GF SEC: The demand for optical storage in emerging market countries in Asia, Africa, and Latin America is expected to fluctuate upwards.

GF SEC released a research report stating that in the long term, the shortage of electricity is common in Asian, African, and Latin American countries, but the export of main coal-fired power equipment companies is restricted. With the prices of solar and energy storage dropping, new energy is expected to become the most optimal solution to alleviate the shortage of electricity, and the demand for solar and energy storage in Asia, Africa, and Latin America has a clear long-term trend. In the short term, external factors causing fluctuations in electricity prices, electricity shortages, policy changes, and other factors affect short-term demand. Weather, shipping, and other factors also have an impact on installation efficiency, and it is expected that the demand for solar and storage in emerging markets in Asia, Africa, and Latin America will fluctuate upwards. Tailoring to the local conditions on both the supply and demand sides, the economic potential in the emerging markets of Asia, Africa, and Latin America for solar and storage is being unleashed. The semi-competitive price: that is, when photovoltaic + energy storage achieves nearly coal-fired level of controllability on power generation, the overall electricity cost of photovoltaic combined with storage is lower than the benchmark coal-fired electricity price. Compared to the more stringent fully competitive price, the semi-competitive price has more practical significance for solving the issues of controllability and integration of new energy. Supply side: Semi-competitive price achieves preliminary controllability of photovoltaic output and promotes centralized large-scale deployment of solar and storage. Under the scenario of semi-competitive solar and storage, GF SEC calculates that by adding energy storage equivalent to 50% of the daily output of photovoltaics (that is, 1kW of photovoltaics with 45% power generation capacity and 4 hours of energy storage), the midday integration problem can be initially solved, which is expected to become the key to the large-scale deployment of centralized solar and storage in Asia, Africa, and Latin America. Demand side: External factors have led to a significant shortening of the static payback period in some countries, rapidly unlocking the demand for residential solar and storage. Compared to the supply side, which focuses on long-term returns, the demand side is more concerned with short-term profits, i.e. the static payback period. According to GF SEC's calculations, if the residential electricity price in Asian, African, and Latin American countries is higher than 1.0/1.5 yuan/kWh, with static payback periods less than 7/5 years, it is highly attractive. The stability of the grid determines the priority direction of solar and storage construction, with different countries having differing demands. Considering the strong grid support needed for large-scale deployment, countries with robust grid stability have potential for both large-scale and residential solar and storage development, while countries with weaker grid stability should prioritize the development of distributed solar and storage. Dividing countries based on grid strength, electricity prices, and electricity shortage level, developed countries like Europe, the US, Japan, and Australia have high electricity prices and tight power supply, hence both large-scale and residential solar and storage have potential. Meanwhile, countries like Saudi Arabia and Oman, with low electricity prices and relatively ample electricity supply, are mainly driven by policy-induced centralized solar and storage. GF SEC believes that in countries with weaker grids like Pakistan, Brazil, South Africa, and Ukraine, demand driven by electricity prices or power shortages is showing strong growth. On the other hand, countries like Mexico, the Philippines, Egypt, Vietnam, and Thailand have the potential for large-scale development of residential solar and storage, with a focus on policy orientation in the future. Investment recommendations: In the photovoltaic sector, focus on leading battery companies such as Jinko Solar(688223.SH), Hainan Drinda New Energy Technology(002865.SZ), Suzhou Shijing Environmental Technology(301030.SZ), Tongwei Co., Ltd(600438.SH), LONGi Green Energy Technology(601012.SH), JA Solar Technology(002459.SZ); and materials companies like Changzhou Fusion New Material(688503.SH), Wuxi Dk Electronic Materials Co., Ltd.(300842.SZ), Flat Glass Group(601865.SH), Hangzhou First Applied Material(603806.SH), etc. In the energy storage sector, focus on companies with technological advantages and leading positions in large-scale deployment like Sungrow Power Supply(300274.SZ), Sineng Electric(300827.SZ), CSI Solar Co., Ltd.(688472.SH), Shenzhen Sinexcel Electric(300693.SZ); as well as companies focusing on specific markets and new products in the residential energy storage sector like Ningbo Deye Technology(605117.SH), Shenzhen Hello Tech Energy(301327.SZ), SolaX Power Network Technology(688717.SH), Jiangsu Goodwe Power Supply Technology Co.,Ltd.(688390.SH), Ginlong Technologies(300763.SZ), Jiangsu Tongrun Equipment Technology(002150.SZ), Hoymiles Power Electronics Inc.(688032.SH), Yuneng Technology(688348.SH), etc. Risk warning: Demand lower than expected; price risk in the industry chain; deterioration in competitive landscape, etc.