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The European Bank for Reconstruction and Development (EBRD) has drawn up a blacklist of module manufacturers that will not be able to be financed from next week, because it suspects that some of them use silicon produced with forced labor. A number of satellite banks are expected to follow the same guidelines. pv magazine analyzes with Asier Ukar, from PI Berlin, the current state of traceability systems.
The European Bank for Reconstruction and Development (EBRD) has compiled a list of module manufacturers, to which pv magazine has had access, that will not be eligible for financing as of May 23. In conversation with Asier Ukar, Managing Director and Senior Consultant of PI Berlin Spain, we analyze where the industry is headed.
pv magazine: Investors and buyers of solar PV equipment want to ensure that the products they purchase and the suppliers comply with strict environmental, social and governance (ESG) policies. Legislation in the United States and concern in the European Union about supply chain traceability have put additional pressure on buyers. It is suspected that forced labor may be used in the production of polysilicon. Can reliable monitoring be carried out?
Asier Ukar: So far, traceability upstream to include silicon wafers, polysilicon, and metallurgical silicon (MSG) has generally not been well developed or implemented. According to PI Berlins first supply chain traceability audits, most manufacturers silicon supply chain traceability systems only extend from modules to cells. PI Berlin has been conducting supply traceability audits to ensure consistency throughout the supply chain. Right now the main focus of the audit is on polysilicon manufacturing in certain regions of China.
What exactly is evaluated?
Manufacturer is evaluated on its ability to obtain, maintain, and document material transactions in the supply chain, including purchase orders, invoices, and bills of lading related to traceable materials and their links to material identifiers , suppliers and lots. They are asked about their systems for data collection, record management and retention, monitoring reports and monitoring request management. The audit is carried out by reviewing the documentation and verification at the factory and meeting with the personnel of the manufacturers purchasing department.
In that sense, PI Berlin has developed a supply chain traceability audit that assesses the maturity of the PV module manufacturer in terms of supply chain (material) traceability policies, systems, processes and compliance. Manufacturers are asked to share their policies, objectives, methodology and scope for supply chain traceability management. The main focus of the questionnaire sent to manufacturers is the sourcing of polysilicon, where the greatest concerns regarding the protection of human rights have been raised.
But we are before "the word" of the manufacturer, then.
With the above evaluation, Buyer can assess the manufacturers ability to trace the origin and production of the silicon used in Buyers modules. Depending on the capacity of the manufacturers, their influence in the supply chain and their willingness to cooperate with the audit, the buyer may understand where the polysilicon in the modules comes from and be able to independently verify it. The degree of cooperation of manufacturers with the audit and the current status of their traceability system already offer valuable information to know if the manufacturer should be considered a reliable supplier for your project.
The main challenges hindering PI Berlins ability to execute traceability audits and generate tangible results to date have been mainly related to the unwillingness of manufacturers to offer transparency in their supply chain, the fear of receiving a bad result audit when supply chain traceability systems are still immature, concerns about the origin of materials in their supply chain, and the potential political ramifications of cooperation. So far this year, two projects have been paralyzed by the client, once it has received our results. This demonstrates that auditing the origin of polysilicon is not just a formality, and that certain agents take their internal Code of Conduct very seriously.
Those audit reports, arent they confidential?
The common approach taken by buyers in all sectors to address these issues is audits of their supplies. As in the case of solar energy, the sensitive nature of these audits can lead to balancing multiple financial, political and social interests. Ideally, the buyer receives a statement from the auditor verifying, based on tests, that the products comply with the legislation and their own policies. However, limitations on the auditor (such as access, confidentiality, policy, etc.), whether internal or from an independent third party, may reduce their ability to provide evidence-based conclusions. In any case, if the results are positive, that is, if we can prove that the supply chain is clean,
What does the audit cover? Are all manufacturers evaluated the same?
The audit provides a qualitative assessment of the scope, strength and maturity of your traceability system. The manufacturer is evaluated based on its ability to provide supply chain traceability documentation that is consistent and compliant with the current guidelines and requirements of its relevant jurisdiction (ie US, UK or Europe). We do not make distinctions between manufacturers, we evaluate large and small manufacturers in the same way.
Developers are concerned about project delays if modules are seized by US Customs, Border and Protection authorities, as has happened several times in the past year. Is there any way to minimize risks? What does Europe plan to do?
The United States has already passed legislation enacting a Sale Retention Order (WRO) on modules containing materials from certain Chinese metallurgy and polysilicon manufacturers. The European Union is preparing its own directive. The EU Sustainability Due Diligence Directive is due to be published in 2023 and will require Member States to implement national legislation obliging companies to integrate policies focused on human rights and the environmental impact of the supply chain. Germany has already passed legislation that will gradually impose requirements on companies starting in 2023. Along the same lines, the European Bank for Reconstruction and Development has published a black list of module manufacturers that will not be eligible for financing after May 23 of this year. It is worth remembering that there are a number of satellite banks that will follow the same guidelines, which indicates that the thing is serious.
On the other hand, an independent audit report cannot guarantee that the manufacturer will not be subject to seizure of the merchandise in the US or in other countries where there are import restrictions related to the origin of the materials of the modules. . The ability to initiate this type of audit work and complete the entire scope as written is subject to the customer obtaining the manufacturers consent to be audited, the manufacturers continued cooperation, and Chinese anti-foreign sanctions laws. may affect PI Berlins ability to carry out this work.
Is there any "clue" to know which manufacturers can be more transparent?
Supply chain traceability is a new requirement for manufacturers and many are continually creating or improving their traceability systems, together with their suppliers. The more integrated the manufacturer is vertically, the greater its ability to trace upwards. Also, the larger the manufacturer, the greater its ability to apply commercial leverage to obtain the level of traceability you want or need. Some manufacturers are also in the process of changing and reorganizing their supply chains to avoid potentially restricted or non-compliant materials and suppliers.
To what extent is this fulfilled today? What should a developer take into account?
Most manufacturers are still unable or unwilling to offer full transparency in their supply chains to the level that buyers are asking for, but this is evolving.
For their part, buyers of equipment for photovoltaic plants will have to address supply chain traceability issues in the future, both to comply with their own policies and with those of existing or planned legislation in their countries of action. A combination of independent audits and specific clauses in supply agreements can help buyers assess risks and identify strategies to address them.
It is strongly recommended that traceability requirements and independent audits of them be integrated early in the purchasing processes (as part of the qualification and tender processes for manufacturers), rather than waiting for the requirements to be executed. supply agreements. Based on the results of the audit and the cooperation of the manufacturers, buyers will be in a better position to determine if they should consider the manufacturer as a suitable supplier for their future PV projects.
Steven Xuereb, Executive director of Sales and project delivery at PI Berlin, addresses supply standards in the article “Evolving standards for supply chain traceability”, published in the April issue of pv magazine . Below, Asier Ukar, General Manager and Senior Consultant of the Spanish headquarters of PI Berlin. |
