Power Equipment & New Energy: Space-Based PV Gains Momentum, Accelerating Mass Production of Next-Gen Battery Technologies

Date: March 1, 2026
Sector: Power Equipment & New Energy / Photovoltaics (PV)
Rating: Overweight / Maintain
Analysts: Hong Yi, Hou Heqing, Wu Zhengyang

Executive Summary

The Chinese photovoltaic (PV) industry is undergoing a pivotal structural transformation in early 2026, shifting from a phase of aggressive "scale competition" to one focused on "value competition." This transition is driven by three converging forces: policy-guided supply-side optimization, the emergence of space-based photovoltaics (SBPV) as a new growth frontier, and a rationalization of module pricing reflecting true cost structures.

While domestic installations are expected to see a temporary correction in 2026 (estimated at 180-240 GW, down from 315 GW in 2025), the long-term trajectory remains robust. The "15th Five-Year Plan" period projects an annual average domestic installation capacity of 238-287 GW, with global averages reaching 725-870 GW. This indicates that the current slowdown is a healthy market clearing mechanism rather than a demand collapse.

A significant catalyst for the sector is the rapid industrialization of space-based solar power. Recent developments, including a supply-demand matchmaking conference organized by the Wuxi Development and Reform Commission and intensive supply chain due diligence by Tesla and SpaceX in China, signal that SBPV is moving from conceptual stages to industrial synergy. This trend specifically favors advanced battery technologies such as Heterojunction (HJT) and Perovskite, which are better suited for the extreme environments of space.

Furthermore, recent central state-owned enterprise (SOE) procurement bids have seen module prices rise above the psychological threshold of RMB 1.0/W for high-efficiency N-type modules. This price recovery, driven by rising silver costs, the anticipated removal of export tax rebates, and industry-wide consensus against "involution" (destructive price wars), suggests improving profitability for leading manufacturers.

We maintain an Overweight rating on the sector. We recommend investors focus on three core investment themes: (1) Beneficiaries of supply-side discipline in the main PV chain; (2) High-certainty growth in global energy storage; and (3) Early movers in space-based PV technologies, particularly those specializing in HJT and Perovskite cells.

Key Takeaways

1. Industry Outlook: From Scale to Value, Long-Term Growth Intact

Short-Term Correction, Long-Term Expansion
According to the China Photovoltaic Industry Development Roadmap (2025-2026) released during the industry seminar in early February 2026, domestic new PV installations in 2026 are projected to range between 180 GW and 240 GW. This represents a notable回调 (correction) from the 315 GW installed in 2025. However, this adjustment should be viewed as a rational clearing of inefficient capacity rather than a fundamental deterioration in demand.

Looking ahead to the "15th Five-Year Plan" period (2026-2030), the growth中枢 (central tendency) is clearly shifting upwards:
* Domestic Annual Average Installations: 238–287 GW
* Global Annual Average Installations: 725–870 GW

Policy Support for Green Energy Infrastructure
On February 16, 2026, Qiushi Journal published a key article titled "Key Tasks for Current Economic Work," which explicitly mandates:
* Accelerating the construction of new energy systems.
* Ensuring that incremental electricity demand is primarily met by new energy generation.
* Building smart grids, microgrids, zero-carbon parks, and zero-carbon factories.

This top-down policy directive provides rigid, policy-backed support for domestic PV installations, ensuring a baseline demand floor despite short-term fluctuations.

Strategic Shift: Value Competition
The industry’s strategic pivot from "scale competition" to "value competition" is critical. This shift implies that market share will no longer be won solely by lowest-price bidding but by technological superiority, efficiency, and reliability. This environment accelerates the exit of backward production capacities and benefits head enterprises with advantages in high-efficiency cells, advanced auxiliary materials, and premium equipment.

2. Catalyst: Space-Based Photovoltaics (SBPV) Enters Industrial Phase

The most disruptive development in February 2026 is the tangible progress in space-based solar power, transforming it from a speculative concept into an emerging industrial ecosystem.

