Suncast Episode #414: WRO & Logistics Affecting Your Solar Pipeline? Supply Chain Expert Andy Klump of CEA is Your Guide

Over the last six months, the solar industry has experienced confusion and uncertainty with regard to a handful of policies that are affecting many. In this interview, CEA’s Founder and CEO, Andy Klump, talks about the impacts of the WRO (Withhold Release Order) on the solar industry, and provides his thoughts on how the Biden administration might provide relief to current supply chain and pricing challenges being faced by the US solar industry.

Podcast Transcript

Nico Johnson:
Welcome back, solar warrior, to another tactical Tuesday. These are shorter form conversations with subject matter experts designed to give you practical tools, tips, and advice for building your solar business and career. Now, a lot of you have faced problems with logistics, and you're maybe just wondering what does WRO mean? You're seeing prices soar, and it's just not clear what's going on with all of our modules and racking and maybe even inverters. Why is there so much slippage? Well, there's nobody in my network who I trust more with the answer to those questions than Andy Klump, CEO and returning guest from Clean Energy Associates. Andy has spent 20 years in China. He spent a lot of time in the solar supply chain and he is here today to answer these questions and more because, let's face it, and you've got questions, I've got questions, and I go get answers. Thank you for giving us your time and attention. These are things that you can't get back. So we are going to lean in and give you a return for that investment today.

Every now and then I get to sit before the Kings of the industry. And today I quite literally mean that because broadcasting for the first time ever from my home studio here in Durham, North Carolina, I'm sitting with my buddy, Andy Klump who just popped over to say hi. Andy, how you doing?

 

Andy Klump:

I'm doing fantastic. Thanks for the invitation, your wonderful home, and it's good to be here in person.

Nico Johnson:

It's so surreal actually, to have you in my house here in Durham, you know, our friendship and professional relationship that is now probably close to a decade long, by and large is over video conference with you living in China and me living in many different places, now in North America. You know, let's start with, before we head out to dinner and chat about all kinds of things that can't be recorded, let's start a little bit with what brought you from China back to the States for what now has been an extended tour. And I'd love to learn some of the things that you've learned, but let's kind of start with what brought you back over for this tour?

Andy Klump:
Well, my initial intention was to start in early August with a chance to reconnect with the team and CEA’s US organization. We actually have over 55 professionals, mostly engineers, in-house. Many of which have been hired in the last 18 months and I've never seen, so it was an opportunity to have a team gathering in San Jose. We did this in mid August. And then the book end of the trip was going to be SPI after which I was going to head back, but due to circumstances out of our control that didn't happen. I made the trip plan prior to Delta really spreading. And so I've now been traveling around visiting a lot of the customers that I would've seen at SPI instead. Now having a lot more personalized one-on-one meetings in various parts of the country.

Nico Johnson:
Yeah. You've been traveling madman. I’ve had the pleasure of kind of watching you touch down all over Chicago, New York, DC, and all parts in between, a lot of flyover country as well. Where has been the most interesting place that you have visited on this trip?

Andy Klump:
I would say the most fascinating by far has been my visit to Washington DC and meeting a lot of the policy makers who are asking a lot of very interesting questions, because solar has now become a part of their agenda.

Nico Johnson:
Finally, thank goodness.

Andy Klump:
Yes, absolutely. And it's not just the climate change agenda. It's also understanding about what are the obstacles to deploying more solar, unfortunately. So there's a lot of education that I've been involved with in various departments in Washington DC.

Nico Johnson:
It's fun watching you, the unwitting advocate, fly over from China and get pulled into these meetings with a lot of higher-ups that we probably can't mention here on the recording, but that have none nonetheless been providing a lot of influence for how our industry is directly and indirectly affected. And that's what we want to dispel for you all myths and give you some real truths about what's happening at sort of the higher levels and up chain in our supply chain that can, whether you realize it or not, they can impact your business today and your plans for tomorrow.

