WEBVTT - US Tariff Threat Risks Own Goal in Solar Trade War 0:00:00.520 --> 0:00:03.440 This is Dana Perkins and you're listening to Switched on 0:00:03.760 --> 0:00:07.080 the B and EF podcast. So, solar module prices are 0:00:07.120 --> 0:00:10.799 at record lows and oversupply is one of many factors 0:00:10.840 --> 0:00:14.760 driving this. So what does this mean for the industry overall? 0:00:14.840 --> 0:00:18.680 In a time of tariffs and protectionism. These record breaking 0:00:18.720 --> 0:00:22.360 prices are found in Asia, but for manufacturers outside of 0:00:22.400 --> 0:00:25.800 Asia it is a different story. The US government previously 0:00:25.880 --> 0:00:29.240 placed tariffs on China and recently extended these to parts 0:00:29.240 --> 0:00:32.480 of Southeast Asia where Chinese manufacturers had been setting up. 0:00:32.640 --> 0:00:35.200 This might have the potential to foster a US based 0:00:35.240 --> 0:00:38.640 solar manufacturing industry, but it also has the potential to 0:00:38.640 --> 0:00:41.480 slow down solar adoption in the US, where prices really 0:00:41.520 --> 0:00:45.160 are very different. To explain what's happening on today's show, 0:00:45.200 --> 0:00:48.560 we are joined by Poul Askano from bn EF's Solar Team. 0:00:48.840 --> 0:00:51.360 I am also joined today by a co host, Tom 0:00:51.479 --> 0:00:54.040 Rowlands Reese. Now, if you like this show, make sure 0:00:54.080 --> 0:00:57.000 to subscribe or consider giving us a review. Right now, 0:00:57.040 --> 0:01:09.440 Tom and I though get to speak with Pole. So 0:01:09.520 --> 0:01:11.720 today we've got a guest and a co host, and 0:01:11.720 --> 0:01:14.080 I'm going to start off with my co host, So 0:01:14.360 --> 0:01:15.679 Tom rollins three say. 0:01:15.600 --> 0:01:16.360 Hello, Hi. 0:01:16.440 --> 0:01:18.640 That Dana, I promise not to call you by your 0:01:18.640 --> 0:01:20.920 full name the entire time. You're Tom from here on out. 0:01:21.280 --> 0:01:23.240 That that makes me a lot more comfortable. 0:01:23.480 --> 0:01:25.080 And Paul, welcome to the show today. 0:01:25.240 --> 0:01:26.040 Thank you, Dana. 0:01:26.200 --> 0:01:29.520 So Tom and Paul we have you both joining us 0:01:29.560 --> 0:01:32.880 from the US, and that's really apt given this conversation 0:01:33.000 --> 0:01:37.040 is about solar, which is a truly global market in 0:01:37.200 --> 0:01:39.920 many respects kind of you know, the workhorse of the 0:01:40.000 --> 0:01:43.119 renewable energy part of the energy transition with such wide 0:01:43.120 --> 0:01:45.800 scale adoption. But today we're talking about really kind of 0:01:45.840 --> 0:01:48.560 a big change on free market economics here and how 0:01:48.600 --> 0:01:52.200 the US has intervened in this space with tariffs. Now 0:01:52.280 --> 0:01:55.480 we know that China has led to incredibly low prices 0:01:55.600 --> 0:01:59.040 for solar modules all over the world, and the US 0:01:59.040 --> 0:02:01.600 has set up a different scenario for themselves. So can 0:02:01.640 --> 0:02:04.320 you just give everyone an understanding of what the current 0:02:04.360 --> 0:02:08.680 situation is with US prices versus Chinese prices? And then additionally, 0:02:08.919 --> 0:02:12.040 you know what that tariff structure, how as it currently stands, 0:02:12.200 --> 0:02:13.440 looks like sure? 0:02:13.520 --> 0:02:16.639 Yeah, In general, I guess the easy way to understand 0:02:16.680 --> 0:02:22.160 this is to understand the situation between what US developers 0:02:22.200 --> 0:02:25.400 pay for modules versus what everyone else pays elsewhere in 0:02:25.440 --> 0:02:29.400 the world. Is that there's plenty of factories in China 0:02:29.520 --> 0:02:31.920 that are supplying pretty much most. 0:02:31.760 --> 0:02:34.000 Of the world except the US in India. 