Catalyst with Shayle Kann - Unpopular solar opinions, 2022 edition

Episode Date: December 1, 2022

We want your feedback! Fill out our listener survey for a chance to win a $100 Patagonia gift card. In a funny twist of fate, solar’s success has made it old news. It’s the fastest-growing source of electricity in the world and one of the cheapest. But it’s far from the hot topic it was a decade ago when utility-scale photovoltaics were still an emerging technology. Now that it’s a more mature tool in the climate fight, we take it for granted. And yet there’s so much more we need to do. To reach net zero by 2050, we likely need to quadruple global solar capacity by 2030, according to projections by BloombergNEF (BNEF). But labor shortages, high material costs and interconnection bottlenecks stand in the way.  So how do we get there? In this episode Shayle talks to Jenny Chase, who managed BloombergNEF’s solar insights team for 17 years before leaving the role this month. Every year she tweets a thread of 50 not-always-popular opinions on solar, covering the state of the industry and the challenges it needs to solve. For this episode, Shayle picked the opinions he found most interesting and unpacked them with Jenny.  They cover Jenny’s opinions on: The biggest bottlenecks holding back solar deployment, like labor shortages, high polysilicon prices and grid interconnection backlogs Why we don’t need new technology breakthroughs in solar  Perovskite and building-integrated photovoltaics   How residential solar and battery salespeople are making up their savings projections How the U.S. Inflation Reduction Act could spur an unsustainable boom in solar and hydrogen equipment manufacturing Why leading forecasts could be underestimating solar deployment Recommended Resources: Twitter: Jenny Chase’s 2022 opinions-on-solar thread  Canary Media: What’s behind solar’s polysilicon shortage — and why it’s not getting better anytime soon Canary Media: Perovskites can make solar panels more efficient than silicon alone Bloomberg: Solar Outshines Wind to Lead China’s Clean-Energy Transition Bloomberg: Solar Growth Estimates for 2050 Are Aggressive, But Not Unrealistic Catalyst is a co-production of Post Script Media and Canary Media. Catalyst is supported by Scale Microgrid Solutions, your comprehensive source for all distributed energy financing. Distributed generation can be complex. Scale makes financing it easy. Visit scalecapitalsolutions.com to learn more. Catalyst is supported by CohnReznick Capital, a trusted source for renewable energy investment banking servicing the US sustainability sector. Visit cohnreznickcapital.com to learn more.

from the studios of PostScript Media and Canary Media. I'm Shail Khan, and this is Catalyst. So we're going to quadruple the amount, the cumulative amount of solar we've ever built in the world between now and the end of 2030, and yet that's 20% shy of where we need to be on a net zero pathway. What's the fundamental constraint that you see there?

So personally, I think the fundamental constraint is that our forecasts are probably wrong. Ah, it's getting colder, the leaves are turning, pumpkin spice lattes abound. That's right, you guessed it, it's that time of year, the season of Jenny Chase's solar opinions. When utilities need flexible capacity they can count on, they turn to Energy Hub. Energy Hub works with more than 170 utilities, coordinating over 2.5 million devices to manage 3.4 gigawatts of flexibility, built for the moments when utilities can't afford uncertainty. Energy Hub builds and operates virtual power plants that utilities actually stake their grid planning on,

coordinating EVs, batteries, thermostats, and more through a single platform built for utility scale. Predictive, verifiable, and designed to perform when it counts. Learn more at energy hub.com. Trillions of dollars are flowing into clean and critical infrastructure, but those investments aren't driven by technology alone. They're shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, and host of a brand new podcast, Critical Capital. Each episode, I talk with people deploying capital, shaping policy, and building the clean economy. Tune in as we unpack how progress is actually made.

Listen to Critical Capital on Spotify, Apple, or wherever you get your podcasts. Catalyst is supported by Fish Tank PR, an award-winning PR firm focused on climate and energy tech, renewables, and sustainability. Fish Tank is known for generating prominent and effective media coverage for the brands they work with. If you want a PR partner that's thoughtful, shoots straight, and gets results, you'll like Fish Tank PR. To learn more about Fish Tank's approach, visit fish tankpr.com. That's F-I-S-C-H-Fish-Tankpr.com. I'm Shale Khan. I'm a partner at the venture capital firm, energy impact partners. Welcome. At this point, I have no idea how many of you already know this about me, but early

