← Catalyst with Shayle Kann
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- [00:03]
Latitude Media Announcer
Latitude Media, covering the new frontiers of the energy transition.
- [00:08]
Shayle Khan
I'm Shayl Khan and this is Catalyst.
- [00:12]
Scott Moskowitz
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 lot of education work that has to get done to overcome that. It is overcomeable. It's not something that we can't do. You know, we build things that are new in the United States all the time. It's just a matter of getting that infrastructure in place and doing the education work.
- [00:44]
Shayle Khan
Coming up Building Solar in the US.
- [00:56]
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- [02:33]
Shayle Khan
I'm Shayl Khan. I lead the early stage venture strategy at Energy Impact Partners. Welcome. So something I've noticed recently, I think there are two prevailing types of sentiment about solar in the United States right now. I'll tip my hand that I think one of them is right and the other one is wrong. The wrong One is basically quite negative. People have noticed the policy winds shifting, the gutting of the ira, the slowing of federal permitting, and they get the impression that it's actually dark times for solar in the US but anyone actually in the market generally sees the opposite. The tax credits still exist, demand is booming, thanks to load growth, speed to power, et cetera, all the terms that we've used a million times on this podcast. And if you look closely, sentiment towards solar even within Magaverse has thawed substantially. So it's actually boom times for solar right now. That's on the demand side. But what about the supply side? Are we in for an industrialization, a domestication of solar manufacturing? What would it take to really do that? It's an interesting conversation, I think, one that isn't had enough. So for this one, I brought on an old and dear friend. Scott Moskowitz is the VP of Market Strategy and Public affairs at QCells, which is the largest domestic silicon solar manufacturer. Scott is also the chair of the board of sia, the Solar Energy Industries Association. So he wears the hat of somebody who is making more wafers and cells for solar than anyone else, and also somebody who is representing the industry in policy discussions. Scott and I also worked together on solar more than a decade ago at gtm, which was my previous company before eip. So it's good to be back talking solar again with Scott. Here he is. Scott, welcome.
- [04:18]
Scott Moskowitz
Hi. Thank you.
- [04:19]
Shayle Khan
It's very good to see you, and I'm excited to have this conversation. 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 both personally and professionally a big proponent of building a domestic solar supply chain in the US or why do you think that's important?
- [04:38]
Scott Moskowitz
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 know, this 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 I think it's remarkable that we're having this conversation now, given where we were years ago, but in my view it's something that We've learned over 10 years of geopolitical shifts over a pandemic that tested supply chains in every industry, but really showed that we want to have supply chains domestically as much as we can, in particular for critical sectors like energy.
- [05:32]
Shayle Khan
Yeah, the history of it in solar is interesting. So when I started with looking at solar way back in the day, a few years before you did, it was Germany, right. Germany was manufacturing most of the solar and then Germany basically lost the battle to China and China scaled and took over and drove costs down. And then China kind of expanded out as a result of tariffs mostly from China to like Southeast Asia. So then a lot of solar started getting manufactured in Southeast Asia, but it's still Chinese companies for the most part. And then now there's this interesting. As a result, I don't know of, of predominantly policy. You can tell me if there are other drivers that you've seen resulting in this. Now there's this interesting question of, at least in the U.S. i think more so than in Europe, 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 do you see that as having been driven predominantly by policy or, or was there a push before that?
- [06:33]
Scott Moskowitz
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 I think there had been a focus and an effort to reshore even prior to the Inflation Reduction act being passed a couple years ago. But it was really that piece of legislation that it made it economically feasible to do it. And we're at a point now where 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 sell zwefers polysilicon 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.
- [07:18]
Shayle Khan
Okay, so you hit on the next thing I want to talk about which is that people who aren't steeped in solar world think of the supply chain as being panels and, and the final step is module assembly. And I mean, you could go downstream of that I guess and put on frames and inverters and stuff. But the final step in solar modules is assembly and that as you said has been fairly domesticated. 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 crystalline silicon solar, which is basically the entire market X for solar, 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?
