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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

2、e depth and breadth of research found on our platform-a snapshot of what you can expect to see as a Smartkarma subscriber.All research on Smartkarmas platform is produced by independent Insight Providers.Almost half of the research coverage on Smartkarma is on small-and mid-cap firms,demonstrating a

3、 differentiated view of the market,which generally tends to skew large-cap.Research on our platform spans 15 core content verticals,including Equity Capital Markets,Event-Driven,Macro,Forensic Accounting,Credit,and more.The unprecedented upheaval of 2020 has reaffirmed our conviction that there is t

4、rue value in building and nurturing thriving networks that empower the distribution and exchange of insight.Thats why we leverage the online economy,applying this innovative mindset to capital markets.For a single subscription,Smartkarma users can consume all the research they need,just like Netflix

5、 enables viewers to watch unlimited hours of content.Our model ensures that research on our platform is objective and unbiased,independent and free from conflicts of interest.The platform determines appropriate pricing according to the quality and value of each research piece.This helps independent

6、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 Insight Providers publishing on our

7、platform.If you want more such Insights delivered to you in real time on your desktop or mobile,visit .Cover Photo by Christian Dubovan on UnsplashTable of Contents1.Asian Solar Energy Sector:Powered by Subsidies 4 and Moving Downstream By Aqila Ali2.Asian Wind Energy:Efficiency and Cost Reduction i

8、n Focus 109 as Players Eye a Post FiT Future By Mio Kato3.Asian Nuclear Energy Industry:The Value Chain 192 By David Blennerhassett4.Carbon Markets Original:An In-Depth Analysis into the Evolution 232 of Carbon Markets By Mio KatoThematic(Sector/Industry)Asian Solar EnergySector:Powered bySubsidies

9、and MovingDownstreamBy Aqila Ali|30 Sep 2020EXECUTIVE SUMMARYWhats 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

10、an in-depth analysis onthe solar energy sector,which includes an 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 tec

11、hnology lookspromising and compare the technology used across the 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

12、)and the leadingplayers in those stages(includes listed and unlisted 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 opportunities and

13、risk We compare andcontrast the investment opportunities for each of the keyplayers in the sector,to understand if the companies follow asimilar strategy or otherwise.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali4Aqila AliEquity Analyst|LightStream ResearchAqila Ali h

14、as over five 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

15、(Sector/Industry)Analysis on the key revenue and margin drivers Wecompare and contrast the key revenue growth and profitabilitydrivers for the listed companies.We have also provided a shortinvestment thesis on the key listed players and looked at theirvaluation.The Insight is structured as follows:A

16、.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 IndustryBackgroundSolar energy has been one of the fa

17、stest 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),solar power generation increased by 22%(+131

18、 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 comparatively more efficient power system than produc

19、ingenergy from coal and oil.In 2019,a total of 720TWh was generated.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali5Source:IEABloomberg New Energy Finance expects solar technology to represent morethan 40%of global electricity capacity by 2050,which would be a significa

20、ntincrease 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 three of these factors,consensus estimates

21、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 discuss in detail below.B.A Deep Dive into

22、 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 to requiring a lower number of people to o

23、perate 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 distinct purposes.Whileconcentrated solar p

24、ower 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.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali6Although plants with thermal storage

25、(such as CPS)have greateroperational 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

26、of the project.While this is a general 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.Photovoltaic(PV)A photovolt

27、aic 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 photons(particles of solar energy insunlight

28、)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 produce electricity.Asian Solar Energy Sect

29、or:Powered by Subsidies and Moving DownstreamAqila Ali7PV 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 si

30、nce 2004,the use of PV cells has greatly 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

31、 orwristwatches.However,these cells 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 s

32、unlight to electricity varies based on the type of semiconductormaterial 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 markets such as spacesatellites.Solar PV is hi

33、ghly subsidised by governments worldwide,and the chart belowshows the types of market incentives and enablers provided for solar PVworldwide in 2018.Source:StatistaAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali8Concentrated Solar Power(CSP)CSP is based on the principle

34、 that a temperature of around 550C 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

35、 be used to generate industrialsteam 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

36、 solar output during periodsof low 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

37、 tube which runs along about a meter 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 th

38、e CPS plants incommercial operation were troughs.Power 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 generated when the heat transfer fluid in the

39、 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 use the same principles of the trough syste

40、m,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 fixed at the focal point.Asian Solar Energ

41、y Sector:Powered by Subsidies and Moving DownstreamAqila Ali9Source:SolarPACESSolar Heating and Cooling(SHC)Systems which change sunshine into usable thermal energy are referred toas solar heating and cooling(SHC)technologies.According to the SolarEnergy Industries Association(SEIA),a single-family

42、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 heating,and solar pool heating.The following are some examples of solar heating and coolin

43、g 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.Types of solar collectors include flat plate,evacuated tube,Integral Collector Storage

44、(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 absorber plate contained in an insulated box that iscovered with a tempered glass or polyme

45、r 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 tube.Generally used when higher temperatures or higher volumes of water are needed,as w

46、ellas for process heating and solar air conditioning systems.SimpleunglazedcollectorsUsually used to heat pool water or preheat large volumes of industrial process water inwarm climates.ConcentratingcollectorsUseful in industrial and manufacturing processes due to their ability to produce heat inexc

47、ess of 300F-400FAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali10Source:Solar LoveSource:Solar LoveSolar Air HeatingSolar heating systems have been found to produce a number of heat unitsequivalent to c.80%of the available solar energy,hitting the surface of thecollecto

48、r 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.Solar CoolingAbsorption chiller systems and desiccant systems are two types of solar

