Rethink Energy 229: Rio Tinto bets on future lithium price recovery; trends in TOPCon solar technology

Speaker A: Hello and welcome to the Rethink Energy podcast. I'm as ever your host Andreess Vantanaar and I'm joined once again by Cha Hyun Kim.

Speaker B: Hi.

Speaker A: Today we'll be talking a bit about solar technologies, uh, really the mainstream and how that's going. It's still progressing despite some theoretical limits approaching. And we'll also talk about Jahyoon Kim's article first about uh, lithium mining. So my stance on lithium supply and demand is that obviously it's in huge oversupply right now. The prices are heading towards historic lows but that's clearly going to change at some point in the next decade. Eventually the demand will catch up. We're not quite sure when and it's kind of always difficult, it's always a bit really impossible to predict exactly when that will be because of uh, a lot of it depends on government policy, on politics. But what we do have now is this huge investment that's been announced by uh, Rio Tinto in a new mine. So that's a big voted confidence. So um, take it away.

Speaker B: Um, so basically the background you just described uh, was the main rationale of how Rio Tinto decided to invest almost around like $900 million in Chilean lithium mining projects. So they, they have recently announced these two major projects happening in Chile, uh one in Maricunga salt flat and the other uh, Alto Andino salt flood as well. So as we all know the biggest lithium mining country mining region is actually Australia. But Chile surprisingly is the second highest um, concentration of lithium. So Rio Tinto um, decided to invest huge amount of money uh by proceeding uh, the project along with the uh, state owned mining company called Cold echo holding a 49.99 stake. Um so when they announced this project there have been many concerns and skepticism arguing that oh like we have the lowest ever lithium price. Like why would you take that risk to pour $900 million of money into that cheap lithiums? And there explanation was just like you explained. Okay, we now have oversupply as of now, but this oversupply will be absorbed with the future increasing demand anyway we're going to have more EVs, we're going to have more batteries thanks to renewables. Um so that was their basic argument of this investment. Um, but in this week's article I pointed out two different factors that would play a huge role um, to support Rio Tinto's um, optimistic uh, perspective in the industry. Um, the first one was basically the adoption of alternative chemistries. Um, I mean for now most of the batteries we use are based on lithiums. But before this lithium batteries became um, dominant we had um, batteries that, that were based on higher percentage, higher rate of cobalt. Cobalt was also basically the lithium um, back then like it was very expensive. Uh, it was the major component of batteries. Um, so the manufacturer decided to decrease um, the cobalt rate of the battery manufacturing by coming up with innovative technologies. So now we have like a newer version of lithium batteries instead of high percentage cobalt batteries. So if we end up having like new innovative technologies that could possibly decrease the level of lithiums, the price of lithium is going to continue to like go down. Um, um, like opposite of the Rio Tintos production. So yeah, it will be definitely interesting to see how like new technology technologies such as like sodium ion or like very recent uh, technology would be. I say um, there was um, there was a vanadium flow as well. So it would be.

Speaker A: That's my favorite one to natter on.

Speaker B: Yeah, exactly. You could add more content to that but it would be really interesting to see how these new technologies become more commercialized. Yeah, so that was basically uh, this week's article was about. And uh. Andres, do you have any comments, extra comments?