in my quote-unquote climate tech career, I was basically all about solar. Prior to EIP, I spent the better part of a decade leading GTM research, which was a market analysis firm with a team of analysts who were tracking and forecasting the energy transition. And at our core, the sort of where we started and made a name for ourselves was in looking really deeply what was happening with solar power. This was starting in the late 2000s, when solar module prices, modules, mind you, not systems, were in the $5 a watt range, and today, of course, you could build entire systems

for maybe 10% of that. These days, of course, my remit is broader than just solar and even broader than just energy, but I try to keep a close eye on the solar market because I continue to fundamentally believe that solar is going to be the bedrock of decarbonization. Put another way, if you ask me what single technology will do the most

to mitigate climate change. Short of some potential geoengineering or nuclear fusion future, my answer is solar. But in what to me seems like kind of a weird turn of events, I think solar actually gets talked about less today in climate tech circles

than it did a decade ago precisely because it's a somewhat more mature market. But mature does not equal boring or easy, for that matter. And just because I'm confident that solar will be a long-term winner does not mean it will be a smooth ride. Anyway, back to waxing about my own solar history, back when solar was my game, apart from my own rock star team at Gtm, the person whose views I respected most was Jenny Chase, who led the solar practice at Bloomberg New Energy Finance. And unlike me, Jenny has stuck with it.

So I'll posit that there is no single person with a deeper understanding of global solar past and present than Jenny, full stop. which is why I get so excited when once a year, Jenny publishes her annual list of solar opinions, as she calls it, some popular, some less so. She did this year's version last month, so I brought her on so that I could cherry pick the opinions that I thought were most interesting, and we could take a ride together through Solar World. Here's Jenny. Jenny, welcome to Catalyst. Thank you, Shail. It's nice to be here. I am very excited to talk about solar opinions.

Okay, so here's what we're going to do. you listed out, I don't know how many, 50 or so opinions about solar and about surrounding technologies, to be fair. I've cherry-picked some of my favorites, or at least the ones that I think are most interesting to talk about. And so we're going to run through a bunch of them and discuss. In some cases, one-by-one, in some cases I've bundled a few together that are related to each other. So let's dig in. I'm going to start with a combo of two opinions. All right.

The first is opinion number three. I'm going to state the number for anyone who wants to follow on on Twitter. as they listen to this. Okay, opinion number three, solar is the cheapest source of bulk electricity in many countries and one of the quickest to deploy, which in the 2022 global energy crisis has been invaluable. That, I think, is fairly straightforward. The second part of it, though, the limits to PV build this year have been supply, installation, labor, grid access, and permitting.

And then I want to combine that with your opinion number six, which relates, I think, in particular to the supply question, which is prices for freight, polysilicon, steel, and aluminum went up in the last two years. Freight is back down, but polysilicon is still above $37 a kilogram, which is up from a low of $6.3 per kilogram in the summer of 2020. We, this being you, expected to drop back to nearly $15 a kilogram early in 2023 on increased supply. Okay, so stepping back from this, maybe talk a little. little bit about what have been the bottlenecks that PV has faced this year. I think from the

outside, you often think of solar as at this point of this sort of like growth juggernaut, but it hasn't been exactly an easy ride in 2022 despite all the tailwinds. It's not been an easy ride, but we are forecasting officially 251 gigawatts of build this year, up from 182 last year. So that's pretty strong growth, and I wouldn't be surprised if it comes out at higher than 251 gigawatts. A lot of markets are building because they're seeing their version of the energy crisis. And for example, in Germany, residential solar installers are booked out till well into next year because they do not have the teams to send to put modules on the roof. And that might make us think that weight, the issue is entirely downstream, but the prices suggest that actually

that's not true and that all the manufacturing in the market is in fact going somewhere. We think that there's enough polysilicon made this year to make over 300 gigawatts of modules. So with 251 installed, then that would still, it still gives us 50. So the price shouldn't be staying as high as it is. The fact that the price is staying actually pretty firm, even now in November, suggests to us that there probably is a black hole sucking up modules somewhere. And that might be China, it might be Europe, it might be inventory in Europe. It might be that more is being built than we think. It's basically, although the fact that the prices for the commodity policy are staying this high strongly suggests that there's something we haven't quite got in our

demand supply model, and it's not, I think, less supply than we think. So it sounds like what you're describing is just a normal supply demand imbalance of one or maybe balance, right? So you're saying that basically what's going on in the market is that prices for polysilicon, which is the furthest upstream you get in solar, which then... It's the bottleneck right now, polysilicon. And then that bleeds down through the price of panels and ultimately into the price of projects. You're saying that this is sort of just how much is getting installed versus how much is getting produced. To what extent is solar or has solar been subject to some of the supply chain