49、cooling 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 desiccantsystem,the air is cooled by passing it over a common desiccant such as silicagel,

50、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 water.These solar water heaters consist of three main elements:the solar collector,insu

51、lated 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.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali11Source:Solar LoveThe Round-Up:The Three Technologies ServeDisti

52、nct PurposesMeasurePhotovoltaicConcentrated Solar Power(CSP)Solar Heating&CoolingTechnologies Uses sunlight through thephotovoltaic effect to generatedirect electric current(DC)in adirect electricity productionprocess.This DC then has to beconverted to alternative current(AC)with the use of inverter

53、s 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 powernetworks.Uses the sunsthermalenergy tochange thetemperatureof air andwater.Energys

54、torage 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 technologies(TES)and using it at times of no or lowsunlight,hence increasing thepenetratio

55、n of solar thermaltechnology in the power generationindustry,as it helps overcomeproblems such as environmentalfluctuations.Has a highlevel ofefficiency,butsupplementalenergysources orstoragerequired forlong sunlessstretches.CostCan be built at a lower costcompared to CSP plants.Requires higher inve

56、stment andinvolves greater risk(challenges withthermal storage,cooling).Lower costinvolved.Ease inbuildingEasier to build compared to CSPplants.Comparatively difficult to build.Easiest tobuild andadoptespecially onsmaller scale.Direct andIndirect JobsWorldwide(000 jobs)3,60534801Asian Solar Energy S

57、ector:Powered by Subsidies and Moving DownstreamAqila Ali12Source:Helioscsp,International Renewable Energy Agency(IRENA)s 2019 reportC.A Look at the Leading AsianCountries in the Solar Market:China,Japan and IndiaSummary:China leads the solar market globally.India,we believe has highpotential for gr

58、owth.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.However,the countrys lack ofsunlight and mountain terrain makes it difficult to erect

59、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,we feelthat policies and subsidy provisions are provided to develop all threetechnolo

60、gies 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 to PVs and its R&D in CSP to achieve its aim.Until recently,the US and Europe led the

61、renewable and solar energymarkets.However,this situation has largely changed in the past decade andaccording to data from Statista and Equal 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

62、in terms ofsolar power capacity.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali13Source:EqualOceanFurthermore,according to a new report by EY,seven Asian countries rankamong the worlds most attractive markets for renewable energy sourcesincluding wind power,hydropower,a

63、nd 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 place this year,compared to its previousthird position,which is now held by France.J

64、apan 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.The Round-UpChinaIndiaJapanSolar powercapacity-2019(Gigawatts)1853864Ranking inEYsRenewableEnergyCountryA

65、ttractivenessIndex-20192710ExpectedTargetIncrease shareof renewable-based powergeneration to28.2%in 2020.Produce 175GW ofrenewable energyby 2022 of which100GW is to befrom solar.Have renewable resourcesaccount for 22-24%ofnational electricity generationby 2030,nuclear power20-22%,and fossil fuels 56

66、%.Cut its GHG emissions by26%compared to 2013levels.StrategyGovernmentinvestment and policysupport,Attract foreign investors tothe country.Policy supportCurrentlyfocusedtechnologyCSPAll three technologies.SHCAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali14Opportunities

67、 in the three tech typesPVOutperformancein the nationalsolar PV target.Increase inChinas solar PVshare of totalelectricitygeneration fromgrid-connectedsources.Emergence ofnew futuregrowth areasfor solar PVwhere feed-in-tariffs(FiTs)arenow offered forPV combinedwith electricalenergy storagein Jiangsu

68、.The creation of26 power-trading centresspecifically fordistributedgeneration isdriving demandand theemergence ofnew businessmodels for solarPV in thecountry.Anunderpenetratedsolar market.High growth forrooftop solarinstallation whichare deemedcleaner andcheaper energysolution forcustomers.World Ban

69、ksupport 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 batteries,retrofitting storage,sale ofsurplus electricity via one-on-one contracts with u

70、tilities 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 sector,the Japanese Ministry ofEconomy,Trade and Industry(METI)has set a three-yearde

71、adline for the completionof projects over 10kW in size.CSPVarious projectsto expandcapacity are inplace.India was the onlyother country inAsia to have CSPcapacity underconstruction by theend of 2018.Early hands ontechnologicaldevelopment and isranked fourth interms of number ofSolar Heat forIndustri

72、alProcesses(SHIP)additions in 2019.Subsidyprogramme forconcentrating onsolar thermalsystems.Japan has made plans to useCSP plants in the worldssunny regions such asAustralia in order to generatefuel which can then beshipped back to the country.Asian Solar Energy Sector:Powered by Subsidies and Movin

73、g DownstreamAqila Ali15SHCChina is one ofthe key marketsfor SHC with aninstallation ratestronger thanthe US.In 2019,Chinaled the rankingfor newinstallations ofglazed andunglazedcollectors,accounting forc.73%of thetotal.Rural areademand stillexists.Positivegovernmentspolicies.Governmentsupport andsub

74、sidies drivespopularity of solarwater heaters inthe country.Limited growth potentialgiven a currently decliningmarket.Threats in the three tech typesPVPolicyUncertaintyEconomicslowdown,tariffcaps,paymentdelays andchallenges relatedto land acquisitionand access to gridconnections led toa slowdown in2

75、018.Expectedslowdown in 2020as well,though arebound isexpected in 2021with capacityadditionsexceeding 2019levels.Grid constraints,lack ofavailable land and low-costfinancial resourcesHigh labour costs and highprices of solar generation,where Japans prices aresome of the worlds highest.CSPHigher pric

