Photovoltaic Industry Weekly Report: Policy Tailwinds Accelerate Grid Integration; 2026 Demand Outlook Improves Amid Supply-Side Rationalization

Date: November 29, 2025
Sector: Renewable Energy / Photovoltaics (PV)
Rating: Outperform (Maintained)
Analysts: Su Qianye (SAC: S1340525110004), Yang Shuaibo (SAC: S1340524070002)
Source: China Post Securities Research Institute

Executive Summary

The Chinese photovoltaic (PV) industry is currently navigating a critical transitional phase characterized by short-term demand volatility but underpinned by robust long-term structural drivers. While the fourth quarter of 2025 has seen muted demand following the rush-to-install peak earlier in the year, we identify a significant divergence between market expectations and the emerging fundamental reality. The core investment thesis for the sector is shifting from pure capacity expansion to supply-side rationalization ("anti-involution") and policy-driven grid integration improvements.

Key developments supporting our Outperform rating include:
1. Policy Support for Grid Integration: The National Development and Reform Commission (NDRC) has revised regulations on transmission and distribution cost supervision and pricing. This move introduces capacity-based pricing mechanisms for new energy sources, aiming to reduce transaction costs and accelerate the absorption of power from large-scale renewable bases.
2. Global Climate Commitments: China’s formal submission of its Nationally Determined Contributions (NDC 3.0) for 2035, coupled with ongoing submissions by other signatories at COP30, reinforces the global momentum for energy transition. We anticipate that domestic supporting measures will be rolled out densely, further resolving grid connection bottlenecks.
3. Supply-Demand Rebalancing: Continuous "anti-involution" efforts on the supply side are expected to stabilize prices. Although Q4 demand is flat, we project full-year 2025 installations to reach 300 GW, with wind and solar accounting for over 20% of total electricity generation. The expectation gap for 2026 demand is widening positively as grid constraints ease.

We recommend investors focus on integrated module manufacturers with strong balance sheets and technological leadership, specifically highlighting LONGi Green Energy and Jinko Solar, as they are well-positioned to benefit from the anticipated demand recovery and margin stabilization in 2026.

Key Takeaways

1. Macro & Policy Landscape: China as a Proactive Agent in Energy Transition

The narrative surrounding China’s role in global energy transition has shifted from passive participation to active leadership. On November 3, 2025, China formally submitted its 2035 Nationally Determined Contributions (NDC 3.0). This strategic move signals a firm commitment to decarbonization targets and serves as a catalyst for domestic policy alignment.

1.1 NDRC Pricing Reform: A Catalyst for Grid Absorption

A pivotal development this week was the NDRC’s revision of the Measures for the Supervision and Examination of Transmission and Distribution Pricing Costs and related pricing methods for provincial grids, regional grids, and cross-province/cross-region special projects.

• Objective: The primary goal is to promote the consumption and utilization of new energy, ensure power supply security, and improve the cost-efficiency of the grid.
• Mechanism Innovation:
  • Capacity-Based Pricing: For new business models involving nearby consumption of new energy generation, a single capacity-based electricity price mechanism is being implemented.
  • Cross-Regional Projects: For special projects primarily transmitting clean energy across provinces and regions, the NDRC is exploring two-part tariffs or single capacity-based tariffs.
• Impact: These reforms aim to lower the transaction costs associated with new energy trading. By decoupling some costs from volumetric transmission and linking them to capacity availability, the policy reduces the marginal cost of integrating variable renewable energy. This is expected to accelerate the resolution of grid absorption issues for large-scale renewable bases, thereby unlocking latent demand that was previously constrained by curtailment risks.

1.2 Global Context: COP30 and NDC 3.0

As the Conference of the Parties (COP30) progresses, the submission of NDC 3.0 by various contracting parties provides a cohesive global framework for energy transition. This international consensus reduces policy uncertainty for Chinese PV exporters and reinforces the long-term demand trajectory for solar technologies globally. The synergy between domestic grid reforms and international climate commitments creates a favorable environment for the PV industry’s mid-to-long-term growth.