- [08:03]
Scott Moskowitz
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 two decades now. And you know, at the moment we have enough module capacity to supply US 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 US or at least there have been historically. One of which is rec silicon which is switched to silane gas. Something that my company Qcell's really participated in. But then there's hemlock and there's Waker Walker mostly gets their semi grade or solar grade policy looking from Germany. So it's really just a couple of players were probably 10 to 20 gigawatts or so of poly capacity. And then in the middle cells and wafers up until the IRA you had zero of those factories. None. 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 only two companies, QCells and Hemlock Corning that are making wafers or about to start making wafers in the United States. So there's more sell but again it's an ongoing effort of reshoring. I really think of it in there's probably four stages of this. There's where we were pre IRA of an industry that was kind of surviving. There's where we are now of an industry that has made a lot of investments as in sort of on a path to reshore. The third would be finally having some self sufficiency to serve the entire US market. And then aspirationally the fourth would be know being Competitive on a global basis and scaling for export. So you know, I think we're, you know, we're kind of at part two of hopefully a four step process of where the industry really builds itself back up.
- [09:53]
Shayle Khan
Yeah, I've always thought it's interesting that people didn't even appreciate that prior to the ira, prior to a bunch of investment in wafer and cell manufacturing in the US which there's still not that much wafer manufacturing as you said in particular. And there's more cell but not much wafer. A typical supply chain would be polysilicon. Solar grade polysilicon is made in the US or maybe in Germany. It's then shipped to China or increasingly in recent years to Southeast Asia where it has turned into wafers and cells, at which point it is shipped back to the United States to be assembled into modules. That was kind of like a very typical supply chain. And the question is, can we build 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 those the ones that got domesticated first? People would assume it's low labor basically. Are those the things that require the least labor per watt or is it something else
- [10:56]
Scott Moskowitz
on the polyside? The predominant cost for polysilicon manufacturing is the cost of energy, electricity to input. And so you have, you look at REC silicon, it's in Washington state, they have some of the cheapest hydroelectricity in the world. Same with Michigan. A lot of nuclear, a lot of coal, a lot of natural gas, relatively low electricity prices. And that drove and enabled a lot of poly, which is also supporting the semiconductor industry. There's a matter of which solar grade poly manufacturing is critical to semiconductors. On the module side, part of it was just that 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 incredible factories. We've had module manufacturing in Georgia for the last eight years. Anytime anyone visits it, they're blown away. It used to be it's like, oh, we don't need these factories here. They're highly automated, they're not a lot of jobs. But even a 2 gigawatt module assembly plant is going to be 800 people. Well paid manufacturers, engineers, technicians, all sorts of stuff. And it's a really impressive, complicated process, but it's not, it doesn't require the same amount of Capital investment, chemical infrastructure, lots of complicated localized type supply chains that you would have for, say, cells and wafers. So it was easier to do modules first.
- [12:15]
Shayle Khan
So that I guess gets to the next thing, which is, let's talk about cost competitiveness. We have incentives. I mean, it's hard to be apples to apples, right, in terms of total cost between the US and China in particular. Right? Because there's like all these hidden subsidies in China. But as you think about it, let's start 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. If you think of the closest you can come to, to an apples to apples comparison, how close to cost competitive are we? Module assembly in the US for the US market versus module assembly in China for the US market, excluding tariffs.
- [12:53]
Scott Moskowitz
I'll put it in two ways. First, let's compare in the US market in general and whether or not solar, even if it went more expensive, 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 solar specifically, it is still cost competitive with other forms of technology. You look at Lazard's LCOE models and those cost charts, solar is always going to be right on the bottom. And that is even when you have US manufactured goods into the mix. I think in the US 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 45X was designed to do. It was designed to overcome the cost differentials between making something in the US and making it in China or other parts of Asia. We're getting closer to it, but it's still something that requires scale and it requires localized clustering of manufacturing investments. Because 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 basis for 7, 8, 9 cents a watt.
