1 00:00:00,120 --> 00:00:02,760 Speaker 1: This is Dana Perkins and you're listening to Switched on 2 00:00:02,960 --> 00:00:05,840 Speaker 1: the B and EF podcast. Today we welcome back to 3 00:00:05,880 --> 00:00:08,520 Speaker 1: the show the head of Trade and Supply Chains at BNAF, 4 00:00:08,680 --> 00:00:12,319 Speaker 1: Antoine Wagner Jones. Last year, Antoine came on the show 5 00:00:12,320 --> 00:00:15,600 Speaker 1: to discuss the complex world of global supply chains and 6 00:00:15,640 --> 00:00:20,520 Speaker 1: how the then newly introduced Inflation Reduction Act was impacting them. Well, 7 00:00:20,640 --> 00:00:23,120 Speaker 1: in a few months that have passed, the IRA has 8 00:00:23,239 --> 00:00:26,640 Speaker 1: indeed caused a shift in clean tech production alignment in 9 00:00:26,680 --> 00:00:30,720 Speaker 1: the US and in response, other countries, regions and trading 10 00:00:30,720 --> 00:00:33,760 Speaker 1: blocks have been making moves of their own. So what 11 00:00:33,960 --> 00:00:36,919 Speaker 1: is the current state of play, both in and outside 12 00:00:36,960 --> 00:00:39,960 Speaker 1: of the US and what policies are countries introducing to 13 00:00:40,120 --> 00:00:43,920 Speaker 1: ensure that they keep pace with their own clean energy transitions. Well, 14 00:00:43,920 --> 00:00:46,040 Speaker 1: we're going to come to that, and on today's show 15 00:00:46,080 --> 00:00:48,839 Speaker 1: we discuss with Antoine a range of topics. We talk 16 00:00:48,880 --> 00:00:52,440 Speaker 1: about the potential fracturing of these traditional supply chains as 17 00:00:52,479 --> 00:00:55,800 Speaker 1: countries attempt to onboard their clean tech production and the 18 00:00:55,920 --> 00:00:59,200 Speaker 1: risks that this may pose for the global net zero targets. 19 00:00:59,480 --> 00:01:03,600 Speaker 1: Also how countries and areas like the EU have reacted 20 00:01:03,600 --> 00:01:06,759 Speaker 1: to the inflation reduction Act and then lastly, really can 21 00:01:06,800 --> 00:01:10,520 Speaker 1: anyone challenge China's production capacity. If you like this podcast, 22 00:01:10,640 --> 00:01:13,440 Speaker 1: make sure to subscribe on whatever player you're listening to 23 00:01:13,480 --> 00:01:16,720 Speaker 1: it on today to receive updates on future episodes, and 24 00:01:16,880 --> 00:01:20,160 Speaker 1: consider giving us a review on Apple Podcasts or Spotify. 25 00:01:20,360 --> 00:01:23,800 Speaker 1: We've included several links to BNF research notes on supply 26 00:01:23,920 --> 00:01:27,280 Speaker 1: chains in today's show notes, and BNF subscribers can access 27 00:01:27,319 --> 00:01:30,640 Speaker 1: them at BNF on the Bloomberg terminal, at BNF dot com, 28 00:01:30,800 --> 00:01:33,400 Speaker 1: or on our mobile app. As a reminder, bn EF 29 00:01:33,440 --> 00:01:36,679 Speaker 1: does not provide investment or strategy advice, and our full 30 00:01:36,680 --> 00:01:38,800 Speaker 1: disclaimer is at the end of the show. But right 31 00:01:38,840 --> 00:01:51,640 Speaker 1: now I get to speak with Antoine about supply chains. Antwin, 32 00:01:51,680 --> 00:01:53,320 Speaker 1: thank you very much for joining us today. 33 00:01:53,440 --> 00:01:54,880 Speaker 2: Thanks Dana, great to be here. 34 00:01:55,160 --> 00:01:57,480 Speaker 1: So we're here, We're back. We're talking about supply chains 35 00:01:57,480 --> 00:02:00,120 Speaker 1: with you on the show, and this is actually a 36 00:02:00,160 --> 00:02:02,400 Speaker 1: really great time. No, we scheduled this before we knew 37 00:02:02,400 --> 00:02:04,000 Speaker 1: what was going to happen at the G seven, But 38 00:02:04,080 --> 00:02:06,920 Speaker 1: at the G seven supply chains featured quite prominently. Can 39 00:02:06,960 --> 00:02:09,359 Speaker 1: you tell us a little bit about what transpired? 40 00:02:09,680 --> 00:02:12,120 Speaker 2: That's right, there was a convening of the G seven 41 00:02:12,400 --> 00:02:15,960 Speaker 2: in Hiroshima in Japan, and three days ago on the 42 00:02:16,000 --> 00:02:19,120 Speaker 2: twentieth of May, they issued a communicate, which means that 43 00:02:19,280 --> 00:02:22,480 Speaker 2: it's a document that outlines their priorities. And what was 44 00:02:22,520 --> 00:02:25,520 Speaker 2: striking was maybe two things. One was the extent to 45 00:02:25,560 --> 00:02:28,400 Speaker 2: which supply chains featured and the importance of building out 46 00:02:28,400 --> 00:02:31,600 Speaker 2: clean energy manufacturing. And that's something that we've seen piecemeal 47 00:02:31,680 --> 00:02:35,760 Speaker 2: emerge across these big economies across the world since August 48 00:02:35,760 --> 00:02:38,440 Speaker 2: of last year with the Inflation Reduction Act being passed 49 00:02:38,440 --> 00:02:40,520 Speaker 2: by the US, and we also saw a desire to 50 00:02:40,520 --> 00:02:43,839 Speaker 2: sort of reframe what's being seen as strategic based off 51 00:02:43,840 --> 00:02:47,480 Speaker 2: with China and not talking about decoupling, but talking about 52 00:02:47,560 --> 00:02:50,320 Speaker 2: de risking. And that's very important as well, because a 53 00:02:50,320 --> 00:02:53,880 Speaker 2: lot of these moves towards reshaping clean energy supply chains 54 00:02:53,880 --> 00:02:57,000 Speaker 2: are shaped in relationship with China, which dominates the production 55 00:02:57,040 --> 00:02:58,120 Speaker 2: of clean energies today. 56 00:02:58,480 --> 00:03:01,440 Speaker 1: And certainly we're here to talk about clean energy supply chains, 57 00:03:01,680 --> 00:03:05,280 Speaker 1: but was it all supply chains or specifically clean energy 58 00:03:05,320 --> 00:03:07,320 Speaker 1: supply chains that were discussed at the G seven. 59 00:03:07,520 --> 00:03:10,280 Speaker 2: So energy featured in about a court of the total 60 00:03:10,280 --> 00:03:12,519 Speaker 2: points that were put out in the various documents that 61 00:03:12,560 --> 00:03:16,080 Speaker 2: were issued after the convening. And what's interesting is when 62 00:03:16,080 --> 00:03:18,760 Speaker 2: they've talked about supply chains, when that was mentioned, it 63 00:03:18,840 --> 00:03:22,880 Speaker 2: really was mentioned overwhelmingly with relation to either making supply 64 00:03:22,960 --> 00:03:25,679 Speaker 2: chains more sustainable, so accounting for emissions as part of 65 00:03:25,720 --> 00:03:29,440 Speaker 2: supply chains, or talking about the on shoring of clean 66 00:03:29,520 --> 00:03:33,000 Speaker 2: energy supply chains that's implicitly things like batteries, things like 67 00:03:33,080 --> 00:03:36,360 Speaker 2: solar panels, things like electorallyzers for making hydrogen. 68 00:03:37,040 --> 00:03:40,600 Speaker 1: For a very long time, China has dominated in this 69 00:03:40,720 --> 00:03:45,440 Speaker 1: clean energy equipment manufacturing space and has really driven a 70 00:03:45,480 --> 00:03:47,720 Speaker 1: lot of the cast of clients in certain industries. And 71 00:03:47,800 --> 00:03:50,760 Speaker 1: let's use solar as an example. Even though this conversation 72 00:03:51,000 --> 00:03:54,920 Speaker 1: really has started to shift towards having more local supply 73 00:03:55,000 --> 00:03:58,040 Speaker 1: chains around the world, is China still the dominant player. 74 00:03:58,640 --> 00:04:02,040 Speaker 2: So China still dominates dominates in various areas, and that 75 00:04:02,120 --> 00:04:05,680 Speaker 2: really ranges from the production of various pieces of equipment, 76 00:04:05,840 --> 00:04:08,400 Speaker 2: so of solar modules, of the end piece of equipment 77 00:04:08,480 --> 00:04:11,040 Speaker 2: like battery cells, but it also goes upstream from there, 78 00:04:11,080 --> 00:04:13,680 Speaker 2: and that dominance is even more accentuated in sort of 79 00:04:13,680 --> 00:04:17,040 Speaker 2: midstream building blocks to making solar modules for example, like 80 00:04:17,200 --> 00:04:19,760 Speaker 2: ingots and wafers. And when it comes to batteries, anodes 81 00:04:19,800 --> 00:04:22,080 Speaker 2: and cathodes, and then if you go even further up, 82 00:04:22,120 --> 00:04:25,040 Speaker 2: there's also a lot of refining that's done for things 83 00:04:25,080 --> 00:04:27,760 Speaker 2: like lithium, for things like cobalts, so metals that are 84 00:04:27,839 --> 00:04:30,719 Speaker 2: used for making batteries in sort of the mainstream battery 85 00:04:30,800 --> 00:04:33,520 Speaker 2: chemistries that we're seeing today, and those two are mostly 86 00:04:33,560 --> 00:04:37,120 Speaker 2: located in China. And what we've been doing recently at 87 00:04:37,120 --> 00:04:39,520 Speaker 2: BNF over the last few months is starting to track 88 00:04:39,760 --> 00:04:42,280 Speaker 2: investments and starting to look at the amounts that's sort 89 00:04:42,279 --> 00:04:45,120 Speaker 2: of represented that's flowing into new factories that are being 90 00:04:45,120 --> 00:04:47,800 Speaker 2: brought online across the different sectors that we're looking at. 91 00:04:47,839 --> 00:04:52,400 Speaker 2: And actually there's this dominance today of manufacturing concentrated within China, 92 00:04:52,400 --> 00:04:55,159 Speaker 2: but when we look at new facilities new factories that 93 00:04:55,200 --> 00:04:58,200 Speaker 2: are being brought online, that's equally striking. And actually what 94 00:04:58,240 --> 00:05:01,200 Speaker 2: we're seeing in things like for SOL for example, upwards 95 00:05:01,240 --> 00:05:04,279 Speaker 2: of ninety five percent of new capacity that's coming online 96 00:05:04,279 --> 00:05:07,240 Speaker 2: that came online last year did so in China. When 97 00:05:07,240 --> 00:05:09,760 Speaker 2: we look at the battery supply chain too, it was 98 00:05:09,839 --> 00:05:12,600 Speaker 2: upwards of ninety percent of everything new that came online 99 00:05:12,600 --> 00:05:15,120 Speaker 2: in terms of capacity came online in China. So that's 100 00:05:15,160 --> 00:05:17,839 Speaker 2: not just a snapshot in time. It's not just a 101 00:05:17,880 --> 00:05:20,839 Speaker 2: picture that we're seeing. Over the last few years, China's dominated, 102 00:05:20,880 --> 00:05:23,200 Speaker 2: but that's starting to change. Even though we've got all 103 00:05:23,200 --> 00:05:26,279 Speaker 2: of this talk of shifting supply chains and on shoring 104 00:05:26,400 --> 00:05:29,680 Speaker 2: things to various countries and friendshuring and near suring, what 105 00:05:29,760 --> 00:05:33,159 Speaker 2: we're not seeing is that translate into factories coming online 106 00:05:33,240 --> 00:05:37,040 Speaker 2: just yet to really challenge that dominance of all that 107 00:05:37,080 --> 00:05:39,480 Speaker 2: concentration of capacity in one country. 