0:02:33.560 --> 0:02:38.280 And typically supply of panels is exceeded demand, despite the 0:02:38.280 --> 0:02:41.160 fact that most of these countries have been growing their 0:02:41.160 --> 0:02:44.480 sole installations quite rapidly. But the US doesn't really have 0:02:44.600 --> 0:02:47.280 access to all of those factories in China because since 0:02:47.320 --> 0:02:51.320 twenty twelve they started imposing a different set of tariffs 0:02:51.360 --> 0:02:54.400 that essentially has forced module buyers in the US to 0:02:54.440 --> 0:02:57.959 pick from a more limited amount of factories outside of China, 0:02:58.080 --> 0:03:01.560 mostly in Southeast Asian countries. So what happened is, as 0:03:01.560 --> 0:03:05.280 developers said, less less factories and less less amount of 0:03:05.280 --> 0:03:09.000 modules to pick from, manufacturers logically had a little bit 0:03:09.000 --> 0:03:12.280 more room to play in terms of charging higher margins 0:03:12.320 --> 0:03:15.280 and production costs were slightly higher than than in China 0:03:15.320 --> 0:03:18.040 across some of those countries. So it ultimately happens as 0:03:18.040 --> 0:03:20.560 of today, developers would pay about three times more the 0:03:20.680 --> 0:03:22.960 modules in the US and what a developer in Europe 0:03:23.000 --> 0:03:24.760 would pay for for instance. 0:03:25.000 --> 0:03:29.320 So that's a pretty hefty impact I presume on the 0:03:29.360 --> 0:03:32.920 cost of developing sola in the US. I suppose a 0:03:32.960 --> 0:03:35.800 couple of just things to clarify there is for thinking 0:03:35.840 --> 0:03:39.320 about utility scale solar how much is the module actually 0:03:39.440 --> 0:03:41.080 part of the cost of the project. I'm assuming that 0:03:41.120 --> 0:03:44.160 as modules get cheaper and cheaper, a multiple on the 0:03:44.200 --> 0:03:46.320 cost of modules starts to matter less and less. So 0:03:46.440 --> 0:03:49.120 is it really like a game change of that amount 0:03:49.120 --> 0:03:51.120 of money? And then what is the US government doing 0:03:51.160 --> 0:03:52.720 to sort of offset that? 0:03:53.480 --> 0:03:57.160 So, to use round numbers, it costs for utility scale 0:03:57.200 --> 0:04:00.400 it costs about a dollar or what to build a 0:04:00.640 --> 0:04:03.600 utility skill solar farm in the US slightly over, but 0:04:03.800 --> 0:04:05.760 just to use PRG numbers, let's just say one dollar 0:04:05.880 --> 0:04:09.240 what and modules, as I said, costs about thirty cents 0:04:09.240 --> 0:04:12.200 a what for those projects, so very easily, about thirty 0:04:12.240 --> 0:04:15.560 percent of the upfront cost of building a utility skill 0:04:15.640 --> 0:04:19.200 solar farm goes into into buying those modules. And the 0:04:19.680 --> 0:04:23.159 reason why the really high module prices haven't had a 0:04:23.200 --> 0:04:26.839 dramatic impact on solar deployments because the US for a 0:04:26.880 --> 0:04:29.240 long time has been paying back in the form of 0:04:29.279 --> 0:04:32.520 tax credits about thirty percent of those upfront costs to 0:04:32.600 --> 0:04:36.200 the project owners, which essentially upsets some of those higher 0:04:36.240 --> 0:04:37.880 prices that developers. 0:04:37.480 --> 0:04:38.440 Have to pay for modules. 0:04:38.560 --> 0:04:40.920 So if you think about it from a more first 0:04:40.920 --> 0:04:46.120 principles basis, it's US tax credits subsidizing in a way 0:04:46.400 --> 0:04:49.760 these higher module prices that developers in the US have 0:04:49.839 --> 0:04:50.800 to have to pay for. 0:04:51.320 --> 0:04:55.279 So this is costing the US money. 0:04:54.279 --> 0:04:57.280 Technically, I mean, tax credits is not it's not a 0:04:57.320 --> 0:05:00.320 direct subsidy, it's not a grant. So their tax credits 0:05:00.360 --> 0:05:03.960 are only subsidies that get materialize if the think gets built, 0:05:04.000 --> 0:05:06.520 if the project gets built. So you could also argue 0:05:06.520 --> 0:05:08.719 in the absence of those tax credits, those projects would 0:05:08.760 --> 0:05:10.800 not get built in the first place. So what you're 0:05:10.880 --> 0:05:14.359 essentially doing is you're reducing some of that expected tax 0:05:14.440 --> 0:05:17.080 collection from this activity that you're incentivizing. 