76、e perkilowatt incomparison tophotovoltaicpowerLack offinancingmeans.The links in theCSP industrialchain remainweak and no on-grid power priceof CSP projectshas yet beendetermined,slowing downthe progress ofCSP.India lags peersdue to low investorconfidence,unreliable solardata,lowavailability ofskill

77、ed labour,and ahigh cost for CSPcompared to PV.Countrys rocky terrain makesit difficult to erect CSP plantswithin the country.SHC-Declining subsidies for solarenergy.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali16Our ThoughtsThe country has beenlargely focusing on PVs

78、and 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).We feel that policies andsubsidy provisions areprovided to develop allthree technologi

79、esequivalently and nospecific technology istargeted still.Rooftop solarenergy solutions is atargeted produced acrossthe three types oftechnology.Japans proposals for its long-termemission reduction are focused moreon the transport sector and zero-emission buildings.Given the declinein subsidies for

80、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%solar and wind in the overall power mix in 2018,Chinasgovernment aims to increase the t

81、otal 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 power Chinas renewables sector.Since 2008,China has been the worlds largest manufactur

82、er of solar panel technology,and accounts for the production of over 60%of the worlds solar panels,according to IEA.Strategy to Achieve Renewable Energy AimsIn order to increase the countrys share of renewable-based powergeneration,nine provinces and regions have been ordered to generate morethan 15

83、%of power from non-hydro sources,and 10 provinces and regionsshould generate at least 30%of power from renewable sources.Furthermore,the country has pledged to invest CNY2.5trn in renewablepower generation over 2017-2020.Below,we shall discuss whether any of thethree technologies are specifically be

84、ing targeted towards achieving thesegoals.Photovoltaic(PV):Dominant PositionChina is the single largest market for solar PV and dominates 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

85、and indirect jobs,and accounts for c.54%of renewable energy jobs inChina.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali17However,Chinas annual solar PV market(newly installed capacity)declinedby nearly 32%YoY in 2019 despite the countrys year-end rally,with morethan 12

86、 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 paidto renewable energy producers for each unit of energy produced and injectedinto the el

87、ectricity 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 PV target,which was established in2016,of achieving 105 GW by 2020.However,reduced c

88、urtailment 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.Source:evwindChina has also seen the emergence of new future growth areas for solar PVsuch as the combination of EVs,residential sol

89、ar and storage.A recentreport from the US-based Institute for Energy Economics and FinancialAnalysis(IEEFA)argues that batteries and EVs 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

90、savings.Chinahas recognised the effectiveness of these combinations and feed-in-tariffs.(FiTs)are now offered for PV combined with electrical energy storage inJiangsu.Furthermore,the creation of 26 power-trading centres specificallyfor distributed generation is driving demand and the emergence of ne

91、wbusiness models for solar PV in the country.Chinas 14thFive-Year Plan(2021-2025)by the National EnergyAdministration(NEA)outlines the development 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 generati

92、on capacity.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali18Concentrated Solar Power(CSP):IncreasingFocusAs of January 2020,China had eight large-scale concentrated solar powerprojects with total capacity of 500MW in operation across China.Five of theseven projects use

93、 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 over the trough system due to its higher temperatureoperation,which allows for greater

94、 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 batches of 20 pilot CSPprojects,and is the countrys largest parabolic trough CSP pla

95、nt.The plant isexpected to generate c.350GWh of electricity annually.The status of thepilot projects as of January 2020 is as follows.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali19Source:CSP FocusIn May 2020,the Supcon Solar Delingha 50MW Molten Salt Tower reportedth

96、at 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 toreduce weather risks and improve performance.Furthermore,the DunhuangDacheng 50MW Molt

97、en 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 key development problems.Thehigher price per kilowatt in comparison to photovoltaic p

98、ower 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 determined,slowingdown the progress of CSP.Solar Heating and Cooling(SHC):Policy toSupp

99、ort 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 water heating.According toIRENA,China employs 670,000 people(16%of renewable energy jobs

100、 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 unglazedcollectors,accounting for c.73%of the total.Asian Solar Energy Sector:Powered by Subsidies

101、 and Moving DownstreamAqila Ali20Source: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 convenienceand cost of solar water heaters acts as the main market driver.Furthermore,the C

102、hinese 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 house”which contain large southern windows and the possibilityfor attached sunspace.A

103、sian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali21India:Needs Continuous Supportfrom the GovernmentIn May 2019,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 country

104、s electricity in 2018-19.According tothe PV magazine India,the countrys total solar energy potential isestimated at c.750 GW.The country 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 ot

105、her renewabletechnologies,and the government has launched a reverse auction system forsolar capacity,increased the availability of funding to the renewables sector,and allocated concentrated zones of development for solar power facilities,hence driving down the implementation time and cost of projec

106、ts.India hasthe fourth-largest number of renewable energy jobs globally,and employed719,000 people directly and indirectly in the sector.According to the UnitedAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali22Nations Sustainable Development Goals partnerships platform,I

107、ndia 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 investors to the country,for which it had taken numerous measuresincluding the following:The

108、 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 revision of the tariff policy,which includes penalties for unscheduledpower cuts and removin

109、g 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 certainminimum criteria to submit non-negotiable price bids.The buyer thenselects winning selle

110、rs 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 generation projects bid the lowestprices which they would be willing to accept to develop r

111、enewableenergy 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 applications:INR1,667 croreViability Gap Funding Scheme under the Jawaharlal NehruNational Solar

112、 Mission(JNNSM)Phase II:INR1,335 crore.TheJNNSM,launched by the Indian Prime Minister in January 2010,aims to install 20,000 of grid-connected 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 capi

