The Exchanges

Q those intermediate pieces? Let me ask you this, though. Why, if you look at that sort of historic barbell of, we had some polysilicon, we had a fair amount of module assembly, why are the ones that, why are those the ones that got domesticated first? And people would assume it's low labor, basically. Are those the things that require the least labor per watt, or is it something else?

A On, you know, on the poly side, uh, the predominant cost for polysilicon manufacturing is, is the cost of energy, electricity to input, and so, you know, you have, uh, you look at REC Silicon, it's in Washington State, they have some of the cheapest hydroelectricity in the world, right? Same with Michigan, a lot of nuclear, a lot of coal, a lot of natural gas, like very low, relatively low electricity prices, and that sort of drove and enabled a lot of poly, which is also supporting the semiconductor industry, right? So, you know, there's a matter of which solar-grade Poly manufacturing is critical to semiconductors. On the module side, you know, part of it was just that it's, uh, the economics can make sense. It's not necessarily labor. It's the fact that it's bulky manufacturing, shipping costs matter, and it's relatively quick and simple. Not to say that they're not really, uh, incredible factories. We've had module manufacturing in Georgia for the last eight years. Anytime anyone visits it, they're, they're blown away. It used to be, you know, it's like, oh, we don't need these factories here. They're, they're highly automated. They're not a lot of jobs, but Even a, you know, two gigawatt module assembly plan is going to be 800 people, uh, well-paid manufacturers, engineers, technicians, all sorts of stuff, and it's a really impressive, complicated process, but it's not, it…

AI assessment note: “On the module side... It's not necessarily labor. It's the fact that it's bulky”

Q but we should talk about the whole supply chain, because I think it is important to do so and to recognize what that looks like. So, In the context of crystal and silicon solar, which is basically the entire market X for solar, um, the supply chain is polysilicon wafer cell module. So can you walk me through how much domestic manufacturing we have of each of those four steps?

A Yes, so even, again, even before the IRA, we had a fair amount of module assembly, which was supported by trade policy, and we've had, you know, a historically decent amount of polysilicon for You know, two decades now. And, you know, at the moment, we have enough module capacity to supply U.S. demand. That's, you know, 40 to 50 gigawatts a year, and there's probably even more than that. On the poly side, we're probably 10 to 20 gigawatts. It's a moving target. Obviously, there's three big poly manufacturers in the U.S., or at least there have been historically. You know, one of one, one of which is REC silicon, which has switched to silane gas. You know, something that we, my company, Qcells, really participated in. But then there's Hemlock and there's Valker. Valker mostly gets their semi-grade, or solar-grade polysilicon from Germany. So it's really just a couple of players for probably 10 to 20 gigawatts or so of poly capacity. And then in the middle, cells and wafers, you know, you didn't, you had, up until the IRA, you had zero of those factories. None. You know, and in fact, wafers, pretty much 99% of them were coming from China. They largely shifted to Southeast Asia over the last five years as a result of another trade case. But you've seen investments in that sector, finally. There's more cell manufacturing than there is wafer manufacturing. At the moment, there's onl…

AI assessment note: “we have enough module capacity to supply U.S. demand. That's, you know, 40 to 50 gigawatts”

Q and it's resilient supply chain, and so on. And so if you're trying to stand up a supply chain from, from virtually nothing, particularly if we're talking wafers or cells, which you guys are doing at Qcells in the US, um, you don't benefit from that. So like, does that, is that a meaningful disadvantage? Just that You know, we don't have enough suppliers for basically everything that you need.

A It's definitely a challenge to reshoring. It's like one of the critical first steps of it, right? You know, I think we face two challenges when you're trying to build a factory, which is the first of its kind in the United States. One is that, you know, you have to find a contractor to build, say, a wafer factory that's never built a wafer factory before. And then you have to work with, you know, local permitting jurisdictions that have definitely never permitted a solar cell or wafer factory before. So, There's a lot of education work that has to get done to overcome that. It is overcomable. It's not something that we can't do. Um, you know, we build things that are new in the United States all the time. It's just a matter of, um, getting that infrastructure in place and doing the education work. The supply chains, yeah, you're buying a lot of things off global markets, and, you know, I, you're doing work to not just reshore your own part of the market, but other parts of the market. First Solar's been good at this in Ohio. They have, you know, they've got a local glass float manufacturer who they've, you know, supported and helped invest over the years, and You know, I think a good analog is the auto industry. You know, in the South in particular, where I live, you've had, since like the late eighties, you've had a bunch of global car manufacturers move down here. You've had …

