Speaker 1: This is Tom Rowland's Reese and you're listening to Switched
Speaker 1: on the podcast brought to you by bn EF. In
Speaker 1: recent years, the world has been a wash, with cheap
Speaker 1: solar hammering the profits of PV manufacturers while at the
Speaker 1: same time opening up new export markets to developing nations
Speaker 1: seeking affordable energy sources. Demand growth for solar is still strong,
Speaker 1: with our global installation forecast for twenty twenty five set
Speaker 1: to reach six hundred and ninety five gigawatts, exceeding the
Speaker 1: five hundred and ninety nine gigawatts seen last year, but
Speaker 1: headwinds remain in some territories, especially in the US, where
Speaker 1: the Trump administration's tariffs have taken aim at the entire
Speaker 1: value chain for key parts originating from China and some
Speaker 1: Southeast Asian countries.
Speaker 2: So just how much.
Speaker 1: Longer can module prices continue to decline? What impact has
Speaker 1: large scale solar adoption had on energy markets, and could
Speaker 1: the US government's policy actually support the growth of a
Speaker 1: domestic PV manufacturing industry or harm it. Today I'm joined
Speaker 1: by BNF Solar specialist Jenny Chase as we discuss findings
Speaker 1: from her most recent PV market outlook, which b and
Speaker 1: EF clients can find at b and EF go on
Speaker 1: the Bloomberg terminal or on bnef dot com. All right,
Speaker 1: let's get to talking about the out look for SOLA
Speaker 1: with Jenny. So it is not very often that we
Speaker 1: have a bona fide celebrity on the podcast, but I
Speaker 1: said to my wife this morning that we are having
Speaker 1: Jenny as a guest on the podcast, and she said,
Speaker 1: who's Jenny? And I said, well, imagine if Sola was fashion,
Speaker 1: then maybe Jenny is Anna Wintle. And my wife said, well,
Speaker 1: does that mean she makes interns cry? And I said no,
Speaker 1: it's just that, you know, very highly respected opinion, but
Speaker 1: gives it.
Speaker 2: To you straight.
Speaker 1: And she said, oh, you mean Jenny Chaser. So that's
Speaker 1: why I mean that we have a bona fide celebrity.
Speaker 1: So everything there is to know about Sola is contained
Speaker 1: within the mind of Jenny. And so, Jenny, welcome to
Speaker 1: the show. Really glad to have you on.
Speaker 3: Hello Tom.
Speaker 1: So we were just talking actually before we started recording
Speaker 1: that today. You wanted to talk about, among other things,
Speaker 1: the global oversupply in solar.
Speaker 2: So tell us a little bit more. And I do
Speaker 2: have follow on questions around this, but yeah, what is it?
Speaker 2: Can you just describe to us the situation as you
Speaker 2: see it.
Speaker 4: So, solar manufacturing is a business in which it is
Speaker 4: very hard to make in the lock dawn. It is
Speaker 4: regularly the case that far more solar modules can be
Speaker 4: made in a year than are actually bought. And this
Speaker 4: is despite the fact that the volumes of solar modules
Speaker 4: being bought and installed are growing at really quite a
Speaker 4: rapid clip, and have been for the last twenty years.
Speaker 4: The thing is that the solar manufacturing industry consistently expands
Speaker 4: faster than demand. So even though demand is growing, you
Speaker 4: regularly get these periods of oversupply where all the manufacturers
Speaker 4: suffered negative profitability and quite a lot of them go bust.
Speaker 4: We have been in one of those phases for about
Speaker 4: a year now, and there's no sign of us coming
Speaker 4: out of it.
Speaker 1: I suppose the reason I have follow up questions is
Speaker 1: I sort of get it where you describe. I have
Speaker 1: this picture of, you know, two things that are growing
Speaker 1: really fast, the demand for solar and the supply of solar.
Speaker 1: And maybe if you're in the world of the supply
Speaker 1: of solar, it's kind of hard to judge the pace
Speaker 1: and so maybe the industry collectively sometimes overdoes it a
Speaker 1: little bit and needs to slow down, which is kind
Speaker 1: of how you're describing it.
Speaker 2: I suppose.
Speaker 1: The question I have is is I don't remember a
Speaker 1: time where you have ever said there's undersupply of solar.
Speaker 1: I you know, you're saying that the market's going through
Speaker 1: a really tough time, But I feel like whenever I
Speaker 1: talked about solo, you're saying them.
Speaker 2: Maybe I have a short memory, so it's both.
Speaker 4: Now you're pretty much right. I mean, so in twenty
Speaker 4: twenty two, demand actually group quite quickly, and prices the
Speaker 4: solar model actually rose for a little while. So there
Speaker 4: are periods where solar manufacturers can make fairly nice profits.