113、tal in the first year.The government,in September 2019,also reduced the general corporate taxfrom 30%to 22%for Indian companies,adjusting the rate to thoseapplicable in other South Asian countries,making the country morewelcoming for investors.Asian Solar Energy Sector:Powered by Subsidies and Movin

114、g DownstreamAqila Ali23However,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 less than 1GW in 2010 toc.36.6GWFS5 GB6 of solar power currently,we believe it would

115、 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 contraventions,which makes it more difficult for it to achieve these goals.An examplewhi

116、ch 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 manufacturingstrategy.”Photovoltaic(PV):Untapped Market OpportunityOver 200m people in India do not have

117、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 India,with a CAGR of c.116%over2012-2018.To achieve the 100GW target of the Indian gov

118、ernment,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 units across India.Indias rooftop solar PV costs are among the lowest in the world.Sou

119、rce:Mordor IntelligenceFollowing these trends,Indias solar PV sector became its second-largestrenewable energy employer,where it supported c.115,000 direct andindirect jobs.However,the countrys installations declined in 2019compared to 2018 due to economic slowdown,tariff caps,payment delaysand chal

120、lenges related to land acquisition and access to grid connections.According to a report by the International Energy Agency,Indias solar PVdeployment is set to decrease by 23%in 2020 compared to 2019,but arebound is expected in 2021 with capacity additions exceeding 2019 levels.Asian Solar Energy Sec

121、tor:Powered by Subsidies and Moving DownstreamAqila Ali24Concentrated Solar Power(CSP):Cost Factorand Low Investor Confidence Limits GrowthIndia was the only other country in Asia to have CSP capacity underconstruction by the end of 2018.The 25 MW Gujarat Solar One facility(9hours TES)was expected t

122、o 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 India being PTC based and being expected to add275 MW of capacity.Source:Currentscience

123、Furthermore,in May 2020,researchers at the Indian Institute ofTechnology-Madras(IIT-M)developed a low-cost Solar PTC system forconcentrating solar energy in areas such as desalination,space heating,andspace cooling.India also ranked fourth in terms of number of Solar Heat forIndustrial Processes(SHI

124、P)additions in 2019.Source:Solar PaybackIndia had an investment subsidy programme for concentrating solar thermalsystems until March 2020.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 suc

125、h as Spain and theUnited States.Challenges which slow down the growth of CSP in Indiainclude low investor confidence,unreliable solar data,low availability ofskilled labour,and a high cost compared to PV.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali25Solar Heating and

126、 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 units in various parts of the country as follows.Source:Bijli Bachao!A subsidy is pr

127、ovided 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 Rs.100/month subsidy in the energy bill.Japan:Government Yet toCompletely Support Sect

128、ors GrowthJapan started embracing new power generation technologies particularlyafter the earthquake and nuclear disaster in Fukushima in 2011,where theshutdown of the countrys nuclear fleet resulted in higher electricity prices.In 2019,renewables accounted for c.19%of Japans power generation,whichi

129、ncluded c.8%wind and solar.The annual increase in figures for renewableenergy has reached almost double-digit units until 2017,after which 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 i

130、ts greenhouse emissions by 26%compared to 2013 levels,whilstdoubling its renewable energy production by 2030.The Japanese government aims 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 En

131、ergy AimsIn 2017,Japan introduced new legislation aimed at increasing the countryspercentage of renewable resources.Furthermore,analysts 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 decl

132、ine of c.30%in wind and solar generation costs.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali26Source:Long Term Emission Reduction ProposalJapans proposals for its long-term emission reduction are focused more onthe transport sector and zero-emission buildings.Japan is

133、 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 energy goals.Photovoltaic(PV):Government Policies UpliftGrowthFollowing the Great East Jap

134、an Earthquake of 2011,Japan initiallyintroduced a high FiT of 40/kWh in 2013,to kick-start the solar PV market.Solar PV Generation is now 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

135、 installation target of 64GW by 2030,and despite thecountrys progressive decline in PV installation,since peaking in 2015,consensus believes 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

136、inJapan over the next few years.Residential consumers are now looking atoptions beyond self-consumption,in combination with electric vehicles(EVs)or batteries,retrofitting storage,sale of surplus electricity via one-on-one contracts with utilities or power producers and suppliers(PPSs),and anewly fo

137、rmed power distribution business under Japans electricity marketreform.Additionally,in 2018,the Japan Electric Power Exchange(JEPX)issued tenders for non-fossil-fuel certificates,and is also planning tointroduce futures contracts.For the non-residential sector,the JapaneseMinistry of Economy,Trade a

138、nd Industry(METI)has set a three-yeardeadline for the completion of projects over 10kW in size which had signedcontracts with a utility(an organisation supplying the community withelectricity,gas,water or sewerage)after 1stAugust 2016.Asian Solar Energy Sector:Powered by Subsidies and Moving Downstr

139、eamAqila Ali27Source: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 worlds highest.In 2017,a tender program wasintroduced to reduce the high solar power price

140、 in Japan.Furthermore,withthe spread of the adoption of renewables,problems have emerged with theFiT.These include increasing surcharges 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

141、 10kW and500kW and a decision has been made to overhaul the FiT by the end ofFY2020 to allow renewables to become an economically self-sustaining coreelement of the power generation mix.Japan hopes to integrate large solarpower generation and wind power generation to the electric power marketthrough

142、 making them more competitive sources.Concentrated Solar Power(CSP):ContinuousR&D in Attempt to Broadly Commercialises theTechnologyJapan 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(

143、amount of solar radiation received per unit bya surface that is always held perpendicular to the rays that come in a straightline from the 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