Andy and I have both been in the industry for 15 years, and we've seen a lot of analog or a lot of scenarios that look scarily similar to what we're experiencing right now. So we're going to unpack a bunch of those things, acronyms and the like, that you will be hearing if you read enough in the industry journals, and if you don't, then I'm glad you're listening to Suncast because you're going to get some of the inside information that isn't even being covered in journals. Yet by the time this is published just shortly before Thanksgiving, Andy hopefully will be on his way back to China to see his family. And this will be relatively hot off the press information for you guys to digest and ingest into your business plans.

Withhold Release Order (WRO) on Solar Raw Materials

I want to start with an acronym that if you're not familiar with, as I was relatively unfamiliar with it, you should be, and we'll talk about why it matters. But Andy, there's an acronym being volleyed around that I just didn't understand neither what it means or the implications. It's called “WRO”. Can you define it and then give us some context about what it is and why it matters?

Andy Klump:
Correct. The WRO is the withhold release order put in place by CBP, another acronym, but Customs and Border Protection. CBP looks after our borders, and they also look after the product that comes in to the United States. And there are some concerns about the labor content and some of the products in our crystalline solar supply chain that's been coming in from overseas. And so consequently, a withhold release order was put in place in late June of this year.

Nico Johnson:
So the WRO is essentially the order that is allowing or disallowing product across the border. Most of which in our case, as we talk a lot about inverters and modules and many other balance of system components that would be coming in through the various ports, both east and west, and even down in Houston, here in the United States, that serve our industry. I think the utility scale side of our business is probably feeling the biggest pinch on that. But what are some of the main constraints or drawbacks that are impacting your clients and many others as a result of the WRO?

Andy Klump:
Well, one of the biggest challenges is that the CBP has put in place a requirement that companies who are manufacturers, and they are importer of record of solar modules, show the traceability of where their components came from. But they're highlighting a subcomponent, which has not been tracked in our industry ever in my 15-year history, nor has it been something that's been recognized or talked about before in the sector, and that is metallurgical-grade silicon. And so the source of that metallurgical-grade silicon that's manufactured by a company by the name of Hoshine is the material that is in question. So the CBP has the chance to seize different products that they are concerned may have this sub-component material. But the reality is one cannot determine from observing a solar module where those sub-components came from without having a thorough traceability system in place. And unfortunately, that system, or that requirement was put in place after a lot of these products had been manufactured and there was no traceability system.

Impacts of WRO on US Solar Industry

Nico Johnson:
I appreciate you explaining what the WRO is. And in particular, we'll probably circle back around to this notion of traceability and how that can actually be handled, but what are the broad reaching impacts of these products being withheld, and in many cases sent back at the port?

Andy Klump:
So, first and foremost, there are thousands of jobs that are at stake here in the United States because they're installing solar modules and a variety of utility scale applications throughout the US. And unfortunately, the WRO has created uncertainty that is impacting some manufacturers from actually importing them into the United States. So there are two manufacturers that are both Tier Ones that are importing or planning to import gigawatts of product into the US that now these products are being sent elsewhere. And there's some that are imported and sitting at the customs in the United States, they're not being able to be imported. So there are hundreds of projects that are stranded and the workers can't install modules because the racking, cabling, everything else for the system is ready. And so this is going to have a dramatic impact of potential job loss in our industry. Much more so than I think what a lot of the policy makers were aware of prior to some of the meetings I've had in Washington DC in September.

WRO’s Impact on Distributed Generation and C&I Sectors

Nico Johnson:
By and large, a lot of the work that I know that you're focused on and get engaged in is around rather large scale. We may refer to them as utility-scale central plants, the provision of product for those plants, the quality assurance for those plants, even the engineering for those plants. And I can see how those can have a direct impact on the utility-scale sector. Does it have a similar or knock-on effect to the distributed generation sector?

Andy Klump:
It absolutely does. Because what has happened is with two major manufacturers not importing product into the US, it's caused a squeeze on modules and we've seen pricing go up. We’ve seen a number of DG installers, both C&I and residential players, who are now seeing cost increase and they correspondingly are having a harder time obtaining product. I even had a call this morning from someone who was looking for 1.8 MW of product that is now withheld at the customs.