Speaker 4: They just tend to be quite short. And what tends
Speaker 4: to happen then is that they build new factories using
Speaker 4: the latest technology, and when they built the factories use
Speaker 4: the latest technology, the factories that are three years old,
Speaker 4: and how obsolete.
Speaker 1: So a question I have here, I mean, this is
Speaker 1: kind of almost like everything I've ever wanted to ask
Speaker 1: Jenny about some of these dynamics.
Speaker 2: Is why are people building these factories? Then?
Speaker 1: I mean, given what you're saying, why would anyone in
Speaker 1: their right mind be investing in solar manufacturing.
Speaker 4: Where you got me there, tom So, I think the
Speaker 4: dynamic here is that if you're a solar manufacturer, you
Speaker 4: always have a choice. You can expand you can build
Speaker 4: a new factory using the latest technology, so making the
Speaker 4: latest N type top con cels with the best efficiencies
Speaker 4: in the market, and you can survive another year. Or
Speaker 4: you can not do that. You can just run your
Speaker 4: current capacity and you will lose market share and eventually
Speaker 4: become obsolete. So you certainly have no choice but to
Speaker 4: shoot for the stars. And of course if you shoot
Speaker 4: for the stars, what happens to a great many of
Speaker 4: these companies is that they fail, they burn up, they
Speaker 4: go bankrupt. But there are always new investors willing to
Speaker 4: come in because everybody loves sold there so much.
Speaker 1: Is there an element because I've also been looking at
Speaker 1: this from you know, the perspective of some of the
Speaker 1: US efforts over the years to cultivate its own solar
Speaker 1: manufacturing business. And I remember saying on actually the first
Speaker 1: time I ever was a host on this podcast, we
Speaker 1: had one of our US solar analysts who was talking about,
Speaker 1: you know, the use of tariffs and incentives, and this
Speaker 1: predates Trump to stimulate manufacturing in the US and this
Speaker 1: kind of trying to fight it out with China, which
Speaker 1: is I mean, point number one is that seems like
Speaker 1: a battle that you're unlikely to win. But point number
Speaker 1: two I made was is this a battle you even
Speaker 1: want to win?
Speaker 2: It's like this.
Speaker 1: War over a little patch of desert where there is
Speaker 1: the least arable land ever, and so the only conclusion
Speaker 1: I could kind of come to was that some of
Speaker 1: this interest was from a more of a national security
Speaker 1: resilience point of view. Is that also a fact that
Speaker 1: it's encouraging or incentivizing some of this investment we see globally,
Speaker 1: particularly in China, is that it serves a strategic interest
Speaker 1: and is therefore being encouraged.
Speaker 3: Not in China.
Speaker 4: So around two thousand and eight, maybe even a bit
Speaker 4: before twenty and four to twenty ten or so, the
Speaker 4: Chinese federal government did support solar manufacturer. It particularly gave
Speaker 4: the provincial government a remit to give land and permits
Speaker 4: and suitable infrastructure to solar companies, and the big Chinese
Speaker 4: state banks were willing to back manufacturers. So yes, there
Speaker 4: was a period when for China solar manufacturing was strategically
Speaker 4: important and the central government was supporting it.
Speaker 3: That phase has long long ended.
Speaker 4: The Chinese solar industry is viciously capitalist, that is, dog
Speaker 4: eat dog, and the solar manufacturing industry is principally Chinese
Speaker 4: companies competing with one another. In fact, the Chinese PV
Speaker 4: Industry Association has tried to stop manufacturers selling at vices
Speaker 4: as low as the vices currently are, and it largely
Speaker 4: failed because it's very difficult to get five hundred companies
Speaker 4: to all sell at higher devices that they are naturally
Speaker 4: inclined to.
Speaker 1: So one of part of this cycle you've described is,
Speaker 1: you know, companies going bust and then also this idea
Speaker 1: of manufacturing capacity becoming obsolete. So when companies go bust,
Speaker 1: to other companies swoop in and buy their factories or
Speaker 1: is it by that stage those factories are worthless because
Speaker 1: they're obsolete. You know what happens there?
Speaker 4: They do often get picked up by other players, usually
Speaker 4: for quite small and absent money. And in China there
Speaker 4: is a dynamic where the local government will lost and
Speaker 4: back another company to take it over because it's a
Speaker 4: bit let embarrassed than just closing that entirely. The major
Speaker 4: Chinese module makers have also cut the number of employees
Speaker 4: by significant amounts in twenty twenty four, simply because they're
Speaker 4: reducing production and they're also increasing productivity per employee.