bottlenecks that have plagued like basically every other industry on the planet this year? Or is solar pretty insulated? And what's happening here is just like, you know, we have more demand, then we have supply at the moment. So I think solar is worse than most industries. First of all, solar is still affected by disruptions. So if your transformers don't arrive on time, then even if you've got all the other components,

you can't finish your project, and that's affected your solar. If you're trying to make solar modules and you run out of EVA, then you can't make your solar modules. And so all those little things have made it more difficult to build solar this year. But also there is in places inventory build up. You know, there is, we couldn't, I think, have built 500 gigawatts if we had the modules ready to go either. Because of there isn't the labour to install them in all markets. There isn't the grid connection ready to take them.

There isn't the permitting. So there are multiple bottlenecks. But the Polysilicon one is probably the worst. It takes at least 18 months to build a factory for Polysylican. even in China, and a lot longer anywhere else. And there has just not really been enough polysilicon to keep the prices low. So I don't think that's been the main thing that slowed things down, but it is also a bottleneck. My sense would be, okay, so I'm going to go back to your limits of PV build this year have been,

and this was the list that you put in the opinion, supply, labor, grid access, and permitting. So on the supply side, as you said, polysilicon seems to be. the current bottleneck. Correct me if I'm wrong, but that one seems like a classic solution to high prices as high prices. We've seen this play out before. There have been periods of tight polysilicon supply in solar, though it takes 18 months in China and longer in other countries to build up new polysilicon supply. We have no shortage of raw material. There's nothing stopping us from doing that. Absolutely. Polysilicon is just made of sand. You need sand and energy to make polysilicon. and there is nearly a terawatt of new polysilicon manufacturing capacity

intended to come online in the next two years. So we think that the polysilicon shortage, we strongly think, will end maybe in the next three months, although I've been saying that for a while. So every Wednesday my team are betting on what will happen to the polysilican spot price and going, is this the week it goes down? It's just the week it goes down. And then it goes down a little bit,

and then you check the yuan to dollar exchange rate, and it's just because the dollar has got stronger. But we do expect the Polysilicon spot price to start dropping any month now. All right, so that bottleneck, we presume, goes away with time, whether it's three months or six months or a year. But what about the other one? So installation, labor, grid access, and permitting. So the labor challenge, we've seen this in many markets as well.

You mentioned Germany residential installers. We've seen some of this in the U.S. as well, And I think as demand grows faster, the labor challenge becomes even larger. Is that one that you foresee exacerbating over time? Or is that one that you see alleviating because the demand growth is clear and we're just going to have to train more folks to install solar? That'll probably go in fits and starts. It will continue to be an issue because one of the things that will help in Germany

is that the prices for residential solar systems are going up, which presumably means it's more lucrative. and you can train more teams of people to go and get on roofs. But at the same time, there's a limited pool of people who are able and willing to go and get on roofs to put solar panels up. So you don't have an infinite supply of labour and you're competing with other industries. I think that's going to be a cyclical thing probably. Yeah, it's also probably tied to the macro economy and the labor force in general and whether you're an environment where it's easy to find labor or hard to find labor.

and so on. But then that gets us to the last two, which I'll combine together, grid access and permitting. Both of those are sort of geography-specific, right? Every country, every region has a different permitting regime and a different interconnection process. I spent a lot of time looking at this in the U.S. context, and it's terrifying, especially the grid access side of this. Like, I think interconnection may end up being the single largest bottleneck to the energy transition or even climate tech across all things. But I'm not as deep in it in the global context. So I'm curious, ex-United States, how big a problem is grid access? And where do we see it? Is there anywhere outside of regimes like China where you don't really have a traditional

interconnection process? Is there anywhere that has it solved? No, I don't think anywhere has it solved. And it's not just a policy thing either. fundamentally the grid is not infinite. There are not an infinite number of sites that are suitable for solar or to put it another way unsuitable for other uses and that are also next to grid connection. There are things that governments can and are working on to make that easier.

So the European Union is proposing to more or less automatically allow rooftop solar nearly anywhere with a permitting time of a month. The idea being, I think, if I understand it correctly, that you apply for permits to build a solar project on your roof, and if you don't get them in a month, you can just go ahead and build it. And of course, if it's a building, that it already has a grid connection, and you can probably sort that out, even though you may not get paid for the exported power. There's also a lot of work in Europe on lifting restrictions on using certain types of land.

