WEBVTT - Shifting Supply Chains for Batteries and Solar 0:00:00.560 --> 0:00:03.280 Hi, I'm Dana Perkins, and you're listening to Switch on 0:00:03.400 --> 0:00:06.080 the b n OF podcast. Now. If you've listened to 0:00:06.080 --> 0:00:08.320 this show in the past, you've likely been following the 0:00:08.360 --> 0:00:12.799 deployment and growth of clean energy technologies, might be solar 0:00:12.920 --> 0:00:16.520 or wind, maybe batteries or hydrogen. But one thing that 0:00:16.600 --> 0:00:18.760 we haven't talked about much here on the show are 0:00:18.800 --> 0:00:23.319 the highly globalized supply chains that underpinned these technologies. The 0:00:23.360 --> 0:00:26.920 COVID nineteen pandemic has exposed just how complex and at 0:00:26.960 --> 0:00:30.760 times vulnerable these supply chains can be, and some governments 0:00:30.800 --> 0:00:34.000 have started trying to address this by localizing their supply 0:00:34.080 --> 0:00:38.440 chains for clean energy. Recently, the United States passed the 0:00:38.479 --> 0:00:41.880 Inflation Reduction Act or i ra A, which includes near 0:00:42.040 --> 0:00:46.760 infinite manufacturing credits for what could spur huge investments in wind, 0:00:47.040 --> 0:00:51.680 batteries and solar photovoltaic. For its part, the EU has 0:00:51.720 --> 0:00:55.600 also started to accelerate its spending on battery and electrolyzer 0:00:55.680 --> 0:00:58.680 making in order to try and localize production of the 0:00:58.720 --> 0:01:01.840 clean energy infrastructure it will so desperately need to meet 0:01:01.880 --> 0:01:05.760 its climate goals, and questions still remain though, what is 0:01:05.840 --> 0:01:08.479 driving the shift and how might we go about this 0:01:08.959 --> 0:01:12.400 and at what price? Tag Also, what is this going 0:01:12.440 --> 0:01:16.280 to mean for the energy transition and net zero targets. 0:01:16.720 --> 0:01:20.480 To explore this topic, be NFF has recently started focusing 0:01:20.520 --> 0:01:24.800 more on trade and supply chains and this newly formed 0:01:24.800 --> 0:01:28.759 team has published an inaugural research note titled localizing Clean 0:01:28.880 --> 0:01:32.240 Energy Supply Chains at a Cost. I'll be speaking with 0:01:32.280 --> 0:01:34.520 the author of this note today. He's the head of 0:01:34.560 --> 0:01:37.120 Trade and Supply Chains at BENF and his name is 0:01:37.160 --> 0:01:40.560 Antoine Wagner Jones. All of our reports can be found 0:01:40.600 --> 0:01:43.360 at benof go on the Bloomberg terminal, on banf dot com, 0:01:43.480 --> 0:01:46.160 or via our mobile app. And as a reminder, b 0:01:46.319 --> 0:01:49.160 and EF does not provide investment or strategy advice, and 0:01:49.240 --> 0:01:51.960 we have a full disclaimer at the end of the show. 0:01:52.560 --> 0:02:03.279 But now let's speak with Antoine about clean energy supply chains. Nine. 0:02:03.320 --> 0:02:05.400 Thank you for joining us today. Thanks for having me Dana. 0:02:05.920 --> 0:02:09.120 So we are here to talk about global supply chains today. 0:02:09.160 --> 0:02:12.440 And as we delve into that, can you outline specifically 0:02:12.480 --> 0:02:15.400 within the clean energy supply chain, what industries are we 0:02:15.440 --> 0:02:18.320 talking about. We're talking about renewables and we're talking about 0:02:18.360 --> 0:02:22.560 storage and what that means is looking at technologies like solar, 0:02:22.760 --> 0:02:25.079 but also looking at everything you need to make a 0:02:25.160 --> 0:02:28.959 little mind battery, So that's going all the way upstream 0:02:29.040 --> 0:02:31.960 to the processing and refining of battery metals, all the 0:02:31.960 --> 0:02:34.840 way downstream to the finished sort of battery pack. And 0:02:34.880 --> 0:02:37.360 then in the piece of research that we've published, we've 0:02:37.400 --> 0:02:40.880 also looked at some parts of the wind value chain. 