0:05:17.480 --> 0:05:20.360 So the regulation here largely tariffs are really focused on 0:05:20.400 --> 0:05:23.200 these foreign entities of concern. Can you help define what 0:05:23.240 --> 0:05:25.120 that is and what's really included there. 0:05:25.400 --> 0:05:29.720 Yeah, so foreign entities of concern is a slightly different 0:05:29.839 --> 0:05:33.440 term than what we would be using in this case 0:05:33.560 --> 0:05:36.960 because the foreign Entities of concern list has a different 0:05:37.279 --> 0:05:40.440 trade implications for the US. What these tariffs are doing 0:05:40.880 --> 0:05:46.080 is broadly targeting solar factories mostly owned by Chinese companies 0:05:46.360 --> 0:05:49.520 in Southeast Asia and historically also in China with the 0:05:49.520 --> 0:05:51.080 first set of tariffs. 0:05:51.360 --> 0:05:56.480 So these tariffs, logically one would expect that both the 0:05:56.480 --> 0:06:01.520 intention and impact would be to benefit US solar manufacturers. 0:06:02.040 --> 0:06:03.320 So is this what we're seeing? 0:06:03.720 --> 0:06:07.240 Partly and there's quite new once that I will try 0:06:07.279 --> 0:06:10.919 to keep as simple as possible. But making solar panels 0:06:10.920 --> 0:06:13.680 in the US and solar sales is very expensive, and 0:06:13.880 --> 0:06:17.320 even with some of those tariffs, it's still cheaper to 0:06:17.440 --> 0:06:22.880 buy modules from abroad than using modules made in the US. However, 0:06:22.960 --> 0:06:25.919 if the terrors end up exceeding that fifty percent up 0:06:26.040 --> 0:06:28.560 arranged at US in the industry more or lesser expecting, 0:06:28.800 --> 0:06:31.480 then manufacturing sales and modules in the US can be 0:06:31.600 --> 0:06:35.359 quite profitable. And by quite profitable, I mean there's the 0:06:35.400 --> 0:06:38.440 potential to earn more than forty percent in gross margins 0:06:38.440 --> 0:06:40.440 for every single module you sell in the US with 0:06:40.480 --> 0:06:43.320 a US made sell, not only because the market price 0:06:43.400 --> 0:06:46.240 is higher for imported product because of the tariffs, but 0:06:46.320 --> 0:06:49.760 also because the Inflation Reduction Act pays you a lot 0:06:49.800 --> 0:06:51.839 of money to produce in the US. If you're making 0:06:51.920 --> 0:06:53.920 sales and modules, it's going to pay you about eleven 0:06:53.960 --> 0:06:56.400 cents a while, which is already more than what it 0:06:56.480 --> 0:07:00.240 costs to buy a whole module from China, to put 0:07:00.279 --> 0:07:02.800 it into perspective. And then on top of that, if 0:07:02.839 --> 0:07:04.960 you are making sales in the US, there is a 0:07:05.000 --> 0:07:07.040 potential that you're also going to be able to charge 0:07:07.040 --> 0:07:10.480 a premium to the developer or whoever is the end buyer, 0:07:10.600 --> 0:07:13.320 because the project might be able to claim a very 0:07:13.440 --> 0:07:16.920 lucrative domestic content subsidy of a ten percent extra on 0:07:16.960 --> 0:07:19.160 top of the subsidy that you're already getting from the IRA. 0:07:19.480 --> 0:07:21.840 And what you're doing with that price premium is essentially 0:07:21.840 --> 0:07:24.600 share that benefit between the project. 0:07:24.320 --> 0:07:26.480 And the developer and U as the manufacturer. 0:07:26.600 --> 0:07:29.880 So the combination of production subsidies that lower your overall 0:07:29.920 --> 0:07:33.840 production costs and essentially give you the window to earn 0:07:34.120 --> 0:07:37.040 really high margins, the extra premium that you can charge 0:07:37.320 --> 0:07:39.880 and the fact that prices are structurally high because of 0:07:39.880 --> 0:07:44.600 the tariffs can make US manufacturing very lucrative. However, a 0:07:44.680 --> 0:07:47.080 lot of the plan factories are still struggling to raise 0:07:47.160 --> 0:07:51.880 financing because of production cost declines in Southeast Asia are continuing, 0:07:51.960 --> 0:07:55.240 and they're probably going to continue, and even if tariffs 