Speaker 1: I just find this whole phenomenon so interesting. It reminds
Speaker 1: me of that I don't remember the name of the
Speaker 1: guy that Greek legend about the guy who had to
Speaker 1: roll a stone up the hill, Cidyphus, Sisyphus. That's the
Speaker 1: one that's kind of like what the solar industry seems
Speaker 1: like to me. The way you describe it is you're
Speaker 1: either pushing the stone up the hill, which is hard work,
Speaker 1: or you're out of the game and back to the bottom.
Speaker 4: I think that's what makes that's what trying to make
Speaker 4: money and solar manufacturing is like. I mean, Cis of
Speaker 4: Firs was assigned that job as a punishment, and it
Speaker 4: wasn't really a job. There is a good side to this,
Speaker 4: which is the watch thank you. There is a good thing,
Speaker 4: which is is that worldwide, consumers are getting really cheap modules,
Speaker 4: and we see that even some quite poor countries like Pakistan,
Speaker 4: South Africa and Nigeria are starting to deploy large about
Speaker 4: sols now just because they are so cheap.
Speaker 2: Yeah, I mean obviously.
Speaker 1: I mean I sometimes think when people talk about over
Speaker 1: suppliers a problem like, well, whose problem is that? And
Speaker 1: clearly there is an upside to all of this, which
Speaker 1: is everywhere else benefits from this suffering that is happening
Speaker 1: in the Chinese industry. I still just trying to work
Speaker 1: out what's in it for Chinese solar manufacturers.
Speaker 2: Is there is there an upside for any of them
Speaker 2: or some of them.
Speaker 4: Will survive and go on to the next phase.
Speaker 3: I suppose.
Speaker 4: I don't know where the next phase will be, but
Speaker 4: sometimes they make money sometimes. I mean, what's the outside
Speaker 4: of your job, Tom? I think we just have to
Speaker 4: say sometimes these firms are doing what they do because
Speaker 4: it's their job.
Speaker 2: Fair enough.
Speaker 1: Fair enough, Let's go back to the topic around incredibly
Speaker 1: cheap solar everywhere in the world and what the knock
Speaker 1: on effects of that are. I remember when I joined
Speaker 1: n EF in two thousand and nine and you were
Speaker 1: still in London. I was still in London, and you
Speaker 1: were describing to me this Moore's law type decline in
Speaker 1: solar prices, and I remember thinking like, wow, that's going
Speaker 1: to completely change the world. It's like, so awesome, I
Speaker 1: want to be in the solar team. And I suppose
Speaker 1: now we're living in that world, that that sort of
Speaker 1: trend we were seeing promised of incredibly cheap solar everywhere.
Speaker 2: So can you.
Speaker 1: Describe a little bit about you know, what you're seeing
Speaker 1: and how that's changing the game generally?
Speaker 4: Yeah, So you call it Moore's law. Then Moore's law
Speaker 4: is just a special case of what we normally call
Speaker 4: the experienced curve. And the basics of the experience curve
Speaker 4: is every time the human race doubles its cumulative production
Speaker 4: of something, and it's a manufactured commodity like solar modules,
Speaker 4: like Brits, like semiconductor chips, we reduce the cost per
Speaker 4: unit by a fairly fixed amount, and you can calculate
Speaker 4: what that percentage is. Then it's usually around twenty percent
Speaker 4: now for solar modules, calculate We can calculate this back
Speaker 4: in nineteen seventy six. The trouble is, it depends wildly
Speaker 4: on your assumption about inflation over that period. How you
Speaker 4: normalize it, And right now the answer makes no sense
Speaker 4: because the experienced curve says that solar models should be
Speaker 4: significantly more offensive than they are, and they should be
Speaker 4: slightly more expensive than they are, but if everyone was
Speaker 4: making money in the value chain, but probably not that much.
Speaker 4: So right now we're kind of looking at the experienced
Speaker 4: curves suspiciously and saying, we'll see what happens when we
Speaker 4: get a few more data points. But yes, right now
Speaker 4: you can buy a solar module for nine then for
Speaker 4: what in normal markets? So normal markets mean not the
Speaker 4: US and not India either. This means that solar models
Speaker 4: are so cheap that they're basically cheaper than fences. You know,
Speaker 4: if you want to build a fence around your guards
Speaker 4: in US up or China or most of the world
Speaker 4: of that, you can use solar modules as fencing material,
Speaker 4: and even if you don't bother wiring them up, you'd
Speaker 4: probably save money versus buying some Liz Wold.
Speaker 1: This reminds me of in history, learning about hyperinflation in Viamar, Germany.
Speaker 1: I saw this picture that was someone using banknotes as
Speaker 1: wallpaper because that was cheaper than buying paper. So maybe
Speaker 1: people are going to have solar wallpaper inside, you know,
Speaker 1: completely pointless, but why not? So what consequences that having
Speaker 1: on the energy industry?
Speaker 2: That you're seeing.
Speaker 3: Well.