108 00:05:39,520 --> 00:05:43,680 Speaker 1: And that conversation around enshuring near shoring moving. The supply 109 00:05:43,800 --> 00:05:46,400 Speaker 1: change largely has to do with the West and then 110 00:05:46,600 --> 00:05:50,240 Speaker 1: Australia and the beginning you reference the G seven transpiring. 111 00:05:50,279 --> 00:05:52,880 Speaker 1: At the same time as the G seven, China had 112 00:05:52,920 --> 00:05:55,000 Speaker 1: a meeting with a number of other countries in Asia, 113 00:05:55,400 --> 00:05:59,440 Speaker 1: which also serve as an excellent block of countries that 114 00:05:59,520 --> 00:06:03,360 Speaker 1: are also so installing renewable energy. Is the domestic market, 115 00:06:03,360 --> 00:06:05,640 Speaker 1: both in China and then within the rest of the 116 00:06:05,680 --> 00:06:09,640 Speaker 1: continent going to essentially grow to the point that even 117 00:06:09,680 --> 00:06:12,839 Speaker 1: with the onshoring and near shoring taking place in other 118 00:06:12,920 --> 00:06:15,960 Speaker 1: parts of the world, perhaps it doesn't wind down business 119 00:06:15,960 --> 00:06:18,280 Speaker 1: activities within Asia. 120 00:06:18,400 --> 00:06:21,440 Speaker 2: So definitely, domestic markets are really important when it comes 121 00:06:21,480 --> 00:06:23,600 Speaker 2: to industrial strategy, and that's something that we're sort of 122 00:06:23,600 --> 00:06:25,560 Speaker 2: seeing from a number of different angles. One of the 123 00:06:25,600 --> 00:06:27,760 Speaker 2: reasons why China has been able to scale up the 124 00:06:27,760 --> 00:06:30,719 Speaker 2: manufacturing of things like batteries, of things like soda, having 125 00:06:30,720 --> 00:06:35,000 Speaker 2: these really efficient integrated value chains located within its borders 126 00:06:35,520 --> 00:06:38,599 Speaker 2: is due to having this massive booming local market and 127 00:06:38,640 --> 00:06:42,160 Speaker 2: then having that be the basis for developing this manufacturing 128 00:06:42,240 --> 00:06:43,960 Speaker 2: base and then being able to export from that has 129 00:06:44,000 --> 00:06:46,080 Speaker 2: been really key to to what we've seen play out 130 00:06:46,120 --> 00:06:48,360 Speaker 2: over the last couple of decades. And then the presence 131 00:06:48,400 --> 00:06:51,560 Speaker 2: of countries near China that are also seeing an increase 132 00:06:51,560 --> 00:06:55,000 Speaker 2: in an uptake of renewable energy of storage of electric vehicles, 133 00:06:55,040 --> 00:06:57,919 Speaker 2: whether they be two three wheelers or passenger vehicles, is 134 00:06:57,960 --> 00:07:00,320 Speaker 2: also a big part of the picture, and that's something 135 00:07:00,360 --> 00:07:03,360 Speaker 2: that we'll see manufacturing emerge in those countries too, and 136 00:07:03,400 --> 00:07:06,000 Speaker 2: we are already seeing that. But is also a boon 137 00:07:06,120 --> 00:07:08,680 Speaker 2: to sort of China being able to leverage its proximity 138 00:07:08,680 --> 00:07:11,480 Speaker 2: to those markets in continuing to remain one of the 139 00:07:11,520 --> 00:07:13,240 Speaker 2: big sources of exports in the region. 140 00:07:13,400 --> 00:07:16,160 Speaker 1: So you noted that some of the projects haven't really 141 00:07:16,200 --> 00:07:20,240 Speaker 1: started yet and that we haven't seen these manufacturing facilities 142 00:07:20,280 --> 00:07:23,360 Speaker 1: really at the scale that they're being talked about, or 143 00:07:23,400 --> 00:07:25,920 Speaker 1: perhaps are intended in the future. But certainly there are 144 00:07:25,960 --> 00:07:28,200 Speaker 1: movements in various countries and parts of the world from 145 00:07:28,240 --> 00:07:32,440 Speaker 1: a policy standpoint, that do very intentionally create an environment 146 00:07:32,480 --> 00:07:34,840 Speaker 1: where we expect to see this happen in the future. 147 00:07:34,880 --> 00:07:38,520 Speaker 1: So let's start with the US. Can you remind us 148 00:07:38,560 --> 00:07:41,640 Speaker 1: briefly what it is that the Inflation Reduction Act is 149 00:07:41,680 --> 00:07:45,880 Speaker 1: designed to do in reference to supply chains and manufacturing. 150 00:07:46,560 --> 00:07:48,880 Speaker 2: Absolutely, when we talk about a lack of investment in 151 00:07:48,920 --> 00:07:51,880 Speaker 2: new facilities, that's really in the West, in countries that 152 00:07:52,040 --> 00:07:55,560 Speaker 2: profess to have this real emphasis on reshowing, on onshoring, manufacturing, 153 00:07:55,600 --> 00:07:57,760 Speaker 2: supply chains for clean energy, and we haven't seen that 154 00:07:57,760 --> 00:08:01,960 Speaker 2: translate into commissionings yet into being brought online at scale 155 00:08:02,080 --> 00:08:04,160 Speaker 2: and anywhere near the scale that we're seeing in China. 156 00:08:04,160 --> 00:08:06,360 Speaker 2: And we're continuing to see there. That might change, and 157 00:08:06,400 --> 00:08:09,680 Speaker 2: that might change just because of what you mentioned just now, 158 00:08:09,720 --> 00:08:12,440 Speaker 2: which is because of policies like the Inflation Reduction Act, 159 00:08:12,560 --> 00:08:16,240 Speaker 2: which are all about deploying speeding the energy transition within 160 00:08:16,280 --> 00:08:18,400 Speaker 2: the US, but are also framed and this is really 161 00:08:18,400 --> 00:08:21,960 Speaker 2: important as an economic tool as a job creation bill, 162 00:08:22,160 --> 00:08:25,840 Speaker 2: and as something that really doubles down on localizing the 163 00:08:26,120 --> 00:08:28,880 Speaker 2: value add and having that accrue as part of the 164 00:08:28,960 --> 00:08:31,040 Speaker 2: energy transition, having that value add a crew to the 165 00:08:31,120 --> 00:08:34,400 Speaker 2: US to the domestic market. So what's resulted is this 166 00:08:34,480 --> 00:08:37,920 Speaker 2: policy which not just subsidizes through the form of tax credits, 167 00:08:37,960 --> 00:08:40,440 Speaker 2: the deployment of things like evs, of things like the 168 00:08:40,440 --> 00:08:43,400 Speaker 2: production of hydrogen of ccs, but also is very keen 169 00:08:43,480 --> 00:08:46,600 Speaker 2: on providing that same support to manufacturing facilities. So you've 170 00:08:46,600 --> 00:08:49,520 Speaker 2: got tax credits again that are available for manufacturers not 171 00:08:49,600 --> 00:08:52,720 Speaker 2: just of critical minerals for batteries, but also of various 172 00:08:52,720 --> 00:08:57,120 Speaker 2: components for whether it's onshore or offshore wind, solar battery 173 00:08:57,160 --> 00:08:59,920 Speaker 2: making itself really across the board, and it's very compar 174 00:09:00,240 --> 00:09:02,280 Speaker 2: have been doing so. And then you've got some additional 175 00:09:02,320 --> 00:09:04,520 Speaker 2: tools which are very much linked to this, such as 176 00:09:04,520 --> 00:09:06,880 Speaker 2: with some of the investment tax credits which are available 177 00:09:06,880 --> 00:09:10,720 Speaker 2: for deploying renewable energy projects. Ten percent for examples, is 178 00:09:10,720 --> 00:09:14,080 Speaker 2: typically what it's set at. Additional subsidies which are provided 179 00:09:14,120 --> 00:09:18,000 Speaker 2: when various domestic manufacturing requirements are met. So there's a 180 00:09:18,000 --> 00:09:20,360 Speaker 2: whole suite of tools that are deployed as part of 181 00:09:20,400 --> 00:09:23,440 Speaker 2: not just the Inflation Reduction Act, but also piece of 182 00:09:23,480 --> 00:09:25,800 Speaker 2: legislation that are linked to it, such as the Infrastructure 183 00:09:25,800 --> 00:09:28,680 Speaker 2: Bill that was passed earlier by the Biden administration. And 184 00:09:28,720 --> 00:09:31,600 Speaker 2: that's a pretty powerful arsenal when it comes to really 185 00:09:31,679 --> 00:09:34,480 Speaker 2: channelling investments into the US, and we've seen a pretty 186 00:09:34,520 --> 00:09:36,600 Speaker 2: marked response as a result of that. What we're doing 187 00:09:36,679 --> 00:09:40,360 Speaker 2: is tracking new EV new battery factory projects. We're doing 188 00:09:40,360 --> 00:09:42,280 Speaker 2: so in other areas too, but just when we look 