In-depth understanding of the current situation of the photovoltaic inverter industry

1 Industry overview: an excellent track with light assets and high ROE

Inverter is a device that converts direct current (battery, storage battery) into alternating current. It is widely used in many fields such as automobiles, rail transit, communication equipment and new energy power generation. At present, the inverter mentioned in the market mainly refers to the photovoltaic inverter used in the photovoltaic power generation system, and the energy storage inverter (or energy storage converter) used in the energy storage system.

1.1 Photovoltaic Inverter: The Key Equipment Connecting the Photovoltaic System to the Grid

Photovoltaic inverters are the key equipment for connecting photovoltaic systems and power grids, ensuring long-term reliable operation of power plants and improving project investment returns. The basic function of the inverter is to convert the DC power output by the photovoltaic cell into AC power, which is mainly realized by the high-frequency switching of power electronic switching devices such as IGBT and MOSFET, and the output AC power needs to meet the power quality of the grid. Require. The performance of the photovoltaic inverter will have a direct impact on the operation stability, power generation efficiency and service life of the entire photovoltaic system.

          The inverter is also responsible for the intelligent control of the entire photovoltaic system. As the main intelligent equipment in the current photovoltaic system, the inverter also has the maximum power point tracking (MPPT) function to improve the power generation efficiency of the system, the islanding effect control and zero voltage ride-through to monitor, adjust and protect the system status.

Photovoltaic inverters can be roughly divided into four types: centralized, string, distributed and micro inverters. The main difference between these four categories is the individual capacity of the inverter and the number of PV modules directly connected to the inverter, thus having different downstream application scenarios.

String inverters have a larger share of the global market. At present, the shipments of string inverters by capacity in the global market account for about 60%, centralized inverters account for about 35%, and distributed and micro inverters account for a small market share. In the traditional concept, the single-unit capacity of string inverters is small, which is suitable for household and industrial and commercial distributed photovoltaic systems; the single-unit capacity of centralized inverters is large, which is suitable for large-scale photovoltaic power station scenarios. However, in recent years, various manufacturers have launched large-capacity string inverters of 200KW or even more than 300KW, which have been successfully applied to large-scale photovoltaic power plants, further increasing the market share of string inverters.

Inverter cost only accounts for about 3%-5% in my country's photovoltaic system. With the continuous decline of inverter prices in recent years, according to the statistics of China Photovoltaic Industry Association, the average prices of centralized inverters and string inverters in my country will drop to 0.11 yuan/W and 0.18 yuan/W respectively in 2020. , while the initial investment costs of large-scale ground photovoltaic systems and industrial and commercial rooftop distributed systems are 3.99 yuan/W and 3.38 yuan/W respectively, and the cost of inverters only accounts for about 3%-5%.

1.2 The development of energy storage business has become a new growth point of the industry

The deployment of energy storage is an important trend in new energy power generation. With the increase in the proportion of photovoltaic and wind power generation, the congenital defects such as volatility, intermittent and inflexible adjustment become more and more obvious. In future new energy power generation projects, it has basically become a consensus in the industry to configure energy storage to improve power quality and maintain grid stability. Various traditional inverter manufacturers have also launched energy storage products in order to seize the share of emerging markets.

Since 2021, the state has put forward a series of policy support and guidelines for the development of energy storage. In April 2021, the National Energy Administration issued the "Notice on Submitting the "14th Five-Year" Electric Power Source Grid Load-Storage Integration and Multi-Energy Complementary Work Plan", by implementing the requirements for renewable energy consumption capacity, encouraging configuration for energy storage. In May, the National Development and Reform Commission proposed the establishment of a new energy storage price mechanism in the Action Plan for Deepening the Reform of the Price Mechanism during the 14th Five-Year Plan Period. In July, the "Guiding Opinions on Accelerating the Development of New Energy Storage" put forward the goal that the installed capacity of new energy storage will reach more than 30 million kilowatts by 2025 (the installed capacity of electrochemical energy storage will be about 3 million kilowatts in 2020); " In the Notice on Further Improving the Time-of-use Electricity Price Mechanism, by increasing the peak-to-valley price difference, space has been created for the development of user-side energy storage.

The energy storage system needs to be connected to the grid through an energy storage converter. Energy storage converters are generally called energy storage inverters for household energy storage, and are generally called PCS (Power Conversion System) in large-scale industrial and commercial energy storage fields. A device that realizes bidirectional conversion of electrical energy between power grids. The energy storage converter can not only invert the direct current in the energy storage battery to alternating current, and transmit it to the power grid; it can also rectify the alternating current in the power grid into direct current to charge the energy storage system.

Photovoltaic inverter manufacturers have a competitive advantage in the new energy storage track. The role of the energy storage converter in the energy storage system is similar to that of the photovoltaic inverter in the photovoltaic system; the technology between the energy storage converter and the photovoltaic inverter is similar, and the photovoltaic inverter production line is switched to The energy storage converter production line only takes about 1-2 weeks, and it is mainly a switch in the production process, so the entry barrier for inverter manufacturers is low. The main customers of the two are similar, and the sales channels and brand reputation established by inverter manufacturers are still valid; and for existing customers, when there is a demand for installing energy storage converters, they will also tend to choose and photovoltaic inverters. the same brand as the device for a more convenient after-sales service.

1.3 Industry characteristics: asset-light model operation, emphasis on brand and channel building

The fixed assets of the inverter link are lighter and the ROE is higher. Compared with companies in other parts of the photovoltaic industry chain, inverter manufacturers have a lower proportion of non-current assets, while ROE and asset turnover rate are higher; the ROE of GoodWe and Jinlang Technology in 2020 are 34.99% and 29.05%, respectively. It is higher than the representative companies selected by us in the fields of silicon wafers, cells, components and so on.