And the reason I'm linking land and grid is that it's about finding that combination of where there's good land for this, which may not be good land for anything else, and access to grid, a grid that's not particularly congested. And then it's about having enough people working at the grid planning office to identify that connection to the grid will not be a problem and can be done. Australia has done it, parts of particularly Western Australia,

have done this quite badly by just saying, oh yeah, you can connect to the grid. And the result is very high curtailment for some projects because you've got a lot of projects on one node, which you can partly fix with batteries. You can put batteries on so that when you've got periods of congestion, you save the energy and then you send it off later. But it's not ideal. I think of interconnection as being a problem for distributed for behind the meter rooftop stuff,

but potentially like an existential problem for utility scale front of the meter projects, certainly as I look at it in the U.S. where you see these interconnection cues that can be years long, right, waiting to get projects installed. I think that's true in some other places as well, and maybe we'll become increasingly true the more we build. It is definitely. The thing is that when your grid goes out into places where there's lots of land that is not particularly, that is suitable for solar, so generally where land is not particularly valuable, the grid is then going to be carrying a lot of power back to other bits of land, probably. and then you have very high grid congestion risk. And historically that hasn't been a problem because most of the power is quite centralised. So one major thing that nearly every country should do is just staff up its planning offices, have people that actually go through these grid queues and say, good idea, good idea, not a bad idea,

and just let the developers know, because the developers know that they're not going to get grid permits for everything that they file for. that's the whole job of a developer to file 100 grid connection request and maybe get 10 of them approved. What they'd really like is a yes or no in a reasonable time frame. Okay, let's move on to second opinion, or I guess bundle of opinions. This one is near and dear to my heart. Okay, so we're going to combine three of your opinions here. The first one is the fundamental opinion, which is number four. We don't need a technology breakthrough.

Today, solar developers just need a grid connection, to the point we were just talking about, and permission to sell electricity, and they'll be off building solar plants, whether it's a good idea or not. Okay, combine that with opinion 25, which is I, again, you, refuse to get excited about Paravskites until a Parovskite company can disclose a commercial partnership with a named major module manufacturer. This was your opinion in 2018, 2019, 2020, and 2020, and it is your opinion still. And then finally, we'll combine that with Opinion 46, which is building integrated PV products or BIPV, are usually attempts to sell bad solar products for premium prices to gullible esthits and architects. All right. So stepping back from this one, this is about like there has always been and probably will always be a vocal contingent of people pushing for the next big technology breakthrough in solar.

I'd say Parovskites probably have gotten the most attention as the next big technology breakthrough in solar, maybe short of like concentrated solar power. So why is it fundamentally that you think, or at least that your view is currently, one, we don't need any of this stuff? And two, it seems like what you're saying is the excitement around both perovskites and we'll talk about building integrated PV2 is a little bit unwarranted. So firstly, the reason why I would like this kind of hype over new technologies to die is that I occasionally encounter the opinion that we shouldn't build solar until it's better. It doesn't need to be any better. It's fine. It does the job that it's meant to do, and it does it pretty cheaply these days. And perovskite is one example where, like, I hope that we have a perovskite breakthrough

and that we get even better modules than today's module. But peroscopes are a lab tech. They're a family of lead compounds, which have in the lab progressed relatively quickly from very, very low efficiencies to only moderately low efficiencies. And the lifetimes are still pretty terrible. that you still don't have a perovskite lab product that would really last 10 years at the field. And bear in mind that silicon solar modules are under warranty for 25 years, and a lot of developers are talking about 40-year lifetimes being assumed these days.

And I think parovskites get the attention because they could give you a breakthrough in cost and efficiency. They could increase your efficiency by several percentage points at a very low cost, because they're not very expensive, used it in tandem junction with crystalline silicon. But what you have to do is look at the companies that are making crystalline silicon modules who are probably quite good at doing so and know what they're doing,

and they could probably make a lot of money by adding a perovskite layer to their output. And selling a slightly more efficient product, more watts per meter squared, great for them. Why are they not doing? Probably because it doesn't work very well. and these are literally the people whose job it is to make that decision,

and they're saying it doesn't work very well. Maya Berger is not, myruger is Swiss company that is pretty much the expert in heterojunction, solar cells and manufacturing equipment, which is now going into cells and modules, not using perovskites. I don't think that that's going anywhere in the next five years, and I don't think we should be waiting for it. I wish the company's doing it luck, but we shouldn't be waiting.