Speaker A: Yeah, I think uh, my, my basic attitude to this comes down to the figure in gigawatt hours that we make each year of lithium, which uh, most batteries right now are uh, lithium. So you can kind of treat the two interchangeable and it's something like 1000 GWh or 1 Terawatt Hour for EVs power batteries, another 300 GWh for energy storage and 200 GWh sort of miscellaneous everything else. And I believe and um, really this is just my uh. It's just like a rather lazy almost extrapolation of what's been happening so far. Like right now that the manufacturing scale of EV power batteries in China is up 40% year on year. So I think these will increase several times over the um. So let's take the 300 gigawatt hour energy storage battery figure and let's compare that to roughly 600 gigawatts of solar and I think it's about 300 gigawatts of wind being added each year. So pretty soon we'll be adding 1 terawatt of wind and solar capacity each year, uh, globally if that needs to have multiple hours of battery energy storage on average, which eventually it will as various grids have more and more intermittent resources on. Well if it needed three hours on average, which I know is a large number, but it'll get there eventually. You would need 3 terawatt hours of energy storage to be manufactured each year, which is 10 times the existing amount uh, of energy storage manufacturing. It's also twice the amount of total manufacturing. And then you've got EVs. Like I said, they're up again 40% this year. So they also have the potential to increase several times over. And then instead of looking at 1.5 terawatt hours of manufacturing each year, you're looking at what actually is it? You're looking at about up to 6 terawatt hours, four times the current scale. And that would arrive in, let's call it ten years from now. And this is all very back of an envelope sort of calculations, but it's just uh, but, but like I remarked at the very beginning, a lot of this depends on uh, arbitrary political decisions, even military decisions. I mean it's my pet theory that Nord stream blowing up is why China supercharged its uh, its uh, energy transition in the past couple of years. So you can't predict those things but you can say for sure that the number is going to go up. And I think lithium mining production capacity is only uh, it's only twofold over capacity. So the demand only has to increase two times over uh, for the price to recover. Currently the price is really rather on the low side. And another thing to consider is that I'm really not an expert on the production cost of lithium mining, uh, really anywhere. But I assume that. Well actually no, I do know that when you're dealing with high grade uh, high yield mining areas that the cost per unit output of lithium is obviously lower. So even if the cost is fairly low in the future, this Rio Tinto investment, uh, we're looking at the latest one this time is uh, 900 million. But I think they've announced some other sort of almost as large investments in Chile over the past few years as well. So you know, they're investing a few billion dollars. It's a very large scale operation with very good quality, natural uh, resources to work with. This will be competitive, even the price isn't so good. Um, so I think actually Rio Tinto's uh, really making the right decision. After all the mines won't come on now, they will come online in uh, about five years. Was uh, it five years or often mines are actually take longer than that, so that's plenty of time for the price to recover. And you know like as I just sort of rambled on about both power batteries and energy storage batteries, which are the two main categories are growing I think it's 40% year on year, and the year before that it was 60%. And there will be some slowdown now. Um, actually, did I write a little article on this question of, um. I think I actually did write. I wasn't going to talk about this, but it's kind of relevant. So the big question, when you're trying to predict the demand for energy, uh, renewable energy equipment, the big question is actually just China, because China used to be about one third of the global renewable, uh, energy additions, which is a sensible amount for them because they're about one third of global manufacturing. So it kind of makes sense. Um, right now they're more than half. Uh, and so China has just liberalized its power market. That's actually a bad thing for the scale of renewable energy installations in the short term. In the long term it should be, well, it's necessary and it should actually be perhaps good even in the, even in the medium term for energy storage. And um, so I'm kind of wondering to myself, what will be the new scale of wind, solar and battery additions in China? And it's really hard to tell. But we do have Guangdong province, which is not even one of the more active provinces for renewable energy. They've, uh, announced that they plan to build 209, uh, battery energy storage system projects in 2025 with a total scale of 42 gigawatts and 85 gigawatt hours. I mean, this is, that's probably several times the entire Californian battery energy storage fleet. It's enormous. And Guangdong, like I said, isn't even one of the biggest provinces for this kind of thing. Well, maybe it will be, but I don't think so. Um, so yeah, the demand is actually going up.

Speaker B: Um.

Speaker A: Oh, yes. And I guess maybe I should let you jump in again. You feel free to talk over me if you, if you want to, but the other topic was the, uh, uh, the, the alternative chemistries. Now it would be nice to say that the alternative chemistries are going to be good technology. So they will get made and therefore that will drive the lithium price down. I think it's kind of a little bit almost the opposite way round. Once the lithium price increases, then it becomes worthwhile to make stuff using the alternative chemistries. See, alternative chemistries have some advantages, like sodium is safer, it's more reliable at low temperature, it's faster charging, but it's just more expensive. So, you know, people do know how to make these. There are some supply chains for them. But I think what will happen is they will be A limiting factor on the lithium price increase because they will only kick in in a major way as the price increases. So the price has to be a little bit elevated for them to play a role. I think right now, uh, in China, which I treat as sort of the basic baseline case for any market because it makes everything. Um, in China, I think vanadium flow. No, no, I think sodium and vanadium are roughly 20% or 30% more expensive than lithium energy. Lithium, uh, ion energy storage. Um, and actually sodium ion also gets used in EVs because of the fast charging. But that's very small. I think it's maybe 5 gigawatt hours or something of production. Um, it's very small so far. Cattles. Or is it catl. Are we allowed to say cattle? But anyway, it's exported its first ever sodium ion batteries for power for EVs, uh, just like last month compared. Compare that to what it's probably exported 1 terawatt hour of um, lithium based ones. So. Well, I think we've covered everything on that. Yeah, I mean. Or what do you, do you want to add anything?

Speaker B: Not really. I think you pretty much covered like other important topics.

Speaker A: Well, sorry about that. I hogged the. Hogged the topic.

Speaker B: No problem at all.