2. Market Performance & Sector Dynamics

2.1 Stock Performance Analysis (Week Ending Nov 29, 2025)

The PV sector exhibited mixed performance during the reporting week, reflecting the market’s digestion of short-term demand data against long-term policy optimism. While the broader sector showed slight differentiation, the module segment remained relatively weak due to immediate pricing pressures. However, specific sub-sectors, particularly inverters and certain auxiliary material providers, demonstrated resilience and upward momentum.

Table 1: Weekly Performance of Core PV Stocks

Source: iFind, China Post Securities Research Institute

Analysis:
* Inverter Strength: The outperformance of inverter stocks, particularly Sungrow (+8.9%) and Deye (+6.0%), suggests that investors are favoring segments with better pricing power and exposure to global markets, where grid modernization and storage integration are creating higher value-added opportunities.
* Module Weakness: Integrated module makers like LONGi and JA Solar faced headwinds, reflecting the current oversupply in the module segment and the lag in passing through cost reductions to end-users amidst weak Q4 demand.
* Material Volatility: Stocks like Cybrid Tech (+9.6%) and Hiuv New Material (+6.8%) showed significant gains, indicating niche opportunities in auxiliary materials where competition may be less intense or where technological differentiation is providing margin protection.

3. Supply Chain Price Trends: Stabilization Amidst Downward Pressure

The PV supply chain continues to experience price adjustments, with varying degrees of pressure across different links. The overarching trend is one of bottoming out, driven by production cuts and the gradual adaptation to the new "auction" and market-based electricity pricing mechanisms.

3.1 Polysilicon: Stability Through Production Cuts

• Price Status: Polysilicon prices have remained stable in the short term.
• Supply Dynamics: Domestic polysilicon production schedules decreased significantly month-on-month. This deliberate reduction in output has alleviated shipment pressure on manufacturers.
• Demand Constraint: Despite supply cuts, downstream demand remains tepid, and price differentiation across the chain persists. Consequently, polysilicon prices remain under pressure, lacking strong upward momentum.
• Current Price: Dense material averages around RMB 52/kg (Range: 47-55 RMB/kg).

3.2 Wafers: Continued Decline and Margin Compression

• Price Trend: Wafer prices continue to fall, exacerbating pressure on both upstream and downstream margins.
• HJT Specifics: HJT (Heterojunction) wafer prices have dipped slightly in line with the general decline in conventional large-size wafers.
• Outlook: We expect wafer prices to remain volatile at low levels. The intense competition and high inventory levels in the wafer segment necessitate further consolidation or production adjustments to stabilize prices.
• Key Data Points:
  • Mono N-type 182mm/130μm: RMB 1.20/piece (-6.3% WoW).
  • Mono N-type 210mm/130μm: RMB 1.55/piece (-3.1% WoW).

3.3 Cells: Slow Downward Trajectory

• Price Trend: Cell prices are slowly declining due to weak demand.
• Average Prices (RMB/W):
  • 183N: 0.285 (Range: 0.28-0.29)
  • 210RN: 0.275 (Range: 0.27-0.275)
  • 210N: 0.285 (Range: 0.28-0.285)
• Margin Analysis: The margin compression is evident. For TOPCon cells, the average selling price is barely covering costs for some inefficient producers, leading to a slow but steady downward adjustment in average transaction prices.

3.4 Modules: Signs of Stabilization and Tentative Recovery

• Price Status: Module prices have largely stabilized.
• Tendering Trends: There is a noticeable trend of rising bid prices in domestic centralized ground-mounted projects. For instance, in the China Energy Construction Corporation (CEEC) 17GW centralized procurement project, mainstream module manufacturers quoted prices generally above RMB 0.70/W.
• Implication: This indicates that the race-to-the-bottom in module pricing may be nearing an end. Manufacturers are showing more discipline in pricing, likely supported by the anticipation of improved demand in 2026 and the need to restore profitability.
• Q4 Outlook: We expect module prices to remain stable in the fourth quarter, providing a clearer revenue visibility for integrated manufacturers.

Table 2: PV Supply Chain Price Changes (Week Ending Nov 29, 2025)

Source: InfoLink, China Post Securities Research Institute

3.5 Profitability Analysis: TOPCon vs. HJT

The divergence in profitability between technology routes is narrowing but remains distinct.