        The investment cost of production equipment is low, and the output per capita is high. In 2020, the investment cost of inverter production equipment per unit capacity is 60,000 yuan/MW, which is at a low level in the photovoltaic industry chain. The per capita output of direct employees of the inverter production line is about 17.5MW/year/person, which is higher than that of other links in the industry chain.

More than 80% of the raw materials of inverters have been localized, and most of the industries in which the suppliers are located are in a state of full competition. Therefore, the cost of domestic inverters can be reduced compared with overseas manufacturers. The cost of inverters is mainly based on direct materials. The direct materials accounted for 93.74%, 95.15% and 87.28% of the main costs of pure inverter targets Jinlang Technology, Shangneng Electric and GoodWe respectively. 42.66% of the revenue comes from power station system integration, so the proportion of direct materials in the cost is relatively low.

Channel and brand building are the main thresholds for enterprise development. Since the cost of the inverter accounts for only about 8%-10% of the entire photovoltaic system, but if a failure occurs, the system will be paralyzed in a large area, so customers will tend to choose the head with rich industry application experience and good market reputation brand. And after customers accept a certain brand, they will tend to establish long-term and stable cooperative relations with high loyalty.

In the past ten years, dozens of inverter companies have successively withdrawn from the photovoltaic inverter business, and the products left by the withdrawn brands have become a huge problem for the owners when they need to be repaired. repair. Therefore, owners often choose first-tier brands when purchasing again, and they will regard the efficiency and quality of after-sales service as important factors to examine.

The distributed photovoltaic market is oriented to household users or scattered industrial and commercial owners. It has a strong To C attribute and attaches great importance to the construction of sales channels. Therefore, the inverter is similar to the module segment, and has a higher sales expense rate than other manufacturers in the photovoltaic segment. Under the general trend of domestic manufacturers speeding up to go overseas, various manufacturers have established overseas subsidiaries or hired local third-party agencies to be responsible for overseas channel construction. According to Jinlang Technology's 2020 annual report, "overseas service fees" accounted for the highest proportion of sales expenses. , up to 35%.

         Product iterative upgrades are rapid, and manufacturers need to quickly respond to market demands. As the proportion of photovoltaic power generation in the power system continues to increase, the grid side requires the inverter to undertake functions from "not affecting the grid" to "adapting to the grid" to "supporting the grid". The user side needs the inverter to improve the degree of intelligence and provide data support for the intelligent operation and maintenance of photovoltaic power plants. On the component side, the inverter needs to adjust the electrical parameters in time to adapt to the electrical characteristics of the new components. As a result, new demands have been put forward for inverter products, requiring manufacturers to iterate quickly and respond in a timely manner.

2 Supply side: domestic brands occupy the main market and will accelerate overseas penetration

2.1 Industry Pattern: Market Share Gradually Concentrate on Leading Manufacturers

Top 6 Chinese companies account for 60% of the global PV inverter shipments. According to Wood Machenzie, the top 10 global PV inverter companies in terms of shipments in 2020 accounted for 6 domestic companies. Huawei and Sungrow constitute the first echelon of global PV inverter companies, with shipments of 41.7GW and 2020 respectively. 35.0GW, accounting for 23% and 19% of global shipments. SMA, Power Electronics and Fimer represent the European forces that dominated the inverter market before 2014, with a combined market share of 16%.

        The leading position is stable, and the competition in the waist is fierce. Since 2015, Huawei, Sungrow and SMA have maintained a stable TOP3 position in terms of shipments, while the market share of the industry waist enterprises is close, and the competition is more intense. In the competition, Chinese inverter companies are gradually rising. In 2012, there was only one Chinese company in the top 10 global shipments, Sungrow, while the German company SMA, the inventor of photovoltaic inverters, had a global market share before 2012. reach more than 30%.

The inverter market concentration has gradually increased, with shipments CR10 reaching 80%. In 2010, the CR10 shipments of global PV inverter companies were over 70%. As Chinese companies seized the leading share of traditional European markets, CR10 dropped to a low of 55% in 2013; Driven by the increase in the world's leading market share, the global inverter market concentration is showing an upward trend, and the CR10 shipments in 2020 will be 80%.

2.2 Vendor differences: The differences in technology endowments continue to the energy storage field

1) Differences in company size: Among the domestic listed companies, Sungrow’s inverter business revenue is much higher than other comparable companies. In 2020, the revenue of photovoltaic inverters is 7.515 billion yuan. Jinlang Technology, GoodWe and Shangneng Electric 2020 The annual revenue of inverter business was 2.019 billion, 1.523 billion and 953 million yuan respectively. Among foreign companies, SolarEdge, SMA and Enphase’s inverter-related business revenue in 2020 is about 8.3 billion yuan, 8.2 billion yuan and 5.1 billion yuan.

    In 2020, the inverter shipments of Sungrow, Jinlang Technology, GoodWe and Shangneng Electric were 33.52, 8.92, 7.02 and 5.97GW respectively. The horizontal comparison results of Chinese and foreign companies in terms of power shipments and revenue are quite different, mainly because the unit price of inverters produced by foreign companies is significantly higher than that of domestic companies, and both SolarEdge and Enphase focus on the production of low-power household products. . In terms of the number of units shipped, SolarEdge will ship 662,000 units in 2020, while Jinlang Technology and GoodWe will ship 482,000 and 352,000 units respectively.

2) Differences in product lines: Among the companies we compared, Sungrow and SMA have relatively complete product categories, and have product layouts in various application scenarios such as households, industrial and commercial rooftops, and large-scale power stations. Both serial and centralized solutions.