Speaker 4: The other thing is that it's not just cheap, there's
Speaker 4: also quite a lot of it. We estimate that five
Speaker 4: hundred and ninety nine gigawatts of solar modules were installed
Speaker 4: in twenty twenty four, and about six hundred and ninety
Speaker 4: five gigawatts would be installed this year in twenty twenty five.
Speaker 4: And just for contexts, the entire global power system, all
Speaker 4: the fossil field and everything, is approximately ten terra watts
Speaker 4: at the start of this year. So if we're adding
Speaker 4: like zero point seven terra watts a year to a
Speaker 4: ten terra wats system is quite a lot. And of
Speaker 4: course it's not evenly distributed. So what what's happening is
Speaker 4: that when the sun's out power is very readily available,
Speaker 4: it's very cheap, and in some cases there's actually more
Speaker 4: solar power being generated than total demand, which causes problems.
Speaker 4: I was just reading on the Solar News this morning
Speaker 4: that in Cyprus, which is obviously a quite a tiny
Speaker 4: part of the world and has now had quite a
Speaker 4: lot of solar, fifty eight percent of the renewables generated
Speaker 4: in the first five months of this year have been curtailed.
Speaker 4: That is thrown away because the grid can't take them.
Speaker 1: Wow, that is the highest curtailment numbers I've ever heard,
Speaker 1: I know, right.
Speaker 4: I mean this time of year in northern Northern Hemisphere
Speaker 4: you always get high solar catailment because it's it's sunny.
Speaker 1: Particularly since it's over like you know, you're not just saying,
Speaker 1: oh and this hour fifty eight percent with ktail, you're
Speaker 1: talking over a whole month. It's over five months.
Speaker 4: Yeah, so last year in total, twenty nine percent was katail.
Speaker 4: But that, I mean that's like economically a disaster.
Speaker 2: Well, not if you're an electricity cons well.
Speaker 4: I mean, first of all, those results are not being
Speaker 4: fed directly to electricity consumers.
Speaker 3: But yes, in sery, you're if you could use that.
Speaker 4: Electricity that would otherwise be wasted, it would not be
Speaker 4: a problem. That is not easy to do though, because
Speaker 4: it's all being generated at the same time.
Speaker 1: I mean, I look at power markets, So this is
Speaker 1: something I also think about a lot, is the disruptive
Speaker 1: effect of solar and how batteries can manage that. But
Speaker 1: I just want to step back to look at the
Speaker 1: big picture. It seems like there's this wave starting, you know,
Speaker 1: with upstream solar and those cost declines, and you know,
Speaker 1: the solar industry being a hard place to make money,
Speaker 1: and it then feeds into every subsequent step in the
Speaker 1: value chain and is now impacting power markets and power prices.
Speaker 1: And is this going to one day lead to a
Speaker 1: point in time where just how you're saying it's incredibly
Speaker 1: hard to make money manufacturing solar because it's just getting
Speaker 1: cheaper all the time, that we're also going to say
Speaker 1: it's incredibly hard to make money selling electricity because it
Speaker 1: essentially has no value because of all of this solar
Speaker 1: Do you.
Speaker 2: Think that that's where we're trending towards.
Speaker 4: Well, it's incredibly difficult to make money selling power in
Speaker 4: sunny hours already, that doesn't mean that there's no money
Speaker 4: in selling electricity. The obvious solution is batteries, but it's
Speaker 4: not actually trivial to solve all your solar time shifting
Speaker 4: problems with batteries.
Speaker 2: Why not in your opinion.
Speaker 4: So basically it's about utilization. If you're in a place
Speaker 4: where all the days are the same length and it's
Speaker 4: sunny every day, then you can charge your battery every
Speaker 4: day and discharge it every day, and you run that
Speaker 4: battery three hundred and sixty five times in a year, right, Yeah, However,
Speaker 4: most places are not like that. Most places have seasonality,
Speaker 4: they have variation in demand, and I mean, if it's
Speaker 4: northern Europe, we have winter, it is quite a long
Speaker 4: period where your solar panels don't generate much, and so
Speaker 4: your battery doesn't run every day. Your batteries it's empty
Speaker 4: all winter basically, and then it sits full all summer.
Speaker 2: I hear what you're saying.
Speaker 1: Are we setting an unrealistic bar here? It's a little
Speaker 1: bit where like when people who are skeptical about renewables say, oh,
Speaker 1: wind and solar aren't the solution, because you know, the
Speaker 1: sun isn't always shining, the wind isn't always blowing, and
Speaker 1: they're setting this bar of this thing is useless because
Speaker 1: you can't depend on it one hundred percent of the time,
Speaker 1: Whereas the reality is is, yes, it can get you,
Speaker 1: I don't know, depending on where you are, fifty to
Speaker 1: eighty percent of the I just pulled these numbers out
Speaker 1: out of thin air.