144、CSP plants in the worlds sunny regions such as Australiain order to generate energy FS7 GB8 which can then be shipped back tothe country.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali28Source:MDPI;showing main CSP patent applicantsThe Japanese company Chiyoda Corporati

145、on 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,whichcurrently has a demo plant in Italy which was built in 2013.The MSPT-CSPtechnology has the ability to operate at temperatures of up to

146、 550C bychanging only the heat transfer fluid from hot-oil to molten salt.In August 2014,a pilot CSP plant based on parabolic trough solar collectors,binary power generation unit and biomass boilers started its operations inAugust 2014.The main specifications of the plant included a power outputof 7

147、0kW and an output ratio of 1:1 between solar and biomass.Source:SciencedirectAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali29Solar Heating and Cooling(SHC):CurrentlyDeclining on the Back of Reduced SubsidiesTowards the end of 2011,Japan was among the 12 countries in th

148、e 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,thenumber of solar heating systems installed in Japan has decreased over2015-2018,al

149、ongside declining subsidies for solar energy.Source:StatistaD.Value Chain AnalysisSummary:Of the three technologies we have discussed above,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 thesignifi

150、cant market conditions affecting the overall PV industry along withkey players at each stage of the value chain(where such information isavailable).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 larg

151、e scale.-The solar PV value chain involves silicon purification,which areconverted into ingots,and are then cut into wafers.The solar cells arethen produced,assembled into a solar panel and installed.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali30-Silicon purification

152、,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 players enjoy a relatively high margin.-Chinese players dominate the solar market at eac

153、h 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 be categorised into four main types.Wafer-based crystalline PV cells,which are produce

154、d 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 solidificationprocess which produces multiple,smaller crystals).Thin film cells are produced by d

155、epositing 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 applications.The efficiency of the cells is increasedusing either one PV cell(single

156、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).Of 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

157、uses of PV cells,below are some categories of PV market typesalongside possible applications.CategoriesApplicationsGrid-connectedSize of PV systemGrid-connectedOff-gridUtility DistributedGrid-connected,utility-scalegenerationPower generators,industrial usersXXGrid-connected,distributedenergyResident

158、ial&commercial buildingsXXOff-grid,utility-scalegenerationIndustrial users;remote communitiesXXOff-grid,distributedenergyResidential&commercial buildings,including withremote communities;remote,niche applications(ranging from small calculators,to offshore oil rigs,tospace applicationsXXAsian Solar E

159、nergy Sector:Powered by Subsidies and Moving DownstreamAqila Ali31Source:World Intellectual Property Organisation:Economic Research WorkingPaper No.40The Solar PV Value ChainThe solar PV value chain involves many chemical processes andmicroelectronic techniques.Starting off with purifying the silico

160、n 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 Property Organisation:Economic Research WorkingPaper No.40The following image provides a b

161、asic 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 chain functions.Source:Total Solar ExpertAsian Solar Energy Sector:Powered by Subsidies a

162、nd Moving DownstreamAqila Ali32Stage 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 capital-intensive,as the minimum purity required is 99.999999%andusing lower quality polysi

163、licon 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.Silica found in quartz sand needs to be purified alongside a mixture of coaland wood in

164、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 high temperatures in a reactor to form purified nuggetscalled“chunks”that are called pol

165、ysilicon.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 of solarcapacity have led to unprecedented growth in the polysilicon market.Stage 2:Co

166、nversion 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,which are smaller.The following steps are thenundergone to convert the ingot into a wafer

167、.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.Tailing,cylindrical grinding and cutting of the ingots:the extremes of theingot and externa

168、l surface corrugations are eliminated.Shaping of the monocrystalline ingots:the ingot is shaped into a square,which allows optimisation 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 inte

169、grated circuits and manufacture solar PV cells andaccounts for up to 40-50%of crystalline module cost.The ingots are sliced into wafers 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

170、 clean the debris fromprevious processes,and a first selection is made to remove defective wafers.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali33Stage 4:Cell ProductionWafers texturing:the wafers are placed in a bath to remove the surfacedamaged by sawing and to textu

171、re 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 diffusion.Anti-reflection coating ensures more effective photon absorption andsurface

172、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 current.Connecting cells:the cells are assembled and welded together to formmulti-cel

173、l 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 Solar ExpertFinishing and mounting the modules:the PV solar module is framed andequippe

174、d with a junction box for power connection.Testing:Modules are tested in calibrated artificial light to measure theirelectrical characteristics.Stage 5:Formation of Solar Panel SystemsTo deliver electricity to the loads(electricity consumption devices or to theelectricity grid),the modules are combi

175、ned with complementary equipment(such as batteries or inverters).Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali34Stage 6:InstallationThis final stage of the overall manufacturing process contains two aspects:A mechanical integration of the solar module into its chosen

176、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:Significant Disparities BetweenUpstream and DownstreamThe above processes have been segre

177、gated into upstream,midstream anddownstream as follows.UpstreamSilicon purificationIngot&wafer manufacturingMidstreamCell productionModule assemblySystemsDownstreamInstallationElectricity generationSource:World Intellectual Property Organisation:Economic Research WorkingPaper No.40Although the solar

178、 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 costs towards near equivalence with installation costs.Thisshift to the downstream parts

179、 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.Higher Margins for Downstream Companies?Solar manufacturing is generally considered a low-margin b

180、usiness.Upstream companies are usually chosen by customers on the basis of brandand involve a higher running cost,thereby limiting the margins.Downstream product services,in contrast,allow manufacturers to retainhigher margins.A recent trend that can be observed is that PVmanufacturers across the va