Shangneng Electric can provide distributed products, as well as string and centralized products for industrial and commercial customers and large power stations, but it has less coverage in the household field. Jinlang Technology and GoodWe focus on covering the needs of scenarios such as distributed and large-scale power plants with string-type products, with similar product structures. The products of Deye shares, SolarEdge and Enphase are mainly aimed at the distributed photovoltaic market. Deye shares and Enphase can provide micro-inverters. The solutions of SolarEdge are relatively unique, and inverters are generally used with the optimizers they produce.

Ginlang Technology, GoodWe and Shangneng Electric are pure inverter targets. In 2020, inverters (including photovoltaics and energy storage) accounted for 96.87%, 95.83% and 94.89% of the main components; Sungrow photovoltaic Inverter revenue accounted for 38.97%, and another 42.66% of revenue came from power station system integration, 7.34% from wind power converters, and 6.06% from energy storage business; Chint Electric, Kestar and Kehua Data and other companies have inverters The appliance business accounts for a lower proportion of total revenue.

3) Differences in the development of energy storage business: Among inverter manufacturers, Sungrow has the largest energy storage business. In addition to energy storage converters, it can also provide other core energy storage equipment such as lithium battery modules and energy management systems. .

Goodway's energy storage inverter revenue accounts for the largest proportion of total revenue, with revenue of 159 million yuan in 2020, accounting for 9.99% of total revenue; according to Wood Mackenzie statistics, Goodway's household energy storage inverter shipments ranked first in the world in 2019 First, the market share is 15%.

Shangneng Electric and Jinlang Technology are actively expanding the production of energy storage products. In 2020, Shangneng Electric will realize energy storage bidirectional converters and system integration products of 60.1457 million yuan. The integrated industrialization project of bidirectional converter and energy storage system is expected to be completed and put into operation in the second half of 2021;

Jinlang Technology's energy storage inverter revenue in 2020 is 37.3333 million yuan, and the revenue in the first half of 2021 is 66.4282 million yuan. It has invested in a new capacity of 100,000 energy storage inverters through fixed increase fundraising. It is expected to be put into production in 2021.

The "photovoltaic energy storage inverters" of Jinlang Technology and GoodWe are mainly aimed at the small household market. The power range of Jinlang Technology's energy storage inverter products is between 3-10KW, and GoodWe is between 2.5KW-10KW, both of which belong to the household level and are suitable for small and medium-sized houses. The main function of the product is: the energy generated by the photovoltaic system is preferentially used by the local load, the excess energy is stored in the battery, and it can be selectively integrated into the grid when there is still surplus energy; when the photovoltaic energy is insufficient, the battery discharges It can be used by local loads, thereby reducing the dependence on the grid and traditional energy sources, and striving to achieve "self-sufficiency" in residential electricity.

Such "photovoltaic energy storage inverters" can be regarded as a combination of photovoltaic inverters and energy storage converters. At the same time, they have the functions of grid-connected photovoltaic power generation and charging and discharging functions of energy storage batteries, which can obtain a higher technical premium. , but will not produce an increase in volume.

The "energy storage converters" of Sungrow and Shangneng Electric are mainly high-power products. Sungrow's energy storage converters currently cover the high power range of 500KW-3450KW, and there is also a 50KW medium power product; Shangneng Electric's AC energy storage converter products cover the power range of 100KW-2500KW.

High-power energy storage converters are mainly used to solve the fluctuation and consumption problems of renewable energy grid-connected on the power generation side; on the grid side, they are mainly used to achieve peak regulation and frequency regulation; on the user side, they are used in large-scale industrial and commercial photovoltaic energy storage projects , through peak-valley arbitrage and other methods to increase power generation revenue and reduce electricity costs. In the case of large-scale centralized energy storage applications, energy storage converters are generally independent of equipment other than photovoltaic inverters.

   4) Differences in dominant markets: Sungrow has a high market share in all markets except Europe in 2019, and will achieve rapid growth in the European market in 2020, ranking second in European shipments; Jin Lang Technology has a relatively high market share in the domestic and Latin American markets, and also has a part of the market share in India, Australia and Europe; Shangneng Electric's dominant market is mainly in the Asia-Pacific region represented by China and India; GoodWe 2019 Shipments in the Australian market account for 7% of the local market, Asia Pacific, Latin America and Europe are also important markets for the company; SMA's main advantageous markets are Australia, Europe, the United States and the Middle East & Africa;

The dominant market of SolarEdge is in the United States, and it has expanded the European market in the past two years; Enphase's main market is in the United States, and its products are mainly high-value micro-inverters. Although the shipment in 2019 is only about 2GW, accounting for 7% of the US market, But it is mainly concentrated in the high-end user sector, and achieved a revenue of 624 million US dollars.

2.3 Domestic manufacturers have obvious competitive advantages and will accelerate overseas penetration

The average sales price of domestic inverters is significantly lower than that of overseas brands. The average unit price of domestic photovoltaic inverters is around 0.16-0.27 yuan/W, while that of SMA and SolarEdge is around 0.57-0.78 yuan/W, and the average unit price of Enphase's micro inverter products is around 2.20-2.75 yuan/W.

        More than 90% of the operating costs of inverter manufacturers such as Jinlang Technology and GoodWe come from direct materials, and inverter raw materials can be divided into two categories: one is electronic components, such as IGBTs, capacitors, inductors, reactance and PCB boards, etc.; the other type is structural parts, mainly cabinets and chassis. At present, about 80% of the raw materials can be localized, except that IGBT power devices mainly rely on the import of German brands such as Infineon and Ximenkang, and Japan's Fuji and Mitsubishi.