189 00:09:42,320 --> 00:09:46,000 Speaker 2: at EV's and batteries, we see about sixty plus billion 190 00:09:46,040 --> 00:09:50,160 Speaker 2: dollars of new announcements that have been made since August 191 00:09:50,280 --> 00:09:52,680 Speaker 2: last year, and really directly as a result of the 192 00:09:52,720 --> 00:09:55,480 Speaker 2: Inflation Reduction Act. So the IRA has really proven that 193 00:09:55,559 --> 00:10:00,480 Speaker 2: it's managed to convince developers, investors finances to double their 194 00:10:00,480 --> 00:10:04,280 Speaker 2: efforts towards funding facilities in the US for manufacturing clean 195 00:10:04,400 --> 00:10:06,760 Speaker 2: energy technologies. And that's something that's really speeding up. 196 00:10:06,920 --> 00:10:10,280 Speaker 1: And certainly this will drive this onshoring move in the 197 00:10:10,400 --> 00:10:13,640 Speaker 1: United States. But what about the near shoring aspects? Does 198 00:10:13,679 --> 00:10:17,440 Speaker 1: the array have a benefit for nearby countries and specifically 199 00:10:17,520 --> 00:10:21,360 Speaker 1: I'm thinking about Mexico, which has started to emerge as 200 00:10:21,400 --> 00:10:23,120 Speaker 1: a nearby manufacturing hub. 201 00:10:23,360 --> 00:10:25,800 Speaker 2: So there are various bits of the IRA that do 202 00:10:25,840 --> 00:10:28,280 Speaker 2: allow for near shoring. I think what's important to note 203 00:10:28,320 --> 00:10:30,000 Speaker 2: is that this is actually quite limited when we talk 204 00:10:30,040 --> 00:10:31,960 Speaker 2: about the IRA as a whole. There's a number of 205 00:10:31,960 --> 00:10:35,480 Speaker 2: different production tax credits, investment tax credits that fund clean 206 00:10:35,600 --> 00:10:38,120 Speaker 2: energy technologies, but there's only really one where this whole 207 00:10:38,160 --> 00:10:41,280 Speaker 2: near shoring aspect is that relevant, and that's the Electric 208 00:10:41,400 --> 00:10:44,240 Speaker 2: Vehicle Tax Credit. So that's five hundred dollars that you're 209 00:10:44,280 --> 00:10:47,480 Speaker 2: ultimately eligible if you meet both criteria that are set 210 00:10:47,679 --> 00:10:50,280 Speaker 2: for accessing this tax credit, and part of that can 211 00:10:50,320 --> 00:10:54,560 Speaker 2: be met via sourcing critical materials from a number of geographies, 212 00:10:54,880 --> 00:10:57,800 Speaker 2: including countries with which the US is a free trade 213 00:10:57,840 --> 00:11:01,160 Speaker 2: agreement and that does include North America to Canada and Mexico. 214 00:11:01,400 --> 00:11:05,320 Speaker 2: And the other is to assemble manufacture electric vehicles in 215 00:11:05,440 --> 00:11:09,320 Speaker 2: North America, and that includes Mexico and Canada, and that 216 00:11:09,360 --> 00:11:12,800 Speaker 2: does represent opportunities not just for free trade agreement countries, 217 00:11:12,880 --> 00:11:15,440 Speaker 2: but also for of course the countries that are closest 218 00:11:15,440 --> 00:11:19,120 Speaker 2: and that are most enmeshed in the vehicle supply chains 219 00:11:19,120 --> 00:11:21,600 Speaker 2: that we have today in the US, and Mexico really 220 00:11:21,600 --> 00:11:24,079 Speaker 2: has pride of place there as somewhere where it's actually 221 00:11:24,160 --> 00:11:27,079 Speaker 2: quite cheap to manufacture. Labor costs are now cheaper than 222 00:11:27,080 --> 00:11:30,440 Speaker 2: in China, Andres Manuel Lopez Obrador, the Mexican President, is 223 00:11:30,520 --> 00:11:32,800 Speaker 2: very keen to make good on this. And even though 224 00:11:32,840 --> 00:11:35,440 Speaker 2: he isn't very keen on building out renewable energy locally 225 00:11:35,440 --> 00:11:37,520 Speaker 2: within his country, he is keen on building on these 226 00:11:37,600 --> 00:11:40,080 Speaker 2: kind of opportunities available as a result of near shoring 227 00:11:40,200 --> 00:11:43,400 Speaker 2: and the IRA having those provisions, So that changes things somewhat. 228 00:11:43,480 --> 00:11:46,520 Speaker 2: And what we've also spotted as a trend that's emerged 229 00:11:46,640 --> 00:11:48,920 Speaker 2: after the IRA is the fact that we've had a 230 00:11:49,000 --> 00:11:52,320 Speaker 2: number of different governments, a number of different countries come 231 00:11:52,360 --> 00:11:54,880 Speaker 2: to the US and ask to be included in various 232 00:11:54,880 --> 00:11:58,079 Speaker 2: bits of this EV tax credit. So, for example, I 233 00:11:58,200 --> 00:12:01,600 Speaker 2: mentioned that critical material require for materials that are mined 234 00:12:01,760 --> 00:12:04,760 Speaker 2: or refined in a given region being used for an 235 00:12:04,760 --> 00:12:08,040 Speaker 2: EV sold in the US, thereby making it eligible for 236 00:12:08,160 --> 00:12:10,719 Speaker 2: about half of that tax credit. Well, that's a requirement 237 00:12:10,800 --> 00:12:13,640 Speaker 2: that's been lobbied for by various regions, such as countries 238 00:12:13,679 --> 00:12:17,360 Speaker 2: like Japan. So Japan successfully asked to sign a form 239 00:12:17,400 --> 00:12:20,520 Speaker 2: of free trade agreement that allows for its raw materials 240 00:12:20,559 --> 00:12:23,520 Speaker 2: to be considered as part of that tax credit Europe, 241 00:12:23,559 --> 00:12:25,920 Speaker 2: the EU, the European Commission is quite keen to do 242 00:12:25,960 --> 00:12:29,360 Speaker 2: something similar, but as a whole, that's only one small 243 00:12:29,400 --> 00:12:32,160 Speaker 2: part of the overall package. And when it comes to 244 00:12:32,200 --> 00:12:35,640 Speaker 2: a lot of those subsidies available for domestic manufacturers in 245 00:12:35,679 --> 00:12:38,760 Speaker 2: the US, those are really focused just on the domestic market. 246 00:12:38,800 --> 00:12:41,800 Speaker 2: They're not available to other countries, and a real focus 247 00:12:41,880 --> 00:12:45,000 Speaker 2: of that's part of this policy, which is bringing manufacturing 248 00:12:45,040 --> 00:12:47,520 Speaker 2: to the US as part of this energy transition that 249 00:12:47,520 --> 00:12:50,680 Speaker 2: we expect to accelerate as a result of the IRA Well. 250 00:12:50,800 --> 00:12:54,120 Speaker 1: So you reference that there are some very limited instances 251 00:12:54,120 --> 00:12:56,679 Speaker 1: where countries are able to take advantage of the tax credits, 252 00:12:56,679 --> 00:12:59,920 Speaker 1: but largely this is a domestic conversation, which then leads 253 00:13:00,080 --> 00:13:02,880 Speaker 1: need who then ask what is the reaction on the 254 00:13:02,920 --> 00:13:06,680 Speaker 1: part of other countries that perhaps were depending upon trade 255 00:13:06,840 --> 00:13:09,600 Speaker 1: or even on another side of it in the EU 256 00:13:09,720 --> 00:13:12,200 Speaker 1: where they were looking to become manufacturing homes of some 257 00:13:12,320 --> 00:13:15,839 Speaker 1: of these industries. What has the reaction been over in Europe. 258 00:13:16,080 --> 00:13:17,480 Speaker 2: So I feel like we're entering a bit of a 259 00:13:17,520 --> 00:13:20,040 Speaker 2: new phase with the energy transition, where before it was 260 00:13:20,080 --> 00:13:23,640 Speaker 2: all about carbon budgets domestically quantified you try and hit 261 00:13:23,679 --> 00:13:26,440 Speaker 2: your goals, you'd clean up your power sector. The spillover 262 00:13:26,480 --> 00:13:30,840 Speaker 2: effects would be pretty negligible. Besides providing opportunities for countries 263 00:13:30,880 --> 00:13:33,640 Speaker 2: like China to emerge as exporters of clean technology, what 264 00:13:33,679 --> 00:13:35,760 Speaker 2: we're seeing now is something very different, and we've entered 265 00:13:35,800 --> 00:13:38,160 Speaker 2: a sort of era of policy competition where there's this 266 00:13:38,240 --> 00:13:41,480 Speaker 2: perceived need to respond to things like the IRA, which 267 00:13:41,480 --> 00:13:45,120 Speaker 2: a seemingly proven extremely attractive when we look at announced 268 00:13:45,160 --> 00:13:48,000 Speaker 2: projects and the investment that's flowing to the US right now, 269 00:13:48,080 --> 00:13:51,080 Speaker 2: and there are concerns by countries like the member states 270 00:13:51,080 --> 00:13:53,319 Speaker 2: of the European Union, for example, that they might be 271 00:13:53,400 --> 00:13:55,960 Speaker 2: left by the wayside. So the EU has targets for 272 00:13:56,000 --> 00:13:58,959 Speaker 2: building out battery making. It's for the last few years 273 00:13:58,960 --> 00:14:02,679 Speaker 2: formed big sort of sourcier and alliances and different projects 274 00:14:02,679 --> 00:14:05,600 Speaker 2: of common European interests, for example, to promote battery making 275 00:14:05,600 --> 00:14:08,480 Speaker 2: within its borders. But what the IRA provided was this 276 00:14:08,600 --> 00:14:12,000 Speaker 2: extremely streamlined system of tax credits, which have no sort 277 00:14:12,000 --> 00:14:14,920 Speaker 2: of federal budgetary limits to how they can be accessed, 278 00:14:14,960 --> 00:14:19,080 Speaker 2: are extremely generous and basically blow anything that the European 279 00:14:19,200 --> 00:14:21,560 Speaker 2: Union is offering out of the water. And that's something 280 00:14:21,640 --> 00:14:24,080 Speaker 2: that's been really that's been a real concern and has 281 00:14:24,120 --> 00:14:27,520 Speaker 2: been a point that a lot of clean energy lobby 282 00:14:27,520 --> 