Policy momentum to continue until September, peaking in November: We expect China will announce a series of decarbonization policies – its national decarbonization plan and >20 complementary policies – ahead of the Glasgow COP26 summit in November 2021, likely by September 2021. On renewables, we expect cross-departmental policies to accelerate installation growth.

We cut our 2021 solar demand forecast but raise our expectations for 2022: We expect 50-55GW in China in 2021, with this to accelerate to 75-80GW by 2022, assuming module prices fall. IPPs will accelerate development of solar farms to achieve 2025 targets with improved IRRs, while distributed solar will grow based on the implementation of whole county policies, C&I users' decarbonization pressure and a peak-trough tariff structure.

Policy changes to support power system integration: Recent policies on distributed solar, peak-trough tariffs, peaking/storage capacity and market liberalization signals have changed from promoting plant construction to integrated power system development, amid rising renewable penetration.

Assuming policies are implemented and costs continue to fall, China's solar installation may reach 80-90GW p.a. in 2022/23.

Tight polysilicon supply will likely ease in 2022, and may turn to oversupply from 2023: Polysilicon Association estimates domestic polysilicon capacity to reach 540k/850k tons in 2021/22, 30k/30k higher than previous forecasts. Total polysilicon supply in 2022 could reach 750-780k tons, sufficient to support 250260GW wafer/cell/module demand and 210-220GW global solar installation.

Prefer Longi; solar expectations in 2H21-1H22: With a resilient polysilicon price in 2H21, high module price, logistics delay and concentrated demand (30GW in China in Q4-21), we reduce our installation and margin expectations for 2H21. We believe the market is focussing on 2022/23 demand, where we are bullish. We expect margin recovery for downstream (cell/module/IPPs) into 2022/23. We reiterate our OW on Longi and raise our PT to Rmb100 on higher module sales in 2022. Valuation looks attractive vs. global peers.