Since 2017, with the continuous advancement of industry technology, the replacement of electronic components and products has accelerated, the price level has dropped year by year, and the procurement costs of downstream photovoltaic inverter companies have also benefited from reductions. Taking GoodWe as an example, from 2017 to 2019, the unit purchase price of the company's power devices, inductors, capacitors and control components and other electronic components basically showed a decline in varying degrees, superimposed on the lower domestic labor costs, domestic inverter manufacturers are in the low Under the premise of selling price, it can still maintain a high gross profit rate. Taking Sungrow and SMA, two manufacturers with complete product lines as examples, the gross profit margin of Sungrow's inverter business in 2020 is 35.0%, while that of SMA is only 16.3%. In this context, there is still room for domestic manufacturers to cut prices in order to seize a larger overseas market share.

The performance of domestic inverter products is internationally leading. After years of development, the quality of domestic inverters has reached or even surpassed similar products from overseas established manufacturers. We compared the performance of inverters with different specifications from 5KW to 3000KW, and found that compared with SMA, the products of Sungrow and Jinlang Technology generally have higher conversion efficiency and wider MPPT voltage range, so they can obtain higher power generation efficiency.

Domestic manufacturers update and iterate faster. Due to the complete domestic photovoltaic industry chain and the world's leading technology and technology, domestic manufacturers are more closely connected with upstream and downstream, and can better capture user pain points in a timely manner, and have advantages in new product development. In recent years, domestic manufacturers have accelerated product iteration, enriched product lines, and upgraded performance indicators such as input current and product capacity to better meet the needs of various customers for different usage scenarios. The speed of launching new products is faster than that of overseas manufacturers.

Domestic manufacturers have gradually increased their recognition of overseas brands. In 2020, Bloomberg New Energy Finance conducted a survey on the bankability of inverter brands by issuing questionnaires to investors of renewable energy projects. Brands with higher rankings mean that it is easier to help project developers obtain bank financing, which is conducive to binding long-term customer groups;

On the other hand, it shows that the inverter of this brand has outstanding performance in product quality, operation performance, after-sales service support and long-term reliability, which is conducive to the expansion of overseas layout. Sungrow was elected as the "World's Most Valuable Inverter Brand" with 100% of the votes. Huawei ranked second, and a total of 9 Chinese companies were on the list. It shows that in the process of overseas expansion of domestic manufacturers, the brand The value has been improved, and it has gradually been recognized by overseas investors.

         During the epidemic, the recovery was rapid, and the proportion of domestic inverters further increased. After the domestic epidemic gradually subsided in the first half of 2020, production enterprises resumed work and production in an orderly manner, while the production of overseas manufacturers suffered a longer period of stagnation. Therefore, domestic manufacturers have seized an important time window and significantly increased the proportion of shipments in the global market from about 58% in 2019 to 70%.

The profit margins in overseas markets are larger, and domestic manufacturers are accelerating their overseas penetration. The overseas selling price of domestic inverters is higher than that in China. The gross profit margins of Sungrow, Jinlang Technology and GoodWe are 35.16%, 42.58% and 47.59% respectively, all of which are more than twice the domestic ones. Driven by profits, the focus of domestic manufacturers’ revenue has shifted to overseas, with Jinlang Technology and GoodWe both accounting for more than 60% of overseas revenue; Sungrow’s overseas revenue has been increasing in recent years, currently reaching 34.23%; After 2018, it focused on the development of overseas business and achieved significant improvement.

         In order to improve the company's global production and supply capabilities, cope with international trade disputes and pass on tariff costs, domestic inverter companies have also begun to set up factories in key overseas countries, such as Sungrow (initial production capacity of 3GW, will be expanded to 10GW in 2021) , Shangneng Electric (with an annual output of 3GW), and TBEA (with an annual output of 2GW) in India, and Kstar has opened factories in Vietnam to better cover the local market, neighboring countries and even the global market demand.

In addition, Jinlang Technology, Growatt, GoodWe, etc. are also further strengthening and expanding their overseas layout, and benefiting from the scale growth of emerging markets such as Latin America, Southeast Asia and the Middle East, their overseas market shares have increased.

Domestic inverters have strong influence in the global market. According to Wood Mackenzie, in 2019, there are many Chinese companies in the top 10 companies with inverter shipments in various markets around the world, and Huawei has the largest share in all markets except the United States. At present, the U.S. market has imposed many restrictions on Chinese photovoltaic products. The Japanese market has a strong preference for local brands, and it is relatively difficult for Chinese companies to penetrate. In emerging markets such as Latin America, the Middle East, and Africa, domestic inverters are still relatively large. alternative space, is expected to further increase market share.

In 2020, the share of domestic manufacturers in the global market will increase, and the development of Sungrow as an industry leader is very eye-catching. In the European market, Sungrow's market share ranking increased by 7 places compared with 2019, ranking second; in the Latin American market, Sungrow became the largest inverter supplier in the region with a market share of 18%; in the African market , Sungrow accounted for 20% of the share, ranking third.

3 Demand side: photovoltaic energy storage two-wheel drive, broad industry space

3.1 Main Markets: Traditional Markets Maintain Growth, Emerging Market Demands Emerge

China, the European Union and the United States are the world's largest photovoltaic markets. In 2020, the newly installed capacity of the DC side of the global photovoltaic market will be 134GW. By the end of 2020, the cumulative installed capacity of photovoltaics in the world will be 760.4GW. There are 20 countries with newly installed photovoltaic capacity exceeding 1GW, of which China, the European Union and the United States rank among the top three global markets with newly installed capacity of 48.2GW, 19.6GW and 19.2GW respectively. As a necessary equipment for photovoltaic systems, the demand for photovoltaic inverters directly benefits from the growth of photovoltaic installed capacity. According to Wood Mackenzie, global PV inverter shipments in 2020 will be 185.14GW, a substantial increase of 43% over 2019.