Speaker A: The next one. So I, um, I spoke to a British solar developer recently. It's quite a small one. It's in the commercial scale, rooftop specifically, lightweight and flexible segment. So that's why it's small Britain and everything else. It's not a very huge industry, but it's quite big in that context of Britain. Um, and so they're putting solar installations on rooftops that aren't capable of holding lots of weight. Uh, which means they can't bear, um, some solar module that's encapsulated in several millimeters of glass with metal framing. It's just too heavy. Uh, you can end up with as much as 50 kg per kilowatt which is just too heavy. Um, so they're doing these lightweight and flexible ones. And I always thought that lightweight and flexible solar meant that it generally wasn't silicon. It would be amorphous silicon, which is sort of a weird niche technology that's fallen by the wayside. Or it would be sigs, which means copper indium gallium selenide. Or it would be cadmium telluride, although that's not. That's actually made for the utility scale these days by First Solar. Or it would be something else like perhaps in the future perovskites. Now what they're what they've actually done in this country in this company Solivas, in its uh, eight year lifespan since 2016. They did indeed start out with SIGS based solar uh, modules. But actually over time they've switched to silicon, uh, crystalline silicon which surprised me. It turns out that uh, I was speaking to. Who was I talking to? Kieran, uh, Cotter, the technical director. And he said there's something, there's some process you can do to make a semi flexible crystalline silicon, um, cell using like uh, it was something to do with resin. I honestly don't know and don't understand the technical details but you can actually bend, you can, you can make these semi flexible silicon modules that can bend which very much surprises me. So instead of resorting to some niche semiconductor that is just sort of more expensive, less powerful, uh, less reliable, you know, there's a reason that silicon dominates, um, you can actually just use silicon. Now Silivius is still looking into some other technologies. They want organic PV for a really flexible uh, roll to roll low temperature production arc product for the residential segment, that it'll have really small cells because uh, it's a thin film technology and therefore it will be resilient to shading effects. But um, and they also say that they're quite interested and impressed in perovskites. And they also say that still about half of their installations are done with SIGs. But really that was a big takeaway for me is I'm just so surprised. You can actually make these flexible, these semi flexible silicon um, modules and put them on airports or stadiums, um, and you know they remove the glass or rather they don't make the module with glass in the first place. They use polymer. So that loses about one tenth of the power output because glass is more uh, see through than polymer is. And what uh, else is it? Instead of mountings that you sort of screw everything into made of aluminium or steel, instead of that they use um, glue adhesives, different adhesives. Um, but yeah, that's, it's just nice to, to have a catch up with um, someone on the ground in the, in the industry. Uh, and I was, it's, it's actually I should complain. I find it deeply frustrating that it's always bloody silicon. It's always this highly commoditized silicon technology. It's probably worth a hunt. I mean the stuff they're doing using the semi flexible thing is probably a bit special. It is a bit boutique. They mentioned they have some particular suppliers but it's always this hundred dollar per kilowatt. Commoditized, 23% efficient, uh, 30 year lifespan product, which is a good thing, but it's uh, actually a little bit boring to write about. It doesn't have any supply chain shortages these days other than the silver paste either. Uh, and with that, and having complained that mainstream solar is boring, I actually wanted to talk a little bit more about it. Anyway, um, Jinko Solar, they've put out a little white paper basically boasting about how good their technology is. So like I said, the standard solar module on the market, I guess it would be a high end one actually. Uh, using N type technology. Topcon is 23% efficient. Um, so the efficiency rating is directly proportional to, it's literally the measure of how much solar power you get per square meter. Um, Jinko Solar is boasting that it's got 20, it's going to reach 27% efficient cells by the end of this year, which means they'll be making uh, modules with 25% efficiency. So easily, uh, 10% more powerful than the mainstream. Um, well about that much. And uh, it's quite remarkable that they've managed, I say they, because this isn't so different from the other leading companies. They've managed to keep improving uh, the solar power output by sort of half a percentage point every year, uh, even as it gets closer and closer to the Shockley CASA limit, which in Topcon's case is 28.7% physical limit on how much electricity you can cram out. But uh, just because the scale of the industry has grown and just so has the scale of the R and D budgets and so they've continued making progress but um, if they keep doing that, you can just measure where are they now, how fast are they advancing before they get to the 28.7% limit. You can actually kind of say that Silicon PV only really has about five years left of technological innovation before it's stuck. Like what is it supposed to do, improve the lifespan? That doesn't mean anything. It's already 30 years anyway. Uh, is it supposed to reduce the price? No, that's meaningless because it's already $100 per kilowatt. Now I realize that you could still innovate solar by developing robots to install it on the developer side when you're turning it into a proud project. But on the manufacturing side there's really nothing you can do. Uh, except there's some little things like you can work to replace, um, silver paste with, uh, what was it, silver coated copper paste or pure copper metallization, that sort of thing, but even that is quite minor. Ah, uh, something like 25% of the cost of a solar panel before tariffs and, um, shipping costs and whatever else people put on them is just the glass. And the glass is an astonishingly commoditized product. If you really wanted to, you could probably. The glass people make two centuries ago would probably be just about usable. Uh, there's not much you can do there except just try and keep the electricity price low, which is a function of the government and the energy strategy, not the manufacturer. So if that's all terribly boring and stagnant, and I'm kind of regretting it because I used to enjoy writing about that, uh, what does that leave you with? In fact, what does it leave all of these leading solar manufacturers with Perovskite? They're, uh, all starting to invest in perovskite. Whether it's Jinko or Trina or GCL technologies, all the biggest and Longhi. All the biggest solar manufacturers today are investing in Perovskite. I think, necessarily, not necessarily, um, with a plan to release products imminently because they may still have all kinds of problems, uh, on the practical side, uh, specifically durability. But it's just the main future avenue. They don't have much else to invest in and so they're doing it to make sure that they don't get caught out when or if one of their rivals figures it out. So that's my thoughts on that. Any, any questions, any comments?