As for building integrated, when was the last time that somebody told you about building integration and talked about the energy production? Usually these are like kind of bad thin film silicon modules or sometimes crystalline silicon modules with bits etched off them to make them see through. Well, we should clarify what we mean by building integrated PV because I think there's a couple different versions of it. So building integrated PV is where it has a secondary architectural function. Right. So this would include both solar glass, which is a long vaunted, never really deployed category, as well as something like the Tesla solar roof, right?

Like the building integrated roof tile type of thing. Exactly. And they're both a waste of time. I don't disagree with you. Virtual power plants are becoming a reliable way for utilities to manage capacity. But enrolling devices is just the start. What really matters is confidence, knowing those resources will perform when dispatched and being able to prove it from the control room to the living room. Energy Hub's platform handles the full picture.

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and energy sits at the center of all of it. Trillions of dollars are flowing into power plants, transmission lines, battery factories, data centers, but the future of energy isn't shaped by technology alone. It's shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, the capital platform for the clean economy.

Join me for my brand new show, Critical Capital, as I talk with people deploying capital, shaping policy and building projects. Together, we unpack how risk is priced, how incentives are structured, and how progress is actually made. Listen to Critical Capital on Spotify, Apple, or wherever you get your podcasts. Are you tired of overpaying for big-name PR firms, but not really knowing what they're delivering? Is your comms team wasting time reviewing lengthy messaging briefs and decks, instead of engaging journalists or producing content? Are you wondering why your competitors are getting press and you aren't?

Fish Tank PR is an award-winning climate and energy tech, renewables, and sustainability. FACTS PR firm dedicated to elevating the work of both early stage and established companies. Whether you need to position yourself as a thought leader in between project announcements or translate complex ideas and technologies into tangible, compelling stories that resonate with the media, Fishtankpr.com. Check out fishtankpr.com. That's F-I-S-C-H-Fish-Tankpr.com. Okay. So one, solar is great, but there are supply chain bottlenecks, installation, labor bottlenecks, grid access and permitting bottlenecks. Two, we don't need a technology breakthrough, though you wish those who are seeking one the best. Let's move on to the next opinion,

which is number eight. High input prices for solar plants, which we talked about, have been largely irrelevant this year because electricity prices have risen much more. However, developers that signed fixed price power purchase agreements before 2021 have suffered badly. I think the second part of that is what's interesting to me. So the first part is fairly self-explanatory, which is solar prices have risen, but electricity prices have risen even more, and so the comparative economics for solar have continued to be good. But describe what's happening to developers who sign PPAs before 2021. They're in big trouble. There was a period where auction, where the prices that developers would offer solar was just going down every time an

auction was held and there was fierce competition to get these prices. And if you worked as a developer, you had to play the game because if you applied for all these auctions and never won, then you wouldn't have a job. Whereas if you applied for these auctions and won and just didn't manage to build the project in two years' time because component prices didn't fall as much, financing costs went up, various factors might act against you, then you'd probably still have a job because you did win the contract after all, and you could always go and work for a different company. And it would sound a lot better than I just didn't win any auctions ever.

I always bid too low. So I think what you had was a lot of these sometimes sub-30-dollar per megawatt-hour power contracts in places where that was very marginal when they were offered. If that was possible to build at all when they were offered and not gambling on further falls in the prices of a cost. equipment and finance, then it certainly wasn't possible this year. So in South Africa, in some other geographies as well, you do have projects that have just been stuck in not proceeding hell because the economics no longer work for the contracts

they're locked into. Are we seeing PPAs get renegotiated? There was a period when we saw this happen in reverse in the U.S. where like the early, I think the PPAs that were signed largely by like the Calais. California utilities in 2009-ish. They were super, super rich. This is back when Polysilican prices were really high in one of those previous waves. And then module prices crashed, and it turned out that all those developers were, those

projects were super rich. And a few of those PPAs ultimately did get renegotiated down. Have we seen any of these getting renegotiated up or are the projects just kind of sitting in limbo? A mixture. So what's some European governments, notably, France, Spain and Portugal have done, and they all had basically state auctions,

so the government was involved in this. They've said, if you build your project now, we'll give you the merchant power price for the first 18 months or until your project was due online. And since that is, well, technically the cap is 180 euros of megawatt hour.

And if you think of these projects as being signed at 30, 30 euros a megawatt hour, then 180 for 18. months makes a huge difference to economics and it does get the, it gets the projects moving. And of course, possibly in America you don't realize how much we are absolutely freaking out about our dependence on Russian gas and the high power prices this summer. And the fact that we actually nearly ran out of gas last winter, that was even before Russia invaded Ukraine, we were already having gas problems for unrelated reasons.