The global share of China's photovoltaic market has increased significantly from 25% in 2019 to about 36%. The U.S. market is expected to grow steadily. The Vietnamese market, due to the decline of photovoltaic subsidies, has driven a surge in demand for the rooftop photovoltaic market, becoming the world's largest new installed capacity. 3 countries. Although countries such as France, Turkey, Mexico, Chile, Saudi Arabia, the United Arab Emirates and Egypt have not entered the GW-level market in 2020, the market has begun to take shape and the reserve projects are sufficient. According to the China Photovoltaic Industry Association, these countries will become the future A new growth point that will drive global market demand in 2-3 years.

       Since 2018, domestic inverter exports have grown rapidly. In 2020, the epidemic will drag down the progress of overseas photovoltaic installations, but my country's inverter exports still maintain a relatively high growth. According to the data released by the General Administration of Customs, from 2018 to 2020, the export value of my country's inverter products was US$1.85/2.76/3.48 billion, respectively, corresponding to a growth rate of 23.5%/49.4%/26.1%; The newly installed capacity was 59.7/84.9/81.8GW respectively, corresponding to a growth rate of 29.3%/42.1%/-3.64%; the growth rate of my country's total export value of photovoltaic products according to the statistics of the association was 12.0%/30.0%/-5.0%. The growth rate of inverter exports in 2019-2020 was higher than the growth rate of new overseas installations in the same period, and was significantly higher than the growth rate of total exports of photovoltaic products in 2018-2020.

In the first half of 2021, inverter exports will maintain a high growth rate. In the first six months of 2021, the export value of inverters totaled 2.145 billion US dollars, a year-on-year increase of 64.75%, reaching 62.32% of the total export value in 2020, reflecting the strong demand in overseas markets.

Europe and Asia are currently the most important markets for my country's inverter exports. In 2020, my country's total exports of inverters to Europe and Asia will be 1.25 billion US dollars and 1.14 billion US dollars, a year-on-year increase of 31.44% and 43.43%; and the export value to the European market in the first six months of 2021 has reached 920 million US dollars, equivalent to level in 2019. In 2020, my country's exports to North America fell by 20.04%, mainly due to the impact of Sino-US trade disputes. Some companies responded to such situations by setting up factories overseas.

Emerging markets are growing rapidly. In addition to the traditional European and American markets, the demand in emerging markets represented by Vietnam, Brazil and many Arab countries continues to grow, bringing more opportunities for Chinese inverter companies. According to the data released by the General Administration of Customs, in the first half of 2021, my country's inverter exports to Latin America, Southeast Asia, the Middle East and Africa were 2.60, 1.19, 0.81 and 65 million US dollars, accounting for 25% of the inverter export value. about.

From 2017 to 2020, the three-year CAGR of inverter exports to Southeast Asia, Africa and Latin America was as high as 134.31%, 63.67% and 49.25%, respectively, higher than other markets. Among them, the three-year CAGR of the export value of representative countries such as Vietnam, Brazil and South Africa reached 395.40%, 156.41% and 121.16% respectively, showing a huge growth elasticity. In the Middle East, my country's inverter exports to the UAE in the first half of 2021 increased by 350.51% year-on-year, reaching US$21 million.

3.2 Product Structure: String

Type, high-power, high-voltage products have gradually become the mainstream

1) The string type has largely replaced the centralized market share

The proportion of distributed installed capacity has gradually increased. Globally, the rooftop PV market is growing more rapidly than the utility-scale PV market, accounting for about 40% of new installations in 2020. In China, since 2013, the proportion of distributed installed capacity has been on the rise as a whole among the newly installed photovoltaic capacity in the country over the years. In the first half of 2021, new distributed installed capacity nationwide increased by 97.5% year-on-year, and new centralized installed capacity decreased by 24.2% year-on-year; new installed capacity for household accounts for 42%, becoming the main source of new installed capacity.

        String inverters have gradually become mainstream products in the market. With the increasing use of string inverters in centralized photovoltaic power plants and the rapid advancement of distributed photovoltaic installations, the domestic string inverter market share has increased by 5pct to 66% compared with 2019, while Wood Mackenzie According to statistics, the global market share of string inverter shipments in 2019 is about 63%.

The price difference per watt has narrowed, and the proportion of string type in bidding in the first half of 2021 is significantly higher than that of centralized type. According to the China Photovoltaic Industry Association, the average market prices of string and centralized inverters in my country in 2020 are 0.18 yuan/W and 0.11 yuan/W respectively, and the price difference of 0.06 yuan/W is 3.5-4.0 yuan/W relative to the overall photovoltaic system. In terms of price, it only accounts for about 1.6% of the total cost, and the gradually narrowing price difference creates conditions for the promotion of string type in large-scale power plants. According to the statistics of Sobey Photovoltaic Network on the bidding information of 20.37GW of photovoltaic inverters in the first half of 2021, the string type accounts for 81%, and the centralized type accounts for 19%.

In addition, according to PV-Tech's statistics on the bidding results of central enterprises' photovoltaic inverter centralized procurement of about 24GW in 2020, the total number of string-type bidding in the statistical projects exceeds 17.74GW, accounting for 73.93%, centralized accounting for 20.00%, and distributed-type bidding. accounted for 6.06%.

         The string type can be more flexibly applied to more scenarios and improve power generation efficiency. For scenarios such as mountain photovoltaic power stations with complex terrain, scattered industrial and commercial roofs, and residential roofs with a small installation area, string inverters have inherent advantages over centralized ones. In addition, since string inverters have fewer PV modules connected to a centralized single unit and have a wider range of MPPT voltage variation, when external temperature, light and other factors change, some modules may be affected by vegetation, floating clouds, etc. When shaded, the string type can obtain greater power generation under the same conditions than the centralized type.