0:07:55.280 --> 0:07:57.440 are in the fifteen to fifty percent range of the 0:07:57.440 --> 0:08:00.160 industry respects. This is now going to be a a 0:08:00.200 --> 0:08:03.000 deal breaker for product from Southeast Asia to come into 0:08:03.040 --> 0:08:05.120 the US. And at the same time, it's really really 0:08:05.120 --> 0:08:08.520 complicated to build stuff in the US, to build factories 0:08:08.560 --> 0:08:12.240 in the US. And when it comes to building that factory, 0:08:12.320 --> 0:08:14.600 even if the on paper are on an Excel spreadsheet, 0:08:14.600 --> 0:08:16.560 the economics might look good and you can expect to 0:08:16.560 --> 0:08:19.680 make quite high margins, it takes many years to build 0:08:19.680 --> 0:08:22.520 a cell factory in the US and it's very complicated. 0:08:22.520 --> 0:08:25.400 The permiting tanks a long time, and getting the factory 0:08:25.400 --> 0:08:28.320 connected to the grid can be a serious bottleneck. So 0:08:28.600 --> 0:08:30.960 despite the fact that on paper, as I said, the 0:08:31.200 --> 0:08:33.480 economics might look good, it's still going to take some 0:08:33.559 --> 0:08:36.280 time to build those factories. And who knows what happens 0:08:36.320 --> 0:08:38.520 during the years that you're trying to build your cell 0:08:38.600 --> 0:08:41.120 factory abroad. Who knows where prices are going to go. 0:08:41.200 --> 0:08:43.559 So the risk is quite high. The market risk is 0:08:43.640 --> 0:08:45.800 quite high, so which is why a lot of investors 0:08:45.960 --> 0:08:49.080 have not really been willing to back those factories and 0:08:49.240 --> 0:08:51.920 provide financing. And the only companies that have really been 0:08:51.920 --> 0:08:54.800 able to materialize those investments are companies that have quite 0:08:55.000 --> 0:08:57.680 big balance sheets and have the money to invest themselves. 0:08:58.240 --> 0:09:00.640 So how deep into the supply chain is go? I mean, 0:09:00.760 --> 0:09:04.440 is it the manufacturing facilities that create the finished modules? 0:09:04.480 --> 0:09:07.720 Are we going all the way down to the silicon? 0:09:08.480 --> 0:09:11.920 So technically we most of the tears are applied at 0:09:11.960 --> 0:09:14.960 the cell level, But there's a set of rules in 0:09:15.000 --> 0:09:20.040 some of the terraffs that essentially indirectly targeted Chinese wafers, 0:09:20.120 --> 0:09:23.480 which is this key component to make the silicon cells. 0:09:23.679 --> 0:09:26.280 And it doesn't specifically set a TeV on the waiver. 0:09:26.679 --> 0:09:30.160 What does is essentially telling these factories in Southeast Asia 0:09:30.360 --> 0:09:32.880 or outside of China that if they don't want to 0:09:32.920 --> 0:09:35.439 be subject to some of those tariffs, they will need 0:09:35.520 --> 0:09:39.000 to buy wafers silicon wafers from outside of China. 0:09:39.520 --> 0:09:42.080 Can I just pick up on something you said previously? 0:09:42.760 --> 0:09:45.200 You just mentioned that a lot of these companies in 0:09:45.280 --> 0:09:49.000 Southeast Asia are Chinese owned. So should that mean that 0:09:49.120 --> 0:09:53.199 if the intention is to compete with China and ultimately 0:09:53.360 --> 0:09:57.480 Chinese companies are getting higher margins subsidized by US taxpayers. 0:09:57.679 --> 0:10:00.319 There's a very cynical take, is that what's happened here 0:10:00.400 --> 0:10:02.680 or is there you know, is it working on some 0:10:02.920 --> 0:10:05.320 level in achieving its subjective. 0:10:05.480 --> 0:10:09.760 Honestly, I don't really know what the end goal is here. Well, technically, 0:10:09.800 --> 0:10:13.920 it's let's bring back US solar manufacturing, and let's incentivize 0:10:13.960 --> 0:10:16.880 a ton of jobs in the US putting panels together 0:10:16.960 --> 0:10:20.800 and making sales and quote unquote making this very sophisticated 0:10:20.960 --> 0:10:24.520 technology that we're going to need to power the energy transition. 