0:02:41.240 --> 0:02:44.000 We've also looked at some parts of the hydrogen value chain, 0:02:44.040 --> 0:02:47.920 focusing on electoralizers. But what we're generally looking at is 0:02:48.120 --> 0:02:52.440 technologies that will represent the vast bulk of investment that's 0:02:52.480 --> 0:02:58.160 needed to decarbonizing power, decarbonizing transport, and also to some 0:02:58.200 --> 0:03:01.240 extent industry for if we're to get to net zero. 0:03:01.600 --> 0:03:04.359 And I know we can't talk about every single part 0:03:04.400 --> 0:03:07.040 of the clean energy supply chains, so batteries and wind 0:03:07.200 --> 0:03:11.840 and various equipment manufacturing, but from a percentage standpoint, so 0:03:11.880 --> 0:03:15.920 you mentioned that over and sent currently in the photovoltaic 0:03:16.000 --> 0:03:19.120 space is manufactured in China. Is it roughly the same 0:03:19.240 --> 0:03:23.600 for batteries and wind or is it just or what's 0:03:23.639 --> 0:03:26.720 the range? The range it does vary quite a bit. 0:03:26.840 --> 0:03:29.920 There's not that larger share of the world's battery grade 0:03:30.000 --> 0:03:33.000 nickel is produced in China, but China, as I said above, 0:03:33.160 --> 0:03:35.680 eleven eleven different bits of those different value chains being 0:03:35.720 --> 0:03:38.720 above is free substantial and when you look at that average, 0:03:38.720 --> 0:03:42.600 it's over half overall and far higher than that for 0:03:42.720 --> 0:03:46.120 many sectors like ingots and wafers for solo, for example, 0:03:46.160 --> 0:03:49.560 which are above. So I think what's maybe useful is 0:03:49.600 --> 0:03:51.640 to take solo for example, and to walk through it. 0:03:51.720 --> 0:03:55.360 So he starts out and you've got polysilicon, which is 0:03:55.520 --> 0:03:58.480 you basically take sand and you make it into a 0:03:58.560 --> 0:04:00.840 very refined form of silica, and then you end up 0:04:00.840 --> 0:04:03.280 with these what are basically rocks, which then are then 0:04:03.400 --> 0:04:06.800 melted and made into ingots in a different facility, which 0:04:06.840 --> 0:04:09.320 are then sliced and made into waivers, often in an 0:04:09.360 --> 0:04:12.040 integrated facility with the in goot production. And then you 0:04:12.080 --> 0:04:16.400 then combine those and seal them into cells which are 0:04:16.440 --> 0:04:20.760 then strung together and assembled into modules. Broadly speaking, those 0:04:20.760 --> 0:04:23.960 different steps are done three different factories and different facilities, 0:04:24.320 --> 0:04:26.560 and when we think about supply chains, this is going 0:04:26.600 --> 0:04:28.520 to be something that's very relevant in this discussion is 0:04:28.560 --> 0:04:30.760 that they're very different in terms of the amount of 0:04:30.760 --> 0:04:35.280 economic value they produce. For polysilicon, for example, margins are 0:04:35.320 --> 0:04:39.120 far higher than module manufacturers, and in terms of job creation, 0:04:39.240 --> 0:04:41.240 you've got very different pictures for those different bits of 0:04:41.279 --> 0:04:44.080 the supply chains. So polysylican, for example, a new facility 0:04:44.200 --> 0:04:48.920 might only create fifty two hundred jobs, very automated low 0:04:49.040 --> 0:04:52.160 in terms of labor intensity, But then a module manufacturing 0:04:52.160 --> 0:04:55.840 facility might involved it's seven hundred jobs per gigawat, and 0:04:55.839 --> 0:04:57.960 that was per giggle watch for the polysylicon side of 0:04:57.960 --> 0:05:00.560 things too, So you've got this vastly front sort of 0:05:00.560 --> 0:05:03.039 picture in terms of economic value add of having a 0:05:03.120 --> 0:05:06.440 certain bit of the value chain located in your country 0:05:06.480 --> 0:05:08.880 if your government, as well as job creation, and those 0:05:08.880 --> 0:05:11.279 two things might not always run in parallel, but then 0:05:11.520 --> 0:05:14.520 so for example, so there's only a few factories making 0:05:14.520 --> 0:05:16.400 poly cynic in the world, most of them are located 0:05:16.400 --> 0:05:18.919 in China, many of them are located in specific parts 0:05:18.920 --> 0:05:20.920 of China and the West in a couple of provinces, 0:05:20.960 --> 0:05:23.680 And the picture from module manufacturing on the other end, 0:05:23.760 --> 0:05:26.640 on the downstream of the solar sector is far more dispersed, 0:05:26.880 --> 0:05:28.839 and there's a lot more of that happening in places 0:05:28.880 --> 0:05:32.120 like Southeast Asia, and some of it also happening in 0:05:32.600 --> 0:05:35.360 the global West, for example in India is something where 0:05:35.360 --> 0:05:38.200 we're seeing things picking up. In order to understand where 0:05:38.200 --> 0:05:40.800 we're going, it was useful to figure out how we 0:05:40.839 --> 0:05:46.719 got here. And solar manufacturing is definitely seen very steep 0:05:46.760 --> 0:05:49.760 declines and costs year on year, and I think that 0:05:49.839 --> 0:05:52.800 seems to be changing a bit at the current moment. 