Nico Johnson:
That small? I mean, that's a relatively small order.

Andy Klump:
Absolutely. So every container has 300 kilowatts. And so that's a 6-container order that is being stopped. And so after 90 days, the manufacturer has the choice to either have the product be destroyed, or they can ship the product elsewhere. So it's hard to imagine that we could see thousands of solar containers be destroyed, but that is technically how the law is written. So it's up to CBP's choice if the manufacturer does not re-export them to another market.

Nico Johnson:
So the silver lining, our listeners in Africa and Asia and Latin America could be seeing product that needs to be moved relatively quickly, and so there's price advantage.

Andy Klump:
Potentially, yes, that is one way to look at it. So there is an opportunity for those folks but once again, it's a shame because a lot of this product, which has been made in Southeast Asia to abide by the current AD/CVD provisions that are blocking Chinese made modules. Now that's higher cost product, which is now being shifted to other markets. So it's a loss to the manufacturers and it's a loss to the industry.

Global Manufacturing Response to WRO

Nico Johnson:
Yeah. And as I mentioned to you, I sent you some messages that I received from one of my colleagues down in Mexico. Because a lot of the expansion we're seeing in Latin America is by and large led by investors from Europe and the United States with operations in Latin America. And we'll just use Latin America as an example, this is true in other places as well. We’re seeing that due to thankfully the increased awareness in ESG and the implications, these companies headquartered in Europe and the United States are effectively enforcing the same WRO type restrictions on projects being built for them in Latin America. So it's not completely, and those are by and large, the large projects, right? The large C&I and the small to medium utility projects. So it's not as though we will see zero effects outside of the United States. I think that that's one of the messages I wanted to sort of sound out here is whether or not this is something that's just going to affect our market in the United States. Categorically, it will. But I expect that we'll also see this sort of ripple effect around the world.

Andy Klump:
So once again, it depends how other countries actually respond with actual specific policy implementation. The US has led the policy debate on this topic and they're enforcing a 1930s law on this topic of labor practices and requesting traceability that once again, it doesn't exist, so manufacturers aren't able to present that. But what it is triggering is many different companies are trying to take different positions to have an alternative supply chain.

One example is Jinko Solar has announced a 25,000 metric ton supply agreement for polysilicon from Wacker Chemie, a German manufacturer in Burghausen. I've actually been there myself because I used to buy polysilicon when I worked at Trina 15 years ago. They’re actually buying effectively all this product over the next several years. And there actually will be manufacturing, both ingots and wafers, in Vietnam to the tune of roughly 7 GW of capacity. That capacity will be ramping up in Q1 and active in Q2. And so Jinko will be fully able to abide by the requirements of CBP to have modules that are not even made in China. So it'll be an entirely non-Chinese based supply chain.

Nico Johnson:
So this will be, just so I'm clear, this will be ingot and wafer capacity coming from non-Chinese supply, presumably coming to the Jinko facility they've recently put in the United States?

Andy Klump:
So Jinko has a module manufacturing facility in Jacksonville, Florida, but that's only smaller capacity, roughly 500 MW. But most of Jinko’s facilities right now are in Malaysia. But effectively you're taking German polysilicon, manufacturing ingots and wafers in Vietnam, and then they will ship those to Malaysia for both cells and module production. And then those modules will then be shipped to the US.

Provenance and Traceability of Solar Raw Materials

Nico Johnson:
If it's dizzying for you, that's why I wanted to have Andy here, because in fact, this is very complex. You use a word that I've heard Darryl, who was recently on this show, mention, and I know that this is something that's a big piece of your practice called “provenance”. Can you explain the idea of provenance and traceability and just how hard this all is for a company like yours that basically focuses more than half of your resources on it?