At present, traditional centralized inverter manufacturers have already launched various string-type products. Therefore, we believe that the replacement trend of string-type inverters for centralized inverters does not mean that it is good for traditional string-type manufacturers and traditional centralized manufacturers. The continuous improvement of product efficiency will improve the overall power generation efficiency of photovoltaic power plants, expand the scenarios of photovoltaic development, reduce the cost of power generation and grid connection, and provide strong support for the further expansion of the industry market space.

2) Manufacturers continue to introduce products with higher power

At present, major inverter manufacturers have launched inverter products with higher power levels. In terms of centralized inverters, domestic manufacturers such as Sungrow Power, Shangneng Electric and TBEA have all launched products with a rated power of 3125KW or 3400KW. Foreign manufacturers such as SMA and Power Electronics have also launched 3000KW and 3510KW centralized inverters respectively.

In terms of string inverters, Sungrow's SG320HX is currently the world's largest single-unit string inverter product, with a rated power of 320KW; Huawei, Jinlang Technology, GoodWe, and SMA and other domestic and foreign mainstream manufacturers also Launched 150KW-300KW high-power string products. The improvement of the inverter power level is, on the one hand, to adapt to the increase in the power of photovoltaic modules and the increasing construction scale of photovoltaic power plants; at the same time, it can also effectively reduce the cost per watt of the inverter, thereby reducing the overall cost of photovoltaic power plants. cost.

3) Large-scale photovoltaic power plants gradually switch to 1500V system

Under the background of the accelerated process of photovoltaic power generation to achieve comprehensive parity and grid parity, benefiting from the maturity of DC 1500V technology and the improvement of market acceptance, photovoltaic power plants have increased the voltage level from 1000V to 1500V to become an important way to reduce costs and increase efficiency. According to IHS Markit, 1500V photovoltaic systems will account for 45% in 2020; at present, in emerging markets such as India, Vietnam, Latin America, Middle East and Africa, the 1500V scheme is generally adopted in the bidding of large-scale photovoltaic power plants; 70% of domestic large-scale ground-based power plants will be newly added in 2020. % use the 1500V system; and the photovoltaic power station market in developed countries such as Europe and the United States has gradually switched from the 1000V system to the 1500V system. Mainstream manufacturers at home and abroad have also launched a variety of 1500V system inverter products.

The 1500V system mainly increases the DC side voltage, reduces the loss of cables, and reduces the number of power equipment, thereby reducing investment costs and increasing power generation. According to the calculation of the China Photovoltaic Industry Association, the 1500V system can improve the system efficiency of photovoltaic power plants by 1% and reduce the cost of electricity by 2 points/kWh.

We believe that changes in the market demand for inverter product types are generally developing in the direction of cost reduction and efficiency enhancement. In the long run, the proportion of photovoltaic power generation in the overall energy structure will be promoted, thereby realizing the expansion of the industry space. Effect.

3.3 Driving factors: new demand is strong, the stock market is emerging, and energy storage is a new growth point

1) The global demand for new installed photovoltaic capacity continues to increase. In 2020, the global photovoltaic market still achieved accelerated growth under the influence of the new crown epidemic. The newly installed capacity for the year was about 130GW, a year-on-year increase of 13.0%, an increase of 4.5pct compared with 2019. In 2020, China added 48.2GW of new photovoltaic installed capacity, a year-on-year increase of 60.1%; the United States added 19GW of new installed capacity, a year-on-year increase of 42.9%. China and the United States ranked the top two in the world in 2020 respectively. Due to changes in the subsidy policy, Vietnam experienced a surge in installations in 2020, with 10.75GW of newly installed capacity, a year-on-year increase of 92.0%, making it the third largest installed capacity market in the world.

According to the forecast of China Photovoltaic Industry Association, in the next five years, the new installed capacity of global photovoltaics will grow rapidly at a CAGR of 15.74% or 20.48%, respectively, under conservative or optimistic conditions, reaching around 270-330GW by 2025. Inverter is a necessary equipment for grid connection of photovoltaic system, and the rapid increase of photovoltaic installed capacity will become an important factor driving the growth of the inverter industry.

2) The space for stock replacement continues to expand. The service life of power electronic devices such as IGBTs inside the inverter is about 10-15 years, while in the European market where the global photovoltaic started earlier, the life expectancy of the household string inverters used in the early days is 5-10 years, which is low. Since the service life of photovoltaic modules is 20-30 years, the inverter needs to be replaced at least once in the complete operating cycle of the module, so that the inverter market enjoys the space for stock replacement in addition to the fast-growing incremental market.

According to IHS Markit, as the scale of aging photovoltaic installations continues to expand, the global demand for inverter replacement in 2020 will be around 8.7GW, an increase of nearly 40% from 2019. With the continuous improvement of inverter product performance, in recent years, new products have added or strengthened intelligent functions such as system monitoring and autonomous control, and customers with newer inverters will also improve the intelligence of the entire photovoltaic system. Consideration, resulting in the need to replace the inverter.

The need for replacement also comes from the replacement of legacy products from manufacturers that have withdrawn from the market. Since 2013, the number of domestic PV inverter companies has dropped from a few hundred to a few dozen; in overseas markets, manufacturers such as Satcon and Advanced Energy, which once occupied a large market share, are no longer active in the market. When the inverter products left by such out-of-competition manufacturers fail, they often cannot be repaired, and the owners can only choose to replace them with new products.

According to Wood Mackenzie, for a 50MW photovoltaic power station, the cost of inverter replacement only accounts for 12%-13% of the average operation and maintenance cost; , the reason for choosing the replacement of the whole machine rather than the individual replacement of the specific parts.

         3) The rapid development of electrochemical energy storage drives the demand for energy storage inverters. According to CNESA statistics, the newly installed capacity of electrochemical energy storage in the world in 2020 is 4.73GW, an increase of 63.67% over 2019; the newly installed capacity in China in 2020 is 1.56GW, an increase of 145% over the same period last year. According to IRENA’s forecast, by 2025, the new electrochemical energy storage capacity in the world will reach 195.6GWh, with a 5-year CAGR of 82.36%, showing huge growth potential.

