The Exchanges

Q them all back together and then seeing what that has done to the market. So I think we'll start with the, as you said, the mega tailwind in the market that was the Inflation Reduction Act. Maybe just start with the high level. Okay, what, what did the Inflation Reduction Act include in it for solar, and what are the remaining open questions that we're still trying to work out?

A Well, okay, so, uh, the, maybe at, at the highest level, the most important thing about, I would argue, about the IRA is that it goes across the value chain. So it provides, um, supports All the way down to the project developer, but all the way back up to the polysilicon producer. So each segment of the value chain has been shown some love, essentially, by the law. And exactly how each one of those pieces is going to be, um, rolled out, um, remains to be seen. Um, but we're getting details as we go. The, the other thing is just starting with the developer perspective. The developer, um, now can claim the production tax credit In addition to the investment tax credit, the investment tax credit is, was awarded on a CapEx basis at about 30% of the total CapEx. Now, projects can receive the benefit of the PTC as well, so for every kilowatt hour.

AI assessment note: “The developer, um, now can claim the production tax credit In addition to the investment tax credit”

Q U S right now, but it's also like a particularly weird time when like the market is being pulled by a bunch of different factors simultaneously. And so it's kind of hard to figure out what's actually going on. It, it, You're definitely closer to it than I am. Is that, does that feel true to you as well, or, or is it just me on the outside being confused?

A No, it is a lot. There's a lot going on, and there's a lot of different sort of cross currents and things to try to unpack, and hopefully we can try and go through some of them. Um, but yeah, it's a particularly, um, difficult, I'd say, not difficult, but, but, um, sort of slight, maybe slightly confusing time. Um, it's sort of everything, um, Everywhere, all at once. Um, we have the most important piece of, uh, legislation ever passed to support the solar industry that is being rolled out and implemented now with a lot of open questions around that. We have, uh, the, an ongoing long-term, to be clear, trade sort of dispute that's been going on between the U.S. and China, which is in an interesting sort of interregnum at the moment with some tariffs coming back. Um, and then we have, um, a lot of interesting dynamics in the global market that really go beyond policy, which is that the, um, the era of COVID and the tight supply chains and the elevated prices that it created, um, that's easing now. Um, and there's a lot of new capacity, uh, on the global market that is coming. And, uh, so those are really kind of the, at the highest level, I would say, but each one of those is a pretty interesting, um, Um, uh, you know, sub-story worth exploring, and I very well may have, you know, forgotten for number four or number five. I don't know, Shale, if you can think of any others that …

AI assessment note: “No, it is a lot. There's a lot going on, and there's a lot”

Q your 30% ITC, potentially plus 10% if you're an energy community, plus potentially 10% if you're using domestic equipment. So it means you get half of your project paid for. It was already, in many places, pretty lucrative to build utility-scale solar. So like, you know, I, what you're saying is the economics are not the problem anymore. The economics are good. Generally. And the problem is, can you connect?

A Yeah, I think that seems to be, that is going to be, I mean, we, when we have done this in the past and modeled build levels, I mean, so we, we have a core forecast, which is a topic to talk about, but we also run our models as to sort of economic, just purely economic build. If, if in a world in which you just dispatch whatever's cheapest, you know, the solar numbers would be, you know, 10 to 20 gigabyte 10 to 20 gigawatts higher per year of stuff that the, that our model sort of spits out. And that's where human beings have to get involved and say, well, okay, no, because we know there are hundreds of gigawatts of projects and, you know, in the queues right now that aren't getting permitted in, in the real world, that's going to be the thing that, you know, restrains the market going forward.

AI assessment note: “we know there are hundreds of gigawatts of projects and, you know, in the queues”

Q through the end of next year, unless Congress passes another bill and Biden doesn't veto it for some reason. And we got a supply chain crisis that seems to be alleviated. So it seems like it should be full steam ahead on this market right now. And like, just go, go, go again with a constraint being, can we connect this stuff to the grid? Is, am I misinterpreting it?

A I mean, I think it is. Um, you know, if you look at, um, you know, we've seen, you know, dozens of gigawatts of module, again, module capacity is being announced and then a much smaller subset of cell capacity that's being announced. In the U.S., and a lot of big names that are trying to, trying to get into the market. Definitely folks still looking for clarifications on different parts of the treasury guidance that's either come out or is due to come out on various things, and that's sort of understandable, but, um, but I mean, I have to say, you know, the questions we get from clients are just about, you know, are, are often fairly forward-looking about, like, you know, where, where, Should we build in the United States and things like that? And I think that's, you know, that's a very, those were not questions we were getting four or five years ago. Um, and so, yeah, no, I think it's, ultimately, I'm quite optimistic. I think there's all kinds of, there are all kinds of various cross currents, and I don't think it's by any means a slam dunk that, um, the U.S. will be the lowest cost, you know, will, you know, it will, it will fight to be competitive with Southeast Asian nations, um, Um, to, to produce this stuff. Even with these subsidies, I don't know that that's for certain that it's going to work. It's, it's absolutely contingent on private sector action to take advantage …

AI assessment note: “I mean, I think it is... ultimately, I'm quite optimistic.”