Table 3: Gross Margin Analysis by Technology Route

Source: Solarzoom, China Post Securities Research Institute

Interpretation:
* Wafer Losses: The wafer segment is currently operating at a significant loss (-28% gross margin for 210R), indicating severe overcapacity and the urgent need for supply-side clearance.
* TOPCon Resilience: Despite negative cell margins, TOPCon modules manage to achieve a slight positive gross margin of RMB 0.020/W. This suggests that module assembly and branding still retain some value capture ability, or that efficient producers are managing costs better than the industry average.
* HJT Challenges: HJT cells show a small positive margin (RMB 0.008/W), but the module level is slightly negative (-RMB 0.006/W). However, the sequential improvement in HJT module margins (+0.009 RMB/W) suggests that cost reductions in HJT production are beginning to take effect, potentially narrowing the cost gap with TOPCon.

4. Installation and Grid Absorption Data

4.1 Installation Volumes: Post-Rush Normalization

• Cumulative Installations (Jan-Oct 2025): 252 GW, representing a year-on-year increase of 39.3%. This robust growth underscores the continued expansion of China’s renewable energy infrastructure.
• September Dip: September installations stood at 9.7 GW, a sharp year-on-year decline of 53.8%. This drop is attributed to the base effect of the "rush-to-install" phenomenon in April-May 2025, driven by the deadline associated with Document No. 136 (May 31 cutoff). The market is now normalizing after this artificial peak.
• Full-Year Forecast: Despite the Q4 slowdown, we maintain our forecast for 2025 full-year installations at 300 GW. The strong first-half performance provides a sufficient buffer to meet this target.

4.2 Grid Absorption and Utilization

• Absorption Rate (Jan-Sep 2025): The national PV absorption rate stood at 95%. This high rate indicates that despite the rapid addition of capacity, the grid has managed to integrate most of the generated power, although regional disparities likely exist.
• Wind & Solar Share: The proportion of electricity generated from wind and solar is continuously rising. For the full year 2025, we expect this share to exceed 20%. This milestone highlights the transition of renewables from supplementary to primary energy sources in China’s mix.
• Policy Impact on Absorption: The aforementioned NDRC pricing reforms are specifically designed to address the remaining 5% curtailment and to facilitate higher penetration levels. By introducing capacity-based pricing, the economic incentive for grid operators and local governments to invest in transmission infrastructure and flexible resources (like storage) is enhanced.

Chart Analysis (Descriptive):
* Monthly Installations: The data shows a spike in May followed by a normalization in subsequent months. The trajectory for Q4 is expected to be flat but stable, lacking the speculative rush of H1.
* National Absorption: The 95% rate is a critical benchmark. Maintaining this rate while adding 300 GW of new capacity is a testament to grid upgrades, but further improvements are needed to support the 2026+ growth agenda.

Investment Logic & Strategic Outlook

1. The "Expectation Gap" Thesis

We identify a significant expectation gap in the PV sector. The market currently prices in prolonged weakness due to Q4 demand softness and historical overcapacity concerns. However, our analysis suggests that the fundamentals are improving faster than consensus expects, driven by two main factors:
1. Supply-Side Discipline: The "anti-involution" policies are not merely rhetorical. Production cuts in polysilicon and wafers are tangible, and price stabilization in modules is evidence of improved industry discipline.
2. Demand Acceleration via Policy: The resolution of grid absorption issues through NDRC reforms removes a key bottleneck for large-scale base projects. As these projects become economically viable with lower transaction costs, demand will likely surge in 2026, earlier than previously modeled.

2. China’s Role as an "Action-Oriented" Transition Leader

China’s submission of NDC 3.0 is a strategic signal. Unlike previous cycles where policy lagged behind capacity growth, the current approach is proactive. The government is aligning grid infrastructure, pricing mechanisms, and international commitments to support sustainable growth. This reduces the risk of abrupt policy shifts that have historically plagued the sector.

3. Sector Rotation: From Volume to Value

Investors should shift focus from pure volume growth to quality and profitability.
* Integrated Module Makers: Companies with vertical integration can better manage cost fluctuations and capture margins across the value chain. As module prices stabilize above RMB 0.70/W, these players will see margin recovery.
* Technology Leaders: Firms with superior efficiency (TOPCon leaders, emerging HJT players) will gain market share as developers prioritize Levelized Cost of Electricity (LCOE) over upfront capex.