So power prices have been really, really high. there's a cap of 180 euros per megawatt hour because to solar and wind generators as basically a windfall tax on their profits. The merchant rates have sometimes been up to 600 euros a megawatt hour. That's wild. Yeah, I think we've had various periods in history and we'll have them again where the dynamic

of project developers and bidding for PPAs gets really competitive. they have to make some rosy assumptions in their bids around the cost to build, around the cost of financing, around merchant curves in the long term. And then depending on where the world goes within the period between when they bid and when they actually have to line up financing for the project, it either looks really good or it looks terrible. And we're in one of those periods when some of those projects start to look a little bit terrible. All right, let's move on to the next opinion. Number 16. back to my home turf, you said,

the U.S. Inflation Reduction Act appears to be a license to print money for solar and hydrogen firms. We're not going to talk about hydrogen today, though I'll do that another time. An unsustainable boom in build and manufacturing is possible, though this may be muted because the U.S. is a difficult country

to do business in. I'm interested in two components of what you said there. One is what would constitute an unsustainable boom and build and manufacturing in your mind? I agree with you, we're going to build and we're going to develop and manufacture a lot more solar thanks to the Inflation Reduction Act. What would make it unsustainable to you? What would you be looking out for?

And then two is what about the US as a difficult country to do business in that might mute that? I've seen a lot of solar incentives come and go. And a lot of the time, the reason they go very quickly is because they cost a lot more than expected and very clearly over-incentivized billed. Now, in the U.S., it's a tax credit, right? So it's sort of avoided tax. So I don't think you're going to get just a massive bill for cash going to the government, as I understand it, which has been the case in Spain and Romania and... Czech Republic, Italy. Exactly. Vietnam.

I remember those. Those were feed-in tariff. Feed and tariffs was the big one, but sometimes, yeah. But nonetheless, I think if the US builds sort of five times as much as any protection currently is, which it could, because the incentives look pretty generous to me sitting here, and I've seen it happen in the past that just more solar gets built, and starts pumping out solar cells and wafers and modules like Mad, and supplying its own market and exporting to Europe. And Europe starts to bring in the World Trade Association,

on America for stop dumping your products on Europe. And eventually it just gets a little overheated, a little too complicated. The government is ultimately bankrolling this whole thing. And it could be the case that the government goes, this was not such a good idea on the time frame we planned. Let's cut this a bit short, shall we? And this is what typically happens with policy that is overgenerous. So this is probably a topic for another day,

But I've had this conversation many times with people since the Inflation Reduction Act was passed. Sometimes it's in reference to the renewable tax credits. Often it is in reference to the hydrogen production tax credits, which is that people think, look, this is too rich and at some point we're going to have to pull it back. I'll make the counterpoint. Here's why I do not think that that is going to happen. It's a few reasons. One is, in the U.S., we have a great track record of never, basically never pulling back

on existing tax credits once they exist. We sometimes don't extend them. But it'd be very difficult to point to a situation in which there has been a tax credit in place scheduled to expire at some point in the future that we have caused legislatively to expire early. It requires Congress to decide proactively to remove an existing tax credit. Occasionally it happens, but it's very rare because once we've given something away, it's tough to pull back. And usually there is a strong constituency that emerges in favor of keeping

the thing, which brings me to my second point, which is, you know, the scale of the avoided taxes, as you said, as opposed to the outlay, even in a fairly positive scenario, I mean, it could be some really big numbers, particularly for solar and wind, I think much bigger than it could be for hydrogen, just given how much that market has to ramp up. They could be big numbers, but let's keep in mind that in the U.S. we deliver much bigger tax-related subsidies to things like ethanol and oil and gas, and those have sustained a very long time as well. Again, with an industry and a constituency that is very strongly in support. So I'm not like a professional legislative prognosticator,

but I think the assumption that just because these are rich subsidies and they could result in a big boom in manufacturing and in deployment, suggests that we're going to have to pull back on them at some point, I don't necessarily think that comports with how the U.S. legislative process generally works. So your political system is so screwed up, it could maintain excessive subsidies for a very long time. Yeah, got it. Indeed, we have, right? Like ethanol is your classic example of that.

I don't think very few people will argue with you that we should be keeping the ethanol subsidy exactly as we have for as long as we have, but we do. Okay, so this maybe brings the second bit, which is that the U.S. is hard to do business in. The thing is that applying for all these subsidies, particularly as a tax credits, is skilled work. It means employing a lot of people to cut the financings, to jump through all the hoops, and it incensed them, which is why US solar capexas are consistently 30 to 100% higher than for similar projects in Europe. And your import tariffs don't help either, but that's actually only a relatively minor part of it. When solar manufacturers look at setting up factories in the US, they say, well, okay, but it's hard to find a site, it's then hard to get workers who are going to be skilled and stay the distance.