AI assessment note: “It's definitely a challenge to reshoring. It's like one of the critical first steps”

Q this. Now there's this interesting question of, at least in the U.S., I think more so than in Europe, um, are we going to build up a fully domestic, mostly resilient supply chain? And we'll talk more about what that actually means, because it's not a, it's not one thing. But, um, Do you see that as having been driven predominantly by policy, or was there a push before that?

A You know, you had trade policy, which kept the industry alive for a long time. It didn't necessarily allow it to reach the scale that it is now. But, you know, I think there'd been a focus and an effort to, to reshore, you know, even prior to the Inflation Reduction Act being passed a couple years ago. But, you know, it was really that piece of legislation that created, that it made it economically Feasible to do it. And, you know, we're at a point now where, you know, if you're a buyer of solar panels in the United States, pretty much every panel you're going to get is at least domestically assembled. And so most of the market at the moment really thinks that this is a domestically reshored market. You know, it's when you get upstream to sales, waivers, polysilic, and that it becomes a, you know, still an open-ended question. But, you know, we've really hit that point where pretty much everything that gets deployed to a customer comes from somewhere in the United States.

AI assessment note: “it was really that piece of legislation that created, that it made it economically Feasible”

Q Have we seen a wave of fast followers? I mean, you mentioned there's Emlock, Bakker, et cetera, but, um, you know, 3.3 gigawatts compared to a 50 gigawatt market is still pretty small. Uh, versus, especially versus the 50 plus gigawatts of module assembly capacity, which, as you said, does already exist here. Yeah. So, are we seeing, like, where are we on the trend line?

A You know, we're, I mentioned, you know, the four phases of reshoring this. We're on that Part of where we have a lot of one thing. We have a lot of modules. We're still trying to reshore the other aspects of it, and it's part of, it's, it's a success story. It's a huge success story. We've had, you know, manufacturing as a whole has contracted in the United States over the last five years, except for clean energy manufacturing. You know, it's been, you know, you look at Rhodium had reports of, you know, how much investment came out in the, in the two years following the IRA is relative to before it, in this sector in particular, and it was five times easily. So, you've, you've got really strong success stories in this market. You've seen other manufacturers, sells, all sorts of things have come. The challenge has been to get to that third piece of self-sufficiency. We've, we've struggled with a couple of things. Um, one was how that policy has been implemented, both during the Biden administration and into the Trump administration. It was, you know, it took a long time to get guidance issued on things like domestic content and lots of these other pieces of it. And then there's, of course, been changes with OBBBA. But then the other was sort of some of, you know, these macro market conditions that we saw predominantly stemming from China, which was that, you know, over the last …

AI assessment note: “We're on that Part of where we have a lot of one thing.”

Q So I guess to, to wrap it up, what, what, If you had to pick, like, what is the hardest thing? What's the biggest choke point? If you're trying to scale up, um, this middle of the supply chain for solar in the US, ingots, wafers, cells, um, what are you finding to be the hardest thing?

A I still think it's just the general economics. You know, even when you do have a high-priced market like the U.S., we are still competing on a relatively global basis. One, because products still are imported from around the world, and then two, pretty much every manufacturer, whether they're headquartered in the U.S. or in China, has built a factory in the United States, too, right? So you have pretty high volumes of, you know, if you are selling modules in the U.S. with U.S.-made cells, you're competing against someone selling modules with imported cells and all sorts of things. You know, you really need, ah, customers that are going to give you assurances that they're going to be off-takers for 20 years that that factory will be around, or however long it is. And, you know, I think, I, I think, it's funny, because I, if, if Jenny Chase from Bloomberg were listening on this interview, she'd be like, 20 years for a module factory. Most of these factories get built, and then they are on, like, they're, the economics change after five years. Because, you know, this is an industry in which, you know, I, I usually say there's two rules of thumb. One, demand grows faster than people think it will. And two, prices fall faster than people think they will. I think we're talking about how the ladder has sort of changed over the last three or four years, but, um, you know, it's still ju…

AI assessment note: “I still think it's just the general economics.”