0:10:24.880 --> 0:10:28.240 This is the official language. The ultimate goal. I really 0:10:28.280 --> 0:10:31.400 don't understand, because ultimately what's happening is that we're pay 0:10:31.480 --> 0:10:35.080 more for components that are ridiculously cheap everywhere else in 0:10:35.120 --> 0:10:38.800 the world. And then the side effect, which I don't 0:10:38.800 --> 0:10:41.760 know to what extent the US has been aware, is that, 0:10:41.840 --> 0:10:44.320 as you said, Chinese manufacturers have been able to earn 0:10:44.360 --> 0:10:46.320 a lot of margins because they were the ones who 0:10:46.440 --> 0:10:49.320 had the capital to set up all these factors outside 0:10:49.360 --> 0:10:52.680 of China and then become the main supplier to the 0:10:52.840 --> 0:10:54.920 US from just a different part of the world. 0:10:55.320 --> 0:10:57.640 And because the usolar. 0:10:57.200 --> 0:11:00.800 Demand has been growing quite quickly, the Chinese solo manufacturers 0:11:00.840 --> 0:11:03.480 have been able to benefit from that growth, and they've 0:11:03.520 --> 0:11:06.480 also had a much higher market power selling to the US, 0:11:06.480 --> 0:11:08.400 and they have selling everywhere else in the world while 0:11:08.440 --> 0:11:11.760 they are essentially competing with every other factory across the 0:11:11.760 --> 0:11:13.520 street from weather based in China. 0:11:13.720 --> 0:11:18.440 Chinese manufacturers have been very nimble and willing to work 0:11:18.520 --> 0:11:20.840 in other parts of the world. So I'm thinking of 0:11:21.080 --> 0:11:25.240 Mexico and actually for this conversation, really Southeast Asia. So 0:11:25.360 --> 0:11:28.480 can you talk a little bit about the effectiveness of 0:11:28.600 --> 0:11:31.160 these tariffs? And I'm actually thinking, I mean that is 0:11:31.160 --> 0:11:33.560 a follow on to what Tom essentially asked, in that 0:11:33.679 --> 0:11:35.800 we know that it's driving prices up, but is it 0:11:36.120 --> 0:11:40.600 essentially also stopping imports of Chinese goods or has that 0:11:40.679 --> 0:11:44.080 been a difficult thing to actually do and is it 0:11:44.120 --> 0:11:46.440 more or less a you know, an unwinnable game of 0:11:46.480 --> 0:11:48.679 whack a mole. And I think, to some extent also 0:11:48.880 --> 0:11:51.160 a parallel here is when I think about sanctions and 0:11:51.200 --> 0:11:53.840 about how difficult it has been to provide sanctions to 0:11:53.880 --> 0:11:57.920 various countries. You know, the implementation of changing the way 0:11:58.440 --> 0:12:02.440 global trade and supply chain's work is actually very difficult 0:12:02.440 --> 0:12:03.600 for a government to achieve. 0:12:04.200 --> 0:12:08.360 Yeah, and it's a very complicated puzzle, but ultimately what 0:12:08.559 --> 0:12:12.400 the terrors, if accomplished, is for these Chinese companies to 0:12:12.440 --> 0:12:15.199 just re route the supply chains through Southeast Asia, so 0:12:15.240 --> 0:12:18.160 instead of just selling from their factories in some of 0:12:18.200 --> 0:12:21.880 the Chinese provinces, they're just selling from Vietnam, Malaysia, Thailand 0:12:21.960 --> 0:12:25.959 or Cambodia. So same ownership, same structure, just factory in 0:12:26.000 --> 0:12:29.640 a different location. And so far, every time there's been 0:12:29.679 --> 0:12:32.840 a new set of terriffs, these companies have been able 0:12:32.880 --> 0:12:37.600 to quite quickly adjust and build the necessary facilities outside 0:12:37.640 --> 0:12:39.559 of China to be able to comply with the new 0:12:39.600 --> 0:12:43.040 tear rules. So initially what they built was where a 0:12:43.040 --> 0:12:45.600 lot of sell and module factories in the countries that 0:12:45.640 --> 0:12:47.920 I listed, and then with a new set of terrors 0:12:47.960 --> 0:12:50.720 that are expected to come now into effect in June 0:12:50.760 --> 0:12:55.679 twenty twenty four, manufacturers were actually quite impressive in building 0:12:55.800 --> 0:12:59.240 wafer facilities in Southeast Asia as well in order to 0:12:59.280 --> 0:13:02.360 comply with with this new tariffs. So