181、lue chain,especially those players in the mid-stream are increasingly involving themselves with downstream services.Having said that,we also note that,there are significant barriers of entry tothe downstream market,due to requirements such as financing and otherpermits,inspections,suppliers of inver

182、ters,and parts and crew labour.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali35We have compared the margins of Vivint Solar,a company specificallycatering to the downstream of the solar PV value chain,with those of twoupstream and midstream companies,JA Solar and Jinko

183、Solar.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 Dominance of the Solar PV Value ChainThe reported production of solar cells globally range

184、d 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 Taiwan in 2006 and atrend towards increasing production capacities in Asian countries incl

185、udingIndia,Malaysia,Thailand and Vietnam since 2014.Source:European Commission PV Status Report 2019Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali36Although,initially most of the demand and supply was located in developedeconomies,particularly the U.S.,Japan and German

186、y,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 advantage in innovation.With China lowering corporate taxes,providingtax breaks and i

187、ncentives,and streamlining approval processes,local solarmanufacturing was encouraged.However,downside risks also exist frombadly targeted government incentives.Although sector-specific policyincentives can be beneficial,the Chinese governments encouragement hasled to overcapacity and global spill o

188、ver 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 to do so.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali

189、37Key PV Manufacturers in ChinaSince China accounts for the largest proportion of solar PV production,wewill be discussing the top component manufacturers/wholesalers in China.CompanyDescriptionWebsiteDMEGC SolarSpecialises in developing,manufacturing and marketingboth monocrystalline and polycrysta

190、lline 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 manufacturer of high-performance photovoltaicproducts,such as silicon,batteries,components,andp

191、hotovoltaic power plants.http:/ GroupProvides polysilicon,silicon wafers,solar cells,and othersolar components alongside other products catering tothe electrical and rail transportation fields.http:/ EmeiSemiconductorMaterialsProvides semiconductor materials for many industrialsectors and research f

192、ields 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,Jinko Solar has an integrated annualcapacity of 10.5 GW for silicon wafers,7 GW for s

193、olarcells,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 silicon wafers,cells,modules and PV powerplants and as of May 2020,the company had a

194、nintegrated 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,500MW chip production and 500MW crystalingot production capacity.MJ1 GB2http:/ high-tech

195、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 wafers and 3.6m6-inch circuit-grade silicon polishing wafers.Additionally,it can devel

196、op 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 chain of the production of polycrystalline siliconwafers,solar energy batteries,and

197、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,its wafer manufacturingscale is 10 GW:6 GW for single crystal,3 GW forpolycrystallin

198、e,and 1 GW for cast single crystal.http:/www.ht- FeedsHowever,global leading manufacturers differ slightly,as just six of the 10companies 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

199、)are the top 5 leadingplayers in the market.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali38Over 2010-2019,shipments from the top 10 PV manufacturers grew from11GW to 78GW-a CAGR of 24.3%.Only four companies from the top 10 listin 2010 remained in 2019s top 10 list.The

200、se 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 the PV manufacturing industry,givenits already-established market presence.Global leadi

201、ng 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 industry underwent numerous changes in the past few years.Back in 2004,China accounted for

202、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 Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali39Source:Bernreuter

203、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),Tokuyama Corporation(TSE:4043),MEMC Electronic Materials,Mitsubishi Materials Corporatio

204、n(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 the forefront of theglobal polysilicon industry.Xinte Energy Co.,Ltd.(SEHK:1799),Daqo N

205、ewEnergy 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 polysilicon market.OCI Company Ltd.(KOSE:A010060),although thethird-largest polysilicon m

206、anufacturer 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 entry in the form of the high capital expenditure required toestablish a polysilicon pro

207、duction 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 ResearchAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Al

208、i40Ingots 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 Research.Based on various searches,thebelow companies can be considered some of the lead

209、ing players in the ingotmanufacturing market.Company NameRegionMaterial TypesPanasonic Corporation(Sanyo)JapanPolycrystalline ingotSharpJapanMonocrystalline ingotJA SolarChinaPolycrystalline ingotLDK SolarChinaMonocrystalline ingot,polycrystalline ingotDaqo GroupChinaPolycrystalline ingotJinko Solar

210、ChinaMonocrystalline ingot,polycrystalline ingotSUMCOJapanMonocrystalline ingotHT-SAAChinaPolycrystalline ingotTopray SolarChinaMonocrystalline ingot,polycrystalline ingotRietechChinaMonocrystalline ingot,polycrystalline ingotSornid Hi-TechChinaMonocrystalline ingot,polycrystalline ingotOCI CompanyK

211、oreaPolycrystalline 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 cleanliness required by the solar PV cells is lessthan that required for semiconducto

212、rs.The market share of wafer producersworldwide in 2017 and 2018 was as follows.Source:StatistaAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali41CompanyLocationDescriptionSK SiltronSouthKoreaManufactures and sells semiconductors and provides polished wafers,whichare used

213、 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(TSE:3436)JapanManufactures and sells silicon wafers and monocrystalline ingots.Shin E

214、tsuJapanProvides 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 by the five strongplayers mentioned above,leading to limited competition in the market

215、.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 by growing larger sized crystals and improving the seed crystals neededto improve pro

216、cess 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 innovations include finding ways to reduce theamount of metallisation pastes/inks con

217、taining silver and aluminium.Cell ProductionThe top-10 cell producers by volume in 2018 were the following companies.RankingCell Producer1JA Solar2Tongwei3Trina Solar4Hanwha Q-CELLS5JinkoSolar6LONGi7Shunfeng(incl.Wuxi Suntech)8Canadian Solar9Aiko Solar10First SolarSource:PV-TechJA Solar,Trina Solar,