Speaker 4: Oh yeah, so it's not it's definitely not useless. I mean,
Speaker 4: it's already not useless, right. Twenty twenty two and twenty
Speaker 4: twenty three Europe was pretty glad of its solar because
Speaker 4: it meant we burnt less Russian gas.
Speaker 1: Yeah, and I guess I'm you know, I mean, I
Speaker 1: think I'm preaching to the choir here. I know that
Speaker 1: you don't think that solar is useless. I guess what
Speaker 1: I'm saying is, are we setting a like for anyone
Speaker 1: to expect that batteries would completely solve the problem of
Speaker 1: solar being at the wrong time that even in those
Speaker 1: northern climates you described, surely, up to a point, they're
Speaker 1: still very.
Speaker 4: Useful up to a point, yes, but bear by that
Speaker 4: the economics of those batteries gets very bad when you
Speaker 4: stop running them three hundred and sixty five times a
Speaker 4: year and you start running them past that. For example,
Speaker 4: I mean that instantly means that the costs can make
Speaker 4: what hour you're shifting doubles if you have the number
Speaker 4: of times it runs. And so that's why our new
Speaker 4: Energy Outlook modeling, which among the other scenarios we run,
Speaker 4: we have something called the net zero scenario, which is
Speaker 4: about how we totally get to net zero by twenty fifty.
Speaker 4: One of the things that that model doesn't actually rely
Speaker 4: that heavily on solar and store it. I think it
Speaker 4: ends up with about fifty percent solar in a literacy mix.
Speaker 4: That model really wants to build wind and the reason
Speaker 4: is that wind blows in the winter, which means that
Speaker 4: you can also charge your batteries in the winter.
Speaker 1: So kind of going back then to the fundamental question around,
Speaker 1: you know, we've got solar over capacity globally, and then
Speaker 1: it almost sounds like solar overbuild happening in certain places
Speaker 1: that you know you can't one hundred percent solved with batteries,
Speaker 1: and you know you need to bring in another time.
Speaker 4: I mean, at the moment, the levels we're at, we
Speaker 4: can solve that with batteries, and of course that's what
Speaker 4: people are doing. They're building lots of batteries. In fact,
Speaker 4: a quick calculation suggests that twenty percent of the utility
Speaker 4: scale PV built last year had a battery attached.
Speaker 1: I suppose I'm talking about like the example in Cypress.
Speaker 1: Is Cypress now at a stage where I suppose the
Speaker 1: question I was going to ask is why is anyone
Speaker 1: still building solar in Cypress?
Speaker 3: So I'm kind of I kind of hope they're not.
Speaker 4: I had a quick poke around on their Electricity operate
Speaker 4: a website and it looks like they still are, so.
Speaker 2: That rock up the hill as well via the sounds
Speaker 2: of things.
Speaker 4: Cyprus has something called a net billing where you can
Speaker 4: export power into the grid and be paid for it
Speaker 4: for your solar panels, and of course you're being paid
Speaker 4: for it, but that money has to come from somewhere
Speaker 4: and the money is not actually worse it's also not
Speaker 4: safe in so this is this is probably not a
Speaker 4: good policy. It's not sustainable and I don't think the
Speaker 4: Cypress Coop has removed it yet.
Speaker 1: So a lot of farmers in Cypress, I'm presuming, will
Speaker 1: have solar fencing at this point in time.
Speaker 3: Yeah, or solar roofs.
Speaker 4: And what they'll do next hopefully has put some batteries
Speaker 4: in and this will almost certainly alleviate a big part
Speaker 4: of the problem. But push into one hundred percent might
Speaker 4: be a bit difficult. I don't know the climate of
Speaker 4: Cyprus for some.
Speaker 1: No, but you would expect that you know ultimately that
Speaker 1: the market pull of batteries because it this represents a
Speaker 1: huge opportunity for batteries. I mean, my team looks at
Speaker 1: power market dynamics and one of the things I realized
Speaker 1: as we've modeled batteries and prices together, is the biggest
Speaker 1: opportunity for batteries is not the high prices in the
Speaker 1: summer when the sun goes down. It's the cheap prices
Speaker 1: when they can charge you know. I mean, obviously if
Speaker 1: you look at their daily revenues from the wholesale market,
Speaker 1: and obviously batteries make money in other ways. The most
Speaker 1: profitable seasons are not when power prices are highest. It's
Speaker 1: when power price is the lowest. So we're looking at Cyprus.