Government-Led Ecosystem Building
On February 10, the Wuxi Municipal Development and Reform Commission convened a "Space Photovoltaic Supply and Demand Matchmaking Conference." This event brought together core industry players, including Guoyu Xingkong and Hongyuan Green Energy, to establish a dedicated platform for supply-demand coordination. The objective is to facilitate the landing of China’s first full-industry-chain ecosystem for space photovoltaics. This government-led initiative effectively bridges the gap between satellite manufacturing requirements, PV production capabilities, and technical verification processes.

International Validation: Tesla & SpaceX Due Diligence
In early February, a joint team from Tesla and SpaceX conducted intensive due diligence visits across the Chinese PV supply chain. Key companies visited included:
* Jinko Solar
* TCL Zhonghuan
* GCL Group

The primary focus of these visits was on two frontier technology routes: Heterojunction (HJT) and Perovskite cells. Elon Musk’s accelerated layout in the solar sector, combined with local government efforts to link satellite needs with manufacturing, marks a inflection point. The involvement of such high-profile international tech leaders validates the technical feasibility and commercial potential of SBPV.

Implications for Technology Routes
Space environments present extreme conditions, including high radiation, vacuum, and significant temperature variations. Consequently, traditional crystalline silicon technologies face limitations. HJT and Perovskite technologies are emerging as the preferred solutions due to their:
* Higher theoretical efficiency limits.
* Better radiation resistance (particularly when optimized).
* Lightweight potential (crucial for launch costs).

This catalyzes the mass production of these next-generation batteries, as the space sector offers a high-value, less price-sensitive initial market that can help scale up manufacturing before broader terrestrial adoption.

3. Pricing Dynamics: Rational Recovery Driven by Cost and Policy

A significant signal of industry health emerged on February 11, 2026, during the opening of bids for Huadian Group’s 2026 8GW PV module centralized procurement project. For the first time, quotes for central SOE PV module projects exceeded RMB 1.0/W.

Bid Analysis:

Note: While the average prices remain below 1.0/W, the upper end of the bid range for high-efficiency modules breached the 1.0/W mark, indicating a willingness to pay a premium for superior technology.

Drivers of Price Recovery:

1. Rising Silver Prices: Silver is a critical cost component for PV cells, particularly for TOPCon and HJT technologies. According to SMM (Shanghai Metals Market) calculations, for every RMB 1,000/kg increase in silver prices, the cost of a TOPCon 210R cell increases by approximately RMB 0.01/W. The substantial rise in silver prices has forced manufacturers to adjust pricing upward to maintain margins.
2. Export Tax Rebate Expectations: The market anticipates the cancellation or reduction of export tax rebates for PV products. This policy shift encourages enterprises to reprice their products to reflect reasonable cost structures rather than engaging in predatory pricing to capture market share.
3. End of "Involution": There is a growing consensus within the industry to curb destructive internal competition ("anti-involution"). Coupled with increased acceptance from downstream clients (such as central SOEs) of higher, more sustainable prices, the market is transitioning from malignant price wars to rational price repair.

4. Investment Strategy: Three Core Lines

Based on the aforementioned dynamics, we identify three primary investment lines for the next 6-12 months.

Line 1: PV "Anti-Involution" & Supply-Side Optimization

The push against destructive competition benefits sectors with high barriers to entry or high shutdown/restart costs.
* Logic: As supply-side self-discipline intensifies, companies with high asset heaviness and high stop-start costs (like polysilicon) and integrated module leaders gain pricing power. Additionally, leading suppliers of auxiliary materials (like encapsulation films) benefit from the stabilization of the main chain.
* Key Beneficiaries:
* Polysilicon/Integrated Leaders: Tongwei Co., Ltd. Benefits from its dominant position in polysilicon and integrated module capacity. High restart costs for polysilicon plants act as a natural barrier to oversupply.
* Auxiliary Materials: First Applied Material (Foster). As a leader in PV encapsulation films, Foster benefits from the industry's shift towards quality and reliability, where premium auxiliary materials are preferred.