0:05:53.120 --> 0:05:55.719 But a lot of the story of what has happened 0:05:55.760 --> 0:05:59.560 within the solar industry has been that the finished modules 0:06:00.040 --> 0:06:03.640 have been getting cheaper and cheaper over time, and a 0:06:03.640 --> 0:06:07.119 lot of that has been due to manufacturing in China 0:06:07.160 --> 0:06:09.359 and some of these centralized places where they can really 0:06:09.560 --> 0:06:13.240 take advantage of, let's say, economies of scale and efficiencies 0:06:13.320 --> 0:06:17.200 in the manufacturing process. But how did that end up happening, 0:06:17.240 --> 0:06:20.719 How did it end up becoming that it was largely 0:06:20.760 --> 0:06:23.359 centered in this part of the world. So it's a 0:06:23.360 --> 0:06:26.120 story that's very different from each of those difference and 0:06:26.320 --> 0:06:29.880 there's general misunderstanding around China's position today and how it 0:06:29.960 --> 0:06:33.760 got there. Generally speaking, a lot of people highlight, for example, 0:06:34.000 --> 0:06:37.320 the fact that vast subsidies were provided to manufacturers. Now 0:06:37.360 --> 0:06:41.479 that was true for many different industries where investment was attracted, 0:06:41.480 --> 0:06:44.479 where foreign direct investment was something that China was trying 0:06:44.480 --> 0:06:47.520 to or the Chinese government was mindful of attracting. So 0:06:47.600 --> 0:06:51.080 that involved the provision of pretty cheap finance, that involved 0:06:51.360 --> 0:06:55.240 land at a low cost, that involved benefiting from a 0:06:55.279 --> 0:06:57.960 relatively cheap labor force at the time, if we're looking 0:06:58.000 --> 0:07:00.520 at over a decade ago, also the provision of low 0:07:00.560 --> 0:07:04.320 cost power. Those things all played a role on the 0:07:04.320 --> 0:07:07.440 economic side of things, and we also saw vast subsidies 0:07:07.560 --> 0:07:11.480 or indirectly or more direct forms of subsidization occurring, and 0:07:11.520 --> 0:07:14.120 that's something that happened. For example, for for the battery 0:07:14.160 --> 0:07:17.080 industry in the early days, there's it's pretty well recorded 0:07:17.160 --> 0:07:20.240 how low cost loans were afforded and given to manufacturers 0:07:20.240 --> 0:07:23.120 to attract them to set up shop in China. Now 0:07:23.280 --> 0:07:25.160 there's a lack of data as to how much that 0:07:25.280 --> 0:07:28.720 exactly entails in terms of overall funding. There's been various 0:07:28.720 --> 0:07:31.040 efforts made by the Department of Energy in the US 0:07:31.440 --> 0:07:34.080 looking at how much exactly was spent to get here. 0:07:34.120 --> 0:07:36.679 But one thing that's also worth mentioning is the fact 0:07:36.720 --> 0:07:40.480 that some of this was due to supply side subsidies 0:07:40.520 --> 0:07:43.480 and policies too, So there was a feed entire program 0:07:43.480 --> 0:07:45.840 that was brought in over a decade ago in China, 0:07:45.920 --> 0:07:49.040 which then led to an incredible boom in PV demand, 0:07:49.080 --> 0:07:52.080 which led, given that you've got a huge domestic market 0:07:52.120 --> 0:07:55.320 to those enabling those economies of scale that have become 0:07:55.400 --> 0:07:59.679 so important to having these huge integrated facilities and lowering costs. 