What signals does the new energy industry equipment renewal policy send?

On August 21, the National Development and Reform Commission and the National Energy Administration issued the "Implementation Plan for Large-scale Equipment Renewal in Key Energy Fields"(hereinafter referred to as the "Implementation Plan"), proposing that by 2027, the scale of equipment investment in key energy fields will increase by more than 25% compared with 2023. Promote seven key tasks.

Overall, the seven major tasks can be divided into three sections: "4+2+1", namely, promoting equipment renewal and technological transformation in the four industries of thermal power, transmission and distribution, hydropower, and clean heating, and promoting equipment renewal and recycling in the two industries of wind power and photovoltaic, while strengthening the standard supply and upgrading of the energy industry. All changes remain the same. Different measures are carried out around carbon reduction and efficiency improvement, reflecting the purpose of policies to serve the purpose of building a clean, low-carbon, safe and efficient energy system and helping China achieve its strategic goals of carbon peaking and carbon neutrality.

It is not difficult to find from the "Implementation Plan" that the policies differ between my country's traditional energy industry and new energy industry, accurately reflecting the different development stages of the two and the different problems that need to be solved.

Large-scale equipment renewal and energy conservation and emission reduction

Large-scale equipment renewal is one of the priorities of China's economic work this year and is also one of the contents of China's energy conservation and emission reduction work at this stage.

The Central Economic Work Conference at the end of last year and the Fourth Meeting of the Central Financial and Economic Committee at the beginning of this year respectively proposed the requirement to promote large-scale equipment renewal and the replacement of old consumer goods with new ones driven by improving technology, energy consumption, emission and other standards. In March, the State Council issued the "Action Plan to Promote Large-scale Equipment Renewal and Exchange of Old Consumer Goods with New Products."

In July, the National Development and Reform Commission and the Ministry of Finance planned to coordinate and arrange about 300 billion yuan in ultra-long-term special treasury bonds to increase support; the State-owned Assets Supervision and Administration Commission stated that central enterprises will arrange a total investment of more than 3 trillion yuan in large-scale equipment renewal and renovation in the next five years; In August, policies in the energy sector were introduced. In terms of investment scale, in 2023, major power generation companies across the country will complete investment of 967.5 billion yuan in power supply projects, and 527.5 billion yuan in power grid projects. If calculated based on a growth rate of 25%, the investment scale in power supply and power grids will reach 1.87 trillion yuan in 2027.

It can be seen that this round of large-scale equipment renewal is a major measure to comprehensively promote energy conservation and emission reduction in all walks of life at the national level, expand domestic demand, and promote my country's industry from large to strong. The policy aims to expand advanced production capacity as soon as possible and accelerate the elimination of backward production capacity by improving the layout, structure, functions and system integration of green, high-end, and intelligent equipment technology. In essence, it is to promote existing productivity with "new quality productivity". The process of reinventing and expanding the application of "new quality productivity".

According to the classification of the National Bureau of Statistics, the completed amount of fixed asset investment can be divided into construction and installation projects, purchase of equipment, tools, and other expenses. Although the purchase of equipment, tools and equipment accounts for a low proportion of fixed asset investment, it has a certain hedging effect on construction and installation projects.

Under the current conditions of increasing downward pressure on the economy, a downturn in the real estate industry, and overcapacity in many manufacturing industries, the large-scale equipment renewal policy is advancing layer by layer from proposing actions to increasing support, to financial support and central enterprises taking the lead in implementation., reflecting the necessity and urgency.

Promote the improvement of quality and efficiency of the new energy industry through large-scale equipment renewal

In 2023, the country's installed capacity of renewable energy power generation will historically exceed that of thermal power. Photovoltaic and wind power have leapt to become China's second and third largest power sources, and renewable energy power generation will account for more than one-third. In the process of rapid progress in the wind and solar industry, bottleneck problems that restricted industrial development in the past, such as high costs, difficult consumption, and low energy storage, are gradually being solved. However, new problems such as scarcity of wind farm resources, low efficiency of old power stations, and elimination, treatment and recycling of used equipment have begun to become prominent.

New policies solve new problems. In the field of wind power, the Implementation Plan encourages the renovation and upgrading of wind farms that have been connected to the grid for more than 15 years or have a single unit capacity of less than 1.5 MW. In 2023, the maximum single unit capacity of onshore wind power models in China will reach 11 MW, and the average single unit capacity will reach 8.9 MW. It can be seen that the replacement of large wind turbines can stimulate the huge potential of power generation per unit of land area of old wind farms.

In the field of photovoltaic, the "Implementation Plan" requires improving the energy density per unit area of photovoltaic power generation systems and the land use efficiency of photovoltaic power stations. In 2023, the conversion efficiency of mass-produced batteries will reach more than 25%. Leading companies have deployed new large size battery technologies such as TOPCon, HJT, and IBC to further reduce production costs. Coupled with the application of digital technology, new equipment replacements can systematically release the power generation potential of old photovoltaic power stations.

From the perspective of long-term healthy development of the wind power and photovoltaic industries, we cannot only focus on equipment manufacturing and power generation, but also consider carbon emissions issues throughout the life cycle of the industrial chain. Especially as wind power and photovoltaic enter the era of large-scale popularization and application, a large amount of solid waste will be generated. At this time, building a circular economy for wind power and photovoltaic is particularly important. In August last year, the National Development and Reform Commission jointly issued the "Guiding Opinions on Promoting the Recycling of Retired Wind Power and Photovoltaic Equipment" with multiple departments, clarifying six key tasks.