Speaker 1: That's a huge opportunity that will presumably rebalance itself at
Speaker 1: some point. And this is maybe a question, and you know,
Speaker 1: I just say this more speculatively because this goes beyond
Speaker 1: both of our own teams. I always wonder why we're
Speaker 1: not seeing more industries popping up that make use of
Speaker 1: insanely cheap or even negatively priced electricity that is available
Speaker 1: some of the time. You know, I don't know what
Speaker 1: this creative application is, but there has to be something
Speaker 1: someone can do with free energy.
Speaker 4: I presume, well, it's a capex pub isn't it, Because
Speaker 4: it is if.
Speaker 1: We're thinking in terms of all of the industrial applications
Speaker 1: we can think of. I'm just saying there must be
Speaker 1: some use for free energy that is only available some
Speaker 1: of the time.
Speaker 2: I'm just I'm not asking expect.
Speaker 4: This question to be very low capex, because yes, you
Speaker 4: can run a data center or something, but data centers
Speaker 4: don't run for three or four hours a.
Speaker 1: Day, right, So data centers aren't the answer. I guess
Speaker 1: what I'm saying is we have kind of scoped out
Speaker 1: what this has to look like. Has to be a
Speaker 1: low capex industry that can benefit from free energy. Maybe
Speaker 1: this industry doesn't yet exist. So listeners, especially those of
Speaker 1: you at the start of your careers, you can come
Speaker 1: up with something you can might get super rich.
Speaker 4: I mean, to make this electricity into heat, all you
Speaker 4: need is a big one with some resistance. Right, So
Speaker 4: if hardware is actually negative, you could probably make money
Speaker 4: out of just having a really big wire and forcing
Speaker 4: it down it. But you could also, for example, eat
Speaker 4: up a big pile of salt or a pile of
Speaker 4: water and store it for winter to run your district
Speaker 4: heat it. That's being tried in some of the Scandinavian countries.
Speaker 2: That makes sense.
Speaker 4: There's also power to gas, but that is also quite
Speaker 4: high topics for the futical companies.
Speaker 1: Yeah, and I also wonder if power to gas, from
Speaker 1: my understanding, does it have the flexibility to be ramping
Speaker 1: up and down all the time, which is a key
Speaker 1: parameter here, I mean.
Speaker 4: Potentially, Yes, A hydrogen team seems to think that you
Speaker 4: could have electoralizers that run for sort of four hours day,
Speaker 4: so you could make hard I mean, you can make hydrogen,
Speaker 4: but electoralizers are really expensive.
Speaker 1: Yeah, that it violates the capex parameter that you put
Speaker 1: in place exactly.
Speaker 4: But if you if you could make a really cheap,
Speaker 4: even quite low efficiency electoralizer and trickle generate hydrogen, that
Speaker 4: might be something work all right.
Speaker 1: Well, anyway, putting it out there for everyone who's again,
Speaker 1: particularly those of you who are entering into this space,
Speaker 1: very cheap electricity some of the time represents a huge
Speaker 1: opportunity for someone, so get creative. So I'm in the
Speaker 1: US right now, and the US has a relatively new
Speaker 1: government that has lots of ideas about the energy industry
Speaker 1: and global trade, and this is manifesting itself in potentially
Speaker 1: the rescinding of tax credits for various technologies, including solar.
Speaker 1: Also in tariffs on imports, particularly anything that has been
Speaker 1: touched by China. So, from your point of view of
Speaker 1: someone looking at solar globally, how much of a big
Speaker 1: deal is this? You know, seeing here it feels like
Speaker 1: the deglobalization of solar is that to.
Speaker 4: A beretrant tom or people who are in America. So
Speaker 4: the US market is about fifty two gigawats, the global
Speaker 4: market is six hundred and ninety five gigawats this year.
Speaker 4: China of that is three hund and sixty eighty. What's
Speaker 4: so whether the US buys or not is not of
Speaker 4: primary importance to people outside.
Speaker 2: The US, does it?
Speaker 1: Because my understanding of the situation prior to some of
Speaker 1: these tariff changes is that, I mean, there were already
Speaker 1: tariffs on Chinese solar.
Speaker 4: There were, So the US has had tariffs on Chinese
Speaker 4: solar imports since twenty twelve, and in consequence, most of
Speaker 4: the direct imports of solar components to the US don't
Speaker 4: come from China at all. They came from South Southeast Asia,
Speaker 4: four countries specifically, and recent rounds of tariffs, which were
Speaker 4: actually proposed under the previous US government, put tariffs on
Speaker 4: those four countries. So they're Malaysia, Cambodia, Thailand, and Vietnam,
Speaker 4: and that does push up probably the price of supply
Speaker 4: to the US market, but there are also more sweeping
Speaker 4: import tariffs on everything.