Line 2: Energy Storage – The Deterministic Growth Track

Global energy storage installations continue to grow rapidly, driven by the intermittency of renewable energy and grid stability requirements. This segment offers high certainty and volume growth.
* Logic: Storage is becoming a mandatory component of new renewable projects globally. The decoupling of storage economics from pure PV module costs allows for independent margin expansion.
* Key Beneficiaries:
* Inverter/System Integrators: Sungrow Power Supply. A global leader in solar inverters and energy storage systems, well-positioned to capture global market share.
* Other Notable Players: Canadian Solar (Artes), Deye Shares, and Trina Solar. These companies have strong overseas channels and integrated storage solutions.

Line 3: Space-Based Photovoltaics (SBPV) – The Long-Term Alpha

The convergence of AI-driven power shortages in the US/Europe and the technological push by SpaceX/Tesla makes SBPV a compelling long-term theme.
* Logic: AI data centers are creating unprecedented electricity demand. While gas turbines and Solid Oxide Fuel Cells (SOFC) are interim solutions, space-based solar is viewed by some visionaries (including Musk) as a ultimate clean energy source. The immediate investment opportunity lies in the enabling technologies: HJT and Perovskite cells, which are technically superior for space applications.
* Key Beneficiaries:
* Cell/Module Makers: Junda Shares, Risen Energy. Both have significant R&D and production capabilities in HJT and Perovskite technologies.
* Upstream Materials: GCL Tech (Silicon material innovation), Mingyang Smart Energy (diversifying into new energy tech), and Foster (advanced encapsulation for space-grade durability).

Risks / Headwinds

While the outlook is positive, investors must consider the following risks:

1. Development of Space Data Centers Below Expectations:
   The thesis for space-based PV is partially linked to the power needs of future space-based data centers or orbital computing infrastructure. If the commercial viability or timeline for space data centers is delayed, the near-term demand for space-grade PV modules may not materialize as quickly as anticipated.

2. Demand-Side Growth Disappointment:
   Although the "15th Five-Year Plan" targets are robust, macroeconomic headwinds, interest rate fluctuations, or grid connection bottlenecks could lead to actual installation volumes falling short of the 180-240 GW forecast for 2026. A slower-than-expected recovery in global demand could prolong the inventory digestion period.

3. Policy Changes:
   The PV industry is highly sensitive to policy shifts.

   • Domestic: Changes in subsidy mechanisms, land use regulations, or grid curtailment policies could impact project economics.
   • International: Trade barriers, tariffs (e.g., from the US or EU), or the specific implementation of export tax rebate cancellations could disrupt export margins and supply chain logistics.

4. Technological Iteration Risks:
   The rapid shift towards HJT and Perovskite carries execution risk. If mass production yields for these new technologies do not improve as expected, or if alternative technologies (such as advanced TOPCon iterations) remain more cost-effective, the anticipated premium for next-gen tech providers may erode.

5. Raw Material Price Volatility:
   While rising silver prices support module pricing, excessive volatility in silver, polysilicon, or other key raw materials can squeeze margins for manufacturers who cannot fully pass on costs to downstream buyers.

Rating / Sector Outlook

Sector Rating: Overweight (Maintain)

We maintain our Overweight stance on the Power Equipment and New Energy sector, specifically the Photovoltaics sub-sector. The industry is currently at a favorable inflection point where supply-side discipline is beginning to yield results in pricing power, while new technological frontiers (Space PV) offer fresh valuation narratives.

Valuation Context:
* Industry P/E Ratio: 68.33x
* Market Cap: RMB 711.3 billion
* Stock Count: 238 listed companies

The current valuation reflects a mix of legacy assets and high-growth potential. As the industry clears out low-efficiency capacity, the earnings quality of remaining leaders is expected to improve, justifying a re-rating for top-tier companies with technological moats. The "Value Competition" era favors companies with strong balance sheets and R&D capabilities, allowing them to trade at a premium over laggards.

Outlook for Next 3-6 Months:
We expect continued volatility in module prices as the market digests the new cost structures (silver, tax rebates). However, the trend should be upward or stable, avoiding the deep deflation seen in 2024-2025. Watch for further announcements regarding space PV pilot projects and quarterly earnings reports that confirm margin recovery in the integrated module segment.