This "Implementation Plan" requires the establishment and improvement of wind power and photovoltaics recycling, and supports the research and development of low-cost green dismantling of photovoltaic modules, efficient environmentally friendly separation technology and complete sets of equipment. It is important to cultivate and strengthen China's wind power and photovoltaic equipment remanufacturing industry., establishing and improving a circular economy system for wind power and photovoltaic industry chains, plays an important role in promoting.

A large amount of equipment renewal demand indicates that the market has entered a mature period

During the "Eleventh Five-Year Plan" period, China's wind power market began to launch, and connected hydropower has become the main force of renewable energy. In the past ten years, China's new installed capacity of wind power has generally shown an increase, but it has fluctuated greatly in recent years. The wind power industry has experienced a development process from importing complete machines, import substitution, and exporting overseas, and has gradually entered a mature stage as it becomes bigger and stronger.

Due to the high initial cost, photovoltaic equipment was mainly exported to developed countries at first, and the domestic market started slightly later. Under the pressure of foreign "double opposition" policies, the domestic market began to be launched in 2013. During the "12th Five-Year Plan" period, the new installed capacity of domestic photovoltaic power showed explosive growth; after more than ten years of rapid development, photovoltaic costs have dropped by more than 80%, and technical and economic advantages have been highlighted. Since the national carbon peaking and carbon neutrality strategy was put forward, photovoltaic has ushered in a second round of explosive growth during the "14th Five-Year Plan" period. From the perspectives of market growth rate, market share, technological innovation speed, and entry barriers, international and domestic markets jointly promote China's photovoltaic industry to rapidly enter a mature period.

Enterprise strategies in the mature stage of the industry

In the first half of this year, the new grid-connected capacity of wind power nationwide was 25.84 million kilowatts, a year-on-year increase of 12%; the new grid-connected capacity of photovoltaic was 102 million kilowatts, a year-on-year increase of 31%. Although the domestic market still maintains double-digit growth, after the wind power and photovoltaic industries enter a mature period, companies clearly feel that the industry has become more involved.

In the past ten years, the industry has been in a growing period, and market prosperity has given rise to changes on the supply side: huge profits have attracted a large amount of new investment, products have developed from single, low-quality, high-price to diversified, high-quality and low-cost, and enterprises have improved technology and reduced Costs establish a competitive advantage, but production scale must be continuously expanded to maintain and occupy new market shares.

The industry has entered a mature period, and the market competition pattern has basically taken shape. Several leading companies occupy most of the industry's market and build their own relatively stable supply chain system. The pace of technological innovation has slowed down, competition risks have increased, and excessive profits can be quickly earned. Opportunities for profits are reduced, and the possibility of investment losses increases; barriers to entry continue to rise, and market demand and production capacity are becoming increasingly saturated.

For corporate decision-making, clarifying the life cycle stage of the industry is the most basic starting point for corporate strategic positioning and competitive strategies. As the market environment changes, wind power and photovoltaic companies should pay attention to the following points:

The first is to quickly follow up on new technologies, new production processes, and new products, adjust the product structure, and speed up the pace of new products being put on the market; the second is to strengthen quality management. Photovoltaic and wind power equipment need to work outdoors for more than ten years. In recent years, wind turbine accidents occur frequently, which not only has the impact of extreme weather, but also exposes the need to improve the product quality of some companies during rapid product iteration; The third is to vigorously reduce costs. The degree of differentiation of wind power and photovoltaic products is relatively low, and cost plays an important role in market competition, but costs cannot be reduced at the expense of quality; the fourth is to strengthen the construction of supporting service capabilities. With the expansion of wind turbines size, the difficulty of transportation, installation, operation and maintenance of large wind power components is increasing; the fifth is to optimize investment decisions and build a large amount of excess production capacity without being misled by short-term interests; Sixth, prevent vicious competition and avoid unreasonable reactions that are not conducive to the development of the enterprise in order to adapt to competitors 'offensive prices and market behaviors.

Mature companies need to explore new business opportunities

The maturity period of the industry often lasts for a long time, and many new business opportunities continue to emerge, which deserves high attention from industry companies. For example, after the industry enters a mature period, the market for equipment dismantling and recycling is considerable, including automobiles, electronic information, etc., and the wind power and photovoltaic remanufacturing industry has just begun.

The international market also has great potential. China has the world's largest and strongest wind power and photovoltaic manufacturing industry. In recent years, most markets in developed and developing countries have maintained rapid growth. Some markets have just entered a growth period. From product exports to industrial sailing, China's wind power and photovoltaic companies have significant competitive advantages and multiple options.

In addition, there are still many opportunities in the domestic market segment. For example, offshore wind power has had less investment in the past due to reasons such as high cost and difficulty. With the advancement of wind power technology, the state plans to build five 10 million-kilowatt offshore wind power bases, as well as offshore energy islands, deep integration of offshore wind power and offshore oil and gas fields, and other long-term development opportunities have broad prospects. There are more opportunities in the photovoltaic field. Innovations such as photovoltaic desertification control and complementary water, wind and light are emerging one after another. Distributed photovoltaics such as photovoltaic agriculture and photovoltaic buildings have entered the stage of popularization and promotion. Standing ten years ago, it was difficult to imagine the achievements of today's photovoltaics. Ten years later, the scale of photovoltaics is difficult to predict, but it is foreseeable that the cost advantage of photovoltaic power generation will further expand.

The author is an associate researcher at the Institute of Applied Economics, Shanghai Academy of Social Sciences