00:14:30,200 Speaker 2: groups lobby the EU sort of change and revise. So 283 00:14:30,400 --> 00:14:32,640 Speaker 2: what came of that was the Net Zero Industry Act, 284 00:14:32,720 --> 00:14:35,600 Speaker 2: and that's a few weeks ago we saw the release 285 00:14:35,720 --> 00:14:39,800 Speaker 2: of this plan, which really has as a central purpose 286 00:14:39,840 --> 00:14:42,880 Speaker 2: to respond to the IRA and prove that EU means business, 287 00:14:42,880 --> 00:14:45,160 Speaker 2: that it's serious, that it has the tools to encourage 288 00:14:45,240 --> 00:14:48,280 Speaker 2: the onshoring of manufacturing for clean energy technologies. It does 289 00:14:48,320 --> 00:14:50,880 Speaker 2: a few things, and unlike the IRA, it actually goes 290 00:14:50,880 --> 00:14:54,280 Speaker 2: a bit further and sets actual targets that are quantifiable 291 00:14:54,360 --> 00:14:57,320 Speaker 2: in many cases for building out the manufacture of things 292 00:14:57,360 --> 00:15:01,880 Speaker 2: like heat pumps, solar technologies, win turbines, batteries. All of 293 00:15:01,880 --> 00:15:04,360 Speaker 2: those different things have different targets that are set. So 294 00:15:04,560 --> 00:15:07,200 Speaker 2: for batteries that U wants to meet eighty five percent 295 00:15:07,240 --> 00:15:10,080 Speaker 2: of domestic demand by twenty thirty, that's about five hundred 296 00:15:10,080 --> 00:15:12,840 Speaker 2: and fifty gigg what hours of capacity. That's quite a lot. 297 00:15:13,000 --> 00:15:15,640 Speaker 2: And having its sight set on that is very clear 298 00:15:15,680 --> 00:15:18,480 Speaker 2: and sets the direction of travel. Now, whether you fall 299 00:15:18,520 --> 00:15:21,520 Speaker 2: short is by not really having the same system of 300 00:15:21,560 --> 00:15:24,560 Speaker 2: subsidies that the US has We've mentioned how streamlined the 301 00:15:24,640 --> 00:15:27,040 Speaker 2: tax credits are. Even though there's all this guidance coming 302 00:15:27,040 --> 00:15:29,360 Speaker 2: out from the US Treasury about how to interpret various 303 00:15:29,360 --> 00:15:31,680 Speaker 2: bits of them, they're generally there's really good awareness of 304 00:15:31,680 --> 00:15:34,600 Speaker 2: how they can be accessed and the process for doing so. 305 00:15:34,720 --> 00:15:37,080 Speaker 2: It's relatively simple. Now when it comes to the EU, 306 00:15:37,200 --> 00:15:41,120 Speaker 2: what you've got is pretty comparable levels of available funding 307 00:15:41,160 --> 00:15:43,200 Speaker 2: across the board for clean energy, but a lot of 308 00:15:43,200 --> 00:15:45,640 Speaker 2: that isn't going to manufacturing. It's going to things like 309 00:15:45,800 --> 00:15:48,680 Speaker 2: R and D. It's going to things like deploying technologies, 310 00:15:48,800 --> 00:15:51,400 Speaker 2: and that's a bit of a weakness. Now the U 311 00:15:51,560 --> 00:15:53,560 Speaker 2: wants to sort of rejig some of those pots of 312 00:15:53,600 --> 00:15:56,840 Speaker 2: money and have them flow towards manufacturing. But again there's 313 00:15:56,880 --> 00:15:58,680 Speaker 2: this issue, which is when the US try to do 314 00:15:58,720 --> 00:16:00,720 Speaker 2: this in the past, it's struggled with the level of 315 00:16:00,760 --> 00:16:03,680 Speaker 2: administrative complexity of some of these schemes. So there's the 316 00:16:03,680 --> 00:16:06,240 Speaker 2: Innovation Fund, which is one of the main funding schemes 317 00:16:06,240 --> 00:16:09,680 Speaker 2: that's available for the energy transition writ large, that's something 318 00:16:09,720 --> 00:16:13,520 Speaker 2: that's funded by carbon credit revenues levied across the EU, 319 00:16:14,000 --> 00:16:17,360 Speaker 2: and it's actually incredibly difficult and competitive to access that. 320 00:16:17,440 --> 00:16:19,360 Speaker 2: Lots of money. So we saw a success rate of 321 00:16:19,400 --> 00:16:22,160 Speaker 2: about two percent for one of the funding rounds for 322 00:16:22,240 --> 00:16:25,400 Speaker 2: large projects under the Innovation Fund. That's a lot of 323 00:16:25,400 --> 00:16:28,880 Speaker 2: time that's wasted by companies putting together proposals applying for 324 00:16:28,920 --> 00:16:30,960 Speaker 2: that funding. So what you've got in the EU is 325 00:16:31,000 --> 00:16:33,640 Speaker 2: a really broken up system of various funds, of various 326 00:16:33,640 --> 00:16:35,640 Speaker 2: pots of money. There's not a great deal of awareness 327 00:16:35,640 --> 00:16:37,480 Speaker 2: about how to access them. A lot of them aren't 328 00:16:37,520 --> 00:16:40,400 Speaker 2: funding manufacturing and doing so. When you do figure out 329 00:16:40,400 --> 00:16:42,240 Speaker 2: where the money is and how to access it is 330 00:16:42,320 --> 00:16:45,280 Speaker 2: very competitive. So it is not the sort of basis 331 00:16:45,320 --> 00:16:48,320 Speaker 2: for giving US a vote of confidence in European industry 332 00:16:48,440 --> 00:16:51,480 Speaker 2: and seeing it as a real competitor with the IRA. 333 00:16:51,720 --> 00:16:55,000 Speaker 2: And we've continued to see post this Net Zero Industry Acts, 334 00:16:55,080 --> 00:16:58,480 Speaker 2: which again sets those impressive targets, is still a proposal, 335 00:16:58,520 --> 00:17:00,520 Speaker 2: will be enacted over the next couple of is. We've 336 00:17:00,520 --> 00:17:03,320 Speaker 2: seen a response, some enthusiasm, but still there's this general 337 00:17:03,400 --> 00:17:06,400 Speaker 2: narrative that when it comes to competing on these subsidies, 338 00:17:06,440 --> 00:17:10,040 Speaker 2: the US is far ahead, and a number of different 339 00:17:10,080 --> 00:17:14,040 Speaker 2: European battery makers such as North Vault, Freyer, even Tesla 340 00:17:14,119 --> 00:17:16,320 Speaker 2: has said that they'll pivot towards the US, which they 341 00:17:16,320 --> 00:17:19,159 Speaker 2: see as far more attractive in terms of the incentives 342 00:17:19,160 --> 00:17:22,120 Speaker 2: that are being offered and away from the EU, and 343 00:17:22,200 --> 00:17:24,640 Speaker 2: that's a trend that we might receive speed up over 344 00:17:24,640 --> 00:17:25,520 Speaker 2: the next few months. 345 00:17:25,960 --> 00:17:28,520 Speaker 1: Well, let's rewind a little bit and let's just go 346 00:17:28,640 --> 00:17:31,360 Speaker 1: back to those targets that you mentioned in the EU specifically, 347 00:17:31,440 --> 00:17:33,480 Speaker 1: And the reason I want to focus on that is 348 00:17:33,520 --> 00:17:35,679 Speaker 1: one that the space that we work in has no 349 00:17:35,760 --> 00:17:39,440 Speaker 1: shortage of targets, but certainly the underpinning mechanisms are something 350 00:17:39,480 --> 00:17:41,560 Speaker 1: that need to be figured out. These parts of money, 351 00:17:41,680 --> 00:17:45,520 Speaker 1: this complexity around how to actually go about accessing them. 352 00:17:45,520 --> 00:17:49,160 Speaker 1: In the EU, are there dedicated funds that are against 353 00:17:49,200 --> 00:17:51,439 Speaker 1: each of these targets or is it still yet to 354 00:17:51,480 --> 00:17:54,159 Speaker 1: be determined how those targets will be met? And the 355 00:17:54,160 --> 00:17:56,080 Speaker 1: targets just create a statement of intention. 356 00:17:56,320 --> 00:17:58,520 Speaker 2: It's a statement of intention. There's a number of funds 357 00:17:58,520 --> 00:18:01,720 Speaker 2: that are available, the Modernization Fund, the innovation fund I mentioned, 358 00:18:01,800 --> 00:18:04,560 Speaker 2: there's this mooted creation of a sovereignty fund that's to 359 00:18:04,640 --> 00:18:07,280 Speaker 2: speed things. But again, many of those funds are not 360 00:18:07,400 --> 00:18:09,720 Speaker 2: focusing on manufacturing, and some of them aren't even just 361 00:18:09,760 --> 00:18:12,280 Speaker 2: focused on the energy transition. So there's this new fund 362 00:18:12,320 --> 00:18:14,080 Speaker 2: that will be created that will be coming up with 363 00:18:14,119 --> 00:18:16,880 Speaker 2: the words sovereignty slap to its title, and what that'll 364 00:18:16,880 --> 00:18:19,600 Speaker 2: be funding is not just keen energy, but things like semiconductors, 365 00:18:19,600 --> 00:18:22,000 Speaker 2: which are also incredibly capital intensive when it comes to 366 00:18:22,000 --> 00:18:26,040 Speaker 2: building out factories for making advanced chips. So there's there's 367 00:18:26,080 --> 00:18:29,560 Speaker 2: a lack of clarity of purpose, there's an opacity of 368 00:18:29,600 --> 00:18:32,160 Speaker 2: available schemes, and that means that the EU just seems 369 00:18:32,240 --> 00:18:34,879 Speaker 2: less nimble, it seems less reactive, it seems less attractive 370 00:18:34,960 --> 00:18:36,600 Speaker 2: when you're a manufacturer that has a bit of a 371 00:18:36,640 --> 00:18:39,200 Speaker 2: global footprint and some flexibility about where it can set 372 00:18:39,280 --> 00:18:39,720 Speaker 2: up shop. 373 00:18:40,040 --> 00:18:42,520 Speaker 1: So let's continue moving around the world. One of our 374 00:18:42,560 --> 00:18:45,680 Speaker 1: recent shows focused on India, which is now the most 375 00:18:45,680 --> 00:18:48,200 Speaker 1: populous country, and there is a conversation to be had 376 00:18:48,240 --> 00:18:50,760 Speaker 1: regarding whether or not they are going to emerge also 377 00:18:51,000 --> 00:18:53,919 Speaker 1: as a manufacturing center for some of these industries. So 378 00:18:54,800 --> 00:18:59,680 Speaker 1: how has the IRA impacted India's strategy and even more 379 00:18:59,680 --> 00:19:04,760 Speaker 1: broad how do you see India fitting into this renewable energy, 380 00:19:04,880 --> 00:19:07,159 Speaker 1: clean energy manufacturing space. 