The energy storage battery needs to be connected to the grid through the energy storage inverter. According to the forecast of IHS Markit, by 2022, the scale of grid-connected energy storage inverters will increase to 7GW; the global energy storage inverter market scale is expected to be 63GW from 2018 to 2022, showing a continuous growth trend.

3.4 Spatial measurement

According to our estimates, the global PV inverter demand will reach 392.1GW by 2025, and the global PV inverter market space will be 79.161 billion yuan, of which the domestic market space will be 18.253 billion yuan and the overseas market space will be 60.909 billion yuan. The key assumptions are as follows:

1) Global new installed capacity of photovoltaics: The forecast of installed capacity is mainly based on the "conservative situation" guidelines issued by China Photovoltaic Industry Association in the "2020 China Photovoltaic Industry Development Roadmap". By 2025, the newly installed photovoltaic capacity in China will reach Around 100GW, the global newly installed capacity is close to 300GW.

2) Assumption of capacity ratio: Before 2020, my country's photovoltaic system design adopts a 1:1 capacity ratio, and the "Photovoltaic Power Generation System Efficiency Specification" issued by the National Energy Administration at the end of 2020 officially released the capacity ratio restrictions; According to the "Design Specifications for Photovoltaic Power Stations (Draft for Comment)" issued by the Ministry of Finance in 2019, the capacity ratio should not exceed 1.2 in the first-class solar resource areas in China, 1.4 in the second-class areas, and 1.8 in the third-class areas; we are conservative accordingly. It is estimated that by 2025, the average ratio of newly installed capacity in China will be 1.2.

In overseas markets, currently Europe generally adopts a capacity ratio design of 1.2-1.4, and the US and India are around 1.4. We assume that the overall capacity ratio of overseas markets remains at 1.3.

3) Growth rate of replacement demand: We select the CAGR of 17.96% of the stock replacement market from 2015 to 2019 as the annual growth rate of the inverter stock replacement market in the next five years.

4) Proportion of distributed photovoltaics: We believe that although the installed capacity of distributed photovoltaics in China has grown strongly in the first half of 2021 and the installed capacity exceeds that of centralized power plants, in order to achieve the carbon neutrality goal, the construction of large-scale photovoltaic power plants around the world will not be possible in the future. will remain dominant. We assume that by 2025, 45% of the global PV power plant construction will be distributed installations and 55% will be utility-scale centralized installations.

5) Average price of inverters: We do not distinguish inverters by string type or centralized type, but are divided into distributed installations (household, industrial and commercial rooftops) and public installations according to the usage scenarios of inverters. The installed capacity of the business (large-scale ground power station, etc.), that is, the change in the average unit price of inverters assuming "low power" and "high power" respectively.

We refer to the average unit price of domestic and foreign mainstream manufacturers' shipments at home and abroad, as well as the guidance of the China Photovoltaic Industry Association for the change of the average unit price of centralized inverters and string inverters. It is assumed that by 2025, the domestic distributed installed capacity The average unit price of inverters is 0.16 yuan/W, and the average price of utility-scale inverters is 0.11 yuan/W; the average prices in overseas markets are 0.30 yuan/W and 0.19 yuan/W respectively.

The energy storage market has just started, and national standards and regulations are not yet complete, and there are large differences. We have calculated the demand for energy storage on the domestic photovoltaic and wind power generation side with relatively sufficient policy guidelines. It is estimated that by 2025, the demand for energy storage in this part of the market will be 55.2GWh, corresponding to 19.8GW of energy storage inverter demand and 19.79 billion yuan of energy storage demand. Energy storage inverter market space.

The calculation process mainly refers to the “Notice on the Development and Construction of Wind Power and Photovoltaic Power Generation in 2021” issued by the National Energy Administration, which requires that the guaranteed grid-connected scale in 2021 should not be less than 90GW; The Notice of Self-built or Purchased Peak Shaving Capability to Increase the Grid-connected Scale" states that the scale beyond the guaranteed grid-connection of the power grid company shall be initially equipped with an energy storage peak shaving capacity at a ratio of 15% of the power (with a duration of more than 4 hours), according to 20 The requirements for priority grid connection with a ratio of 10% or more; and the requirements for the allocation of energy storage to be between 10% and 20% in the provincial policies for the integrated development of solar energy storage.

4 Analysis of key companies

4.1 Sungrow: the leader of power electronic conversion in the field of new energy

New energy power electronic conversion faucet. The company started from the photovoltaic inverter business. Through its advantages in power conversion technology, it extended horizontally to wind power converters, energy storage converters, new energy vehicle charging systems and other fields, and extended downstream to the investment and development of new energy power stations. . The core technologies of the company's businesses are similar, and the target customers are similar; the company's brand and channel building, as well as the progress made in research and development can benefit all businesses, and can give full play to synergy and scale effects, and continue to expand The company's growth space.

The company's photovoltaic inverter product line is complete, with a maximum efficiency of 99% across the board, leading the world in product quality; the brand is world-renowned, and has been ranked as the "World's Most Valuable Inverter Brand" by Bloomberg New Energy Finance for two consecutive years; The market share of inverter shipments in each market has increased significantly, accounting for 19% of the global market share, and the gap with Huawei has further narrowed.

       The energy storage market has a first-mover advantage. The company has been deploying energy storage business since 2014. In 2020, according to CNESA, the company is currently the largest provider of energy storage converters and the largest energy storage system integrator in China. At present, energy storage converters enjoy a higher premium than photovoltaic inverters, and the company is expected to fully benefit from the development of emerging industries with its first-mover advantage.