Andy Klump:
Absolutely. So CEA has over 175 professionals in 13 countries, but 85 of our team members are involved in inspection work, mostly in China, but also in Southeast Asia. And so our teams have been engaged with working with many suppliers and getting access to documentation about where they obtain their upstream materials. So once again, the module manufacturer has to show where their cells are coming from, the cell manufacturers to show where the wafers are coming from, and then the wafer manufacturers show where the ingots are coming from. And there's some manufacturers who are vertically integrated through those parts of the chain, but very few also make polysilicon as well. So our teams are engaged both with doing desktop research, as well as completing factory inspections for manufacturers. And everyone in the industry at a certain scale has an MES manufacturing execution system. So that gives a clear system in place for this traceability. So our teams are validating all the records and making sure that downstream companies are seeing all these records in place.

Differences Between WRO and AD/CVD

Nico Johnson:
The implications of this particular form of trade barrier for many of us who've been around for a little while in the industry, we’ve kind of seen this before. You mentioned earlier AD/CVD, anti-dumping and countervailing duties that were introduced through SolarWorld and then Suniva, petitioned to the United States government effectively, what 2013, 2014?

Andy Klump:
It was December 2014, Department of Commerce put those in place. And so effectively the regulatory, if I think back in my 15 years in solar, it definitely is reminiscent of that time. And at that time in 2015, I had a lot of folks saying, oh, you know, the world, you know, the US market can't survive without Chinese-made modules. But instead the manufacturers proactively looked at approaches of building another supply chain, and that’s where it's evolved in other markets.

Nico Johnson:
So I think a lot of folks, perhaps that aren't as close to the issue as you, may look at this and go, wait a minute, we've got the, the AD/CVD in place. How is this different from that? Is this additional cost on top of what we've already been effectively penalized in the market to accept that, for what it's worth, like warrant captured either in the 2013 to 2015 financial models predicting what the cost hurdles were going to be for these projects. I have to assume that this is similarly affecting projects that developed three plus years ago are now being put in the ground with certain cost expectations. How does this compare with AD/CVD? Is AD/CVD still in fact in place? Like, talk to me a little bit about that.

Andy Klump:
Correct. So we have to separate the WRO from AD/CVD. Once again, there's multiple AD/CVD cases. Unfortunately, the AD/CVD that we're all accustomed to is the one based off of Chinese cells and modules. And so the recent AD/CVD case that's been brought up by two unnamed petitioners has occurred in the last month or so. It's been brought about against the manufacturers of crystalline solar modules in Malaysia, Vietnam, and Thailand.

Nico Johnson:
So not Europe, United States.

Andy Klump:
No, correct.

Nico Johnson:
I'm saying like, if you aren't in Europe or United States or South Africa, this one's targeting you.

Andy Klump:
This, so this AD/CVD case is just for the US, but it's just for crystalline modules. So once again, anyone making CadTel is excepted. So when asked the question why isn't thin film included, and the two unnamed petitioners did not list thin film. They just focused on crystalline cells and modules.

Nico Johnson:
Yeah. Well, that's quite interesting given the percentage of utility scale projects in particular that use thin film.

Andy Klump:
Correct. There's a very small percentage of the industry that is fed by First Solar. And so once again, our manufacturers, their developers who still use their product, the majority of the market is still rolling on crystalline product from Southeast Asia.

Nico Johnson:
Quite interesting.

Andy Klump:
So to answer the question then about, you know, once again, we have the WRO, which is separate from the AD/CVD, and then it's also separate from the 201. And so you still have to remember that the 201 was supposed to have a step down in early next year, but there still is some questions on what will happen with the 201, and will it be extended at the current rate of 18%. And that is also another regulatory uncertainty that the industry takes into account. But once again we’re talking about a very small step down, you know, 18% to 15%, is not a game changer.

Nico Johnson:

And that 15% is of what?

