On October 19th, Caixin Financial News (Reporter Liu Mengran) faced with the continuous irrational decline in the price of photovoltaic modules, the China Photovoltaic Industry Association has set the "reference price" for module cost in October 2024 at 0.68 yuan/W, and pointed out that according to the "Implementation Regulations of the People's Republic of China on Tendering and Bidding Law", the winning bid contract must be higher than the cost.

Several industry insiders told Caixin reporters that although the association is not the pricing unit, as an industry 'barometer', there is a high possibility that top enterprises will cooperate with this plan. In the short term, there may be multiple companies quoting 0.68 yuan/W simultaneously, therefore the weight of technical evaluation in the future will increase, possibly even directly influencing the bidding results.

The China Photovoltaic Industry Association released an article titled 'Current Cost Analysis of Photovoltaic Modules: Winning bids below cost suspected of violating the law!' yesterday, mentioning that the cost of 0.68 yuan/W is already the lowest cost for excellent companies in the photovoltaic industry while ensuring product quality.

The article points out that according to the relevant provisions of the 'People's Republic of China Tendering and Bidding Law', the winning bid contract must be higher than the cost. The China Photovoltaic Industry Association calls for bidding parties to respect market laws, comply with legal provisions, and develop reasonable bidding plans by setting minimum price limits, reducing the weight of price scores, and increasing the weight of service and quality scores.

Why is it 0.68 yuan/W? According to the materials provided by the association, taking the example of current integrated enterprise N-type M10 double-glass photovoltaic modules, in October 2024, the cell cost is 0.269 yuan (per W, same below), adding glass (0.106 yuan), film (0.046 yuan), frame (0.091 yuan), and others (0.091 yuan), the total module cost is 0.603 yuan, with a tax-inclusive price of 0.68 yuan.

The association mentioned in the article that the above cost calculation does not include depreciation, so in reality, it is lower than the actual production cost, even lower than the full cost including three expenses. The association also mentioned that even if some companies currently have meager gross profits from pure module manufacturing and sales, it is based on severe losses of important raw materials such as silicon materials, silicon wafers, solar cells, glass, etc., and this situation is unsustainable.

Caixin reporters noticed that, according to recent public tender announcements, it is not uncommon for the price per Watt to be lower than 0.68 yuan. On October 16th, China Best Investment released the candidates for winning bids in the third batch of photovoltaic module equipment centralized procurement for 2024, with bid prices of 239.67847696 million yuan and 24547.131024 million yuan for the top two candidates, corresponding to unit prices of 0.662 yuan/W and 0.678 yuan/W.

According to the above regulations, if the bid price is lower than the cost or higher than the maximum bid limit set in the bidding documents, the bid evaluation committee should reject the bid. Some industry analysts believe that after the introduction of the 'reference price,' there may be multiple companies bidding at 0.68 yuan/W in the future.

Lu Jinbiao, Deputy Director of the Silicon Expert Group of the China Nonferrous Metals Industry Association, told a reporter from Caixin that the competition between leading companies is very intense. If there are cases where the prices are the same, the commercial score based on price will be the same for everyone. Winning the bid will depend on the technical evaluation committee, and technical evaluations are typically not blind.

It is understood that technical evaluations usually include aspects such as the company's scale, strength, technical capabilities, past performance, etc. In cases where commercial prices are the same, technical evaluations can be used for determination. Typically, technical evaluations focus on showcasing the bidder's technical solutions and implementation plans to ensure the technical feasibility and quality of the project.

Just this Monday (October 14th), a special symposium organized by the China Photovoltaic Industry Association to prevent 'vicious competition' within the industry was held in Shanghai. 16 leading companies in the photovoltaic monocrystalline silicon industry chain, including Longi Green Energy Technology (601012.SH), JinkoSolar (688223.SH), Tongwei Co., Ltd (600438.SH), and Xinxiang Group, were all present.

According to the information released by the association after the meeting, entrepreneurs and representatives fully communicated and reached a consensus on 'strengthening industry self-discipline, preventing 'vicious competition,' enhancing the market survival of the fittest mechanism, and ensuring the smooth exit channels for backward and inefficient production capacity' to promote the healthy and sustainable development of the industry.

Some industry insiders told Caixin reporters that the consensus reached by the leading photovoltaic companies and policies such as the price limit have to some extent prevented prices from continuously plummeting. It is already a good sign that the photovoltaic industry's downward trend has stopped. However, the current vicious competition in the industry stems from various reasons, including not only the bidding mechanism but also factors like regional protectionism, expanded production capacity for raw materials, and ineffective patent protection, which are among the reasons leading to the depression of component prices. To bring the photovoltaic industry back to orderly development, more measures need to be implemented.