you could argue 0:13:02.400 --> 0:13:04.560 that the US has sup forced some of these Chinese 0:13:04.600 --> 0:13:08.200 companies to make really capix intensive investments outside of China 0:13:08.400 --> 0:13:12.560 and by that also spurring the local economies in Southeast Asia. 0:13:12.600 --> 0:13:14.720 But at the end of the day, we're still talking 0:13:14.760 --> 0:13:18.960 about the same suppliers, and surely because prices are slightly higher, 0:13:19.040 --> 0:13:22.040 this has left some room for non Chinese manufacturers to 0:13:22.120 --> 0:13:25.040 also sell into the US market. But those non Chinese 0:13:25.120 --> 0:13:28.640 manufacturers from South Korea, or from some of the Southeast 0:13:28.640 --> 0:13:32.360 Asian countries, or even from the US have historically struggled 0:13:32.400 --> 0:13:34.920 despite the fact that module prices work quite high, just 0:13:34.920 --> 0:13:37.440 because of how quickly the factories in Southeast Asia were 0:13:37.480 --> 0:13:40.200 able to improve and lower costs. 0:13:41.000 --> 0:13:45.120 See what I'm hearing here is that the tariffs are 0:13:45.120 --> 0:13:49.320 not necessarily working exactly as intended. Maybe they are still 0:13:49.320 --> 0:13:51.960 accomplishing some of their objectives, but it leads me to 0:13:52.000 --> 0:13:55.480 this really fundamental question, which is what actually is the 0:13:55.520 --> 0:13:58.880 point of all of this. If we're using the language 0:13:58.880 --> 0:14:01.760 of war and this is a trade war, it's like 0:14:01.800 --> 0:14:05.640 there's this battle being fought over a piece of scrubland 0:14:05.960 --> 0:14:09.199 that is of no use to anyone, And you could 0:14:09.320 --> 0:14:12.040 argue it's kind of useful for the for the US 0:14:12.160 --> 0:14:15.240 to let China just own sol it. Like you know, 0:14:15.240 --> 0:14:18.240 if it's about electric vehicles, you know, there's the automotive industry. 0:14:18.240 --> 0:14:20.640 It's such a huge industry globally. I get it why 0:14:20.800 --> 0:14:22.600 you would want to fight over that and you know, 0:14:22.720 --> 0:14:25.080 retain those healthy margins. But for all the time I've 0:14:25.080 --> 0:14:27.680 been at BNAF, our colleague Jenny Chase has always been 0:14:27.800 --> 0:14:31.880 talking about how nobody makes money manufacturing solar and all 0:14:31.920 --> 0:14:34.720 these Chinese companies, you know, lose money, and you know, 0:14:34.760 --> 0:14:37.720 but they still scale up. So surely this is like 0:14:37.800 --> 0:14:41.640 the worst industry to be fighting over. And in a way, 0:14:41.720 --> 0:14:44.160 letting Chinese modules into the country is just letting the 0:14:44.240 --> 0:14:48.520 Chinese government subsidize the US energy transition as opposed to 0:14:48.680 --> 0:14:50.680 what we have here now, which is the US government 0:14:50.720 --> 0:14:55.160 is subsidizing Chinese companies. So that's just my a take 0:14:55.240 --> 0:14:57.160 that I have, and I kind of put it to you, 0:14:57.200 --> 0:14:59.840 like fight me, like tell me what the point of 0:15:00.000 --> 0:15:01.920 this is, because this seems like the most pointless battle 0:15:02.360 --> 0:15:03.239 I can imagine. 0:15:03.800 --> 0:15:08.720 Well as a long term analyst working under Jenny Chase, 0:15:08.880 --> 0:15:12.720 obviously her influence has dictated a lot of my takes too, 0:15:12.800 --> 0:15:15.400 so I'm not going to disagree with her. I'm just 0:15:15.440 --> 0:15:18.200 gonna lay out some of the arguments in favor. 