381 00:19:07,480 --> 00:19:09,920 Speaker 2: So India's sort of pursuing its own strategy and it's 382 00:19:09,960 --> 00:19:13,399 Speaker 2: been doing so unlike many other countries pretty consistently for 383 00:19:13,440 --> 00:19:15,760 Speaker 2: the last couple of years. There's been this stated ambition 384 00:19:15,880 --> 00:19:18,600 Speaker 2: to build out with a real focus on solar manufacturing, 385 00:19:18,880 --> 00:19:22,600 Speaker 2: local PV technology production, and there's been a number of 386 00:19:22,640 --> 00:19:25,400 Speaker 2: tools that have been developed doing so what's really interesting 387 00:19:25,480 --> 00:19:28,919 Speaker 2: is seeing how that's playing out. So there's this various 388 00:19:28,960 --> 00:19:32,320 Speaker 2: prongs to this Indian strategy to building out domestic clean 389 00:19:32,359 --> 00:19:35,639 Speaker 2: tech manufacturing. One of them is by limiting manufacturers and 390 00:19:35,680 --> 00:19:39,840 Speaker 2: really barring a whole number of example Chinese solar product 391 00:19:39,840 --> 00:19:42,800 Speaker 2: manufacturers from being able to compete in auctions where a 392 00:19:42,800 --> 00:19:45,320 Speaker 2: lot of the subsidy pots of money are available. There's 393 00:19:45,359 --> 00:19:48,800 Speaker 2: also a pretty hefty tariff for around forty percent that's 394 00:19:48,840 --> 00:19:53,120 Speaker 2: also levied on various solar product imports. There are also 395 00:19:53,200 --> 00:19:56,879 Speaker 2: various local content requirements in different subsidy schemes. There are 396 00:19:56,920 --> 00:19:59,720 Speaker 2: a number of different measures. But what's happened as a 397 00:19:59,720 --> 00:20:02,760 Speaker 2: result that is pushing up the costs of building out 398 00:20:02,800 --> 00:20:05,520 Speaker 2: solo projects in India at a time when the government 399 00:20:05,560 --> 00:20:09,200 Speaker 2: is implementing an incredibly ambitious plan to speed up a 400 00:20:09,280 --> 00:20:13,080 Speaker 2: new energy deployment and a shortage of domestically available modules. 401 00:20:13,080 --> 00:20:15,520 Speaker 2: So a lot of these measures were coming in manufacturers 402 00:20:15,520 --> 00:20:18,120 Speaker 2: were aware of it. They stockpiled a lot of equipment 403 00:20:18,240 --> 00:20:21,159 Speaker 2: in preparation for this coming, but right now there is 404 00:20:21,320 --> 00:20:23,879 Speaker 2: a lack of available modules, which again is having this 405 00:20:23,960 --> 00:20:28,879 Speaker 2: inflationary impact on project costs, so is not going terribly well. 406 00:20:29,000 --> 00:20:31,720 Speaker 2: It is a very determined bid to build out manufacturing 407 00:20:31,720 --> 00:20:34,120 Speaker 2: in a country that has growing demand, but it does 408 00:20:34,200 --> 00:20:36,440 Speaker 2: show that when you're really going for broke, it can 409 00:20:36,480 --> 00:20:39,120 Speaker 2: be difficult to pull off this on shoring play. And 410 00:20:39,520 --> 00:20:41,960 Speaker 2: it's interesting because it sort of stands in contrast with 411 00:20:42,000 --> 00:20:44,560 Speaker 2: the EU, where the EU, in terms of what's proposed 412 00:20:44,600 --> 00:20:47,320 Speaker 2: now and that may change and become more ambitious, we're 413 00:20:47,359 --> 00:20:51,399 Speaker 2: not seeing an awful lot of conviction behind those measures 414 00:20:51,440 --> 00:20:54,400 Speaker 2: and those targets and what's backing them, whereas in India 415 00:20:54,440 --> 00:20:57,560 Speaker 2: we may have seen policymakers go somewhat too far and 416 00:20:57,640 --> 00:21:00,280 Speaker 2: actually suffer the consequences of that, which are in free 417 00:21:00,280 --> 00:21:03,800 Speaker 2: project costs and actually having those different policies present a 418 00:21:03,840 --> 00:21:07,080 Speaker 2: barrier to getting the energy transition right. And there's a 419 00:21:07,160 --> 00:21:10,000 Speaker 2: lesson to be drawn there, and that's finding an equilibrium 420 00:21:10,000 --> 00:21:13,640 Speaker 2: between trying to head your bets against concentration of manufacturing 421 00:21:13,680 --> 00:21:17,200 Speaker 2: capacity globally, making sure that value from the energy transition, 422 00:21:17,240 --> 00:21:21,239 Speaker 2: accrus locally, having political buy in, creating jobs. All of 423 00:21:21,280 --> 00:21:24,280 Speaker 2: those things need to be balanced with this real need, 424 00:21:24,320 --> 00:21:27,880 Speaker 2: which is to keep things economically attractive. And when we're 425 00:21:27,880 --> 00:21:30,359 Speaker 2: scaling the energy transition at a rapid pace right now, 426 00:21:30,480 --> 00:21:33,000 Speaker 2: adding additional cost as a result of trying to do 427 00:21:33,080 --> 00:21:35,920 Speaker 2: things locally of making things less efficient is something that 428 00:21:35,920 --> 00:21:38,520 Speaker 2: should be taken really seriously and quantified. And that's part 429 00:21:38,600 --> 00:21:40,639 Speaker 2: of what we're trying to do at BNF is to 430 00:21:40,720 --> 00:21:44,040 Speaker 2: work out the impact of various levels of local content, 431 00:21:44,600 --> 00:21:48,880 Speaker 2: of various onshoing policies to undeployment, but also on overall 432 00:21:49,040 --> 00:21:51,359 Speaker 2: costs when we look at the energy transition as a whole. 433 00:21:51,680 --> 00:21:54,280 Speaker 1: So with India, it seems like it's both regarding manufacturing 434 00:21:54,280 --> 00:21:57,560 Speaker 1: but also regarding supplying their domestic market. So then let's 435 00:21:57,600 --> 00:22:00,280 Speaker 1: pivot to a country that is looking to manufacture with 436 00:22:00,320 --> 00:22:03,760 Speaker 1: the intention to export, and that would be batteries and 437 00:22:03,880 --> 00:22:06,560 Speaker 1: Indonesia they have been looking at this as a space 438 00:22:06,600 --> 00:22:09,440 Speaker 1: that they could potentially be going into in that value chain. 439 00:22:09,960 --> 00:22:14,240 Speaker 1: What are your views regarding Indonesia or potentially other countries 440 00:22:14,280 --> 00:22:18,440 Speaker 1: that are emerging as battery manufacturing hubs. 441 00:22:18,760 --> 00:22:21,119 Speaker 2: So a lot of middle or low income countries are 442 00:22:21,160 --> 00:22:25,000 Speaker 2: really conscious of this shift and of the opportunity that 443 00:22:25,080 --> 00:22:27,800 Speaker 2: it holds. So we've seen not just India, but many 444 00:22:27,840 --> 00:22:30,080 Speaker 2: other countries, and Indonesia is really one of them. And 445 00:22:30,160 --> 00:22:32,360 Speaker 2: Indonesia is interesting because a lot of the battery grade 446 00:22:32,440 --> 00:22:35,040 Speaker 2: nickel that's produced, that's used for a lot of the 447 00:22:35,200 --> 00:22:38,760 Speaker 2: mainstream NMC batteries that have made up a large share 448 00:22:38,800 --> 00:22:41,640 Speaker 2: of lithiumind batteries deployed in electric vehicles over the last 449 00:22:41,680 --> 00:22:44,840 Speaker 2: few years. A lot of that is mined in Indonesia. 450 00:22:44,920 --> 00:22:47,359 Speaker 2: So initially the government tried to do a few things. 451 00:22:47,480 --> 00:22:50,560 Speaker 2: It restricted exports. What it wanted was for more of 452 00:22:50,560 --> 00:22:54,240 Speaker 2: that nickel to be refined to be processed within its borders. 453 00:22:54,359 --> 00:22:57,000 Speaker 2: That's one move, but there's also real focus on trying 454 00:22:57,040 --> 00:23:00,080 Speaker 2: to attract battery makers to set up facilities for various 455 00:23:00,080 --> 00:23:03,680 Speaker 2: parts of the battery value chain, but notably battery cell facilities. 456 00:23:03,760 --> 00:23:07,880 Speaker 2: For again, having those big capital intensive projects built within Indonesia, 457 00:23:08,080 --> 00:23:12,520 Speaker 2: hiring Indonesians and producing value locally. That's difficult to pull 458 00:23:12,560 --> 00:23:15,479 Speaker 2: off because of a number of different factors, and one 459 00:23:15,520 --> 00:23:18,240 Speaker 2: of them is low local demand. So Indonesia is a 460 00:23:18,280 --> 00:23:20,720 Speaker 2: market where we do see two to three wheelers electrifying 461 00:23:20,760 --> 00:23:23,199 Speaker 2: quite rapidly in the shortter, midterm, but in terms of 462 00:23:23,320 --> 00:23:27,600 Speaker 2: overall having that local demand to scale that manufacturing base 463 00:23:27,880 --> 00:23:30,880 Speaker 2: is maybe not the best suited in terms of locations. 