4. Recommended Focus: Integrated Module Leaders

We specifically highlight LONGi Green Energy and Jinko Solar:
* LONGi Green Energy (601012.SH): As a former leader in wafers and now a strong module player, LONGi has been undergoing strategic adjustments. With wafer prices bottoming and module prices stabilizing, its integrated model offers downside protection. Its strong brand and global distribution network position it well to benefit from the 2026 demand upcycle.
* Jinko Solar (688223.SH): Jinko has demonstrated resilience in maintaining shipment volumes and market share. Its aggressive adoption of TOPCon technology has yielded efficiency advantages. With the module price floor established, Jinko’s scale advantages should translate into improved earnings visibility in 2026.

Risks / Headwinds

While the outlook is positive, investors must remain cognizant of the following risks:

1. Policy Volatility (Domestic & International)

• Domestic: While the current policy direction is supportive, the implementation speed of grid reforms and subsidy settlements can vary by region. Delays in connecting large bases could defer revenue recognition for developers and suppliers.
• International: Trade barriers, tariffs, or changes in renewable energy subsidies in key export markets (EU, US, India) could impact the profitability of Chinese PV exporters. Geopolitical tensions remain a persistent overhang.

2. Downstream Demand Miss

• Macroeconomic Factors: A broader economic slowdown could reduce industrial electricity demand, indirectly affecting the urgency for renewable expansion.
• Financing Constraints: If financing costs for renewable projects rise or credit tightens, project developers may delay commissions, impacting immediate equipment demand.

3. Technological Disruption

• Route Uncertainty: The rapid evolution of PV technology (e.g., BC, HJT, Perovskite tandem cells) poses a risk of stranded assets for companies invested in older technologies. Failure to keep pace with efficiency gains could lead to loss of market share.
• Yield Issues: New technologies may face unforeseen manufacturing yield or reliability issues, delaying commercial scalability.

4. Supply Chain Price Volatility

• Raw Materials: Fluctuations in the prices of silver, copper, or polysilicon can disrupt cost structures. While polysilicon is currently stable, any unexpected supply shock could reignite inflationary pressures.
• Inventory Write-downs: If prices fall further before stabilizing, companies holding high-cost inventory may face significant write-downs, impacting quarterly earnings.

5. Intensified Competition

• New Entrants: Despite "anti-involution" rhetoric, the barrier to entry in certain segments (like module assembly) remains relatively low. New entrants or cross-industry players could exacerbate competition, particularly in niche markets.
• Price Wars: If demand fails to pick up in 2026 as expected, manufacturers may revert to predatory pricing to clear inventory, eroding margins.

Rating / Sector Outlook

Sector Rating: Outperform (Maintained)

We maintain our Outperform rating on the Photovoltaic sector. The combination of policy-driven grid integration improvements, supply-side rationalization, and strong long-term global demand fundamentals outweighs the short-term Q4 demand softness. The sector is entering a "transition period" where the focus shifts from chaotic expansion to structured, policy-supported growth.

Valuation Perspective

The sector valuations have adjusted significantly over the past two years, reflecting the overcapacity narrative. Current P/E ratios for 2026 estimates (where available) suggest that much of the negative news is priced in.

Table 4: Key Company Valuations & Forecasts

Source: iFinD Consensus Estimates, China Post Securities Research Institute

Valuation Commentary:
* Turnaround Story: Most major integrated players (Tongwei, LONGi, Jinko, JA, Trina) are expected to swing from losses in 2025 to profits in 2026. This implies that 2025 is the "bottom" year for earnings.
* 2026 P/E Attractiveness: Forward P/E ratios for 2026 range from 21x to 44x. Given the expected growth rate in earnings from a low base, and the strategic importance of the sector, these multiples are reasonable for institutional investors looking for multi-year growth trajectories.
* Canadian Solar (Artesun): Shows a more stable profit profile with a lower 2026 P/E of 21x, potentially offering a value play with less volatility than pure-play manufacturers.

Investment View

1. Strategic Allocation: Buy the Dip in Quality

The current market weakness in module stocks presents a strategic entry point for long-term investors. The divergence between short-term price pressure and long-term policy support creates an asymmetry in risk-reward. We advise accumulating positions in high-quality integrated manufacturers during periods of market pessimism.