0:08:00.040 --> 0:08:03.960 The same happened for batteries, for example, other very quick 0:08:04.080 --> 0:08:08.560 growth musicipalities, local governments seeking to build out their electric 0:08:08.600 --> 0:08:11.360 bus fleets for example, and that's something that again was 0:08:11.400 --> 0:08:15.720 a massive source of demand and lead to manufacturings being 0:08:15.720 --> 0:08:19.240 able to scale and make future investments and knowing that 0:08:19.240 --> 0:08:22.200 would pay off in the future. So this huge up 0:08:22.240 --> 0:08:24.680 to on and demand is very important. And the end 0:08:24.800 --> 0:08:27.480 picture what we have now is some of the most 0:08:27.480 --> 0:08:30.880 competitive companies in the world such as c A t 0:08:31.080 --> 0:08:34.760 L for example, is the world's largest battery manufacturer, that 0:08:34.800 --> 0:08:38.400 are actually very integrated and they have for activities or 0:08:38.480 --> 0:08:43.080 stakes or investments or direct operations sort of looking at 0:08:43.280 --> 0:08:48.000 across the value chain. So PV manufacturers, producers of for example, 0:08:48.080 --> 0:08:51.599 modules and cells might also operate in gotten way for factories, 0:08:52.160 --> 0:08:55.640 and the same holds true for producers of battery cathodes. 0:08:55.679 --> 0:08:59.680 They might also operate facilities making anodes or separators, and 0:08:59.760 --> 0:09:04.880 that can't be overstated as to how important that is 0:09:04.920 --> 0:09:07.400 today in terms of China's competitive is is less about 0:09:07.480 --> 0:09:10.040 low wages, for example, those have doubled over the last 0:09:10.080 --> 0:09:12.720 decade in China, and it's more about having these incredibly 0:09:13.040 --> 0:09:18.680 technologically sophisticated, integrated value chains that are very often focused 0:09:18.679 --> 0:09:22.280 on industrial hubs and provinces where you have this ecosystem 0:09:22.320 --> 0:09:25.680 of engineers know how an investment built up over a 0:09:25.720 --> 0:09:28.240 decade in many cases in one place, and that really 0:09:28.760 --> 0:09:32.000 was at the heart of China's competitiveness today. So why 0:09:32.000 --> 0:09:34.920 do you have reason to believe that supply chains are changing, 0:09:35.120 --> 0:09:38.120 that there is interest in other countries to bring this 0:09:38.200 --> 0:09:41.000 on board. Number of things have changed, and one of 0:09:41.040 --> 0:09:43.840 the big shifts that we've seen over the last couple 0:09:43.880 --> 0:09:47.720 of years is as there's been discussion localizing supply chains 0:09:47.720 --> 0:09:49.680 as a result of the COVID crisis, or at least 0:09:49.679 --> 0:09:53.240 diversifying things to make them more resilient. Generally speaking, what 0:09:53.280 --> 0:09:55.640 we've talked about here is that many of these different 0:09:55.640 --> 0:09:59.920 bits of clean energy manufacturing are incredibly concentrated in one 0:10:00.120 --> 0:10:05.000 part of the world, and regardless of your various inclinations 0:10:05.080 --> 0:10:08.960 you might have in the political spectrum or geopolitical concerns, 0:10:09.320 --> 0:10:14.440 that concentration is a vulnerability. So generally speaking, if, for example, 0:10:14.480 --> 0:10:16.960 as is the case today, one in seven Chinese solo 0:10:17.000 --> 0:10:20.800 panels are produced within one factory, then if that factory 0:10:20.800 --> 0:10:23.760 shuts down, that has some pretty dramatic repercussions. And there 0:10:23.760 --> 0:10:27.439 have been some issues around gas rationing at least previously, 0:10:27.480 --> 0:10:31.360 and then that causing some slowdown manufacturing at certain facilities 0:10:31.360 --> 0:10:35.280 which have elongated delivery timelines. Or also I believe that 0:10:35.360 --> 0:10:39.320 there was a good move of shipping being disrupted by 0:10:39.360 --> 0:10:42.360 the global movement of PPE, which then changed delivery timelines 0:10:42.400 --> 0:10:44.240 for a lot of different goods as well. Did this 0:10:44.320 --> 0:10:47.680 also affect the clean energy pipeline? Yes, of course, the 0:10:47.720 --> 0:10:50.640 increase in freight rates, the longer lead times, the build 0:10:50.720 --> 0:10:53.120 ups and pork congestion this will had a massive effect, 0:10:53.280 --> 0:10:55.240 as did other things. Are just very recently the last 0:10:55.280 --> 0:10:57.240 few months we've seen in the middle of this year, 0:10:57.240 --> 0:10:59.720 it was the summer of fire in Shinjiang Province in 0:10:59.800 --> 0:11:02.120 ch Know, which is a big pository of a lot 0:11:02.160 --> 0:11:05.199 of polysilicon production, which led to a factory being shut 0:11:05.240 --> 0:11:08.920 down that increased pressure on prices, and we also saw 0:11:09.040 --> 0:11:11.960 later in the year in August, poly cilicon prices reach 0:11:12.160 --> 0:11:15.400 