464 00:23:31,040 --> 00:23:33,399 Speaker 2: The cost of finance is a bit higher than elsewhere, 465 00:23:33,440 --> 00:23:36,119 Speaker 2: and what we're not seeing is a massive amount of 466 00:23:36,160 --> 00:23:38,399 Speaker 2: interest comparable to what we've seen in the US, for 467 00:23:38,440 --> 00:23:41,800 Speaker 2: example post diarray. So there's some real hurdles. What's interesting 468 00:23:41,920 --> 00:23:44,600 Speaker 2: is that when you see countries like the US, regions 469 00:23:44,640 --> 00:23:47,640 Speaker 2: like the EU recognizing that there's this tension, that there's 470 00:23:47,720 --> 00:23:50,600 Speaker 2: these policies that could be seen as distortive in terms 471 00:23:50,600 --> 00:23:53,520 Speaker 2: of subsidies being provided not just by the US but 472 00:23:53,560 --> 00:23:56,440 Speaker 2: by other rich countries too, and that might mean that 473 00:23:56,640 --> 00:23:59,600 Speaker 2: many of these poorer countries lose out. So trying to 474 00:23:59,600 --> 00:24:01,639 Speaker 2: sort of where that circle can be done in a 475 00:24:01,760 --> 00:24:03,800 Speaker 2: number of different ways, and what the US is doing, 476 00:24:03,840 --> 00:24:06,600 Speaker 2: for example, the Biden administration has been very vocal about 477 00:24:06,640 --> 00:24:09,280 Speaker 2: trying to help and support countries to move up the 478 00:24:09,359 --> 00:24:12,280 Speaker 2: value chain and to build out, for example, smelting facilities 479 00:24:12,600 --> 00:24:16,879 Speaker 2: or refineries for battery metals across regions like Southeast Asia 480 00:24:16,920 --> 00:24:19,800 Speaker 2: sub Saharan Africa, and that's a very important move of 481 00:24:19,840 --> 00:24:22,080 Speaker 2: some real value when it comes to sort of convincing 482 00:24:22,119 --> 00:24:24,640 Speaker 2: the world that this isn't just about building out local jobs, 483 00:24:24,680 --> 00:24:26,760 Speaker 2: which it is to some extent, but also about spreading 484 00:24:26,760 --> 00:24:29,600 Speaker 2: the benefits as widely as possible. And maybe we should 485 00:24:29,600 --> 00:24:31,600 Speaker 2: be seeing a bit more emphasis on that in many 486 00:24:31,640 --> 00:24:33,200 Speaker 2: of the policies that are being announced today. 487 00:24:33,480 --> 00:24:35,639 Speaker 1: Other than the countries that I've brought up, are there 488 00:24:35,680 --> 00:24:38,080 Speaker 1: other countries of note that you're watching closely well. 489 00:24:38,080 --> 00:24:40,560 Speaker 2: We're looking at countries that have a potential to scale 490 00:24:40,560 --> 00:24:43,040 Speaker 2: things up quite rapidly and to make a difference. Japan 491 00:24:43,160 --> 00:24:45,399 Speaker 2: is one. It has a battery industry strategy where it's 492 00:24:45,400 --> 00:24:47,600 Speaker 2: aiming to build out one hundred and fifty hours of 493 00:24:47,720 --> 00:24:52,000 Speaker 2: battery cell manufacturing by twenty thirty. There's subsidies being deployed there. 494 00:24:52,160 --> 00:24:56,639 Speaker 2: South Korea is dispersing billions of dollars in support to 495 00:24:56,720 --> 00:25:00,479 Speaker 2: various battery manufacturers locally and within its borders. Canada is 496 00:25:00,840 --> 00:25:03,480 Speaker 2: finalizing its twenty twenty three budgets, and part of that 497 00:25:03,560 --> 00:25:06,040 Speaker 2: is going to replicate, to some extent tax incentives that 498 00:25:06,080 --> 00:25:08,919 Speaker 2: you have as part of the IRA providing a thirty 499 00:25:08,920 --> 00:25:12,800 Speaker 2: percent manufacturing tax credit to clean energy manufacturers, which is 500 00:25:12,800 --> 00:25:15,000 Speaker 2: really consequential and quite big. And you've got a lot 501 00:25:15,040 --> 00:25:17,400 Speaker 2: of smaller countries like the UK, for example, where we're 502 00:25:17,400 --> 00:25:20,480 Speaker 2: recording from actually being a bit lost and having an 503 00:25:20,480 --> 00:25:23,680 Speaker 2: advantage in areas like offshore wind and maybe in ccs 504 00:25:23,680 --> 00:25:27,080 Speaker 2: certain niches, but really struggling to convince when it comes 505 00:25:27,160 --> 00:25:30,080 Speaker 2: to putting the money on the table and competing with 506 00:25:30,240 --> 00:25:32,840 Speaker 2: the likes of the US. And there is some clarity 507 00:25:33,080 --> 00:25:35,560 Speaker 2: from leaders, whether it's in Canada or the UK, that 508 00:25:35,640 --> 00:25:37,760 Speaker 2: those incentives are going to be available, but they're not 509 00:25:37,800 --> 00:25:39,679 Speaker 2: going to be matching what's available in the US, and 510 00:25:39,680 --> 00:25:42,280 Speaker 2: that's something that's already been made quite clear by several 511 00:25:42,320 --> 00:25:44,760 Speaker 2: governments and is quite interesting to see. Even as this 512 00:25:44,880 --> 00:25:47,960 Speaker 2: competition heats up, there is a degree of realism that 513 00:25:48,240 --> 00:25:51,240 Speaker 2: not everyone's pockets are as deep as the United States. 514 00:25:51,520 --> 00:25:53,720 Speaker 1: Now other bottlenecks that we need to think of, and 515 00:25:53,760 --> 00:25:57,359 Speaker 1: I'm specifically thinking the example of battery metals and how 516 00:25:57,480 --> 00:26:00,560 Speaker 1: this is truly no matter where you manage action them, 517 00:26:00,600 --> 00:26:05,080 Speaker 1: they're reliant on global supply chains. So are there really 518 00:26:05,200 --> 00:26:08,040 Speaker 1: tight markets that we need to keep an eye on, 519 00:26:08,760 --> 00:26:11,879 Speaker 1: such as copper in the battery space that are ones 520 00:26:11,880 --> 00:26:14,280 Speaker 1: to watch when we think about how we're changing supply chains. 521 00:26:14,520 --> 00:26:16,960 Speaker 2: So absolutely there's a number of metals that are what 522 00:26:17,240 --> 00:26:19,080 Speaker 2: transition metals you could call them, that are going to 523 00:26:19,080 --> 00:26:22,159 Speaker 2: be really important as scaling things, decarbonizing the economy. Copper 524 00:26:22,200 --> 00:26:25,000 Speaker 2: is very important making cables among other things. We're going 525 00:26:25,040 --> 00:26:28,200 Speaker 2: to be needing vast quantities of that through twenty fifty, 526 00:26:28,240 --> 00:26:31,720 Speaker 2: and about a third of actual spending on transition metals 527 00:26:31,800 --> 00:26:34,200 Speaker 2: is going to be concentrated within copper, and we expect 528 00:26:34,240 --> 00:26:36,600 Speaker 2: that to be a tight market over the next decade plus. 529 00:26:36,800 --> 00:26:39,679 Speaker 2: We also expect the sort of the deficit when we 530 00:26:39,720 --> 00:26:43,280 Speaker 2: look at announced mining facilities. When we look at other 531 00:26:43,359 --> 00:26:46,280 Speaker 2: metals that are key to making batteries, lithium and cobalt 532 00:26:46,320 --> 00:26:48,600 Speaker 2: feature heavily, and those are also metals where when we 533 00:26:48,600 --> 00:26:51,040 Speaker 2: look at what's been announced in terms of production facilities, 534 00:26:51,119 --> 00:26:52,840 Speaker 2: or when we look at what's been announced in terms 535 00:26:52,880 --> 00:26:56,000 Speaker 2: of mines, we do actually see a deficit emerging over 536 00:26:56,040 --> 00:26:59,120 Speaker 2: the next couple of decades. So there's tightness in different markets, 537 00:26:59,119 --> 00:27:01,520 Speaker 2: and we'll see whether the booming demand for those different 538 00:27:01,520 --> 00:27:04,400 Speaker 2: medals could change things, whether the changes in battery chemistries 539 00:27:04,440 --> 00:27:06,400 Speaker 2: could adapt as well, that's something that we've seen happen 540 00:27:06,480 --> 00:27:10,000 Speaker 2: quite rapidly with various lithium ion batteries that don't use nickel, 541 00:27:10,080 --> 00:27:13,280 Speaker 2: that don't use cobalts, that are ferrist based in their chemistries, 542 00:27:13,320 --> 00:27:17,240 Speaker 2: that have emerged and seen uptake incredibly rapidly and far 543 00:27:17,280 --> 00:27:20,160 Speaker 2: beyond what was expected. But there's also this additional question, 544 00:27:20,200 --> 00:27:22,320 Speaker 2: which is when the US says, for example, that it 545 00:27:22,320 --> 00:27:25,000 Speaker 2: wants to focus on sourcing critical minerals from a number 546 00:27:25,040 --> 00:27:27,719 Speaker 2: of limited number of countries with which it has a 547 00:27:27,760 --> 00:27:30,520 Speaker 2: pre trade agreement, for example, that narrows the pull down 548 00:27:30,560 --> 00:27:33,840 Speaker 2: and meeting those critical materials requirements could be quite difficult 549 00:27:33,880 --> 00:27:37,359 Speaker 2: in an inner global scenario where supply demand balances are 550 00:27:37,440 --> 00:27:38,000 Speaker 2: quite tight. 551 00:27:38,640 --> 00:27:42,480 Speaker 1: Is there enough labor, in skilled labor, specifically in various 552 00:27:42,480 --> 00:27:44,919 Speaker 1: parts of the world to actually work in all of 553 00:27:44,920 --> 00:27:48,520 Speaker 1: these on shore near shored manufacturing locations. 