It's difficult to get the permits to do all the work we need to do. Basically, everything about doing anything in the US involves often trying to get those tax credits and jump through the hoops to compete with other places where those tax credits could be realized. So yeah, it's just a difficult business environment compared with places that are a bit simpler but less subsidized. I think that's true, but at the same time, generally we figure it out because the market is big enough, and if it's lucrative enough, people will figure out a way to do it. In my mind, the constraining factor on what will ultimately be the tax impact on the federal government is more likely to be something like interconnection. I think that's where the rubber's going to hit the road for the pace of renewables growth that we see. Perhaps also the market-driven impacts, depending on. how fast we can roll out stuff like energy storage and other things to manage intermittency. And so, you know, depending on how negative power prices get in certain places,

that can have an impact on financing, but with those tax credits, it's not as big a deal. So we'll see. But I'll make the bet that the tax credits last as long as they are currently written into the bill. And you'll have solar panels everywhere. Well, that's the point. Sometimes in places they make no sense at all. may also be the point. We need a lot of power. I mean, we're trying to, the other thing, you know, which I've talked about many times, is that we're going to, we're trying to decarbonize electricity while doubling the electricity grid over the course of the next decade. That's not a small feat. It means we need a lot of renewables, if renewables are going to be a big part of it.

And better late than never, but a lot of countries have thought the same thing and really pushed the accelerator, and they might have been better off accelerating a little more gently, but more sustainably. We shall see. Okay, let's move on to the next one, which is actually a good, this is a good segue into the next one. So, opinion 29, batteries for residential solar systems are becoming standard offers in Europe and in the U.S. Frankly, some of the sales proposals are of indifferent veracity, and the current software isn't up to economically optimizing when batteries charge and discharge. So describe what you mean when you say some of the sales proposals are of indifferent veracity. So I've been reading a bunch of UK proposals for my parents and others.

and also a few German ones. And frankly, I think the salespeople are making it up. When salespeople sell solar systems, they have a very strong incentive already to assume that the power prices will increase and then tell the consumers, oh, it will pay back in X years, or it will make you an IRA of 50%.

And you look at them, and they're actually assuming well above inflation power price rises, which, of course, right now in Europe is what we've seen. So people are freaking out. people are seeing power prices much higher than they have in their lifetime before. And if you assume that that continues for the next 30 years, then yes, you get very, very high IRRs. I don't think there's much real modelling behind some of those assumptions. And when you add a battery, there's often the assumption, there are some very simplistic

assumptions being made about how often the battery will charge from the solar and discharge, about what self-consumption rate you will acquire based on that. And I know they're not even collecting that much data about the system, so they don't really have the means to do that. They're making the most crude, and of course being salespeople, the most generous to them assumptions. Maybe it doesn't matter, but I don't feel that in Europe, at least,

the way solar systems are being paid, gives consumers the tools to accurately assess the financial, of their system. That said, maybe it doesn't matter. If you bought a system two years ago, you're laughing because the prices have risen so much more than you expected. Right. One thing I'm interested in, so as residential batteries emerged as a market in the U.S., you know, it was true in most places initially, and even through to today in most parts of the country, there's not really an economic value proposition for a behind-the-meter battery. The sales pitch has been, less economic, less financial, and more around backup, where we have had regions of the country

that have had meaningful outages, and so the value proposition is a resiliency-driven one, not an economic one necessarily. Is that true in Europe as well, or is it primarily an economic one? And because of that, what you're describing, the sort of like assumptions that go into the financial modeling component of it matter more. Our grids are mostly better than yours here in Europe, so I think that it's less of an issue. There are some people who are concerned about resiliency, of course, there always

will be, but I don't think that's a major driver. Okay, we're going to do two more. Okay, second to last one, opinion 48, there is enough land for lots of solar. There are enough golf courses in the US for about 370 gigawatts for fuck sake.