on the spot market eleven year highs as a result 0:11:15.480 --> 0:11:18.040 of the drought that we saw in Stetran Province which 0:11:18.120 --> 0:11:22.959 led to extricity generations shortages. It's been something that's been 0:11:23.000 --> 0:11:26.600 really evident recently is that even outside of the sort 0:11:26.640 --> 0:11:30.680 of recurring concerns around lockdowns in Shanghai or various other 0:11:30.720 --> 0:11:34.800 COVID related or even war related supply chain issues, we've 0:11:34.840 --> 0:11:38.920 seen evidence of this gaping vulnerability at the heart of 0:11:38.960 --> 0:11:42.079 the world's keenergy supply chain recur and wear its head 0:11:42.080 --> 0:11:44.559 again and again. Now for a very short break, stay 0:11:44.600 --> 0:11:51.040 with us. So which country seemed to be making I 0:11:51.080 --> 0:11:55.000 guess the biggest steps towards bringing manufacturing more local. I've 0:11:55.040 --> 0:11:58.680 just talked about how the concentration of supply chains is 0:11:59.080 --> 0:12:02.079 of vulnerability, and that resiance is something that's being thought 0:12:02.080 --> 0:12:04.640 about by policymakers. There's another factor as well, which is 0:12:04.679 --> 0:12:08.040 the creation of jobs, and that's equally relevant when we 0:12:08.080 --> 0:12:10.320 look at a part of the world that's acting quite 0:12:10.320 --> 0:12:13.800 fast and quite decisively in terms of trying to reshore 0:12:13.880 --> 0:12:17.359 or at least onshore and localize that clean energy manufacturing. 0:12:17.600 --> 0:12:20.160 And that's the US. So the United States. In August, 0:12:20.280 --> 0:12:23.000 Joe Biden signed in the Inflation Reduction Acts, which is 0:12:23.040 --> 0:12:27.120 this massive historic bill that includes provisions on healthcare but 0:12:27.200 --> 0:12:30.200 also is the US is most significant piece of climate 0:12:30.280 --> 0:12:34.559 legislation ever to date. Pretty huge deal. And as part 0:12:34.600 --> 0:12:38.200 of that, what it includes is a sweeping array of 0:12:38.280 --> 0:12:40.679 tax credits which are the main sort of vector to 0:12:40.720 --> 0:12:43.840 which all of this subsidy spending is happening, which targets 0:12:43.840 --> 0:12:46.280 the deployment of a lot of that clean energy. But 0:12:46.360 --> 0:12:50.079 what it also includes is measures that are specifically intended 0:12:50.559 --> 0:12:54.720 to see the development of clean energy manufacturing in the 0:12:54.840 --> 0:12:58.920 US or at least a greater sort of diversification of 0:12:59.040 --> 0:13:03.520 manufacturing and among the US is perceived allies. So, for example, 0:13:03.600 --> 0:13:06.880 if an electric vehicle is being supported by these tax credits, 0:13:06.920 --> 0:13:10.440 are given, share of the battery materials and components that 0:13:10.480 --> 0:13:13.480 are in that electric vehicle have to be produced within 0:13:13.920 --> 0:13:17.439 North America, for example, or depending on what's being covered 0:13:17.679 --> 0:13:20.000 in countries with which United States has a free trade 0:13:20.040 --> 0:13:24.240 agreement for that electric vehicle to be subsidized, So access 0:13:24.280 --> 0:13:27.120 to those subsidies is depending on these local content provisions, 0:13:27.200 --> 0:13:31.640 and we're also seeing pretty generous and meaningful tax credits 0:13:31.679 --> 0:13:35.160 that are then on an output basis subsidizing manufacturing. So 0:13:35.880 --> 0:13:38.640 a manufacture of polysydic and can get I think it's 0:13:38.640 --> 0:13:41.839 ten thousand dollars per mega work of production. That rises 0:13:41.840 --> 0:13:45.840 to fifty thousand if you're producing wafers, for example, and 0:13:46.160 --> 0:13:50.080 that's a reasonably large chunk of the prices of those 0:13:50.080 --> 0:13:52.400 components that we've seen today, So they make a big difference, 0:13:52.760 --> 0:13:56.120 I think, really big deal as well is the fact 0:13:56.120 --> 0:13:59.319 that this is not only backed by pretty aggressive local 0:13:59.360 --> 0:14:04.240 content provisions, is that these subsidies aren't only to last 0:14:04.440 --> 0:14:07.600 over the next decade so through two is a sort 0:14:07.600 --> 0:14:09.959 of phase outdates for all of them across the board. 