itself. In the past two years, the global primary product bull market has ended. Primary product prices, including energy, have dropped significantly. The US-sponsored "shale gas revolution" has further pushed downward pressure on oil and natural gas prices. The price of natural gas in the United States is higher than a year. Before falling about half, the profits of European and American oil giants generally declined.

Although ExxonMobil’s book net profit increased in the second quarter, this increase was mainly due to temporary profits such as sales of daily assets, and its actual net profit was reduced; Chevron’s second quarter net profit decreased by 7% year-on-year. %To 7.21 billion U.S. dollars; Anglo-Dutch Shell oil company's net profit for the second quarter was US$4.063 billion, a year-on-year drop of 53%; BP's second-quarter loss was 1.385 billion U.S. dollars, compared with a profit of 5.718 billion U.S. dollars in the same period of last year. The first quarterly loss since the Gulf of Mexico oil spill in the second quarter of the year...

It is in such an environment that even oil service providers such as Halliburton, Baker Hughes, and Weatherford, etc., saw their North American operating profit drop by about US$1 billion in the second quarter of this year.

Financial market participants have vigorously speculated that the third round of quantitative easing expectations in the United States, anti-crisis policies in China and Europe, the Middle East turmoil, and other topics can create rebounds once again in the energy and other primary product markets, but it is not enough to rewrite the relationship between supply and demand for primary products. The overall situation and its market trend. In such a market environment, new energy prices, including solar energy, remain at a high level, which can only be accelerated when traditional energy prices fall. It is true that the upstream and downstream prices of the photovoltaic industry have all fallen sharply. The price of PV modules has dropped from US$6/watt 10 years ago to the current US$1/watt. The import price of polysilicon has dropped from nearly US$300/kg in the highest season in 2008. At the beginning of 2012, it was US$30.5/kg, and then it fell further to June’s US$23.6/kg. Such a drop caused difficulties for a considerable number of companies. However, based on the above analysis, such a significant price fall is just what the PV industry can do. Sustained survival is essential.

It is precisely from the perspective of competition with traditional fossil fuels that Chinese PV companies with significantly lower production costs have stronger competitiveness and survivability, which represents the direction of this industry to a considerable degree. According to data from the GTM research report, the manufacturing costs of photovoltaic cell companies in Europe, the United States, and Japan exceed 80 cents/watt, and the cost for Chinese companies is 58 to 68 cents/watt. Although the report estimates that 54 Chinese PV companies will go bankrupt or be merged in the next 3 years, the same report estimates that the number of bankruptcies and mergers of global photovoltaic battery companies exceeds 180, and the number of bankruptcies in Chinese companies accounts for less than 30%. , significantly lower than the proportion of China's PV industry capacity in the global industry, in fact, from the side that China's PV companies survive in the harsh winter of the whole industry.

In 2009, the production capacity of polysilicon, silicon wafers, solar cells and modules in China accounted for 25%, 65%, 51% and 61% of the total global production capacity, respectively. According to the statistics of the European Photovoltaic Association, among the top 10 global solar cell companies in 2009, Chinese companies occupied 4 seats.

In 2010, the Chinese PV industry had a capacity of 8,000 megawatts, accounting for more than half of the global PV industry capacity.

In 2012, China's photovoltaic cell production capacity accounted for 63% of the world's total production capacity. The remaining production capacity was mainly distributed in Taiwan Province, Japan, Southeast Asia, South Korea, Europe and other regions. The US photovoltaic cell production capacity (including not included in this "double reverse") Thin film batteries account for only 2% of the world's total capacity.

In view of this, it is an unrealistic and erroneous business idea for China’s European and American companies to launch “double opposition” and attempt to maintain high prices of photovoltaic products. It can only delay the process of reducing the production cost and sales price of the photovoltaic industry. Conventional fossil energy is difficult and difficult to confront. Even without considering the fact that Europe and the United States photovoltaic industry received huge amounts of government funding, the government subsidy directly received by the SolarWorld, a company that took the lead in complaining about Chinese industries and provoking the “solar war” between China and the United States, was between 2003 and 2011. There are 137 million euros; even if we do not consider the principle of fair competition; even if we do not consider that China already has the ability to launch trade retaliation and fight a "regular war" in the WTO, they will start from the goals of the United States and Europe in terms of their own gains and losses and want to achieve. The launch of this "solar war" is also deeply misunderstood in many ways. The biggest misunderstanding is that the “solar war” they initiated will itself curtail the growth prospects of the photovoltaic market, and then damage the domestic photovoltaic industry they are trying to save. Even if the European and American governments “succeeded” to reject Chinese PV products, their local PV companies could not afford to compete with cheap traditional fossil fuels. In fact, the report of the GTM study also found that the number of companies with high manufacturing costs in the United States, Europe, and Canada will have the largest number of failures. Germany’s Solar Energy World, Conergy, and Spain’s Essophit Solar are listed as likely to go bankrupt or be acquired. Ranks.

Because China’s domestic market is vast and the Chinese government will certainly take measures in terms of domestic consumption and opening up new markets for exports, the sharp fall in the prices of products in this industry will also create conditions for rising domestic market demand. It is possible to fight and destroy the Chinese PV industry as a competitor. After all, according to the statistics of the International Monetary Fund, China’s share of global real GDP in 2011 has reached 14.3%, which is equivalent to the entire euro area; currently, the EU’s PV market is 20GW, so the 22GW to 25GW target set by China’s “Twelfth Five-Year Plan” It is not impossible to implement without ignorance, but it is very likely to be achieved.

Based on the above analysis, the rapid growth of China's photovoltaic industry is not wrong in itself, but the barriers to industry standards such as technical standards are too low and the supervision is so “gentle” that they do not have the basic expertise to use large amounts of waste materials in production. It has also emerged in large numbers, which has aggravated the development environment of the entire industry and allowed us to pay a part of the avoidable cost in the unavoidable industry competition for survival of the fittest. It can promote a new industry to leap to the top of the world within a few years and to occupy more than 60% of the global market share. This is a manifestation of China's ability to develop. As more and more countries try to "catch up" with China, this capability is becoming increasingly valuable. What we should do is to eliminate substandard small plants with the help of the current industry. Under the market economy system, we cannot expect to completely avoid “overcapacity” and “waste” that stem from the survival of the fittest; if we want to dominate the international competition in an important industry, even in the global industrial crisis Enterprises are eliminated, as long as the ratio of bankrupt restructuring companies is lower than the production capacity, the market share and status after global industrial restructuring will still maintain or continue to increase. (The author Mei Xinyu is a research fellow of the Ministry of Commerce)

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