Photovoltaic inverter industry research and investment opportunity analysis

1 Industry status: Rapid increase in global share and enjoying overseas premium dividends

Current situation: Domestic market share increased rapidly in 2020, and Sungrow and Huawei maintained their leading position

Sungrow and Huawei have a solid position as the dual leaders. Since 2015, Sungrow and Huawei have been the leaders in the inverter industry, and their shipments have always remained in the top two in the industry. According to Wood Mackenzie statistics, in 2020, the two leading companies shipped a total of about 78GW, with a combined market share of about 42%.

The share of domestic inverters has increased rapidly. In recent years, the shipment share of major inverter companies in my country has remained stable at around 50%. Since 2018, with the rapid rise of second-tier domestic companies, the share of domestic inverters has increased rapidly. In 2020, the top six domestic companies accounted for 60% of global shipments.

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String products are gradually becoming mainstream. In 2018, the shipment of string inverters exceeded that of centralized inverters for the first time, reaching 52GW. This is mainly due to the increase in distributed demand and the vigorous promotion of string products by companies such as Huawei.

Market structural changes: Household photovoltaics usher in an explosion, and the combination of photovoltaics and buildings opens up new markets

China's residential market continues to explode: in 2020, new residential installed capacity reached 10.1GW, accounting for 21% of all new installed capacity, breaking a record high. In 2021, stimulated by a new round of subsidies and the Energy Bureau's county-wide policy promotion, it is expected to reach between 15-20GW in 2021, showing a trend of continued explosion.

The global household market has been steadily improving: in 2019, the global distributed photovoltaic installed capacity was approximately 37GW, and the growth rate of household photovoltaics was even higher, with an increase of 17.25GW that year, accounting for 46.15% of the total distributed installed capacity, the highest proportion in history. Since 2017, the global household installed capacity has achieved three consecutive increases.

2 Core advantages: Domestic brands are leading in cost, technology, and product strength

The photovoltaic "brain" has low cost and high importance

The photovoltaic inverter is the brain of the photovoltaic system. The inverter accounts for only 8%-10% of the cost of the photovoltaic system, but it undertakes important functions such as AC-DC conversion, power control, and on-grid and off-grid switching of the entire system.

For general household photovoltaic systems, one inverter is connected to dozens of photovoltaic panels. The failure of a single panel only affects the power generation of the series circuit, while the failure of the inverter will cause the entire system to fail. The importance of

With the accumulation of experience, the recognition of domestic brands overseas will increase rapidly in 2020

2020 is the year when domestic brands "build strength and then explode". The epidemic has led to insufficient supply capacity of overseas manufacturers, which has indirectly helped domestic brands to significantly increase their overseas recognition. In 2020, China's CR6 accounted for 60% of global shipments, an increase of 11pct from 2019.

Compared with overseas brands, the price advantage is obvious and the cost performance is higher

Domestic inverters are sold at significantly lower prices. In 2020, the unit price of inverters sold overseas by domestic brands was relatively low, with centralized and household inverters priced at only 0.25 yuan/W and 0.5 yuan/W, far lower than the 0.57 yuan/W and 0.78 yuan/W prices of overseas companies such as SMA and Solar Edge. In this context, domestic inverters can seize overseas market share with a slight price cut.

Distributed market C-end attributes, creating channel and brand barriers

The distributed market is mainly sold through channels, and is dominated by system integrators and installers. The development cycle of distribution channels is long, the stickiness is high, and the response premium is also high. The main participants in the distributed market include EPC contractors, photovoltaic power generation system integrators, installers and investment owners, among which photovoltaic power generation system integrators and EPC contractors account for a significant proportion, accounting for nearly 50%.

Domestic products have obvious advantages

1) More complete categories and higher power

Domestic inverter products are more complete. Compared with major overseas inverter manufacturers, domestic inverters have more product types in various power ranges. Take domestic Ginlong Technology and GoodWe as examples. The two have as many as 99 and 52 types of inverter products respectively, while overseas SolarEdge and SMA, although they started earlier, only have 39 and 20 inverters.