0:14:10.480 --> 0:14:13.720 Is that not only are they also spread out across sectors, 0:14:13.760 --> 0:14:16.440 whether it's different parts of the wind value chain, whether 0:14:16.440 --> 0:14:18.600 it's for factories in the battery value chain, whether or 0:14:18.600 --> 0:14:23.000 not is for critical minerals or the solar value chain. 0:14:23.840 --> 0:14:27.920 There's this incredible fact which is that the overall subsidy 0:14:27.920 --> 0:14:32.120 budget is infinite. So actually depending on how demand scales, 0:14:32.160 --> 0:14:34.360 if manufacturers are convinced that demand is going to grow 0:14:34.400 --> 0:14:36.400 in the US that it's worth setting up shop and 0:14:36.480 --> 0:14:39.400 building a factory in breaking ground and developing production lines. 0:14:40.240 --> 0:14:45.800 Then that the subsidy volume could be extremely substantial, and 0:14:46.000 --> 0:14:48.720 that's already sort of estimated by the US government reckons 0:14:48.720 --> 0:14:51.920 it's going to spend around billion on clean energy as 0:14:51.920 --> 0:14:55.800 a result of the i RA through two roughly, but 0:14:55.880 --> 0:14:58.320 that figure could swell and could be far higher depending 0:14:58.320 --> 0:15:01.120 on whether or not on the extent to which manufacturing 0:15:01.160 --> 0:15:04.200 takes off. So it's no exaggeration to say that this 0:15:04.240 --> 0:15:06.600 is a historic turning point, and we are already seeing 0:15:06.640 --> 0:15:11.000 investments made into building out manufacturing capacity across solo, across batteries. 0:15:11.480 --> 0:15:14.720 So given that the potential is you mentioned, to some 0:15:14.800 --> 0:15:17.920 extent limitless for certain parts of the industry, do you 0:15:18.000 --> 0:15:21.440 have a general idea on how much of the supply 0:15:21.520 --> 0:15:26.560 chain you think might shift between now and let's say 0:15:26.800 --> 0:15:29.560 right now, we're tracking investments and we're looking at what's 0:15:29.600 --> 0:15:34.480 happening in the battery space, for example, and it's quite substantial. 0:15:34.560 --> 0:15:39.040 We see announced investment in battery cell manufacturing capacity that's 0:15:39.040 --> 0:15:42.200 of the order of above eight hundred gigawa hours by 0:15:42.320 --> 0:15:46.320 twenty thirty and exceeds demands locally in the US by 0:15:46.360 --> 0:15:49.800 that date by over two hundred gigawa hours, So it's 0:15:49.800 --> 0:15:53.120 really substantial as a pipeline, and that involves roughly sort 0:15:53.120 --> 0:15:57.040 of eight billion dollars of funding investment to build out 0:15:57.040 --> 0:15:59.880 those manufacturing facilities. Things are moving pretty quickly on the 0:16:00.000 --> 0:16:02.080 and the what we've done to gauge the extent of 0:16:02.120 --> 0:16:04.480 which that finance and those subseas are meaningful is we've 0:16:04.560 --> 0:16:06.840 roughly estimated to how much it would cost to do 0:16:06.920 --> 0:16:10.280 everything locally to build up that factory capacity across the board. 0:16:10.360 --> 0:16:11.800 So how much will it cost to build all the 0:16:11.840 --> 0:16:16.800 factories you need to meet demand for solar, for batteries, 0:16:16.800 --> 0:16:20.400 for battery metals, for even electrolyzers you need to make 0:16:20.880 --> 0:16:23.880 low carbon hydrogen. So we estimated for the U S 0:16:23.920 --> 0:16:25.880 that would be about a hundred and thirteen billion by 0:16:25.960 --> 0:16:28.840 twenty thirty dollars, and then for the EU that would 0:16:28.840 --> 0:16:32.760 be a hundred billion dollars. So the sums involves are substantial, 0:16:32.960 --> 0:16:34.720 But actually when you compare that to the cost of 0:16:34.760 --> 0:16:38.000 deploying those technologies, what we see is that there's actually 0:16:38.080 --> 0:16:40.440 only a small fraction of the overall cost of the 0:16:40.520 --> 0:16:43.800 energy transition. So essentially it'll add cast, but then there 0:16:43.800 --> 0:16:46.520 are cost savings elsewhere. So generally, what are we going 0:16:46.560 --> 0:16:50.280 to see to the cost of the finished products and 0:16:50.360 --> 0:16:54.480 the people are actually procuring these finished modules or batteries. 