Speaker 1: I suppose this whole Southeast Asia as being a channel
Speaker 1: for solar to come into the US from China via
Speaker 1: Southeast Asia effectively, and these are Chinese companies operating in
Speaker 1: Southeast Asia. My understand was that this little kind of
Speaker 1: anomaly in the global industry was one of the few
Speaker 1: areas where there was actually a healthy profit margin for
Speaker 1: the solar manufacturers involved. So I suppose a question I
Speaker 1: have is if that sort of loophole is now being closed,
Speaker 1: does that have a significant impact on the solar industry.
Speaker 4: Well, a lot of these factory eat in Southeast Asia
Speaker 4: will disclose on the companies that will take lots on them,
Speaker 4: because it is true the US people love to pay
Speaker 4: for things, and so solar modules in the US cost
Speaker 4: about twenty seven US sense per what versus nine cents
Speaker 4: outside the US. So yes, even though the costs slightly
Speaker 4: higher to manufacturer in South East Asia, these were some
Speaker 4: of the more profitable businesses.
Speaker 1: So stepping back, so I hear your message, This doesn't
Speaker 1: really affect the global industry for solar that much.
Speaker 2: How do you see it affecting solar in the US.
Speaker 4: Well, I think it's going to hurt because, first of all,
Speaker 4: there were a bunch of manufacturers who were setting up
Speaker 4: sell factory EAT in the US because the Inflation and
Speaker 4: Reduction app had some very specific, quite generous incentives for
Speaker 4: manufacturing the US, which first of all could go away,
Speaker 4: and secondly could be affected by one possible provision in
Speaker 4: the latest One Big Beautiful Bill if it goes forward
Speaker 4: as currently anticipated, in that it looks as if components
Speaker 4: and materials from China might not be allowed for important
Speaker 4: into the USS. And depending on how extensively that is prosecuted,
Speaker 4: it may be quite difficult to make a solar module
Speaker 4: using nothing contract.
Speaker 1: Right, So, if the goal is to and I'm not
Speaker 1: saying that this is a realistic goal before you shoot
Speaker 1: it down, but let's just say, if the goal is
Speaker 1: to cultivate a US solar manufacturing industry, there is maybe
Speaker 1: a goldilocks zone of just the right amount of tariffing
Speaker 1: where you create a dependence on stuff manufactured in the US,
Speaker 1: but you still don't completely shut off that manufacturing having
Speaker 1: what it needs, and what you're saying is it looks
Speaker 1: like we might be going beyond that Goldilock zone at
Speaker 1: the moment.
Speaker 4: Absolutely, it's also so unpredictable. You know, if you're a
Speaker 4: company who's trying to decide whether to proceed with building
Speaker 4: a high tapics factory in the US, you want to
Speaker 4: be able to predict what the environment it's going to
Speaker 4: be like in two to three years time. And the
Speaker 4: country that's done that much better is India. India is
Speaker 4: much more successful, it's establishing a domestic manufacturing industry US
Speaker 4: just through being much more predictable.
Speaker 2: Got it.
Speaker 1: That's such an important point. And I think something that
Speaker 1: you know at bn EF, I know, since I joined,
Speaker 1: we've been saying policy consistency is key. Policy inconsistency just
Speaker 1: renders all policy ineffective unless the policy is to kill
Speaker 1: something off. And I suppose that's maybe a real danger
Speaker 1: for the US is the potential flip flopping means it's
Speaker 1: impossible to incentivize anything exactly.
Speaker 4: I mean, in some respects, the US has quite a
Speaker 4: predictable business environment, as the Investment Tax Credit was guaranteed
Speaker 4: for periods that frankly European product developers.
Speaker 3: Would love to have.
Speaker 4: But it well, the latest government has just thrown everything
Speaker 4: into the air, and who knows where the cars will
Speaker 4: come down.
Speaker 2: Well, we shall surely see.
Speaker 4: So Tom, I have a question for you. Since you've
Speaker 4: been tracking US power markets, we see California as world
Speaker 4: leading in terms of adoption. California has got what eleven
Speaker 4: gigawatsa batteries, and a grid with peak demand it's about
Speaker 4: fifty gigwatts that's got to be helping to integrate all this. Solda, right,
Speaker 4: what's going on in California?
Speaker 1: I mean, it's really interesting what you see, and some
Speaker 1: of this is more what we've seen in our modeling,
Speaker 1: and we gradually see it taking shape in the market.
Speaker 1: But you know, California is famous for its duck curve,
Speaker 1: the shape of the power price throughout the day. And
Speaker 1: I'm not going to be able to describe a duck
Speaker 1: over the you know, let's just say that the power
Speaker 1: price goes down, and then it goes up, and then
Speaker 1: it goes down again.
Speaker 2: It kind of peaks in the.
Speaker 1: Late afternoon, and that apparently looks like the head of
Speaker 1: a duck when you put it.
Speaker 2: On a truck.