Andy Klump:
15% of the cost. So there's a effectively a tariff adder due to the 201, but effectively the AD/CVD has in Southeast Asia a much more dramatic impact on the whole industry. And right now, as of late October, we are still in the 45-day window for the Department of Commerce to make a decision on whether the responses which were submitted by the two unnamed petitioners will be accepted. And the Department of Commerce can effectively throw out this decision and say, we are not going to conduct an investigation. And so without an AD/CVD in Southeast Asia, I think the market can still move ahead. On the WRO there is an impact on two specific manufacturers, but there is a concern that the WRO may be extended to others in the industry. So there are many factors impacting the supply chain, and this leads to a tremendous amount of uncertainty about the 2022 module landscape and where folks can source their products from.

Changes in Module Pricing Over Time

Nico Johnson:
And folks will, you know, they'll invariably figure out where they can source modules from. I think the overarching question that they'll have is at what cost. Where are you seeing price thresholds right now? Let's just say for the sake of argument for a utility scale procurement, 20 MW and up.

Andy Klump:
Correct. So we see products at 40 cents DDP, delivered to port, delivered to site.

Nico Johnson:
DDP, right. Delivered Duty Paid.

Andy Klump:
Delivered duty paid, so that's directly to the job site. But that is a minimum, we're also seeing numbers that are in the low forties, call it 43 to mid-forties. So even for some utility scale projects, we're seeing those quotes throwing out there, but the economics are completely upside down for most developers at that level.

Nico Johnson:
Give some context of what that number was 6 to 12 months ago.

Andy Klump:
So if you look back 12 plus months ago, we saw quotes that were even going into the high 20s. DDP, 27 cents, delivered to job site, that many folks were then banking on. And once again, for early 22 deliveries, and they were also making projections we'd be at the mid-20s by 2023. So many projects are completely upside down, when all of a sudden you have a 13 to 15 cent module price swing.

Nico Johnson:
Does this blow your mind? I remember when you were procuring polysilicon for Trina, our assembly pricing was up north of 50 cents, right?

Andy Klump:
It was north of a dollar a watt at one point in time. But yes, my early stage in the industry, I remember seeing this rapid increase in polysilicon cost. At the time I entered the industry in 2006, we saw polysilicon pricing at roughly US $150 per kilo. Once again, a product that cost $30 at kilo to make, it seemed crazy high, but then the pricing skyrocketed all the way to $475 per kilo in the summer of 2008. At the height of the Spanish PV boom. So it then dropped dramatically, almost to $100, literally within two years.

Nico Johnson:
And nearly bankrupt Wacker.

Andy Klump:
Absolutely.

Nico Johnson:
It did bankrupt REC, effectively.

Andy Klump:
Many manufacturers could not adapt because they were new to the industry and they had costs that were above $100 a kilo. But the long-term makers, once again, folks like Wacker, still had costs that were sub $30 a kilo, and they continued to reduce those costs. And then the industry, continuously, pricing dropped from roughly 2011 to 2020, to all the way at the point where the selling prices were below cost at roughly $10 a kilo.

Drivers of Module Price Decreases and Recent Increases

Nico Johnson:
So there's a lot of things that we could spend an entire hour just talking about the cost stack of solar modules that you and I have spent a lot of our career thinking about, and in conversation about, but I'm curious for folks that are just thinking about putting solar panels on roofs, they would be looking at this asking a question: Okay, 40 cents at a utility scale. Maybe even they were getting quoted mid-thirties from their distributors as early as you know, six to eight months ago. If we look over that course of time, what is it that drove prices consistently down, despite things like AD/CVD being put in place? As you said, there was a whole lot of “the sky is falling” in 2011 and 2015, yet prices continue to drop down into the high twenties. So what is it that contributed to driving those prices down, despite all these headwinds? And then what is conversely, and I think the monkey wrench in the conversation that we need to talk about as well, now driving those prices back up?

Andy Klump:
So there are lot of factors that led to a large price decline, but part of it was just demand driven. Obviously during COVID, no one was installing modules in some of the key markets. China in Q1 of 2020 effectively went to zero. And a lot of other folks, as they were installing in other parts of the world, they didn't fully appreciate the level that the pandemic would have, or the influence of the pandemic in many different markets. So installation was a challenge. And once again, late 2020 everyone saw module demand. It leveled off, it was not nearly as robust as what was projected prior to the pandemic. But what did happen in early 2021 is partially what has led to this cost increase. So once again, we had pricing of solar polysilicon at the $10 a kilo level, but then all of a sudden China announced in January 2021 the fact that they have a carbon neutrality pledge by 2060.