218、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 such as Tongwei and Aiko.LONGi solar is the onlycompany which covers the full solar PV

219、 value chain.The industry containslow entry barriers and is therefore highly competitive.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali42Module ProductionBased on own-brand shipped module MWp-dc volumes in 2017 and 2018,the top 10 module suppliers were as follows,with

220、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 third place to Trina Solar.RankingSolar Module Manufacturer201720181Jinko SolarJinko Sol

221、ar2Trina SolarJA Solar3Canadian SolarTrina Solar4JA SolarLONGi Solar5Hanwha Q-CellsCanadian Solar6GCL System Integration TechnologyHanwha Q-Cells7LONGi SolarRisen Energy8Risen EnergyGCL System Integration Technology9Shufeng Photovoltaic InternationalTalesun10Yingli GreenFirst SolarSource:PV-TechSimi

222、lar 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 a large numberof wholesalers,many of whom do not operate globally.While some of thewh

223、olesalers 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 and electricians,larger projects need to undergo various stages of development beforeco

224、nstruction can even begin.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali43A few examples of companies who carry out solar PV projects include thefollowing.Cyprus Creek Renewables is involved in the development,financing,andoperating of utility-scaled and distributed po

225、wer 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 management company with morethan 1,000 energy efficient projects commissioned and more

226、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 energy plants.E.A Look at the Key Asian SolarPlayers:Survival Depends onSubsidiesAs di

227、scussed 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 ManufacturersJinkoSolar Holding(JKS US)(China)JA Solar(China)Panasonic Corp(6752 JP)Via

228、Sanyo 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)LONGi Green EnergyTechnology(601012 CH)(China)LONGi(China)Canadian Solar Inc(CSIQ US)(Can

229、ada)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 that we think are important players in theindustry.Asian Solar Energy Sector:Powered by

230、 Subsidies and Moving DownstreamAqila Ali44Our 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(China)LON

231、Gi(listed inChina)CGN New Energy Holdings(China)Kyocera(Japan)Yingli Green Energy(China)Vikram Solar Private Ltd(unlistedin India)Adani(unlisted-India)Having looked at these players quite closely,we take you through ourconclusions first about the similarities and differences across these players,fol

232、lowed 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 downstream rather than the upstream.Ingot and wafer manufacturers are exceptional as the

233、y 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 thatdownstream players benefit more from subsides than the upstream,alongside the fact that

234、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 Tongwei.Apart from this,the other leading players on our list are trying to increasedowns

235、tream 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 countries,especially in ASEAN.Webelieve that this is a key long-term driver for the player

236、s,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 countries to make it easy for solar energy players tomaintain their pricing and prof

237、itability.Similar basic technology:mono and multi-crystalline;some have a competitive edge by adopting slightlydifferentiated technology such as HJT and Shingled Moduletechnology.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali45Crystalline technology is widely used acro

238、ss 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)for incr

239、emental 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,though not a completely revolutionary change in the solar ener

240、gyproduct.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 Shingled technologies,the other Chinese and Indianplayers might quickly follow.On the ot

241、her 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 differences in operational performances amongstthe Asian players:The Chinese players

242、 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 Suntech and Yingli were also listed,but have bothbecome unlisted now,due to increased

243、 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 the country.With regard to the Japanese players,we note that theseplayers do not solely

244、 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 profitable when compared to the Indianplayers,and they aim to price higher and increa

245、se 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 players across Asia.TheChinese players enjoyed good profitability in the past,but haverece

246、ntly been struggling with their financial performance,mainlydue to the governments decision to reduce subsidies for solar energyAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali46products.As of now,the Indian players appear to be the mostattractive in terms of financial p

247、erformance.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 at th

248、eearly 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 wayto the Chinese players.We feel that the Indian companies are lookingto move towards other developing m

249、arkets,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 unlikely to gopublic until they become much larger,thereby not giving rise tomuch of an inve

250、stment 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 amongst the top ten,they haventyet entirely focused on capturing growth in the solar mark

251、et.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 Chinese listed players:Our main aim here is to compare the listed pure solar players

252、 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 provided a briefoverview of these companies and their strategies in the solar busine

253、ss.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.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali47CompanyInvestment PositivesInvestment Nega

254、tivesFinancialNumbersI.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 model

255、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)JA SolarAcquisitions boost profit and allowthe exploration of new marketsCapacity expansion and productinnova

256、tion 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 key rivalsAggressive capacity expansionand strong demand for bi-facial PVmodulesSubsi

257、dy 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 strengtheningcompetitive position throughacquisitionsReliant on governmentpoliciesI.53%(5-year)II.5

258、4%(5-year)III.49.6%IV.6.1x(NTM)Source:LSRAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali48Source:CapIQAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali49Based on our analysis,we feel that:While LONGi has been trading at a premium to its peers

259、,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,which w

260、e 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 Jinkos.H

261、owever,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 LTM EPS,

262、which isaround 40 x,we feel that Trina looks quite expensive.We like Trinasability to maintain a diversified product base and target developingmarkets.However,it is possible that the companys profitability mightstruggle if subsidies do not exist.Thus,with an already lower EBITmargin when compared to

263、 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 players,in the sense that it focuses solelyon CSP projects.Moreover,the company appears to

264、 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 LONGi and JA Solarfor their attractive fundamentals and ability to capture opportunities

265、 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.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali50Our thoughts on the unlisted