Speaker 3: Because everyone's using air and after the sun goes down.
Speaker 2: Yeah, absolutely, so, yeah, that's the typical profile.
Speaker 1: And the other country in my world, because I also
Speaker 1: have the now the European Power Team reports to me,
Speaker 1: it's very similar in Spain, which is the one country
Speaker 1: in Europe where there's a decent amount of air conditioning.
Speaker 2: They have their own version of this.
Speaker 1: And the thing you see in markets like this as
Speaker 1: you add in more storage to go with your solar
Speaker 1: is the price throughout the day. It just becomes like binary.
Speaker 1: There's a high price period and a low price period.
Speaker 1: It's kind of flat because batteries like balance everything out
Speaker 1: even within those places if you're assuming they're cycling once
Speaker 1: a day, so you get a cheap period of the
Speaker 1: day which is when solar is generating, and then a
Speaker 1: more expensive period of the day when it's not. And
Speaker 1: that's because if you were to add more batteries to
Speaker 1: make it just an even price throughout the whole day,
Speaker 1: then batteries wouldn't make any money, so no one would
Speaker 1: add those batteries, So you're never going to have this
Speaker 1: situation where it's just a consistent price throughout the day.
Speaker 1: But it becomes just much more a two tone situation.
Speaker 2: The thing that's.
Speaker 1: Interesting, though, is even in our forecast, we still see
Speaker 1: days where there's not enough batteries to lap up all
Speaker 1: the solar, and so I mean, I suppose what you'll
Speaker 1: see is curtailment. So even with a lot of batteries,
Speaker 1: you still have and this this goes back to what
Speaker 1: I'm saying, You're still going to have those times where
Speaker 1: electricity is insane nee che.
Speaker 4: But also times when it's the same expensive simply not really.
Speaker 1: I suppose this is the point is that I mean,
Speaker 1: because let's say you've got enough batteries to soak up
Speaker 1: the majority of an entire day's worth of solar, and
Speaker 1: then you might have a period of a few hours
Speaker 1: where prices would be really high. Well, then that's going
Speaker 1: to be the hours where the majority of batteries is
Speaker 1: going to be discharging to push that price down to
Speaker 1: the level because they're always going to prioritize concentrating their
Speaker 1: discharge in those hours. So I suppose what I'm saying
Speaker 1: is batteries will make price dynamics a little bit less explosive.
Speaker 1: They'll be a bit more boring, but it's going to
Speaker 1: go from being all over the place and then maybe
Speaker 1: a really high peak in the afternoon, which is what
Speaker 1: you see in the sort of duck curve scenario to
Speaker 1: just like on time and off time.
Speaker 3: That also been the batteries cannibalized there.
Speaker 1: Great point, and yeah, and that's exactly right. It's like
Speaker 1: the total demand in a market sets a in a way,
Speaker 1: a ceiling on how much solar you can take before
Speaker 1: price cannibalization takes over. And then the total amount of
Speaker 1: solar in the market creates a ceiling for how much
Speaker 1: batteries the market can take. And so you know, this
Speaker 1: is what you know batteries when you see them build anywhere.
Speaker 1: It's like it follows on from solar. Solar creates the
Speaker 1: opportunity for those batteries, and ultimately the amount of solar
Speaker 1: you have in the market is the amount of opportunity
Speaker 1: there is for batteries. You now, what the ideal ratio
Speaker 1: between the two is is kind of depends on your assumptions.
Speaker 1: But that's kind of how I see it from what
Speaker 1: I'm seeing in markets. But yeah, the cannibalization of batteries
Speaker 1: is a thing as well.
Speaker 2: I suppose what you could say with.
Speaker 1: Batteries and that the price dynamics you see there is
Speaker 1: it almost traces all the way back to where we
Speaker 1: started the conversation. Solar is getting insanely cheap as manufacturers
Speaker 1: are cannibalizing their own revenues, and the knock on effect
Speaker 1: is that solar then is really cheap and getting built
Speaker 1: in a lot of markets and therefore cannibalizing its own revenues,
Speaker 1: which creates an opportunity for storage, which can pile in
Speaker 1: and in turn cannibalize its own revenues, which means that
Speaker 1: it's good in any of these spaces to either be
Speaker 1: early or to have been early, because it might be
Speaker 1: too late in some instances.
Speaker 2: And ultimately, I.
Speaker 1: Would say all of this is, if this gets passed
Speaker 1: down to consumer, a good thing, because more electricity will
Speaker 1: cost less. Jenny, thank you very much for joining us.
Speaker 1: Today's has been a really fascinating discussion.
Speaker 3: Thank you very much. Tom.
Speaker 1: Today's episode of Switched On was produced by Cam Gray
Speaker 1: with production assistance from Kamala Shelling. Bloomberg NEF is a
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