And so pricing jumped dramatically for polysilicon. It doubled almost overnight to $20 a kilo. And then it slowly itched its way up to mid-twenties. And then we saw pricing level off really midway through this year, right around the high twenties. And then what's happened in the last month or so is there was a change in the energy policy within China and an energy shortage emerged for a few reasons. One, China had announced the previous year that they were stopping the restricting imports of coal from Australia due to trade issues. And two, they also had increased demand. Once again, as many folks during the pandemic and places like the US could not travel, they started spending money on a lot of goods. And so we started to see massive supply chain bottlenecks. And so there was an increased demand for more goods, so that also drove pricing up.

China’s energy restrictions leading to increased module costs

But the other factor is clearly the cost of overall containers and shipping. And so all those prices together led to massive cost increases in polysilicon. So we now see polysilicon in the upper thirties, and that is a much higher driver of the upstream cost. But once again, the energy shortage, we now have seen China enact policy in 15 different provinces where they’re restricting energy intensive industries. And so upstream metallurgical-grade silicon, polysilicon and ingoting are all energy hogs, and consume a lot of energy to produce those products. So that has led to massive price increase of roughly 3 to 5 cents per watt in this overall cost. So that's the first driver of cost.

Increases in logistics costs

The second one is clearly the increase in logistics, I just highlighted that. Right now, we see logistics pricing, which used to be as low as $2,000 per container. And now we're seeing it over $25,000. And that's often just delivered to the port of Long Beach. And you have long waiting time for the product to actually be unloaded, which is part of the issue. And then you have inland transportation cost. So when you look at the final delivered cost, you're looking at additional 7 cents a watt that used to be, you know, 1.5 to 2 cents a watt. So once again, another 5 cent adder. And then there's also a various other increases, both on glass, EVA, other raw materials that are in the solar module manufacturing process have also been hit. So all these different adders on top are effectively leading to this 13 to 15 cent per watt price swing, from the high twenties where we talked about, to the low forties.

Impacts of India and China Markets on US’ Ability to Scale Solar Deployment

Nico Johnson:
It's worth noting that while the United States is one of the largest demand markets for product, it's by no means the only market in the world. We're seeing massive commitments globally in particular, one that I want to mention and hear from, India, where all of a sudden the manufacturers have a lot more opportunity and options for where to send the product. Of course they want to and need to send to the United States and to Europe. How do you see other global markets impacting our ability to continue to hold stable and eventually drive prices back down and scale up our ability to blanket the US with solar?

Andy Klump:
So the India market is absolutely one of those demand drivers. There’s a policy in mid-2022 where India will be having a tariff on Chinese manufactured product, both on cells well as modules. And so they're trying to encourage more domestic manufacturing within India. So as a result, there's been many manufacturers trying to develop projects, import extra product to deploy in late ‘21, early ‘22, and even mid-’22, for manufacturing of modules in India. So, consequently, we've also seen many Indian buyers of solar cells and modules consequently have high cost increase, so that's been one of the demand drivers. And the other demand driver is clearly China itself.

And so last year, China still had a 48 GW market, but effectively installed 30 GW in Q4 alone. And they had a pledge, or a plan, to deploy 60 to 80 GW this year. But due to the high price of polysilicon, some of those installations slowed. So there's still some question marks of how much China will deploy, but it still is likely to be a 50 to 55 GW market. So once again, in a very compressed period of time, key markets like India and China do have an impact on upstream pricing of polysilicon, ingoting and wafering. And so while they may not help or pinch US-based supply, which is coming mostly out of Southeast Asia, these other upstream cost shifts are certainly flowing out into solar module pricing.