Investment View

Strategic Allocation Framework

For institutional investors, we recommend a barbell strategy that balances defensive plays in established leaders with offensive positions in high-growth technological innovators.

1. Core Holdings: The "Anti-Involution" Winners

Allocate the majority of the portfolio to companies that have survived the price war with intact balance sheets and dominant market shares.
* Tongwei Co., Ltd.: As a polysilicon giant, Tongwei benefits from the high barrier to entry in its core business. The "anti-involution" environment prevents new entrants from flooding the market, stabilizing polysilicon prices. Its integrated module business also benefits from the brand premium associated with high-efficiency products.
* Foster (First Applied Material): Encapsulation films are critical for module longevity, especially in harsh environments (including space). Foster’s market leadership and ability to innovate in materials (e.g., POE films for HJT) make it a resilient pick regardless of which cell technology wins, as long as total installations grow.

2. Growth Engine: Energy Storage

Energy storage is the necessary companion to PV. The growth here is less dependent on PV module prices and more on grid infrastructure spending and battery cost declines.
* Sungrow Power Supply: With a global footprint and strong brand recognition, Sungrow is best positioned to capture the international storage boom. Its diversification across inverters and storage systems provides revenue stability.
* Deye Shares & Canadian Solar: These firms offer exposure to specific geographic markets (e.g., emerging markets for Deye, North America/Europe for Canadian Solar) and integrated storage solutions.

3. Satellite Positions: The Space PV & Next-Gen Tech Theme

This is the high-risk, high-reward portion of the portfolio, driven by the narrative of space-based energy and the technical superiority of HJT/Perovskite.
* Junda Shares & Risen Energy: Both companies are aggressively pivoting towards HJT and Perovskite. Their valuations may expand disproportionately if they secure contracts for space PV pilots or achieve breakthroughs in mass production efficiency. The Tesla/SpaceX visits to Chinese suppliers suggest that these companies are on the radar of global tech leaders, potentially leading to strategic partnerships or supply agreements.
* GCL Tech: While primarily a silicon material player, GCL’s involvement in the space PV ecosystem (via its broader group initiatives and material science R&D) positions it as a key enabler. Its granular silicon technology also offers cost advantages that support the economic viability of large-scale PV deployment.

Conclusion

The February 2026 dynamics in the Chinese PV industry represent a maturation of the sector. The end of reckless price wars, coupled with the emergence of space-based solar as a credible industrial vertical, creates a favorable environment for high-quality companies. Investors should look beyond simple capacity metrics and focus on technological leadership (HJT/Perovskite), supply chain discipline (polysilicon/auxiliaries), and global integration (storage/inverters).

The convergence of policy support ("15th Five-Year Plan"), cost-driven price normalization (silver/tax rebates), and technological innovation (Space PV) provides a multi-layered safety net and growth engine for the sector. We advise accumulating positions in the recommended leaders on any market dips, with a particular emphasis on those directly involved in the nascent space PV supply chain.

Appendix: Industry Data & Analyst Information

Industry Basic Data (as of Report Date)

Source: Hang Seng Polysource, Dongxing Securities Institute

Analyst Team

• Hong Yi: Master of Finance, Sun Yat-sen University; CIIA, CPA. Joined Dongxing Securities Research Institute in 2016. Covers Power Equipment, New Energy, and Environmental Protection. Ranked 5th in Wind Gold Analyst Awards (2017-2020).
• Hou Heqing: Master of Finance; 3 years of industrial investment experience. Joined Dongxing Securities Research Institute in 2022. Covers the Electric Equipment and New Energy industry.
• Wu Zhengyang: Master of Financial Engineering, University of Michigan; CFA. 5 years of investment research experience. Joined Dongxing Securities Research Institute in 2022. Covers Automotive, Parts, Power Equipment, and New Energy.

Disclaimer
This report is prepared by Dongxing Securities Co., Ltd. The information contained herein is derived from public sources believed to be reliable, but Dongxing Securities does not guarantee its accuracy or completeness. The views expressed are those of the analysts and do not constitute an offer to sell or a solicitation of an offer to buy any securities. Investors should make their own investment decisions based on their specific circumstances and risk tolerance.