China’s domestic PV market was booming in the first half 2016, and more than 20GW of power plant projects were connected to the country’s grid for the first and second quarter. During this period, different sections of the PV supply chain at times were unable to keep pace with the soaring demand. As the installation rush was taking place in the year’s first half, China also established module efficiency requirements and encouraged wider adoption of leading-edge PV products. Under this context, the government’s “Top Runner” program, which includes the deployment of 1GW of PV systems in Datong, China during the initial phase, has received a lot of attention from the industry.

One of the domestic PV targets announced by the Chinese government earlier this June was the expansion of the Top Runner program to 5.5GW in installed capacity. The project tenders from the program has become a critical source of demand for PV enterprises operating in China, especially after the installation rush was formally concluded at the end of this June. To win tender contracts, major PV product manufacturers have to use PV modules of high efficiency and quality.

Mono-si products’ market share has grown to 25% in China

It is more feasible for PV developers to achieve efficiency requirements of Top Runner program by using mono-si PV products because the mainstream mono-si cells’ efficiency ranges from 19.5% and 19.8%, while multi-si cells’ ranges from 18.15% and 18.4%. Nonetheless, the FiT rates for Top Runner projects are not much higher than the FiT rates for the average, large-scale PV power plants in China. Hence, power plant companies working on these projects preferred utilizing PV modules without PERC technology. Consequently, mono-Si products were favored in the tenders for the first phase (1GW) of the Top Runner Program in Datong, China. Systems using standard mono-Si modules account for approximately 47% of the 1GW deployment.

Furthermore, lots of large-scale PV power plants’ developers were pushed to select mono-si modules during the first half of 2016, significantly improving mono-si products’ market share in the Chinese PV market. Such trend drove a supply shortage in mono-si wafers even leading manufacturers, Xi’an LONGi and Zhonghuan Huanou, have been rapidly expanding their capacities.

According to EnergyTrend’s data, approximately 3.8GW from China’s actual demand of estimated 15.5GW in 1H16 were mono-si products, representing a 25% market share. Lerri Solar, JA Solar and Trina Solar were the top three mono-si suppliers, jointly contributing more than 50% to China’s domestic PV module demand.

Upgraded Top Runner program Prompts Demand to Mono-si PERC cells

Products that incorporate more advanced solutions such as PERC, N-Type Cells and Black Silicon only make up 12% of the 1GW Datong project (Figure 1).

Figure 1: First-Phase Installation of Top Runner’s Datong Project (by Product Type)

Source: EnergyTrend

However, the situation changed this year because of new scoring criteria. China’s National Energy Administration (NEA), which is responsible for assessing the progress of the Top Runner program, has made changes to the criteria for awarding tenders this year. According to NEA’s latest announcement regarding this subject, technological innovations constitute 20% of the scoring for tender submissions (Figure 2). In addition to meeting the module efficiency requirements, power plant companies competing for tender contracts now have to employ technologies that are more advanced than those featured in standard modules. As a result, PERC is emerging as an important leading-edge technology in the Chinese market as it allows mass production at a low cost. Furthermore, Chinese and Taiwanese cell makers with PERC capacities will be able to maintain their capacity utilization rates even as demand freezes up this third quarter.

Figure 2:

While technological innovations make up a considerable part of the scoring for tender submission, module bid price represents that largest part at 30%. A recent survey of bid prices for modules used in tender projects indicate a steep and rapid price decline for high-efficiency products. The lowest bid price for 285~295W modules has arrived at RMB 3.18/W. Only PERC modules can achieve this range of power output at this price and still make a profit. Hence, prices of PERC cells are plummeting even as there are a lot of interests and queries about these products.

Multi-Si product suppliers this year have been focusing on improving cells to maintain multi-Si modules’ advantage in cost per watt, found EnergyTrend. They are expected to use larger multi-Si wafers (sized 156.75mm x 156.75mm) that will expand the cell’s surface area by 1%. The cell’s layout is also to be upgraded from 4-busbar to 5-busbar so the power output of mainstream PV modules could be further improved.

Looking ahead, module prices will fall during the second half of 2016 as the oversupply problem worsens. On the other hand, the expanding adoption of high-efficiency modules will boost the overall generation efficiency of power plants, thus making a big stride forward to achieving grid parity for PV-generated electricity. Mono-si products’ market share is forecasted to gradually grow year by year thanks to improvements in conversion efficiency and C/P ratio.

(Author: Corrine Lin, Analyst at EnergyTrend)