266、 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-crystall

267、ineA shingled module typeTargets:China&international marketsNot a vertically integratedproducerCaptures growth via differentmodule technologiesContinued growth in PV marketand demand for shingled moduletypesLimiteddownstream focusSubsidy riskSuntechTechnology:Crystalline technologyHeterojunction tec

268、hnology(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 riskYingliTechnology:Pol

269、ysilicon andmonocrystalline technologyTargets:ChinaUSJapanVertically integratedmanufacturingDifferent strategies for each of itsfocus countriesGrowth in the integrated PVmarketCompany has filedfor insolvencyVikramSolarTechnology:Mono Passivated Emitter andRear Cell(PERC)technology.Targets:IndiaAustr

270、aliaUSTaps markets beyond IndiaRuns an EPC modelFocuses on rooftop solar businessin IndiaRecovery in Indias PV industryGrowth expected for Mono PERCsDependent ongovernmentpoliciesSource:LSRAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali51Key points we highlight for thes

271、e 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 support

272、 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 being

273、 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 thefuture

274、.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 for i

275、ts business model and shingledmodule technology.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali52Summary of Listed Players that Are Not EntirelySolar-FocusedCompany Key Technology&Key Target MarketsKey Strategies&Growth DriversI.RevenueCAGRII.OPCAGRIII.OPMKyocera(Japan)

276、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 growthand

277、 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,espec

278、ially 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 otherbu

279、sinessesA 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(initiall

280、y)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 rapidimplementation of p

281、rojectsUntapped demand in IndiaN/ASource:LSRAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali53In Detail:Listed Pure Solar Players:ChinesePlayersJinko SolarCompany BackgroundJinko Solar commenced operations in June 2006 and is one of the largestsolar module manufacturers

282、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 advanced tec

283、hnologies 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 cell.Bif

284、acial 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 highwa

285、y,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 strategic

286、alliances 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 Moving

287、 DownstreamAqila Ali54Continuous 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 necessary

288、for 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 China

289、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.Apartfrom

290、 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 CAGR

291、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 enabl

292、ed 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 margin

293、s 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.Asian Sol

294、ar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali55Furthermore,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 R&D i

295、n 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 disclosuresTrina SolarCompany BackgroundTrina Solar was founded in 1997 in China.Asian Solar Energy Sector:Powered by Subsidies

296、and Moving DownstreamAqila Ali56Some 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 the id

297、eal 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 Ali57

298、TrinaPro 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 record

299、 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 todevelop a so

300、lution 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 conduc

301、ted 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%effici

302、ency).In 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,Trina Solar acquired Nclave Renewable S.L to makeNclave a wholly owned subsidiary of

303、 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 on the multicrystalline(i.e.made of polycrystalline silicon which is relatively low ef

304、ficiency 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 improvementin light capture near the rear surface and optimization of electron capture;in

305、 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 technologiesare used to produce both bi-facial(transforms sunlight into electrical energyon both

306、its top and bottom sides)and mono-facial types of products.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali58Source:Company DisclosuresAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali59Investment ThesisAdopting an EPC Model to Capture Growth

307、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 developed i

308、tssmart 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 solar/

309、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 DriverT

310、he 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 acustomised

311、PV Power+Energy Storage+Diesel Power micro gridintegrated solution based on the electricity demands of 14 islands in theMaldives.Thus,Trina,while having a solid market share in China,could becapable of growing strongly over the long term if it becomes successful inother developing markets where pote

312、ntial 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 market especially in thedownstream of the supply chain,pricing has become very compe

313、titive.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 key concern for Trinais that the companys growth appears to be dependent on Chinas s

314、ubsidypolicy 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 anextent explains Trinas intent to target developing markets,and utilise itsmodule exper

315、tise 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 during the three-yearperiod on average was around 5%.Asian Solar Energy Sector:Powered by

316、 Subsidies and Moving DownstreamAqila Ali60Source: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,involving w

317、afer 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-platformbusiness,which continued to advance with a number of practical a

318、pplicationscenarios 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-7.9%,while SmartEnergy Systems segmental revenue declined at-17.8%CARC.Chinas abruptre

319、moval 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 company introduced in 2018.Source:Company disclosuresAsian Solar Energy Sector:Powere

320、d by Subsidies and Moving DownstreamAqila Ali61During 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-size cell

321、 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 first ha

322、lf 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 2Q FY20

323、20,which we believe is a good sign for thecompany.Source:Company disclosuresAsian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali62JA SolarFounded in 2005,JA Solar is a manufacturer of PV products including siliconwafers,cells,modules and PV power stations.The company has cat

324、ered 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.Similar to certain other leading peers,JA

325、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 and bifacial monoPERC double glass modules(i.e.a frameless solar module).Investment

326、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 productioncapacity.The company would also continue to invest in R&D,especially tooptimise its PER

327、C+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 leading distributorof PV products in Mexico,where the company now has the ability to grow i

328、nthe 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 domore acquisitions this way and increase profitability while minimizing thedownside ris

329、ks 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 also provides to North America.Moreover,subsidies reduction isaffecting most of the Ch

330、inese 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 becomes successful with the Mexican marketsAsian Solar Energy Sector:Powered by Subsidies

331、 and Moving DownstreamAqila Ali63Financial 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 8.8%and

332、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 using ne

333、w technologiesand a series of restructuring projects.Source:CapIQJA Solar classifies its revenues into two key product segments.Asian Solar Energy Sector:Powered by Subsidies and Moving DownstreamAqila Ali64LONGiCompany BackgroundLONGi group is a formation of two key companies-LONGi Green EnergyTechnology(formerly Xian LONGi Silicon Materials Co),which looked intoingot and silicon manufacturing a