Actively expand production to consolidate leading position. On August 5, 2021, the company announced that it will raise funds of no more than 3.64 billion yuan, which will be used to expand the capacity of 70GW photovoltaic inverters, 15GW wind power converters, 15GW energy storage converters, expand R&D centers and build global marketing services system; in 2020, the company's photovoltaic inverter production capacity is about 35.52GW, and this expansion will nearly double its production capacity, which will further consolidate its competitive advantage.

4.2 Jinlang Technology: A leading enterprise in string type, benefiting from the development of distributed market

The company is deeply engaged in the distributed market, and mainly promotes low- and medium-power string products. The company's single-phase string inverter products cover the power range of 0.7KW-10KW, and the three-phase string inverter covers the range of 5KW-230KW. In 2021H1, the newly added distributed installed capacity in China is 7.65GW, which is higher than the centralized installed capacity for the first time, accounting for 59% of the total installed capacity; globally, the newly installed distributed installed capacity in 2020 will account for 40.39%, an increase of about 5pct compared with 2019. In the context of the gradual increase in the proportion of global distributed photovoltaic installed capacity, the company's small and medium power products meet the market demand at home and abroad, and it is expected to continue to benefit from the release of downstream demand.

The construction of overseas channels has been gradually improved, and the global market share has steadily increased. The company actively expands overseas sales channels, and is an inverter company that has passed the mainstream market certifications such as EU CE, Australia AS4777, US ETL and UL earlier in China; the share of string inverters in Europe, the United States, Southeast Asia and Latin America and other markets lead. More than 60% of the company's revenue in 2019 and 2020 came from overseas markets, and the inverter shipments in 2020 ranked sixth in the world; the company's IPO raised investment to build 5 global marketing service offices to further improve the global presence of its own marketing service network. cover area.

The production capacity is expanding rapidly, and the performance is expected to maintain high growth. According to the company's 2021 semi-annual report, as of June 30, 2021, the company has an inverter production capacity of 250,000 units per year, and the output in the first half of 2021 is 361,400 units, with a capacity utilization rate of 144.56%. The company's IPO raised 120,000 units of grid-connected inverters and the new project is ready for use. The new 400,000-unit string-connected grid-connected and energy storage inverter projects are expected to be launched in 2021. It will reach production before the end of the year, and the total production capacity will reach 770,000 units per year, which is three times larger than the current one. It is expected to continue to promote the high growth trend of performance.

4.3 GoodWe: The development of household photovoltaic energy storage has an advantage

The string and energy storage inverters can generate power in both directions. The company's current main products include photovoltaic grid-connected inverters, photovoltaic energy storage inverters, intelligent data collectors and SEMS smart energy management systems. The company's string photovoltaic grid-connected inverters cover the power range of 0.7KW-250KW, which can be widely used in various scenarios. The company's photovoltaic energy storage inverter products will achieve revenue of 159 million yuan in 2020, accounting for 10%; the company's energy storage inverter currently covers the power range of 2.5KW-10KW, mainly used in household photovoltaic systems, and the company provides supporting The household lithium battery products used; according to Wood Mackenzie, the company's household energy storage inverter shipments ranked first in the world in 2019, and it has an advantage in the layout of the household energy storage industry.

        The development of overseas markets yielded significant benefits. The company pays attention to the expansion of overseas markets, and has signed strategic cooperation agreements with world-leading energy giants such as Krannich Solar, Voltalia, IBC Solar, and Memodo. The proportion of overseas revenue has rapidly increased from 20.79% in 2016 to 68.14% in 2020; Higher profit margins pushed the company's net profit attributable to the parent company to increase from 31 million yuan in 2016 to 260 million yuan in 2020, with a CAGR of 70.18%.

Favorable policies are expected to increase the company's revenue flexibility. In 2021, the state has introduced a number of policies to encourage the development of distributed photovoltaics. The company's product structure meets the needs of distributed photovoltaic systems and is expected to benefit fully. In June 2021, the National Energy Administration issued the "Notice on Submitting the Pilot Program for Rooftop Distributed Photovoltaic Development of the Whole County (City, District)", which has greatly promoted the enthusiasm for distributed photovoltaic development in various scenarios and is expected to increase. The sales volume of the company's grid-connected inverters; in July 2021, the National Development and Reform Commission issued the "Notice on Further Improving the Time-of-use Electricity Price Mechanism", requiring the improvement of the peak-to-valley electricity price mechanism, the establishment of a peak electricity price mechanism, and the improvement of the seasonal electricity price mechanism, which will increase the number of users. The economy of end-to-end energy storage is expected to open up market space for the company's sales of energy storage inverters.

5 Risk Warning

1) PV installed capacity is less than expected. Affected by the epidemic and factors such as price increases in other links of the photovoltaic industry chain, the process of new installations of photovoltaics around the world may slow down, which in turn will affect the shipments of inverters.

2) Intensified competition reduces profit margins in overseas markets. At present, the sales of inverters in overseas markets enjoy a relatively high premium compared with the domestic market. With the continuous increase in the global market share of domestic manufacturers, if there is a price war between manufacturers to seize market share, it will lead to overseas inverters. The price drop is faster than expected, and the overall profit margin of the industry will shrink.

3) The shortage of key components such as IGBTs limits production capacity. At present, some of the core components of the inverter still rely on imports, and a comprehensive domestic replacement cannot be achieved in the short term. If there is a supply interruption, it will greatly affect the inverter production capacity.

4) International trade disputes restrict the export of products. At present, the profits of domestic inverter manufacturers mainly come from overseas markets, but the international situation has been complicated in recent years. Huawei has been forced to withdraw from the US market in 2019, and the Indian government has also increased the tariffs on inverters in my country. If the trade dispute escalates, it may lead to a narrowing of profit margins for manufacturers and even be forced to withdraw from some markets.