pv journal: The PV module market has just lately been outlined by very low costs. How is Longi doing on this setting?
Haimeng Zhang: Pricing is on the prime of our minds, in the meanwhile. If folks proceed to hurry to supply extra whereas demand stays the identical, costs will develop into unsustainable. If everybody loses cash, possibly a correction is not too far off. We take a more in-depth have a look at the place every of the gamers is, how rather more ache they will endure, and once we begin to see some indicators of sanity. The trade ought to alter to one thing like $0.12/W to $0.13/W. If you get as excessive as $0.15/W, you will have an excellent margin to spend money on R&D however at $0.12/W to $0.13/W, you’ll be able to simply get by.
A colleague from one other firm just lately requested me ‘why are you promoting at $0.11/W when you’ll be able to promote the very same quantity at $0.20/W?’ It caught with me. High prices have beforehand been a barrier to photo voltaic adoption. We have been capable of cut back prices over time and Longi has performed a key function in that. And now this overly aggressive value setting does not matter – it does not increase the market. The value of photo voltaic is now not a barrier. The obstacles now are power storage and the grid, however we proceed to decrease the value of photo voltaic. It used to assist however not anymore. And some even suppose like that – that if we decrease the value, we are going to get extra demand. But that’s now not the case.
What must occur to get again to this stage of $0.12/W to $0.13/W?
At least some gamers must be fired. Some capability should go offline, particularly on the polysilicon facet. Those factories depend on giant furnaces, processes that can not be simply stopped and began, so they don’t need to cut back manufacturing. They’re dropping cash and build up stock and that is not going to final without end. Even within the subsequent few weeks, issues could begin to change. When some polysilicon makers begin pondering ‘overlook it, I’ve no cash to lose,’ that may set off a sequence response.
Buyers and regulators are more and more involved about ESG practices. How does this have an effect on Longi’s enterprise?
Expectations are rising. The US and European inventory exchanges, in addition to the Hong Kong Stock Exchange have necessary ESG reporting. Longi is listed in China so there isn’t a necessary reporting for us but. However, now we have our annual sustainability report which primarily covers all ESG areas. Investors anticipate this, as do regulators, particularly within the US and Europe. And our prospects are additionally rising.
One space we have a look at is the carbon footprint and environmental-specific impacts. We have the primary, what we name, ‘zero carbon manufacturing unit’ in China. The thought is to make use of hydropower and photo voltaic on-site to fully decarbonize the manufacturing course of. In some certification our bodies, nevertheless, now we have a problem: hydro in China will not be counted as zero carbon power. They work with the typical power combine for the area somewhat than project-specific information. We need to push for some change in that method. We additionally need to work with the utility that gives that hydropower to us and persuade them to get certification. But as a neighborhood Chinese firm they aren’t strongly motivated to work on certification from European entities that their electrical energy is inexperienced.
We have these challenges however the route is obvious. We have to decarbonize our manufacturing. The plan is to develop a really low carbon product, particularly for the European market, within the close to future. Zero carbon could also be an overstatement however it’s a vital discount in scope 1’s footprint [direct] and scope 2 [energy supply] emissions and we do not simply purchase carbon credit to offset them. Scope 3 [emissions from other suppliers in the value chain] tougher however we work with suppliers and supply coaching for them to know the wants of our prospects.
Are there prices related to one thing like a low-carbon module? How does this product evaluate to others available on the market?
Decarbonization must occur on the system stage and we’re taking it step-by-step, beginning with our personal factories then working with our suppliers upstream. We will reveal with a product that photo voltaic manufacturing could be successfully decarbonized. This could initially come at the next value and we additionally have to work with our prospects on how we share these prices. It is a collective effort for the complete provide chain.
Currently, the power used to make a photo voltaic panel is about 0.4 kWh/W. Over its lifetime the photo voltaic panel will generate a median of 40 kWh/W, based mostly on 1,500 hours per yr for 25 years. That’s a 100-fold profit.
Something like 90% of the complete worth chain for photo voltaic manufacturing is in China and China represents half of the world’s PV demand – which means that just about half of that manufacturing is offered overseas. Those emissions from manufacturing are accounted for in China whereas the profit goes to a different nation.
The subsequent step is to scrub up this 0.4 kWh as a result of China desires to develop into much less carbon intensive. A couple of years in the past, we stated we needed to do ‘photo voltaic for photo voltaic.’ But photo voltaic doesn’t present us with round the clock power. Hydro, nuclear, or power storage is required to deliver it collectively.
Integrating recycled supplies can also be an vital a part of sustainable manufacturing. Does Longi make progress right here?
Currently, that is the one module body. We work with suppliers to make use of recycled aluminum supplies for this. There are additionally some nice recycled-material choices obtainable within the light-weight metal body.
There are different smaller areas of impression. The recycled materials could be built-in with some metals utilized in cell processing. But for us it is extremely troublesome to make use of different recycled supplies and it is extremely troublesome for recyclers to get supplies from waste modules and attain the required purity. In relation to the design of the module and making the merchandise simpler to recycle is a driver to additional cut back the carbon footprint.
In our view, recycling will not be good enterprise as a result of the module has been used for 25 years or extra and the quantity of metallic, particularly treasured metals like silver, in a module is lowering. that the recycling worth of that module is proscribed and of a really. very long time horizon.
We additionally understand that that is one thing we have to do. Maybe not for decarbonization however it’s required by regulation and it’s what our prospects care about. That’s why we’re taking steps to make our modules simpler to recycle. To make it simpler to interrupt [products] is the principle driver. Because, previously, if you attempt to get a module out, plenty of parts are destroyed and it is going to be troublesome to recuperate something helpful.
We are working with the trade to develop design requirements in order that recyclers can deal with the modules extra simply. Currently, most of those are targeted on avoiding hazardous supplies or people who have environmental impacts when the module is decommissioned.
Now can we discuss in regards to the ‘social’ facet of ESG?
The largest challenge right here is round supply-chain compelled labor. This is a really delicate subject and totally different governments in China, the US, and Europe have their very own views and necessities on PV module suppliers like us.
As a non-public enterprise, attempting to adjust to these totally different units of rules is plenty of work. What we do is section our practices for various regulators and prospects. For the United States, once they say ‘we do not need sure materials,’ there’s at all times cheap doubt as a result of even with the monitoring documentation you’ll be able to’t inform the distinction between this silicon and that silicon. They are all the identical.
The burden of proof is on us and it can’t at all times be confirmed. So we constructed a complete provide chain outdoors of China, beginning with polysilicon made in Europe. Then there isn’t a doubt by any means. It comes at the next value but when US prospects are prepared to pay for it, then so be it.
That characteristic can also be obtainable to prospects elsewhere however so far as I do know none of our European prospects are prepared to pay the additional value. They want to go along with monitoring. We present full documentation: the place the silicon comes from, the place it’s processed. We ensure now we have licensed, audited documentation overlaying all of this.
Currently, we offer full traceability documentation to prospects who request it. The subsequent step is to offer it mechanically so the shopper does not should ask. We plan this for all European prospects. They scan a QR code and have full documentation. There are extra prices for this and we’re contemplating charging a payment for patrons who want it however on our scale that does not make sense. When you amortize that over the amount we ship to Europe it prices little or no, so we’re giving it away totally free as a part of our customer support ethos.
Those are the primary three elements. Some areas even have sure necessities and we ask them to decide on the extent of monitoring they want.
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