Speaker B: Um, so you basically see the Perovsky as, so to say, like the next step to come after the solar technology innovation becomes stagnant, let's say within five years. If that's the case, shouldn't the peril of sky technology be invested like, heavily starting from now? Like, shouldn't we be seeing like, many countries trying to secure the supply chains and um, new technologies, anything related to perovskites? But, uh, if we think from that perspective, I'd say I don't see that much of a hype surrounding Perovsky, considering that it could be the future of the solar power. So I was wondering what your thoughts are.

Speaker A: There's always a new flow of startups, a few million dollars each. I think you're right. It has, um, hit up against this moving target from silicon. I mean, I remember five years ago people were, some people were really interested in Perovskites because they said things like, well, how are we going to ever have millions of tons of polysilicon production capacity that would cost tens of billions of dollars to build? It would have no profit margin and it would be terribly polluting or something. They probably said that because of the coal and then the Chinese just did it anyway because they don't care, you know, they just don't care about profit margins and capex costs, the things that Westerners worry about. So they just built it anyway. And, and so solar, Solar, I call it solar. I mean, silicon has prevent, presented this constant moving target. And any time that perovskite is supposed to be this insurgent technology, but any time they just spend another year trying to figure out how to make it not degrade under UV light, they spend a year trying to figure out some problem with it. Meanwhile, the silicon has got a tiny little bit more efficient, it's got a bit more cheap. The uh, overcapacity situations got worse. And so no one dares to ever ask for a profit margin. Like I said, uh, it will be the logical next step eventually. And I actually think it's inevitable on the scale of a decade or two decades. And also notice how a lot of the perovskite discourse is about we'll put it on top of silicon and we're not competing with silicon. And there's two types of perovskite. There's the one that avoids competing with silicon by putting it on top of a silicon module in a tandem arrangement. Oh, so it must be better. Or alternatively putting it in places where the silicon can't go because it's too heavy. Um, I mean, I just said. But even there, even there, you know, as I was talking about 30 minutes ago, even though silicon finds a way to be semi flexible, so it's very, it's kind of hard to break in. It's a bit like, it's a bit like these alternative battery chemistries. Uh, we as people writing about it, kind of want them to be a thing and the moment they start to be a thing, we'll know all about it. But in the meantime we're stuck talking about, oh yeah, the price is really low and the entire industry is using the same technology, which is being incrementally improved. And uh, yes, I have to find something completely different to talk about next week because I'm, I'm driving myself up the wall just thinking about it. Actually. I used to love talking about all these supply chain issues back when there were supply chain issues after the pandemic. But, uh, yes, I think it's much more about power market design and um, the costs of building the projects these days more so than the equipment.

Speaker B: Uh, I mean, but still, supply chains are, I think, worth to discuss, so to say. It's still like pretty much the basic of the entire industry. So, I mean, yeah, it's always worth it to talk about supply chains.

Speaker A: Oh, and just to round out the podcast with even more, uh, pessimism and frustration, I've seen a, ah, report and I wasn't actually able to find the original, uh, source. So take it with a grain of salt. Uh, salt. Maybe I'll get on to that next week. But according to some Chinese industry media, the profit margin in the EV manufacturing industry is below 4%. So, I mean, that's better than solar because I think solar's profit margin has been negative or zero for a while. Um, maybe I'm being a bit flippant when I say that, but. Yeah, it's just, it's across the board. And the, the new drama about renewable seems to be how, how do you design the grid to integrate them? Like the new drama doesn't is less about how do we scale up the manufacturing base, how do we get the materials. It's about how do we make the grid accommodate them? And, uh, should we build even nuclear because it's, it's baseload. How do we design, how do we accommodate, um, renewables in terms of energy storage depth and grid frequency, uh, modulation, that kind of thing. Regulation, I should say. Well, I think that just about covers everything.

Speaker B: Yeah.

Speaker A: So I'll see you next week. As ever, you can find us at Rethink Research Biz in the energy section and I'll try to be more upbeat next week. Uh, have a nice week.

Speaker B: Bye.