Mono-Si poised to gain competitiveness
Construction costs: multi-Si at Rmb6.73/W vs. mono-Si at Rmb6.74/W
An obvious advantage brought about by the mono-Si product’s higher power output is the balance-of-systems (BOS) cost savings. According to Citi estimate, ~54% of the ex-module solar installation costs (or Rmb2.01/W out of Rmb6.73/W total installation costs in 4Q16E) is sensitive to solar conversion efficiencies, such as hardware costs (mounting, wiring and cabling), infrastructure, and construction costs, etc. Thus, with an efficiency boost (from 265Wp to 283W, or 6.8% increase) by changing from lower-efficiency multi-Si solar modules to higher-efficiency monoSi solar modules, Citi estimates BOS cost savings of ~Rmb0.128/W.
Adding back the per watt price premium of mono-Si, which is currently at ~Rmb0.144/W, we estimate that solar farm construction costs for both multi-Si and mono-Si products are actually very close, with the former at Rmb6.73/W and the latter at Rmb6.74/W.
Mono-Si modules possess higher power generating performance
Empirical evidence has also shown that even with the same capacity, mono-Si solar modules can generate more electricity than multi-Si modules, thanks to their: 1) lower degradation across the modules’ lifetime of 25 years, 2) higher weak light tolerance, and 3) higher power generation under hot temperature.
For 25 years, average mono-Si module output rate should still maintain at ~83.8% of designed capacity, while multi-Si module’s output rate may drop to ~80%. Thus, we estimate that over the whole 25-year lifetime of solar module, total power generation of mono-Si modules, to our estimate, should be 1-2% higher than multi-Si modules, assuming same initial capacity.
Higher weak light tolerance
The above table shows that the power generation from mono-Si solar modules was higher than multi-Si modules under all circumstances (on average 5.4% higher), but the difference was even more distinct under cloudy, overcast, and rainy weather conditions (6-11% higher, as highlighted in grey in the above table).
Higher resistance to high temperature
Another advantage of mono-Si is that it performs better than multi-Si with high temperature. The designed capacity of a module is measured at a temperature of 25℃, and actually power output would decline with increasing temperature. For mono-Si and multi-Si modules, each 1℃increase in temperature will decrease their respective efficiencies by 0.39% and 0.40-0.41% (temperature coefficient of solar module. If we consider a situation where the solar modules are put under the sun in a desert of Xinjiang in summer, where solar modules could heat up to over 50 ℃, the efficiency difference between monoSi and multi-Si modules could exceed 0.5%.
Equity IRR for mono-Si modules could be 1.2ppt higher than multi-Si's
Who will win the battle? Mono-Si or multi-Si?
Citi believed LONGi’s module pricing strategy, as well as China’s favorable policies could help the development of mono-Si products over the next few years. However, the key concern for the longer term will be whether mono-Si products can sustainably maintain their competiveness against multi-Si products.
The crux of this question, lies in the cost reduction potential of both mono-Si and multi-Si technologies. This is based on the Chinese government continuing to push for lower on-grid tariffs, and whichever technologies leading to lower LCOE would be preferred. Apart from that, solar energy is also competing head-to-head with other energy sources, such as wind power, coal-fired, natural gas fired, etc., and lowering LCOE is the ultimate way to gain competitiveness.
Based on this, Citi expect the cost reduction potential for mono-Si is relatively larger, given that: 1) cost reduction potential for mono-Si wafers looks abundant, at least matching that of multi-Si, and 2) as module costs continue to decline, balance-of system (BOS) cost savings will become more emphasized, and this should benefit mono-Si products.
Longi: Market Leader of a Growing Segment
LONGi is the market leader as well as cost leader of mono crystalline (mono-Si) wafer manufacturing segment. In recent years, the Company has aggressively cut the cost of mono-Si wafer manufacturing, and carefully controlled the price of mono-Si solar modules in order to stay competitive against multi-Si solar modules. This market strategy has successfully increased the market share of mono-Si products in China from merely 5% in 2014, to 15% in 2015, and further up to >25% in 2016