- [14:03]
Shayle Khan
Right?
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Scott Moskowitz
And the reality is we're not quite there in the United states even with 45x, but when you have a slew of other policies involved, whether that's domestic content, whether that is trade policy, whether that's other types of mechanisms which drive demand for US manufactured stuff, again, it's going to be cheap relative to natural gas, and every Other form of energy.
- [14:23]
Antenna Group Announcer
Energy.
- [14:24]
Shayle Khan
You mentioned that in the context of polysilicon, the main cost is energy, which is why we've got REC in Washington and so on 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 is 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.
- [14:51]
Scott Moskowitz
I'd say it's a mix of the capital cost to build the plants. It's one of the things that is a big reality is it's just more expensive to build a structure here. If you look at the fact 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, just the construction cost alone is dramatically different. And that's whether that's as a result of not electricity prices but steel prices and contracted labor and all sorts of permitting and other things that are a bit different in other parts of the world. But otherwise 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, but otherwise those are the real on a generalized basis, the cost difference just becomes aggregation of factors. It's not any one particular thing. But again that's what 45x is really built to address is to try to make sure that any differences you might face is going to make sure that the US can be competitive. And it's also not something that said it's going to do this forever. It was supposed to incentivize investment, create some certainty of demand and then build enough scale. Because that's the other thing the US hasn't had. We've had a bunch of couple hundred megawatt plants here and there, but we're competing on a global basis for 5, 10, 20 gigawatt type plants, much, much larger facilities. So when you those economies of scale, all of those things become much, much smaller. So that's what we're focused on.
- [16:21]
Shayle Khan
You I think you mentioned like we need like a clustering of manufacturing. One other thing that I've heard over the years is that one of the advantages that China has had as it has scaled up the supply chain is just that there is an abundance there. There are multiple suppliers of everything. Whether it's Equipment or whether it's materials or whatever. And not only are there multiple suppliers, but they're in the same region and easy to access and shipping costs are low and you can switch 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 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.
- [17:09]
Scott Moskowitz
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 overcomeable. It's not something that we can't do. You know, we build things that new in the United States all the time. It's just a matter of 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're doing work to not just reshore your own part of the market, but other parts of the market. First Solar has been good at this. In Ohio they've got a local glass float manufacturer who they've supported and helped invest over the years. I think a good analog is the auto industry. In the south in particular, where I live, since the late 80s you've had a bunch of global car manufacturers move down here. You've had BMW in South Carolina, you have Honda, you have Kia, Hyundai, Volkswagen's up near Chattanooga. They have been building factories here for the last three decades or so. And in doing so they've created a lot of those clusters. So it's kind of one of those chicken or egg problems. And the chicken in this case is the factories. Right. The eggs are going to the new. All of the supply chain and all the other clustering things will come as a factor of there being demand for that product here. But you can't have, you know, one's not going to come without the other. So We've been saying that on the module side for a while. We've had that factory in Dalton, Georgia for eight years where it makes modules. But it was the first of its kind in the Southeast. And a lot of the stuff was coming from around the world. And now more of it is coming from the US as it's created that economy of scale and that demand.
- [18:58]
Shayle Khan
What was the calculus internally when you all made the decision to build vertically integrated to go wafer cell module? You were already, as you said, manufacturing modules, and a bunch of folks were doing that. But, but the, the rarer decision was the one to vertically integrate all the way up, up to wafers. So, like, walk me through that calculus.
