LED lighting is difficult to develop, new mode is low in operation

In the early days of high LED lighting market costs, EMC was once considered a tool to open up the market.

EMC, or ENERGY MANAGEMENT CONTRACT (EMC), is a new type of market-oriented energy-saving mechanism. Its essence is an energy-saving business method that pays the full cost of energy-saving projects with reduced energy costs. In short, with the EMC model, buyers can replace new energy-efficient devices at “zero cost” without paying any additional costs.

"The advantage of the EMC model is that it can minimize the acceptance threshold of customers." Yan Shirong, executive vice president of the Shenzhen LED Industry Association, told reporters that this is of great significance to the LED industry in the market development period. In this context, the EMC model was once expected to face more than 70% of the municipal LED lighting market.

However, according to the survey, under the constraints of many domestic factors, the EMC model in the LED lighting market is more "looking beautiful." Due to the government's financial system of “two lines of revenue and expenditure”, EMC lacks operability in the implementation process. In addition, the low electricity bills in some regions have also led to the EMC investment cycle is too long, LED lighting companies lack of enthusiasm.

"looking beautiful" EMC

"In theory, the EMC model can solve the buyer's funding problem very well, so it is more acceptable to the buyer." Zhang Yusheng, executive vice president of LED lighting company Huaying Group, told reporters that LED lighting is facing a replacement market. In the market expansion, the EMC model was once expected to be quite high.

According to Zhang Yusheng, there are usually two types of EMC cooperation: First, the annual savings in electricity bills are divided by the government and enterprises, and are returned year by year until the contracted amount is completed. Usually, under this model, the contract execution period is higher. The second is that for the annual electricity savings, the full amount is returned to the LED company until the contracted amount, "this mode is faster, and is more favored by LED companies."

This is only the basic architecture of the EMC model. In the actual implementation, there are often financial intermediaries such as banks involved. "EMC has a lot of pressure on corporate funds, and it is often difficult for enterprises to support their own funds." Zhang Yusheng said that in the EMC model, banks generally provide loan support for LED companies. "A mature EMC model, at least by enterprises, customers and banks." The tripartite is completed."

The involvement of financial leverage has enabled an EMC project to be launched at a low cost – this is undoubtedly a good medicine for the LED market. Previously, the high price cost of LED lighting products has become a direct obstacle to its marketing. For a time, the "energy" of the EMC model began to expand in the booming Chinese LED market. Our reporter learned that well-known enterprises in the domestic LED lighting industry, such as Qinshang Optoelectronics, Huaying Group, etc., have launched EMC projects.

In April this year, China’s first large-scale EMC alliance initiated by the Guangdong Green Industry Investment Fund settled in Shenzhen. The alliance brings together a number of upstream and downstream enterprises in the LED industry chain. In addition, a number of financial institutions, testing organizations, construction engineering companies, engineering design companies, tendering companies, law firms, and energy contract management services companies have joined.

Li Xuefeng, chairman of the Guangdong Green Industry Investment Fund, said that the “Green Industry Investment Fund” will provide support to the EMC Alliance. “Investing through funds, without increasing pressure on government finances, can get contracts and share contracts through alliances. To find the market."

Game between electricity tariff and scale

The "looking beautiful" EMC model is a lot of resistance in real-world execution.

"Not all projects are suitable for the EMC model." Zhang Yusheng analyzed the reporter. The EMC model is characterized by the more electricity savings, the shorter the project investment recovery cycle.

It depends on two factors. The first is the size of the project, that is, the number of lamps replaced by the project. The larger the number, the more electricity savings are saved. But to a certain extent, this is in contrast to the government's concept of energy conservation. “From the perspective of economy, some city governments’ street lighting often adopts the energy-saving method of 'spotlights'.” Li Zhijiang, chairman of Shenzhen Wanrun Technology, who visited the streetlight market, explained that especially in the secondary cities, After the zero crossing, the street lights are often lit up every other day.

"From a saving point of view, electricity bills will be saved by half. But from the perspective of EMC model implementation, it means that the return on investment will be doubled." Li Zhijiang said: "For LED companies, the more The savings are less suitable for the EMC model."

Secondly, the electricity tariff standard is another key variable of the EMC model. The more expensive the electricity bill is, the more electricity savings are saved, which is more conducive to the implementation of the EMC contract. However, in reality, the uneven electricity tariff standards have become another layer of resistance for the promotion of the EMC model.

“If the electricity bill is low in an area, the EMC model is very difficult to implement.” Zhang Yusheng gave the reporter an example. Huaying had visited many cities in Jiangsu Province, and the local average electricity bill was only about 0.5 yuan/kWh. “Compared with Shenzhen, etc. In the area of ​​about 0.9 yuan / kWh, if Jiangsu adopts the EMC model, its investment cycle should be doubled." After examining a number of streetlight projects in Jiangsu, Hua Tuo chose to give up.

In fact, from the perspective of electricity tariffs, the industrial LED replacement market has great potential because industrial electricity and electricity costs are much higher than civilian electricity. "We are also paying attention to the industrial lighting market, but the market is often limited in size for individual projects, which is still not conducive to EMC implementation." Zhang Yusheng admits that it is not easy to find a high-cost, large-scale LED replacement project.

Subject to "two lines of revenue and expenditure"

The electricity bill and scale are limited, and it is not all the factors that the EMC model has encountered in the LED industry.

It is understood that currently in the domestic LED lighting field, more than 70% of the market is municipal lighting projects. Although the State Council has repeatedly proposed to promote the development of energy-saving and emission-reduction industries such as LED, it is understood that EMC implementation is still struggling in the LED lighting replacement market dominated by the grassroots government.

The government's various departments treat the EMC model, which is a subtle attitude. A realistic problem is that the current financial system of the current “revenue and expenditure lines” of the government departments is specific to any government department, and its electricity expenses and exports are all in the financial sector.

"From the surface, the department that uses electricity does not spend money." An LED company official who participated in the government EMC project analyzed that this directly led to the specific government departments, and the power to replace the LED products for energy conservation and emission reduction was insufficient.

Not only that, but also the financial system of “two lines of revenue and expenditure”, another LED company official trying to participate in the EMC project told reporters that “the current government department’s financial system, the government department does not have independent payment of electricity fees. It is difficult to cash in the money saved by replacing new energy sources such as LEDs."

Feng Jun, chairman of Shenzhen Eite Lighting Co., Ltd. said in an interview that the original plan was to use the EMC model to open up the municipal engineering market. "But eventually it was forced to give up because it could not find the counterparty to pay the unit."

An LED executive who did not want to be named bluntly said that due to the long implementation cycle of the EMC project, the adjustment of government agencies and personnel will bring great uncertainties to the future implementation of EMC contracts. In this context, banks that act as financing intermediaries do not dare to lend easily.

"EMC's implementation in the LED lighting market, there is still a lack of successful samples in China." Many LED executives said that how the government unified and coordinate the implementation of EMC projects will be the key to the successful implementation of EMC projects.

In April 2008, Huaying Group signed a contract with Jiangxi Jingdezhen Municipal Government for the renovation of EMC street lamps with a contract value of RMB 50 million. It is the first EMC project in the field of LED street lamps in China. “The coordination and unified management of the local government played a big role in the execution of the contract,” Zhang Yusheng said.

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