2. Focus on "Grid-Ready" Solutions

Investors should favor companies that are not just selling panels but providing grid-integration solutions. This includes:
* Inverters with Grid-Forming Capabilities: As the grid becomes more saturated with renewables, the ability to provide stability services becomes valuable. Sungrow and Deye are well-positioned here.
* Storage Integration: Companies that offer bundled PV+Storage solutions will have a competitive edge in bidding for large base projects, where curtailment is a key concern.

3. Monitor Policy Implementation Closely

The NDRC’s pricing reforms are a game-changer, but their impact will depend on local implementation. Investors should track:
* Provincial Pricing Announcements: Look for early adopters of the capacity-based pricing model.
* Large Base Project Awards: An increase in the volume and speed of awards for Gobi/desert base projects will be a leading indicator of demand acceleration.

4. Technology Differentiation Matters

While TOPCon is the current mainstream, keep a close watch on HJT and BC (Back Contact) technologies.
* HJT: If cost reductions continue as seen in the margin trends, HJT could capture a larger premium segment.
* BC: LONGi’s push into BC technology could differentiate its product offering, allowing it to command higher prices in distributed and high-efficiency markets.

Conclusion

The Chinese PV industry is at an inflection point. The era of unchecked capacity expansion is giving way to a phase of structured growth driven by policy and grid integration. The submission of NDC 3.0 and the NDRC’s pricing reforms are clear signals that the government is committed to solving the bottlenecks that have hindered the sector’s profitability.

While Q4 2025 may appear平淡 (flat) in terms of demand, the groundwork for a robust 2026 is being laid. The expectation gap is widening in favor of the bulls. We recommend investors look beyond the short-term noise and position themselves in integrated module leaders and grid-enabling technology providers who will thrive in this new, more sustainable market environment.

Top Picks:
* LONGi Green Energy (601012.SH): Beneficiary of technology shift (BC) and market consolidation.
* Jinko Solar (688223.SH): Scale leader with strong TOPCon execution.
* Sungrow Power (300274.SZ): Best-in-class inverter/storage player with global exposure.

Appendix: Detailed Data Tables & Methodology

A. Methodology for Ratings

• Outperform: Expected sector return > 10% relative to the CSI 300 Index over the next 6 months.
• Neutral: Expected sector return between -10% and +10% relative to the CSI 300 Index.
• Underperform: Expected sector return < -10% relative to the CSI 300 Index.

B. Data Sources

• Installation Data: National Energy Administration (NEA).
• Price Data: InfoLink Consulting, Solarzoom.
• Financial Estimates: iFinD Consensus Estimates.
• Policy Documents: National Development and Reform Commission (NDRC).

C. Glossary

• NDC 3.0: Third iteration of China’s Nationally Determined Contributions under the Paris Agreement, targeting 2035 goals.
• Anti-Involution: Policy and industry efforts to curb irrational price wars and overcapacity.
• Capacity-Based Pricing: A tariff structure where users pay for the reserved capacity of the grid rather than just the volume of electricity transmitted, beneficial for variable renewable energy integration.
• TOPCon: Tunnel Oxide Passivated Contact, a high-efficiency crystalline silicon solar cell technology.
• HJT: Heterojunction Technology, another high-efficiency solar cell architecture combining crystalline and thin-film silicon.
• BC: Back Contact, a solar cell design where all electrical contacts are on the rear side, improving front-side light absorption.

Analyst Certification & Disclosures

Analyst Certification:
The analysts responsible for this report, Su Qianye and Yang Shuaibo, certify that the views expressed in this report accurately reflect their personal views about the subject securities and issuers. They also certify that no part of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report.

Important Disclosures:
* China Post Securities Co., Ltd. holds relevant licenses for securities investment consulting.
* This report is based on information believed to be reliable, but China Post Securities does not guarantee its accuracy or completeness.
* This report is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities.
* Investors should make their own independent decisions and consult with professional advisors if necessary.
* China Post Securities and its affiliates may hold positions in the securities mentioned in this report and may engage in trading activities.

Risk Warning:
The securities market involves risks. Past performance is not indicative of future results. Investors should carefully consider their investment objectives, risk tolerance, and financial situation before investing.

(End of Report)