Q seen a lot of announcements of that. So is this, uh, is this a temporary problem? And like a couple of years from now, we're just going to be able to self supply all of the solar that we need and, and the, you know, trade dispute will no longer be relevant and the U S will have succeeded in domesticating its supply chain, or is that an unrealistic expectation?

A Uh, well, here's, Here's the dodge, which is, we'll see. Um, but I do think, um, I do think that the, I guess I'm quite, I'm quite positive about it. I mean, look, the, the, the, nobody can complain that there aren't sufficient supports out there to do solar manufacturing in the United States. That, if you're making that excuse now, like, ok, I mean, sorry, you're, this ain't, this is not, you know, 2020. Um, there are very generous supports. So it's really incumbent You know, fundamentally on the private sector to go out and take advantage of these. And these, you know, each company is going to have to make their own decisions about strategically, you know, what they think is best. And, you know, I did mention earlier the Enel announcement of a big, you know, fairly integrated solar manufacturing plant outside of Tulsa, Oklahoma, that they're going to do with a gigawatt of capacity. And effectively, you know, that looks a lot like a sort of view of like, hey, we want to just We want to take all these issues around tariffs off the table, and we want to have our own supply, and we know we're going to build a lot of projects, and we, and we're going to supply, you know, I mean, and they'll probably build a lot more than a gigawatt a year in the United States, but they know they want to supply some large chunk of that with domestically made stuff. So, anyway, I, I guess I'm fundam…

AI assessment note: “I guess I'm fundamentally pretty optimistic that I think that companies will recognize this”

Q Do you have an estimate just at the highest level? Like stack up all the, say, say you had to fully domestically produced utility kill solar project. Like what does that all stack? I was trying to do the math in my head of what that all stacks up to in terms of like dollars per watt covered by the incentives.

A Yeah. I, um, I can't do it. You know what I should have done? I, I have not converted the wafers and silicon ones to, um, dollars to cents per watt. Uh, obviously on the cells plus modules, you're talking 11 cents per watt. Um, you know, US module prices have been a good deal above the global price, and they've been somewhere up, you know, closer to 35, 40 cents. So, but that just alone, you're talking about, you know, A third to a quarter, you know, a quarter to a third of that, but obviously there's the stuff further up as well. Um, so yeah, it's pretty considerable, and to be clear, and this is maybe another part of our conversation, but prices for modules are dropping. Um, and so as that global price drops, well, these, these, um, supports are not pegged as a percentage of total cost. These are cents per watt, and so they're Um, their value could really rise, um, as the total, um, cost of a module, um, drops. Uh, of course, the prices that I just talked to you about dropping are global prices, not U.S. prices. Uh, and so, you know, the real question is, how much does this apply to a U.S.-made module?

AI assessment note: “I can't do it... obviously on the cells plus modules, you're talking 11 cents”

Q modules in China, for example, than the U S was that there was this mega supply chain. That had built up, and so every component was cheaper in addition to labor being cheaper. If we do indeed get tens of gigawatts of manufacturing capacity in the U.S., do we start to build up a supply chain that rivals some of those countries, and then that cost difference starts to erode?

A I mean, the short answer is we're gonna have to, um, and, you know, and I think that that would help, for sure, is to achieve those kinds of scale, that kind of scale. I think Look, I'm, I'm, I'm generally optimistic that I think it can be done because I think what has long been lacking from the U.S. market was any true sort of long-term optimism, like, that this was gonna, this was for real. It was gonna keep going. It was not contingent on an ITC on again, off again. It was not contingent on a bunch of, you know, whether the Arizona, whatever, you know, the Public Service Commission does this on net metering or whatever. And the signal has now been sent, I think, Um, for demand, longer term. And so I think, again, and this is where, you know, decision, where this is really about 100,000 of decisions by manufacturers about what they're going to do next, but I think that the paradigm, I think, is shifting, and there's a recognition that this is for real. Um, I think one other thing that's changed, again, this is part of the paradigm conversation, is just that, you know, like, we're now talking about Real scale of this market. And, you know, like, as you and I have been doing this for a long time, it was like, half the time when you would talk to someone, you had to convince them that, okay, there's going to be an energy transition, and then, like, a lot of money is going to get…

AI assessment note: “the short answer is we're gonna have to, um, and... that would help, for sure”