554 00:27:48,800 --> 00:27:51,000 Speaker 2: The skilled shortage is one that's brought up a lot, 555 00:27:51,160 --> 00:27:54,520 Speaker 2: and it's a real barrier towards for the energy transition 556 00:27:54,560 --> 00:27:57,439 Speaker 2: from a number of perspectives, whether it's installing heat pumps 557 00:27:57,520 --> 00:28:00,880 Speaker 2: or rooftop solar, but manufacturing is really area where we're 558 00:28:00,920 --> 00:28:03,920 Speaker 2: not seeing the skills base in places like the US, 559 00:28:04,040 --> 00:28:06,720 Speaker 2: where a lot of the focus in terms of vocational 560 00:28:06,760 --> 00:28:09,800 Speaker 2: training or of the educational system has not been in 561 00:28:09,920 --> 00:28:13,600 Speaker 2: those hard manufacturing skills. So there is a real concern 562 00:28:13,680 --> 00:28:15,600 Speaker 2: that there's a need to train up the skill force 563 00:28:15,680 --> 00:28:17,919 Speaker 2: very quickly to match the number of facilities that are 564 00:28:17,960 --> 00:28:20,240 Speaker 2: coming online. And for example, right now we're seeing lots 565 00:28:20,240 --> 00:28:23,120 Speaker 2: of investments in the US by East Asian battery manufacturers 566 00:28:23,119 --> 00:28:25,040 Speaker 2: and a lot of them are relying to some extent 567 00:28:25,080 --> 00:28:29,080 Speaker 2: on engineering expertise from Korea, and that leads to another question, 568 00:28:29,119 --> 00:28:32,359 Speaker 2: which is openness towards investments from various geographies and the 569 00:28:32,440 --> 00:28:34,680 Speaker 2: exchange of that know how and the US has made 570 00:28:34,680 --> 00:28:37,480 Speaker 2: it quite difficult for Chinese manufacturers to set up shop 571 00:28:37,520 --> 00:28:41,080 Speaker 2: where we've seen some scrutiny applied to joint venture between 572 00:28:41,200 --> 00:28:44,560 Speaker 2: Ford and CAATL for taking advantage of some of those 573 00:28:44,600 --> 00:28:47,920 Speaker 2: EV battery tax credits in the US. That project saw 574 00:28:47,960 --> 00:28:50,720 Speaker 2: scrutiny far beyond what we've seen for other projects that 575 00:28:50,760 --> 00:28:54,600 Speaker 2: don't involve Chinese manufacturers. There are concerns around foreign Entities 576 00:28:54,640 --> 00:28:57,600 Speaker 2: of concern list, which is something that again might limit 577 00:28:57,640 --> 00:29:01,600 Speaker 2: the availability of subsidies provided to manufacturers from countries such 578 00:29:01,640 --> 00:29:05,320 Speaker 2: as China. So that lack of openness, those concerns around 579 00:29:05,560 --> 00:29:09,680 Speaker 2: what investments will qualify for various subsidies is a bit 580 00:29:09,720 --> 00:29:11,760 Speaker 2: of a question mark and could impleade the flow of 581 00:29:11,760 --> 00:29:15,120 Speaker 2: information from where knowledge about battery making is that is 582 00:29:15,160 --> 00:29:18,760 Speaker 2: most sophisticated, that being in many cases in China. Same 583 00:29:18,840 --> 00:29:21,719 Speaker 2: goes for solar technologies, for example, two regions that are 584 00:29:21,720 --> 00:29:23,960 Speaker 2: trying to catch up. Europe is adopting a bit of 585 00:29:24,040 --> 00:29:26,560 Speaker 2: a different perspective, a bit of a different strategy with this, 586 00:29:26,880 --> 00:29:30,560 Speaker 2: and is comparatively quite open towards receiving a lot of 587 00:29:30,560 --> 00:29:33,800 Speaker 2: those investments. Last year, the biggest battery self facility coming 588 00:29:33,800 --> 00:29:36,600 Speaker 2: online in the EU was Chinese. It was c ATL, 589 00:29:36,640 --> 00:29:39,880 Speaker 2: the world's biggest battery maker. So there's some differences there 590 00:29:39,880 --> 00:29:43,400 Speaker 2: that are really worth highlighting. Labor shortages are a problem 591 00:29:43,400 --> 00:29:47,040 Speaker 2: across the world, across the geographies where we're seeing clean 592 00:29:47,120 --> 00:29:50,880 Speaker 2: energy manufacturing be aerial focus. But there's this flow of 593 00:29:50,920 --> 00:29:53,320 Speaker 2: knowledge and know how which also needs to happen and 594 00:29:53,360 --> 00:29:56,440 Speaker 2: could be impeded if openness isn't prioritized. 595 00:29:56,680 --> 00:29:59,400 Speaker 1: And so we've talked about upstream, so we've talked about commodities, 596 00:29:59,400 --> 00:30:02,120 Speaker 1: and we've talked onstream and the manufacturing end of things. 597 00:30:02,160 --> 00:30:05,640 Speaker 1: But how about midstream, how about all of the different components. 598 00:30:05,880 --> 00:30:08,360 Speaker 1: Where does that fall. Is it being seen as one 599 00:30:08,360 --> 00:30:12,000 Speaker 1: of the industries that are actually also being near shored 600 00:30:12,120 --> 00:30:14,560 Speaker 1: or on short or is that going to be largely 601 00:30:14,640 --> 00:30:18,520 Speaker 1: unchanged And we're really thinking about just downstream manufacturing and assembly. 602 00:30:18,920 --> 00:30:21,880 Speaker 2: So a lot of the focus investments has been in 603 00:30:21,960 --> 00:30:26,640 Speaker 2: downstream segments like solar modules, battery cell factories, or we 604 00:30:26,640 --> 00:30:29,480 Speaker 2: haven't seen as much of in announced projects and even 605 00:30:29,600 --> 00:30:32,720 Speaker 2: far less in projects that are coming online across the West, 606 00:30:32,760 --> 00:30:35,719 Speaker 2: for example, is in that midstream segment, and what that 607 00:30:35,800 --> 00:30:38,600 Speaker 2: means is looking at the really important building blocks for 608 00:30:39,040 --> 00:30:42,320 Speaker 2: building a solar module, which include things like ingots and wafers. 609 00:30:42,360 --> 00:30:44,680 Speaker 2: When it comes to batteries, that includes things like cathodes 610 00:30:44,720 --> 00:30:47,640 Speaker 2: and anodes. And those are segments where manufacturing is even 611 00:30:47,760 --> 00:30:51,120 Speaker 2: more concentrated in China and where we're really not seeing 612 00:30:51,160 --> 00:30:54,240 Speaker 2: the same level of investment and announcements for building out 613 00:30:54,280 --> 00:30:57,480 Speaker 2: that capacity in regions like Europe. In regions like North America, 614 00:30:57,680 --> 00:31:00,240 Speaker 2: that's been recognized as a bit of a vulnerability, and 615 00:31:00,640 --> 00:31:03,400 Speaker 2: that's also something where we've seen a number of trade 616 00:31:03,440 --> 00:31:06,200 Speaker 2: barriers be erected for things like the use or trade 617 00:31:06,200 --> 00:31:09,880 Speaker 2: of US semiconductors and personnel in China, for example. But 618 00:31:10,120 --> 00:31:12,840 Speaker 2: that midstream is an area where China can react, and 619 00:31:13,000 --> 00:31:15,920 Speaker 2: we've seen suggestions from Chinese ministries that there might be 620 00:31:15,960 --> 00:31:18,920 Speaker 2: restrictions on the exports of various piece of equipment for 621 00:31:19,040 --> 00:31:22,960 Speaker 2: manufacturing some of those midstream components, most notably solar ingots 622 00:31:22,960 --> 00:31:25,920 Speaker 2: and wafers. So there's been a real focus on the downstream. 623 00:31:26,000 --> 00:31:28,080 Speaker 2: What we haven't seen as an approach that aims to 624 00:31:28,120 --> 00:31:30,720 Speaker 2: build out the value chain in a really comprehensive way 625 00:31:30,720 --> 00:31:33,720 Speaker 2: and attributing equal weight to all those different segments. And 626 00:31:33,760 --> 00:31:36,040 Speaker 2: it can make sense to start with the end product 627 00:31:36,120 --> 00:31:38,320 Speaker 2: and work your way up, But given the speed at 628 00:31:38,320 --> 00:31:41,000 Speaker 2: which these manufacturing bases are being built out at it 629 00:31:41,080 --> 00:31:44,280 Speaker 2: seems like some degree of focus of refocusing and taking 630 00:31:44,280 --> 00:31:46,960 Speaker 2: a bit more of a comprehensive approach towards building out 631 00:31:47,040 --> 00:31:49,760 Speaker 2: supply chains might be worth considering now. 632 00:31:49,880 --> 00:31:52,560 Speaker 1: Certainly, the cost declines that we've seen in a number 633 00:31:52,600 --> 00:31:55,680 Speaker 1: of these industries, and solar is a perfect example, have 634 00:31:55,840 --> 00:31:59,920 Speaker 1: come from doing this at scale and having these manufacturing 635 00:32:00,080 --> 00:32:03,080 Speaker 1: hubs that have created cheaper and cheaper products. Are we 636 00:32:03,720 --> 00:32:08,880 Speaker 1: now seeing one a lack of transfer of technology and 637 00:32:09,160 --> 00:32:13,640 Speaker 1: really learning rates across countries as this becomes more fragmented. 638 00:32:13,720 --> 00:32:15,720 Speaker 1: And then the follow on question I'm going to add 639 00:32:15,720 --> 00:32:18,640 Speaker 1: to that is what does this do for us in 640 00:32:18,760 --> 00:32:20,760 Speaker 1: terms of reaching net zero targets? 641 00:32:21,000 --> 00:32:24,880 Speaker 2: So what could happen is if the US, Canada, You're 642 00:32:25,080 --> 00:32:28,480 Speaker 2: all the various regions India are successful in building out 643 00:32:28,520 --> 00:32:31,080 Speaker 2: keen energy manufacturing, then you do see a fragmentation. You 644 00:32:31,080 --> 00:32:33,880 Speaker 2: see a regionalization of supply chains, you see a doubling 645 00:32:34,000 --> 00:32:35,880 Speaker 2: up of investments in a way in which is less 646 00:32:35,920 --> 00:32:38,080 Speaker 2: efficient than what otherwise would be the case. One of 647 00:32:38,080 --> 00:32:40,760 Speaker 2: the things that has allowed for China to be so 648 00:32:40,840 --> 00:32:44,200 Speaker 2: effective in bringing down the cost of producing technologies is 649 00:32:44,320 --> 00:32:47,160 Speaker 2: learning by doing. It's dense pools of labor, it's a 650 00:32:47,200 --> 00:32:50,040 Speaker 2: low cost of finance, but it's also scale. And when 651 00:32:50,040 --> 00:32:52,680 Speaker 2: we look at various segments of the solar value chain, 652 00:32:52,680 --> 00:32:56,160 Speaker 2: it's typical that Chinese facilities factories are about four times 653 00:32:56,240 --> 00:32:59,320 Speaker 2: bigger in terms of their yearly production capacity than outside 654 00:32:59,360 --> 00:33:02,120 Speaker 2: of China. That has a really big impact on cost. 655 00:33:02,320 --> 00:33:04,440 Speaker 2: And when you're breaking things up and you're just looking 656 00:33:04,440 --> 00:33:06,840 Speaker 2: at things from that scale angle, then things become less 657 00:33:06,840 --> 00:33:09,560 