0:15:17.880 --> 0:15:20.480 Of those tariffs that I've heard and read. 0:15:20.960 --> 0:15:25.040 The first one is, it's quite an uncomfortable truth when 0:15:25.040 --> 0:15:28.240 you think about it, to say to the general public 0:15:28.600 --> 0:15:31.800 that let's say solar turns to be turns to generate 0:15:31.840 --> 0:15:34.800 about thirty percent of all electricity in the US by 0:15:34.840 --> 0:15:39.240 twenty thirty. It's quite an uncomfortable truth to think that 0:15:39.680 --> 0:15:42.400 most of that thirty percent of annual generation in the 0:15:42.480 --> 0:15:45.160 US comes from a component made in China. If you 0:15:45.200 --> 0:15:48.960 think about gas plants, nuclear there are usually some like 0:15:49.000 --> 0:15:53.200 a strong attachment to a US company owning that plant, 0:15:53.560 --> 0:15:57.920 operating and plant creating the components. So it's quite uncomfortable 0:15:58.040 --> 0:16:01.800 for policymakers and guests think about the fact that in 0:16:01.800 --> 0:16:04.040 a few years from now a lot of our electricity 0:16:04.040 --> 0:16:07.080 will come from things stuff made in China. 0:16:07.200 --> 0:16:07.880 So that's one. 0:16:08.000 --> 0:16:12.840 And then the other argument that I've heard is industrial capacity. 0:16:13.120 --> 0:16:16.800 So the US, the whole reindustrialization push right now that's 0:16:16.840 --> 0:16:20.960 taking place in the US not only is trying to 0:16:21.240 --> 0:16:24.560 compete against China and create jobs in the US, but 0:16:24.680 --> 0:16:29.840 also it's trying to revitalize the industrial capacity in the 0:16:29.960 --> 0:16:32.960 US in case there was a war, meaning we can 0:16:33.040 --> 0:16:35.480 now again build a bunch of airplanes and a bunch 0:16:35.480 --> 0:16:39.280 of ammunition. The tricky part with this argument is module 0:16:39.320 --> 0:16:42.320 assembly factories are just a big warehouse where you put 0:16:42.320 --> 0:16:45.280 a bunch of assembly lines and you put them madge together. 0:16:45.600 --> 0:16:49.000 So really, I don't know exactly how you would repurpose 0:16:49.040 --> 0:16:53.280 those factories for some military needs, but it's quite a 0:16:53.320 --> 0:16:56.320 simple process, so I don't know what the actual values 0:16:56.400 --> 0:16:58.760 of having all of those assembly lines in the US. 0:16:59.080 --> 0:17:01.800 The second part is a lot of the investments, a 0:17:01.800 --> 0:17:04.199 lot of the sole investments and manufacturers have made in 0:17:04.240 --> 0:17:07.159 the US have come from the same Chinese companies, and 0:17:07.200 --> 0:17:10.560 some of those Chinese companies are heavily involved with some 0:17:10.600 --> 0:17:13.639 of the biggest US developers, So some of the biggest 0:17:13.720 --> 0:17:19.359 US developers rely critically on supply from these manufacturers. So yes, 0:17:19.400 --> 0:17:23.240 there's exceptions like First Solars, probably the most ambitious US 0:17:23.280 --> 0:17:27.600 based manufacturer that has very big ambissions in the US 0:17:27.600 --> 0:17:31.600 and has actually pursued those investments in this scaling up production. 0:17:31.800 --> 0:17:34.600 But a lot of the big announcements come from companies 0:17:34.640 --> 0:17:37.840 that are directly or indirectly owned by Chinese firms. 0:17:38.200 --> 0:17:39.960 I just wanted to follow on while we're on this topic, 0:17:40.000 --> 0:17:42.200 and I'm going to tell you a very short anecdote, 0:17:42.200 --> 0:17:43.879 and I'm going to try and keep it brief because 0:17:43.880 --> 0:17:46.440 what you're saying makes me think of something that happened recently. 0:17:46.760 --> 0:17:49.800 I went to Charleston, South Carolina, me and my wife. 0:17:49.800 --> 0:17:52.560 We're from the UK. We're exploring the US men to Charleston, 0:17:52.600 --> 0:17:56.040 South Carolina. And near Charleston, South Carolina is the North 0:17:56.080 --> 0:17:58.800 America's only tea farm. And we went on a tour 0:17:58.840 --> 0:18:01.520 of the tea farm. And the story of that tea 0:18:01.600 --> 0:18:03.880 farm is it was set up in the sixties by 0:18:03.920 --> 0:18:07.000 Lipton because they looked there. It was the Cold War 0:18:07.080 --> 0:18:09.280 and they were looking at global supply chains and they 0:18:09.280 --> 0:18:13.080 were like, if things go bad, you know, we're not 0:18:13.119 --> 0:18:15.560 going to have any tea in America, so we need 0:18:15.600 --> 0:18:17.919 to set up a tea guard and they invested heavily 0:18:17.920 --> 0:18:21.080 in it. Cold War ended, Lipton was like, Okay, that 