India’s Growing Solar Manufacturing Industry

Nico Johnson:
So we didn't talk about this ahead of sitting down to record, but a thing that occurs to me, especially given Clean Energy Associates’ track record of quality assurance, is that surely you're looking at how the India supply market is growing. And how are the US EPCs and developers and asset owners that you are working with thinking about and viewing the India market as a potential supply opportunity, given the headwinds on Southeast Asia?

Andy Klump:
So from an AD/CVD Southeast Asian perspective, the Indian-based manufacturers can be a solution because they do have capacity that exists outside of Southeast Asia. So there is growth from some of those manufacturers. But keep in mind, newer manufacturers also are prone to having a lot of problems and defects. So extra QA work is absolutely needed. We've seen that firsthand in many factories around the world. But this still does not solve the upstream issues about where the provenance of the upstream material’s coming from. Because still 97% of the world's ingots and wafers are still manufactured in China as of today. And so, the WRO still requires that manufacturers, even from India, provide upstream provenance, and that's a challenge for them.

The Future of U.S. Domestic Manufacturing of Solar

Nico Johnson:
Well, it seems like, as Andy pointed out, for those of you who are currently sitting on a need for modules, you're probably looking into a long waiting line. That's one problem that we'll have to solve. Another, we've talked about Southeast Asia potentially through this AD/CVD second petition being hit as a supplier. It lends to an additional question, you know, in the previous administration, as well as this one, there has been a strong push for domestic manufacturing. It seems like a lot of this regulatory headwind is effectively going to force a US manufacturing industry that, you know, for the last 10 plus years we have by and large avoided, because it just isn't as cost effective. I'm curious your thoughts on both the realistic likelihood and the impact to the near-term ability for us to scale, if we do, in fact, just bring much of the manufacturing we need to US shores.

Andy Klump:
So we absolutely do believe there will be a rebirth of some US-based manufacturing, but a lot of it depends on how policy will be adopted. In the current infrastructure plan, there is a special provision for domestic-made products. And so there's separate carve-outs for polysilicon, ingoting, wafering, cells and modules that ITC domestic content requirement could stimulate a very large build-out of multi-GW of solar manufacturing capacity. But I agree with your comment, there hasn't been much manufacturing except in, you know, 2017, there was some interest and a lot of manufacturers looked into it. And then once again, Hanwha and Jinko did adopt the plan to expand in the US, both in Florida as well as Georgia respectively.

So there's been some manufacturing that's been put in place, but it wasn't enough to really stimulate a broader ecosystem. And so we are absolutely supportive of more US-based manufacturing. We actually have a team that does simple on the ground inspections for our clients that want domestic-made product. But one of the key challenges once again, is that policies makers need to have support for the overall eco-system. Not just the modules, but also have to look at cells and all the subcomponents. And so it needs to be part of a 10-year buildout, not just a four year buildout. So I think that message is being heard, and I do think there are some supporting more US-based manufacturing. So we see that as part of the solution and we absolutely encourage both open trade barriers, or I should say lack of trade barriers, but open trade for products outside of the US, as well as some domestic manufacturing incentives.

Nico Johnson:
Yeah, and this is the thing that I think, by and large, has been missed in US policy setting that, Reagan Farr mentioned, you and I talked a bit about, he's really clear how did he get a plant set up in Tennessee? Well, he went to visit a plant, I think it was Wacker plant in China. And the guy from Wacker said, look, they’ve lowered all the hurdles and all the barriers, and we're building entire business parks. We have not only our glass manufacturers and our EVA providers, but our pallet manufacturers are right here on site. How can the US compete with that? And that broadly is kind of the thing that I've always said, it doesn't make sense for us to bring it back onshore. The reality from a policy perspective and a jobs perspective is, okay, if we embrace the fact that this can create jobs, and with our quantitative easing and our current fiscal policy, like we've got relatively low interest and states can manage their tax plans as they see fit. This provides a great opportunity for competition among the various states. And in particular in the Southeast, where there's a lot of land and a lot of folks being affected by the move away from fossil fuel, into renewables. How have the conversations you've had, just in the time that you've been on your whirlwind world tour here, lend credibility to how the states are viewing? In particular like the states are seeing this opportunity. Are they seeing it, are you hearing from policy makers at a state level, or is it still something that's still sort of circling in DC and hasn't made its way down to the states as an opportunity yet?

