In 2024, photovoltaic inventory is expected to bottom out!

2024-01-03

The brand new year of 2024 is just a few days away.

At the turn of the new and old years, "Magnetic Components and Power Supplies" focuses on the once large but now slightly desolate market of inductive transformers - photovoltaic, to review the development of the photovoltaic industry in 2023, industry challenges, and prospects for the future.

01 Photovoltaic inventory remains high, putting pressure on magnetic component companies

On December 20th, the National Energy Administration released statistical data on the national power industry from January to November 2023. Among them, from January to November, the cumulative increase in photovoltaic installed capacity was 163.88GW, a year-on-year increase of 149%.

In sharp contrast to the explosive growth in terminal installed capacity, photovoltaic inventory is severe. Taking photovoltaic modules as an example, customs data shows that in 2022, China exported 86.6GW of photovoltaic modules to Europe, while Europe's newly installed photovoltaic capacity in 2022 was only 41GW. This means that in 2022 alone, China's photovoltaic inventory exported to Europe exceeded 40GW.

As a result, although the installed capacity of photovoltaics is constantly increasing, due to being in the destocking stage, upstream suppliers have not produced or received new orders, resulting in a smaller market increment. On the other hand, with the continuous development of photovoltaic technology, it is necessary to use better and lower cost products, which puts forward requirements for cost reduction and efficiency improvement for upstream inductive transformers and magnetic materials.

It is reported that inductive transformers account for 20% of losses and 15% -20% of costs in photovoltaic inverters. Therefore, the cost and performance of inductive transformers play an important role in the entire photovoltaic system.

Yu Zhenfeng, a photovoltaic magnetic component engineer at Sunlight Power, believes that photovoltaics need to be resistant to four fires, high temperatures, and flame retardancy. The wide temperature conditions, seismic resistance, salt spray testing, and other requirements for the application of inductive transformers are more stringent than before. However, the result of doing so is vastly different from the goal of cost reduction. "The current solution is either to increase the insulation distance or add flame retardant materials, which increases the cost."

In order to meet more stringent photovoltaic system solutions, more personalized products are needed for inductive transformers. However, this will result in high initial development investment, reduced automation level, and higher costs.

In addition, with the continuous decline in the cost of photovoltaic electricity, although users enjoy cheaper products, this requires all suppliers in the photovoltaic industry chain to lower their prices.

In this situation, inductance transformer enterprises are facing difficulties such as reduced order volume, the need to develop more high-quality products, and continuously reduce costs to attract photovoltaic customers.

"The profit margin of the photovoltaic industry is currently decreasing, estimated to be around 10%," Yu Zhenfeng added. "Every photovoltaic supplier only earns processing fees, and processing profits are becoming thinner and thinner as they are being squeezed." This situation also brings more challenges and higher requirements to the future development of photovoltaic industry chain enterprises.

What will happen to the photovoltaic industry in 2024?

In the past two years, the global photovoltaic industry has emerged against the backdrop of energy structure transformation, with industry scale and installed capacity growth repeatedly reaching new highs. Jibang Consulting predicts that the neutral expectation for global photovoltaic installed capacity in 2024 is 474GW, a year-on-year increase of 16%. Compared with the growth rate of 59% in 2023, the growth rate has significantly slowed down and will return to rationality from high-speed growth.

Yang Jianmin, Deputy General Manager of Mingpu Optoelectronics, also agrees with this trend. He said, "In the long run, I think the photovoltaic industry will slowly return to a normal business model, and the concentration of photovoltaics will continue to rise. Currently, the high inventory of photovoltaics may only last for six months or until the first half of next year."

Industry insiders also believe that the industry is about to enter a destocking cycle in the fourth quarter of this year. During the process of destocking, the prices and profitability of the industry chain will gradually bottom out. In the second quarter of next year, with the increasing demand in the photovoltaic industry, the photovoltaic industry chain is expected to show a stable trend of increasing quantity and price.

This also means that although inductance transformer enterprises are facing the problem of cost reduction and efficiency improvement, the gradual recovery of the photovoltaic terminal market will drive an increase in demand for inductance transformers. Sufficient sales can to some extent dilute costs, and with the support of continuous technological progress, the profitability of enterprises is still expected to improve.

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