Speaker 2: efficient and you're adding cost even if you aren't doing 658 00:33:09,600 --> 00:33:11,320 Speaker 2: things in parts of the world where it's going to 659 00:33:11,360 --> 00:33:14,320 Speaker 2: be far more expensive, like Europe, for example. So that's 660 00:33:14,360 --> 00:33:17,160 Speaker 2: a big question is how to balance these different priorities 661 00:33:17,160 --> 00:33:20,000 Speaker 2: and how to recognize that building things out is good 662 00:33:20,160 --> 00:33:22,720 Speaker 2: from a political perspective when it comes to selling the 663 00:33:22,800 --> 00:33:25,800 Speaker 2: energy transition and its co benefits. What is less good 664 00:33:25,800 --> 00:33:30,120 Speaker 2: at is for maximizing economic efficiency and minimizing the overall bill. 665 00:33:30,320 --> 00:33:33,240 Speaker 2: And we're looking at an energy transition that's running into 666 00:33:33,320 --> 00:33:35,960 Speaker 2: where we saw a trillion of investment last year across 667 00:33:36,000 --> 00:33:37,960 Speaker 2: the energy transition. If we want to be getting on 668 00:33:38,000 --> 00:33:39,800 Speaker 2: tracked net zero, we need to be seeing an average of 669 00:33:39,840 --> 00:33:43,240 Speaker 2: about four trillion every year going towards twenty thirty. Now 670 00:33:43,520 --> 00:33:46,320 Speaker 2: that figure could be inflated quite a bit if we're 671 00:33:46,360 --> 00:33:49,840 Speaker 2: starting to break things up and we're manufacturing more closer 672 00:33:49,840 --> 00:33:52,560 Speaker 2: to demand centers. So trying to strike that balance is 673 00:33:52,760 --> 00:33:56,440 Speaker 2: really important, and we're not seeing a real mature discussion 674 00:33:56,480 --> 00:34:00,760 Speaker 2: about taking those costs into account, factoring them in, passing 675 00:34:00,760 --> 00:34:04,520 Speaker 2: them through in various ways to end consumers or developers, 676 00:34:04,920 --> 00:34:08,600 Speaker 2: and really optimizing things to make things work and diversifying 677 00:34:08,640 --> 00:34:11,040 Speaker 2: those supply chains. Which really is a focus with all 678 00:34:11,080 --> 00:34:14,480 Speaker 2: of these industrial strategies that are coming out in recent months. 679 00:34:14,920 --> 00:34:16,799 Speaker 1: One of the things that you brought up really early on, 680 00:34:16,920 --> 00:34:19,480 Speaker 1: and this is my final question, essentially, it has to 681 00:34:19,520 --> 00:34:22,080 Speaker 1: do with the when. So you reference the fact that 682 00:34:22,719 --> 00:34:25,920 Speaker 1: we have seen a lot of intention and movement towards 683 00:34:26,000 --> 00:34:28,000 Speaker 1: changing these supply chains, but we haven't seen a lot 684 00:34:28,040 --> 00:34:30,040 Speaker 1: of installation as if yet and that makes a lot 685 00:34:30,080 --> 00:34:32,120 Speaker 1: of sense because these new projects are not going to 686 00:34:32,160 --> 00:34:34,279 Speaker 1: happen over a quarter or even half a year. They're 687 00:34:34,320 --> 00:34:36,759 Speaker 1: going to take a while to get online. So that 688 00:34:36,800 --> 00:34:38,759 Speaker 1: then brings me to you know, we love to talk 689 00:34:38,800 --> 00:34:42,719 Speaker 1: about goals and certain years stand out as benchmarks. So 690 00:34:42,920 --> 00:34:45,960 Speaker 1: do we think twenty thirty, twenty thirty five, twenty forty, 691 00:34:45,960 --> 00:34:47,759 Speaker 1: when are we going to start to see essentially a 692 00:34:47,800 --> 00:34:53,080 Speaker 1: material change in terms of supply chains and where they exist? 693 00:34:53,120 --> 00:34:55,520 Speaker 1: And now when are we going to know really where 694 00:34:55,600 --> 00:34:56,760 Speaker 1: the new hubs are. 695 00:34:57,239 --> 00:34:58,759 Speaker 2: So it does take a few years to set up 696 00:34:58,800 --> 00:35:02,680 Speaker 2: manufacturing facilities. Right now, there's a shortage of equipment for 697 00:35:02,760 --> 00:35:06,160 Speaker 2: battery making facilities that's slowing things down. There's a tight 698 00:35:06,239 --> 00:35:09,719 Speaker 2: labor market that we mentioned. There are various reasons why 699 00:35:09,760 --> 00:35:12,440 Speaker 2: permitting things in countries that want to speed things up, 700 00:35:12,480 --> 00:35:14,479 Speaker 2: like Europe or the US, takes a bit of time, 701 00:35:14,640 --> 00:35:17,120 Speaker 2: So that means that you're looking at may sometimes a 702 00:35:17,160 --> 00:35:19,920 Speaker 2: couple of years for setting up a battery manufacturing facility, 703 00:35:19,920 --> 00:35:23,120 Speaker 2: for example. And we've seen a slew of announcements and 704 00:35:23,160 --> 00:35:25,799 Speaker 2: we continue to see that number grow. But as I said, 705 00:35:25,880 --> 00:35:27,600 Speaker 2: we're also seeing the same thing happen in China with 706 00:35:27,600 --> 00:35:30,320 Speaker 2: a vast volume of new facilities that are still coming online. 707 00:35:30,360 --> 00:35:33,000 Speaker 2: I think twenty thirty is a good point to stop 708 00:35:33,080 --> 00:35:35,480 Speaker 2: and see where we're at. A lot of the manufacturing 709 00:35:35,640 --> 00:35:38,440 Speaker 2: incentives under the IRA expire or start to phase out 710 00:35:38,440 --> 00:35:40,799 Speaker 2: in twenty thirty and expire in twenty thirty two. When 711 00:35:40,800 --> 00:35:42,160 Speaker 2: it comes to the EU, that's when it's set a 712 00:35:42,200 --> 00:35:45,000 Speaker 2: lot of its manufacturing targets for It's a year where 713 00:35:45,280 --> 00:35:47,120 Speaker 2: we should be hitting our stride when it comes to 714 00:35:47,160 --> 00:35:49,440 Speaker 2: investments for the energy transition, and things would have scaled 715 00:35:49,480 --> 00:35:52,040 Speaker 2: up if things are going right, dramatically beyond what we're 716 00:35:52,080 --> 00:35:54,840 Speaker 2: at today in terms of investment, and it would be 717 00:35:54,840 --> 00:35:57,399 Speaker 2: a good time to look at trade flows, to look 718 00:35:57,440 --> 00:36:01,120 Speaker 2: at where manufacturing capacity is. And what I'd expect is 719 00:36:01,160 --> 00:36:04,200 Speaker 2: we'd see several percentage points increase in the share of 720 00:36:04,280 --> 00:36:06,640 Speaker 2: that's represented by Europe that's represented by the US when 721 00:36:06,680 --> 00:36:09,480 Speaker 2: it comes to total manufacturing capacity for things like batteries, 722 00:36:09,520 --> 00:36:12,840 Speaker 2: for things like solar But I still expect APAX share 723 00:36:13,040 --> 00:36:16,080 Speaker 2: and China share more specificty to remain dominant. But it's 724 00:36:16,120 --> 00:36:19,239 Speaker 2: not about replacing that overnight. It's about maybe hedging your 725 00:36:19,239 --> 00:36:22,640 Speaker 2: bets and diversifying things somewhat. It's about creating that political 726 00:36:22,640 --> 00:36:25,080 Speaker 2: buy and by attracting some investments, and that in of 727 00:36:25,120 --> 00:36:28,400 Speaker 2: itself is really important. So I don't see a dramatic 728 00:36:28,480 --> 00:36:30,719 Speaker 2: shift in the picture, but I think twenty thirty will 729 00:36:30,760 --> 00:36:33,839 Speaker 2: be a time to see whether these industrial strategies, whether 730 00:36:33,880 --> 00:36:37,000 Speaker 2: these different policies are having their effect, whether there's been 731 00:36:37,040 --> 00:36:40,000 Speaker 2: any success in setting up domestic manufacturing without needing to 732 00:36:40,080 --> 00:36:42,799 Speaker 2: keep them alive via vast subsidies, and whether or not 733 00:36:42,880 --> 00:36:45,200 Speaker 2: this is a course of action to double down on, 734 00:36:45,480 --> 00:36:48,759 Speaker 2: or whether given the geopolitical scenarios we could imagine in 735 00:36:48,760 --> 00:36:51,040 Speaker 2: the future, which are numerous, but whether at that time 736 00:36:51,080 --> 00:36:53,919 Speaker 2: it might be advisable to scale that back and try 737 00:36:53,960 --> 00:36:57,640 Speaker 2: to maximize the energy transitions over all efficiency to minimize costs. 738 00:36:57,800 --> 00:36:59,799 Speaker 2: So I see the next few years leading up to 739 00:36:59,760 --> 00:37:02,360 Speaker 2: twenty a really important time in which to sort of 740 00:37:02,400 --> 00:37:04,960 Speaker 2: gauge the impact of these strategies and to take measure 741 00:37:05,000 --> 00:37:06,080 Speaker 2: of how successful they are. 742 00:37:06,280 --> 00:37:09,160 Speaker 1: So we'll keep watching the companies and certainly the policies 743 00:37:09,200 --> 00:37:12,320 Speaker 1: that are dramatically changing global supply chains. Thank you for 744 00:37:12,400 --> 00:37:13,240 Speaker 1: joining us today. 745 00:37:13,760 --> 00:37:15,399 Speaker 2: Thank you, Dana. It's great to be here again. 746 00:37:24,640 --> 00:37:28,000 Speaker 1: Bloomberg NEF is a service provided by Bloomberg Finance LP 747 00:37:28,200 --> 00:37:31,560 Speaker 1: and its affiliates. This recording does not constitute, nor should 748 00:37:31,600 --> 00:37:35,640 Speaker 1: it be construed, as investment advice, investment recommendations, or a 749 00:37:35,680 --> 00:37:39,239 Speaker 1: recommendation as to an investment or other strategy. Bloomberg n 750 00:37:39,239 --> 00:37:42,759 Speaker 1: EF should not be considered as information sufficient upon which 751 00:37:42,800 --> 00:37:46,480 Speaker 1: to base an investment decision. 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