- [19:18]
Scott Moskowitz
It was, I would say it was a function of the. The lessons learned from the pandemic. Right? Where not only. Well, two things, in fact, the pandemic and pandemic and trade issues. So on the trade side, you've had, you know, again, a dozen years of various trade cases, but then you also had the passage of the Uyghur Force Labor Prevention act, which really affected the supply and origin of polysilicon and all the things upstream of that coming from around the world. And for customers, it made them want to know. They learned very quickly. We were talking about module cells, wafers. People all of a sudden had to learn what quartzite was and metallurgical grid silicon and things that they'd never even thought of before and where their products came from. So for us, customers were saying that they wanted to know where every single piece of that solar panel came from. And they wanted as much of it domesticated to prevent any supply chain risk moving forward. They know where it comes from. They have a sense of what it's going to cost. They know it's going to be a good product. So for us, we really went about trying to localize everything to build a fully US supply chain. So we started with announcing the factory in Cartersville, which is 3.3 gigawatts of modules, ingots, modules all the way to ingot and wafer cells included. And we had also made an investment in REC Silicon in Washington State to restart start the poly plant that had been stranded there after they lost all of their wafer customers around the world. And that was a really challenging endeavor. We ended up that plan, as I mentioned, has shifted over to silane gas. But we've been working on some really strategic sourcing of polysilicon as well. But that was really the motivation for it. And it was the 45x incentives, domestic content incentives that really created the economic ability to make that type of investment.
- [21:06]
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- [23:05]
Shayle Khan
have we seen a wave of fast followers? I mean, you mentioned there's hemlock, Bakker, et cetera. But you know, 3.3 gigawatts compared to a 50 gigawatt market is still pretty small. Yeah, versus, especially versus the 50 plus gigawatts of module assembly capacity which as you said, does already exist here.
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Scott Moskowitz
Yeah.
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Shayle Khan
So are we seeing like where are we on the trend line?
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Scott Moskowitz
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 is contracted in the United States over the last five years, except for clean energy manufacturing. Manufacturing, you look at Rhodium had reports of how much investment came out in the two years following the IRA as relative to before it in this sector in particular, and it was five times easily. 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 struggled with a couple of things. One was how that policy has been implemented both during the Biden administration and into the Trump administration. 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 these macro market conditions that we saw predominantly stemming from China, which was that over the last five years in China the big piece of economic news was that their property sector crashed. And when that happened they really did compensate by essentially doubling down in export oriented manufacturing of solar batteries and electric vehicles. The same three markets that were really driving all of that investment that folks like Rhodium were tracking. And what that did was it really oversupplied the entire global market and it really had an impact on how much manufacturing investment actually came to be in the last three years. So I think we saw a huge amount of growth, but it didn't allow for a complete transition of reshored supply chains into the US So we're still looking for that next phase and trying to figure out what's going to drive those new investments that are needed to really hit self sufficiency.
- [25:25]
Shayle Khan
I'm curious how you think about. It's complicated. I have complicated feelings about this. But part of the results of how the US has tried to address the supply chain for solar, a combination of carrots and sticks basically to have domestic supply, which seems to be working to some extent. I mean certainly Qcells is a good example of it and there are others as well. So success story on the other side of the coin, you know, we pay 30 cents a watt for solar modules in the US or something like that and the global average price is probably 10 cents a watt. So I don't know, how do you, how do you reconcile your feelings about the fact that we are building a domestic supply chain but paying three times the cost of the rest of the world for solar.
- [26:08]
Scott Moskowitz
I think it's because we know that we're not at the end goal of this. The end goal is not to have that particular thing be the fact pattern forever. I think we're trying to get to a point where we have much more scale than we currently have. Companies like QCells that have made multiple investments in these supply chains. Companies like First Solar which are building basically the same modular type factory in various parts of the United States are focused on trying to get to that phase, but it just takes a little bit of time. And part of it is that I think we have learned that customers aren't going to voluntarily pay that 30 cents over 10. They don't want to be paying more. And it speaks to me to the importance of policy. You really need industrial strategy to say we're going to continue to invest in this market so that we can scale it and make sure it's economically competitive around the world. And that is still a work in progress because we've had carrots, we've had sticks on both counts. There has been back and forth on those types of policies. And I think that's one thing you need is you need some continuity and continued push to say this is a strategic sector that we're going to invest in. Again, I think the public sentiment is there that we want to reshore industries, specifically energy, but it's just going to take a little bit of time and a little bit more focus because of the way that these markets have sort of shaped up.