Q why we've got REC in Washington and so on. Um, for wafer cells and modules, what are the, like, walk me through the, the cost stack. How much of it is capex, labor, equipment, materials? Like, what should I be thinking about as the things that really drive it so that we can really understand the comparison between what it costs in China or other parts of Asia versus here?

A I'd say it's a mix of the capital cost to build the plants. You know, it's one of the things that is a, is a big reality is that it's just more expensive to build a structure here. If you look at the, like, you can search what it costs to build a factory for a couple gigawatts of cells in the United States versus what it's going to cost someone to do it in Vietnam. You know, just the construction cost alone is dramatically different, and that's whether, you know, that's as a result of, uh, not electricity prices, but Steel cry, steel prices, and contracted labor, and all sorts of, like, permitting and other things that are a bit different in other parts of the world. But otherwise, like, you know, the equipment you can buy on a global basis, and it's relatively commoditized, whether that's for a panel, glass, frames, junction boxes, all sorts of things. You might have to pay a tariff on some of those things. Um, but otherwise, like, those are the real, you know, on a, on a, on a generalized basis, the cost difference just becomes an, a, It's aggregation of factors. It's not any one particular thing. Um, but again, that's what 45 X is really built to address, is to try to make sure that any differences you might face is going to make sure that the U.S. can be competitive. And it's also, you know, not something that said it's going to do this forever. It was supposed to incentivi…

AI assessment note: “I'd say it's a mix of the capital cost to build the plants.”

Q with module assembly, which is where, as you said, it sort of was easiest to make the case that it was economic to produce domestically. Um, if you think of the closest you can come to, to an apples to apples comparison, um, How close to cost competitive are we? Module assembly in the U.S. for the U.S. market versus module assembly in China for the U.S. market, excluding tariffs?

A I'll put it in two ways. First, let's like, let's compare in the U.S. market in general, right, and whether or not solar, if it, even if it went more expensive, like, it's a reality that it costs more to manufacture things in the United States than it does in China or other parts of the world. I think one of the things we've learned in the last five years is that even when a product is made in the United States, and in solar, solar specifically, It is still cost competitive with other forms of technology. You look at Lazard's LCOE models and, and, and those cost charts, solar is always going to be right on the bottom, and that is even when you have U.S. manufactured goods into the mix, right? So it's a, it, I think in the U.S., we've proved that you can make it here and have it still be an appropriate technology. The question that you're asking is, how do you make it scale or be competitive on a global basis? That's what 45 X was designed to do, right? It was designed to overcome the cost differentials between making something in the U.S. and making it In, in China or other parts of Asia. And we're getting closer to it, but it's still something that requires scale, and it requires localized clustering of manufacturing investments. Because, you know, if you look at what things cost to make in China relative to anywhere else, a solar panel, you can often buy them on a global basi…

AI assessment note: “you can often buy them on a global basis for seven, eight, nine cents”

Q It's very good to see you, and I'm excited to have this conversation. Um, I want to start with a question that, I don't know, feels initially like it's sort of obvious, but I think it's worth walking through it anyway, which is you're a, both personally and professionally, a big proponent of building a domestic solar supply chain in the U.S. Why do you think that's important?

A You know, it's funny, because you and I, we worked together a long time ago, and when we did, it was conventional wisdom that, you You know, this, uh, supply chain for clean energy and lots of these industries in general hit, you know, largely focused offshore. And, you know, we went from a conversation of how do we make renewables as cheap as possible, as quickly as possible, to where we are now, which is, you know, solar is cheap, and now it's a matter of where are these supply chains local, where are they located, and how do we ensure that they are resilient and durable for the scale that we want to be deploying this stuff in the years ahead. So, um, You know, I think it's, it's remarkable that we're having this conversation now, given where we were years ago, but, you know, in my view, it, it's something that we've learned over 10 years of geopolitical shifts over a, over a pandemic that tested supply chains in every industry, um, but really showed that we want to have supply chains, uh, domestically as much as we can, in particular for critical sectors like energy.

AI assessment note: “how do we ensure that they are resilient and durable for the scale”