0:16:54.840 --> 0:16:57.200 So it's not just about the upfund investment for factories 0:16:57.240 --> 0:16:59.440 like I mentioned, and that's a really useful bell weather 0:16:59.560 --> 0:17:01.800 sort of asure the extent to which the funding that 0:17:01.800 --> 0:17:05.919 we're seeing announces significant. It's also about a number of 0:17:05.920 --> 0:17:09.480 other things and the success of this transition and the 0:17:09.560 --> 0:17:13.720 success of this politicized sort of desire to build out 0:17:13.800 --> 0:17:16.600 local manufacturing in the US, for example, but it's something 0:17:16.640 --> 0:17:19.000 that's very much present in the U that's very much 0:17:19.000 --> 0:17:22.840 present in India, for example, is the fact that is 0:17:22.840 --> 0:17:26.440 whether or not production can be competitive. In the US, 0:17:26.520 --> 0:17:28.919 we've seen these local content rules which will fall to 0:17:29.000 --> 0:17:33.680 an extent basically artificially create a competitive environment for local production, 0:17:34.359 --> 0:17:38.240 but production is still more expensive in the US than elsewhere, 0:17:38.280 --> 0:17:40.920 and that really depends on sector. So you see pretty 0:17:40.960 --> 0:17:45.240 dramatic differences in the cost of producing electoralizers in China 0:17:45.480 --> 0:17:48.399 versus Europe or North America. So Chinese electoralizers are about 0:17:48.840 --> 0:17:53.199 five times cheaper because of low operational expenses, low running costs, 0:17:53.440 --> 0:17:56.800 also the provision of cheap equipment and equipment providers that 0:17:56.840 --> 0:17:59.320 are already where's already far more capacity in that area 0:17:59.320 --> 0:18:02.440 built out in China today and even more established sectors 0:18:02.520 --> 0:18:05.399 like there are significant volumes of policylicon being produced in 0:18:05.440 --> 0:18:07.800 Europe today, but the cost of that policylic and is 0:18:07.840 --> 0:18:11.119 far above the average costs that we're seeing globally, and 0:18:11.200 --> 0:18:14.920 especially in China's it's significantly lower. So those running costs 0:18:14.920 --> 0:18:17.600 are going to be higher if you're producing in the 0:18:17.640 --> 0:18:21.199 Global West generally speaking, or even in places like India 0:18:21.280 --> 0:18:23.400 as the sector scales, and you don't have those same 0:18:23.480 --> 0:18:26.920 integrated value chains, and that in of itself is a challenge. 0:18:27.000 --> 0:18:29.320 Another challenge is also the fact that there are significant 0:18:29.400 --> 0:18:32.440 labor needs for those different industries right now. If a 0:18:32.520 --> 0:18:35.280 South Korean sort of LG can, for example, a battery 0:18:35.280 --> 0:18:38.359 manufacturers building out facility in the US, they'll very often 0:18:38.359 --> 0:18:41.800 rely on South Korean engineers to come over and assist 0:18:42.080 --> 0:18:43.840 because of the lack of know how, a lack of 0:18:43.880 --> 0:18:47.000 skilled workers in the United States. Those kind of labor 0:18:47.000 --> 0:18:49.520 shortages is something that's being considered very seriously by an 0:18:49.520 --> 0:18:52.200 industry that's scaling up quickly and important things is also 0:18:52.280 --> 0:18:56.320 that generally speaking, the ecosystem of of associated sort of 0:18:56.400 --> 0:19:00.000 raw material supplies and producers and providers isn't as press 0:19:00.040 --> 0:19:02.920 and so if you're producing PV, if you're producing modules 0:19:02.960 --> 0:19:05.840 in the US, you'll need to deal with the fact 0:19:05.880 --> 0:19:07.920 that right now there isn't an awful loss of those 0:19:07.960 --> 0:19:11.000 materials that you need to build those modules, whether it's 0:19:11.119 --> 0:19:14.639 backsheets or whether it's encapsulent sort of material used to 0:19:14.920 --> 0:19:18.440 as basically glue for some of those cells. So this 0:19:18.520 --> 0:19:20.120 is all a challenge, and this is something that needs 0:19:20.119 --> 0:19:23.720 to be built out, and a lot of those bottlenecks 0:19:23.760 --> 0:19:26.800 and hurdles are only going to become evident if production 0:19:26.880 --> 0:19:30.240 does scale. There's also another question, and that really is 0:19:30.320 --> 0:19:32.240 around the fact that a lot of the bleeding edge 0:19:32.320 --> 0:19:35.199 of technological proficiency and knowledge today for a lot of 0:19:35.200 --> 0:19:38.000 those different sexes resides in China. We're not just seeing 0:19:38.040 --> 0:19:41.280 things being produced on the cheap. We're actually seeing a 0:19:41.280 --> 0:19:44.520 lot of those companies really and the forefront of technological 0:19:44.600 --> 0:19:49.640 innovation and knowledge. Now. Usually when you see a region 0:19:50.119 --> 0:19:53.160 try and build up it's manufacturing base for different technology, 0:19:53.160 --> 0:19:56.000 what they try and do is attract manufacturers from countries 0:19:56.040 --> 0:19:58.840 which are leading and for many of those sexes, that's China. 