- [27:37]
Shayle Khan
Tell me if you agree with this or not. I think there's maybe an extent to which we sort of got lucky with the timing, which is we instituted the set of policies that has resulted in both a resurgence in manufacturing or maybe I guess an emergence manufacturing. We never really made wafers for sales in the US before anyway. So an emergence of manufacturing for solar in the US which resulted in higher prices than the rest of the world is seeing. But that has basically coincided with this period of unprecedented demand for new energy generation thanks to AI predominantly which has meant that the fact that solar PPA prices have gone up over the past couple of years, not down, which is a narrative violation for some people, but is true, has made that fact palatable. And we are still, you know, I mean we've been talking about the supply side, but on the demand side you guys are selling a lot of modules, right? And like that price is being borne by the market reasonably well. And in fact, I think that the outlook for solar demand in the US seems pretty rosy at the moment. So maybe we sort of lucked out
- [28:45]
Scott Moskowitz
with the timing a little bit. Would you attribute those rises in PPA prices specifically to component and supply chain type stuff or also financing costs or other like. To me it's, it's all specific. Yeah, it's not specific to any particular market. So I think we've, you know, as our prices have gone up, you know, some of which just tracks general inflation levels too, right?
- [29:04]
Shayle Khan
Yes, it's a bunch of things. Right. I didn't mean to imply that the PPA prices are exclusively a result of module prices being high. That is a factor amongst a bunch of factors that have driven those prices up. Some of the other component of it is like a supply demand thing. You just can't charge more for PPAs because there is such a demand for power that you can get quickly, which solar happens to be.
- [29:28]
Scott Moskowitz
Yeah, right. No, we should, I want to talk a lot more about that just because the, you know, goodness gracious. The politics in general of the energy industry have changed like crazy over the last three months and they've changed twice. First with, you know, you know, we saw in the, in all of the elections back in November and December the impact of electricity prices in data centers, you know, and what that has done to essentially local elections everywhere. It's the only thing that anyone is talking about. It's one of the top topics in every statehouse in America at the moment. And then second with the war in Iran which has led, you know, creates another energy type situation which we saw after Russia had invaded Ukraine several years ago in which electricity prices went up around the world as a result of gas, you know, changes in supply to natural gas and in Europe specifically that led to a wave of clean energy.
- [30:16]
Shayle Khan
Right.
- [30:16]
Scott Moskowitz
And I think, you know, that plus where we are with data centers in the US the reality is again, even at 30 cents a watt and if we're made in the US we are still the cheapest and fastest thing to deploy in pretty much every scenario. So there's a lot going for the market from that perspective. But the other thing too, to your earlier point of why do we even want this stuff in the US to begin with? There's really, I think back to one of the things, an example I used to give a lot was that, you know, Irena tracks jobs in the energy and the solar industry in particular around the world. And you know, up until right now, China's installing like 5 to 10 times the amount of solar that the US is, but historically it was usually like 2 times the amount in any given year. But if you looked at the jobs figures for how much the US had versus how much China had, it was like 250,000 jobs in the US and 3 million in China. So they were installing twice as much, but they had 10 times as many jobs. And it was really a matter of how much of the supply chain that they had. And to me that's always been one of the core reasons to talk about independent of supply chain certainty and national security and all these other aspects of it. When you have a manufacturing basis, you have political power, you have lots and lots of durable, really good jobs that you want to support. And that's one of the reasons I think China went from installing two times as much solar as the US to 10 times is because they had a big domestic industry to support. And then the second aspect on the next wave of that is solar has become so cheap we're seeing it all over the world. There's all these articles in the last couple of months about solar being installed in Cuba and South Africa and all these places where they have their own energy crisis. Yeah. And that is because of unbelievably large availability of low cost solar panels, which for them predominantly comes from China. But for us, I think it's a huge opportunity that we ultimately want to be supplying those things too, particularly with, with Europe and Mexico and allied government, all these countries around the world that the US does a lot of business with. I think the same way we want to be a player in LNG and all these other energy markets, we want to be a player in this market. So I think that's where we have a really strong drive to narrow that gap of that 10 to 30 cents that you've identified. It's the objective to really get to that point where long term we're competing on a global market.