Domestic inverters have a relatively wider power coverage. Benefiting from years of technological accumulation, domestic inverter manufacturers are superior in product power coverage. The string inverter power of SMA, a German veteran, can cover 3KW-150KW, while the power of the same type of products of Jinlong Technology, a domestic inverter newcomer, can reach up to 320KW.

2) Lighter, quieter and more flexible

Domestic inverter brands have obvious performance advantages. Under similar power conditions, domestic manufacturers' inverters have more MPPTs and a wider operating temperature range, which are suitable for a variety of ground scenarios and easy to maintain; in addition, domestic inverters generally have the characteristics of thin volume, light weight, low noise, and low standby loss, which improves the user experience; finally, the warranty period of domestic inverters is as long as 10 years, which basically covers the entire life cycle of the inverter, and largely eliminates the user's after-sales concerns.

3) Faster product iteration

Domestic inverter products are developed at a fast pace, with rapid product iterations, and the main trends are current upgrades and capacity upgrades. Taking Sungrow as an example, since 2017, it has launched new large-capacity inverters with power exceeding 2000kW for four consecutive years.

3 Outlook: PV and energy storage dual-drive, expected to increase both volume and profit

Photovoltaic industry has grown steadily since price parity, and photovoltaic and storage integration has become a trend

"Photovoltaic + energy storage" has become the standard configuration for photovoltaic development in many countries. After being combined with energy storage, it will bring long-term and sustainable development momentum to photovoltaics. It is estimated that the global photovoltaic installed capacity will increase by 370GW in 2025, and the new demand for energy storage inverters will be about 74GW by then.

Overseas household energy storage demand accelerates, "solar + storage" dual-wheel drive

Energy storage inverter solves the problem of uncontrollable photovoltaic power generation. Energy storage inverter adds the function of energy storage power station to photovoltaic grid-connected inverter, so that the surplus electricity generated during the day can be stored in the battery and released through the battery at night, solving the problem of uncontrollable photovoltaic power generation.

Energy storage inverters have become a highlight. Due to the rapid development of wind and solar power, the demand for energy storage has accelerated. Among them, the inverters used in energy storage are similar to photovoltaic grid-connected inverters, and energy storage inverters have brought incremental business to related inverter companies.

China and the United States lead the rapid growth of energy storage applications in multiple scenarios

Installed capacity forecast: In 2020, global electrochemical energy storage will increase by 4.73GW/9.72GWh, a year-on-year increase of 50%. It is expected that 196GWh will be added in 2025, with a compound growth rate of about 80% in the 14th Five-Year Plan. The overseas pre-meter frequency regulation and other auxiliary service markets are improving, and household energy storage has become economical. China's recent energy storage policy has relaxed restrictions on grid-side energy storage, and provincial grid investment impulses are strong, and new energy storage is in full bloom.

Triple demand resonance: Optical and storage dual-wheel drive, replacement demand cannot be underestimated

The demand for replacing photovoltaic inverters cannot be underestimated. The service life of the inverter is constrained by power electronic devices, and generally needs to be replaced after a service life of about ten years. As the core component of photovoltaic power generation, the performance and quality of the inverter are crucial to the quality of power generation. Generally speaking, the service life of traditional string photovoltaic inverters is about ten years, and the service life of large ground power stations is about 20 years, which means that the inverter needs to be replaced when the power station is halfway through its life. It is estimated that the global demand for new inverters will reach 499GW in 2025, with a compound growth rate significantly higher than photovoltaics.

Profit Outlook:

From the perspective of cost structure, there is still room for sustainable cost reduction. The raw materials of inverters are divided into two categories: power electronic devices and structural parts, accounting for about 60% and 30% respectively, and there is room for cost reduction in both. Power electronic devices include IGBT, capacitors, inductors, sensors, etc., and with the continuous advancement of semiconductor technology, there is still hope for continued cost reduction. Structural parts are related to the capacity of a single unit. As the capacity of a single inverter increases, the unit W cost of structural parts decreases accordingly.