0:19:58.880 --> 0:20:00.919 And the extent to which China these manufacturers are going 0:20:00.960 --> 0:20:02.879 to be able to freely operate or are going to 0:20:02.960 --> 0:20:06.840 be successful in terms of building out capacity in place 0:20:06.920 --> 0:20:09.520 like the US is a bit of an open question 0:20:09.600 --> 0:20:14.080 right now. So that's another thing is policymakers also need 0:20:14.119 --> 0:20:16.640 to be mindful of the fact that transfer of knowledge 0:20:16.920 --> 0:20:20.640 might be made more difficult if some of the decoupling 0:20:20.680 --> 0:20:23.520 that we're seeing today begins to pick up pace. And 0:20:23.520 --> 0:20:26.919 we're already seeing some pretty worrying signals from that perspective, 0:20:26.960 --> 0:20:30.640 where for example, the United States has locked the export 0:20:30.680 --> 0:20:32.919 of some of the most advanced the conductors to China 0:20:33.119 --> 0:20:36.119 over the last month, and that's generally perceived as a 0:20:36.160 --> 0:20:39.040 direction of travel today now for a very short break 0:20:39.160 --> 0:20:46.640 stay with US. So presumably these incumbent players are not 0:20:46.920 --> 0:20:51.000 keen on the idea that they will be losing market share, 0:20:51.080 --> 0:20:53.679 and so it's this technology exchange that's really at the 0:20:53.680 --> 0:20:56.919 heart of trying to protect market share. There is a 0:20:57.000 --> 0:21:00.440 fear on the part of Chinese manufacturers as the result 0:21:00.480 --> 0:21:03.239 of these policies they might lose global market share, and 0:21:03.280 --> 0:21:07.720 what we're seeing is those companies reacting pretty decisively. For example, 0:21:07.840 --> 0:21:10.800 I've mentioned with the IRA, there are various provisions that 0:21:10.800 --> 0:21:13.720 are put in place that favor battery components are within 0:21:14.080 --> 0:21:16.119 countries that have a free trade agreement with the US. 0:21:16.280 --> 0:21:19.280 So we're seeing, for example, some Chinese companies set up 0:21:19.320 --> 0:21:22.280 shop and build out their manufacturing capacity in South Korea, 0:21:22.359 --> 0:21:24.359 a country that has a free trade agreement with the US. 0:21:24.760 --> 0:21:26.920 But it's not just about the IRA and its provisions. 0:21:26.920 --> 0:21:29.679 We're also seeing a significant pipeline of projects of battery 0:21:29.720 --> 0:21:33.760 self factories in Europe, for example, and that comes with 0:21:33.800 --> 0:21:37.800 its own set of policies to see through and develop 0:21:37.880 --> 0:21:40.800 that sector. Now, the EU isn't as joined up in 0:21:40.920 --> 0:21:44.119 terms of having the same kind of manufacturing incentives that 0:21:44.200 --> 0:21:46.480 the US has. Has got a patch work of sort 0:21:46.480 --> 0:21:49.480 of grants and loans and various sort of government sort 0:21:49.520 --> 0:21:53.359 of members state subsidy programs that do encourage the localization 0:21:53.520 --> 0:21:55.800 of a lot of those factories in different parts of 0:21:55.800 --> 0:22:00.160 the value chain, but generally speaking it's less coordinated. However, 0:22:00.280 --> 0:22:02.680 we are seeing several policies come in place that could 0:22:02.680 --> 0:22:05.840 be quite decisive. One of them is the launch in 0:22:05.880 --> 0:22:08.760 the coming years of what's referred to as a battery 0:22:08.800 --> 0:22:12.480 passports are for every battery retail lifting mind, battery retailed 0:22:12.480 --> 0:22:15.360 within the EU, you'll have a QR code which gives 0:22:15.359 --> 0:22:19.320 you information about recycled content about from a life cycle 0:22:19.520 --> 0:22:23.000