- [32:35]
Shayle Khan
Yeah. And as bullish as I am on solar demand in the US and bullish on solar manufacturing growth in the US as well, I don't want to let the solar industry off the hook on this. I was just thinking, I, I think this is back when you and I worked together. I wrote this paper with Varun Sivaram in 2015 or something like that. Who's in that? Varun has been on the pod, is now the CEO of Emerald AI. But we wrote this paper for, I don't know, nature energy or something like that that was titled Solar needs a More Ambitious Cost Target. And I forget about this paper for like years. At a time and then I get some email of somebody citing it every couple of years. But at that time we were saying, you know, the, this was on a capex basis for systems. Not, not lcoe, but you know, the, the goal at the time had been the DOE had this program called the Sunshot program. And the stated goal of the Sunshot program was to get to a dollar a watt fully installed solar. And the point of the paper was to say that's not ambitious enough. Right. We need, we need like a far lower cost than that ultimately, especially given that we're going to deploy a lot of solar and in the places that it's at high penetration, it's going to have decreasing value on its own. So we said, I don't remember exactly something like 25 cents a watt fully installed or something like that should be the target. I still feel that way. Right. Like, I think it is. We have an amazing solar industry and it's coming an incredibly long way in the decade since then. But I still think that we can't like rest on our laurels. I'm concerned about the fact that prices have gone up over the past two years. There was a lot of sort of adjacent industries banking on like the marginal price of electricity going to zero ultimately. And really thinking of that as being like a solar price is going to go to zero, zero over time. And the fact that we are directionally headed in the opposite direction, or at least have been recently, is not good news to me. So like, I'm very excited about solar and super optimistic, but I like want to hold the industry's feet to the fire and say we still need a more ambitious cost target.
- [34:29]
Scott Moskowitz
It's fine. I remember that paper. It was the solar will eat itself type argument. Eventually.
- [34:34]
Shayle Khan
Yeah, it was that. Right. As a result of solar eating itself, we are going to need solar to be a lot cheaper.
- [34:40]
Scott Moskowitz
Yeah. And it's funny, it makes me think I put solar panels on my roof last summer while the tax credits were still here. And you know, the price of the panels relative to the overall installation is still so small. And it's like the same exact things that we were talking about 10 years ago, which is that, you know, the soft costs are still high. Right. And it's still, you know, installed.
- [35:01]
Shayle Khan
Like we really didn't solve that for residential. We, we've like addressed a little bit of it with utility scale. Not actually that much, but a little residential. It's crazy.
- [35:09]
Scott Moskowitz
And I was a customer who knew my installer because they were friends of mine and like I had no acquisition cost. Right. So it was still. There's still just the other components and the permitting and the applications. All sorts of things are still a work in progress, but on a manufacturing basis. Yeah, I agree. And we've seen that around the world where prices have gone from. I mean even in the US we got below a dollar while would it still cost? It probably still costs. It might even be a little bit more on a utility scale basis. Right now though, it's also not apples to apples because for the most part utility projects have batteries now when they did not used to in the past. So. So still thinking about it, but yeah, I think it's a good push and something we should be thinking hard about.
- [35:49]
Shayle Khan
All right, so I guess to wrap it up, if you had to pick what is the hardest thing, what's the biggest choke point? If you're trying to scale up this middle of the supply chain for Solar in the U.S. ingots, wafers, sells, what are you finding to be the hardest thing?
- [36:07]
Scott Moskowitz
I still think it's the general economics. Even when you do have a high priced market like the US 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 US or in China, has built a factory in the United States too.
- [36:26]
Shayle Khan
Right.