There's also loads and loads of roofs, so let's see those who oppose ground-mounted solar support higher costs, mounted solar. First of all, I just like your golf course comment. I agree with you 100%. There's actually a great, I don't know if you ever listen to Malcolm Gladwell's podcast, but he has a whole episode just on the ridiculous amount of land that we dedicate to golf courses

in the United States and the value of that land and how insane it is that it is so underutilized. So I agree with you there. But let me ask you this generally. It sounds like what you're saying is that you don't think land is going to be a fundamental constraint to solar development. Is that generally true everywhere? And to what extent is that differ by location? You could imagine saying, yeah, we have plenty of land in the US, but Europe is actually much

more land constrained. So Grand Mountain Solar in Singapore and Hong Kong is probably not going to be a big part of their energy use, because those are basically city-states. And it's somewhat constrained in Japan as well. Europe, it's really a mixture because we have. have plenty of land in Europe that, first of all, used to be used for industry and isn't anymore, or is used for agriculture, but not particularly productively. You know, it's technically zoned as agriculture, but it's not actually that good. It generates a little bit of very subsidised

wool and mutton. So I don't think, when you actually look at the percentages of the land that you'd have to use, you tend to get a very high proportion of your electricity from solar. you don't actually have to use very much of it in the end. Now I totally see why it makes more sense to use roofs and car parks and land that is not competing with even potential food production or rewilding or biodiversity. But I think ultimately this is a bit of a storm in a teacup. And if you want to find the land to build plenty of solar,

the important thing to do is to make sure that you're putting it on the right land that is not being used for other very valuable purposes. Okay, last opinion, which gets to the heart of the matter, which is your PV forecast of how much solar are we going to build? Okay, so opinion 20, our, this being your PV mid forecast, which is the highest you could get the regional analysts to agree to while allocating most capacity to actual countries, not just a buffer, is only 4.2 terawatts cumulative by 2030, which is rather below the 5.3 terawatt. that BNF models we need to be on to get to a net zero by 2050 high renewables path. So what you're saying is we're going to get to 4.2 terawatts of solar by 2030, which is, I mean, that's a lot. Where are we at today? We just went over a terawatt.

So we're going to quadruple the amount, the cumulative amount to solar we've ever built in the world between now and the end of 2030. And yet, that's not, that's 20% shy of where we need to be in our. on a net zero pathway. What's the fundamental constraint that you see there? So personally, I think the fundamental constraint is that our forecasts are probably wrong, and we're probably not being bold enough about just making up solar.

Because you can't see what's going, you don't have good visibility on 2030 for solar. You know that there are huge theoretical pipelines, but there are all kinds of difficulties with realizing them. And once you start talking to the developers of solar projects, They will give you tens of reasons why their job is really hard, and it's very difficult to build solar projects at all. At the same time, we've seen drastic growth in the past.

And also when I go and talk to my colleague, Caroline Chua in Singapore, who's an expert in Indonesia, then she doesn't see much happening in solar in Indonesia at the moment. Power prices are very low, the national utility is generally quite happy with burning cheap coal. and she points out that why should this change by 2030? So I can't bully her into putting lots of solar into Indonesia, which has a massive population, because she's actually the expert on it, and I'm not.

I strongly suspect that there will be more solar in Indonesia than we forecast. Solar will get cheaper than coal there. It will find places to ease in. The government will probably even change its policy. But when I go through the quarterly process of talking to all my analysts around the world, they cannot imagine the sort of transformative change that has happened in, say, Hawaii or California or even Germany, where you've got solar going from nothing to 10% to 20% of electricity, and we could easily go higher. And that's even before you start thinking about, are we going to build solar to make hydrogen?

And I suspect that by 2030 we are, just because we've got no idea how else to manage the problems of intermittency and how to decarbonize steel and fertilizer. So some of it is literally just that we can't see where this demand is coming from. But the history of solar shows that there's always more solar than you think there will be. That is definitely the history of solar, as I understand it as well. And a good way to end here. Jenny, this was a lot of fun. Thank you so much for doing it.

We'll do it again next year when you publish your new set of opinions. Thanks, Shale. Have a great day. Jenny Chase is the head of solar analysis at Bloomberg New Energy Finance. How do we do on this one? There are lots of solar opinions out there, I know. Do you work at a perovskite company or a BIPV company and think that Jenny is wrong about being down on your industry? Let us know there too.

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You can head over to canarymedia.com for links to today's topics and the full list of Jenny's solar opinions. As always, PostScript is supported by Prelude Ventures, a venture capital firm that partners with entrepreneurs to address climate change across a range of sectors, including advanced energy, food and ag, transportation and logistics, advanced materials, and manufacturing and advanced computing. This episode was produced by Daniel Waldorf, mixing by Greg Vilfranc and Sean Marquand, theme song by Sean Marquand. Our managing producer is Cecily Mazin Martinez. I'm Shail Khan, and this is Catalyst.