0:18:21.119 --> 0:18:24.280 doesn't matter anymore. They weren't interested, so they sold it 0:18:24.320 --> 0:18:25.960 to someone who is more of a te enthusiast. So 0:18:26.040 --> 0:18:29.200 now America has this one little tea garden, this one 0:18:29.200 --> 0:18:31.040 little tea farm. But the point is is that if 0:18:31.160 --> 0:18:34.119 supply chain, you know, if there is a global meltdown, 0:18:34.400 --> 0:18:36.760 America still has a way of getting tea that has 0:18:36.800 --> 0:18:39.560 something to scale from. So is the end goal here 0:18:40.040 --> 0:18:43.440 not that we have this super scale US solar industry. 0:18:43.600 --> 0:18:45.560 But we have something a little bit like the Charleston 0:18:45.600 --> 0:18:48.200 tea garden, something that is like a seed from which 0:18:48.600 --> 0:18:50.880 there is a starting point if things go really bad. 0:18:50.960 --> 0:18:53.920 Is that how you see this? Very I would say 0:18:53.920 --> 0:18:57.720 aggressive and expensive strategy ultimately is to make the Charleston 0:18:57.720 --> 0:18:58.800 tea gardens of solar. 0:19:01.160 --> 0:19:02.640 That's an interesting analogy. 0:19:03.000 --> 0:19:06.560 And I guess my first question would always be like 0:19:06.600 --> 0:19:09.320 how much more expensive or how was that t was 0:19:09.320 --> 0:19:10.080 that tea of better? 0:19:10.280 --> 0:19:11.440 Was that tea more expensive? 0:19:11.720 --> 0:19:15.560 It was really nice, award winning I mean, Tom, your 0:19:15.600 --> 0:19:17.760 country and my country have a long history when it 0:19:17.800 --> 0:19:20.719 comes to tea in international disputes, and I would say 0:19:20.720 --> 0:19:23.400 you might be overestimating how much Americans care about tea 0:19:23.400 --> 0:19:23.879 these days. 0:19:24.080 --> 0:19:27.720 Well, well, Lypton definitely cared about tea, you know, I 0:19:27.880 --> 0:19:29.320 certainly did well. 0:19:29.960 --> 0:19:32.199 But actually, then thinking about so the companies that are 0:19:32.240 --> 0:19:34.800 actually involved here, I want to think about actually the 0:19:35.040 --> 0:19:38.440 US solar manufacturers who are playing by the rules and 0:19:38.840 --> 0:19:42.800 essentially are not circumventing the different trade rules that have 0:19:42.880 --> 0:19:46.480 been set up. They have started a new petition for 0:19:46.640 --> 0:19:49.360 some additional tariffs. Can you get into that. I think 0:19:49.359 --> 0:19:51.160 it's going to be tied very much. Paul by the way, 0:19:51.280 --> 0:19:54.080 with the title of your recent research note, which is 0:19:54.240 --> 0:19:57.680 US solar manufacturer's call for more expensive modules. 0:19:58.200 --> 0:20:02.359 So this is just yet another the solar coaster, as 0:20:02.359 --> 0:20:04.639 they call it here in the US, just becoming more 0:20:04.640 --> 0:20:07.959 and more complicated. So I hope I can explain this 0:20:08.000 --> 0:20:10.800 in simple terms, because it's even confusing for those of 0:20:10.880 --> 0:20:14.360 us who do this for a living and look at those. 0:20:14.200 --> 0:20:14.920 Terrafts full time. 0:20:14.960 --> 0:20:17.440 So what happened is there's a new set of tariffs 0:20:17.480 --> 0:20:20.679 that were already approved that are like the circumvention tariffs 0:20:20.680 --> 0:20:22.920 that you mentioned, that will come into effect in June 0:20:22.960 --> 0:20:27.440 of twenty twenty four. What happened because of this deadline 0:20:27.480 --> 0:20:29.959 that was set by the Department of Commerce and then 0:20:30.000 --> 0:20:33.639 extended by two years by the Biden administration. What happened 0:20:33.680 --> 0:20:36.879 is a lot of the factories in Southeast Asia many more, honestly, 0:20:36.920 --> 0:20:38.680 a lot of factories just came out of nowhere, A 0:20:38.720 --> 0:20:41.239 lot of supply pretty much came out of nowhere and 0:20:41.560 --> 0:20:45.399 just started shipping modules to the US that we're going 0:20:45.440 --> 0:20:47.520 to be subject to this new tariffs that we know 0:20:47.600 --> 0:20:50.600