- [36:26]
Scott Moskowitz
So you have pretty high volumes of. If you are selling modules in the US with US made cells, you're competing against someone selling modules with imported cells and all sorts of things. So you really need 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 it's funny because 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 uneconomic. The economics change after five years. Because this is an industry in which 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 will. I think we're talking about how the latter has sort of changed over the last three or four years, but it's still just a really complicated market. And it just takes that again, real strong focus to say we're going to continue to reshore this market and value that because it's different than say other industries in which we are already highly competitive. Think aviation or pharmaceuticals or automotive or things like that. But on a global basis you're competing against heavy, heavy scale. In a market that's, even though we're still growing, is relatively mature on a manufacturing basis. Solar panel manufacturing, especially to the extent that it's clustered in China, these products are incredible. They last for a long time. They're cheap, they're, they are, we continue to have them get better, but they're really, really incredible products. So you know, you really have to understand that you're not just, you're, you're competing, but you don't have the luxury of saying, oh, we're kind of inventing this thing and we're going to get premiums off the bat. You really have to compete right away. So it just takes that long term commitment both from customers, from government and others to say that we're going to be really focused on this.
- [38:24]
Shayle Khan
There's also this like thing about the capital markets in the US that's different from China, which is you, as you said. Right. Like Jenny would tell us that these factories are going to become obsolete in five years anyway. And in, in China, the way it seems to work is like that's just kind of the cycle of how industry is built. Right. Like they scale up really fast, they end up with oversupply. There's a bunch of shakeout of all the companies. Like I remember back in the day when you and I were working together who were the biggest solar manufacturers in the world. It was like Yingli and Trina and Suntac and. Right, right. Like all these names that really don't exist anymore. But now there's a new wave and it's long and it's ja and I don't know who else you could tell me. But the point being like that's the, that's the natural cycle in China. It's harder to do that in the US like if you're going to, you know, raise capital for a factory that's supposed to last 20 years, your investors, be they public market investors or infrastructure investors or whoever, would like to see some degree of certainty for a good chunk of that 20 years. It's really hard to have that market where you just have this constant churn of capital investment.
- [39:28]
Scott Moskowitz
Yeah, that also explains the whack a mole that you see on these global trade fights that occur when you have factories that start in China, then they go to Taiwan, then Southeast Asia, then other parts of Southeast Asia. Now they're popping up all over the Middle east and Africa and all sorts of places with that cycle in mind. But I mean that's part of what the loan program's office and the Energy Dominance Council or whatever. That's, that's what DOE has been really effective at.
- [39:54]
Shayle Khan
Right.
- [39:54]
Scott Moskowitz
They've been trying to find industries like this that they can de risk and really give some step in in a place where those private capital markets might not otherwise do so.
- [40:03]
Shayle Khan
All right, Scott, this was super fun and it's great to see you.
- [40:06]
Scott Moskowitz
It's good to see you, too. This is fun. And by the way, before we close, for folks like me that used to work with shale, I was talking to someone recently about joking how there's a commonality of people talking about NPR speak and among the well, shale for like, among the small army of analysts that you hired and raised through your tutelage, we kind of joke that there's shale speak because so many of us learned our matters of persuasion and presentation styles from you. So it's kind of neat to have it come full circle and get to do this podcast with you.
- [40:40]
Shayle Khan
My wife would be horrified to hear that there's an army of people who speak like me, but I appreciate it.
- [40:46]
Scott Moskowitz
You're welcome.
- [40:46]
Shayle Khan
All right, Scott, thanks.
- [40:47]
Scott Moskowitz
All right. Thank you.
- [40:50]
Shayle Khan
Scott Moskowitz is the Vice President of Market Strategy and public affairs at QCells. He's also the chair of the board at SIA. This show is a production of Latitude Media. You can head over to latitudemedia.com for links to today's topics. Latitude is supported by Prelude Ventures. This episode was produced by Max Savage Levinson. Mixing in theme song by Sean Marquand. Stephen Lacy is our executive editor. I'm Sheil Khan, and this is Catalyst.