Andy Klump:
Well, I do think there's a variety of ways to look at this. I think individual states do have some favorable policies towards promoting manufacturing. But it needs to be looked in combination, both at the federal level and the state level. And at the federal level, I think there is, based on our conversations with National Security Council, Department of Energy, Department of Homeland Security, many different folks are looking at this from different angles. But I think everyone is certainly open and willing to have more US-based manufacturing. But it's also important to understand, among the 230,000 jobs in solar today, roughly 160,000 are based in construction and installation. And so these are the folks who are taking the modules that are often coming from overseas and putting them on rooftops or installing them in utility-scale solar installations. So, yes, you both need state level support as well as federal level support, but looking at it holistically, the biggest bang for your buck is clearly on the installation part of the industry. But look, the US absolutely does want to have some reshoring and development of a US-based manufacturing supply chain, and that needs those federal level incentives and then certain state-level support.

Advice to Current U.S. Administration to Accelerate Solar

Nico Johnson:
Well, Andy, as is usually the case, I feel like we could talk about this for another hour, but I want to try to see if we can sum it up with some actionable steps, both for listeners as well as participants at large in the industry. If you had an opportunity to give advice to our current administration, what would that advice be? And then a follow-on to that would be how can we, as individuals in the industry, participate and contribute to ensuring that this goes in the direction that we need it to go?

Andy Klump:
So if I had one message to give to US-based policy makers is let the industry prosper on its own with less regulation and provide clarity about if there are regulations in place, what is the reasonable expectation for manufacturers and importers of record to abide by those restrictions. So in the case of the WRO, it's providing clarity about what level of transparency is needed around traceability protocols, and making sure the industry has time to actually implement those protocols.

And then I guess my second message would be the Department of Commerce, for the US to hit its climate change goals that the Biden administration has put out, we absolutely need product from Southeast Asia to be installed by the tens of thousands of workers that are eager and waiting to install a lot of solar modules. And obviously, as I said before, we're very open to having US-based manufacturing. So that could be a portion of incentives and those manufacturers who make those investments, they should get rewarded for that long term view on the US-based supply chain.

Nico Johnson:
Andy, what final piece of advice would you give to those of us in the industry, or have you been giving to folks in the industry as you travel around, given the deep insight that you have about where things are going and the nice edge that we're on, one side or the other?

Andy Klump:
So, certainly, reaching out to your Congressman is quite important to make sure your voice is heard because solar job growth has been off the charts and will continue to grow if the right policy support is there, or there are no obstacles in place. But I think secondarily, I think part of it is be observant of what the impact of these supply chain disruptions have on your projects. We increasingly see many folks shifting out projects from 2022 to 2023 and beyond. But I think the key message is stay hopeful and make sure to have advanced supply chain planning. Don't depend on any one supplier or any one source of product to meet all your needs. So that's where a diversified supply chain approach working with smart folks that are connected throughout the value chain and give help to get provenance of upstream materials. These are all important tips as you grow and expand your solar business.

Nico Johnson:
And now, because you're listening to Suncast, you are smarter and capable of going to your suppliers and asking how these and other implications will impact your price and their price and their ability to deliver. I've talked to folks who have reached out to their distributors for example, and said, how does this WRO, these labor restrictions, affect availability and price? And the answer came back as, oh, it doesn't affect it at all. And the logical question, in one case in particular, the guy said back was, oh, so you've proactively procured sufficient supply that's already on our shores that you don't have to worry about any delays? And their answer was what do you mean? Right? So by tuning into Suncast, as an example, you are able to go back and manage the expectations of your supply chain and your own future. I whole-heartedly support what Andy says, which is you can’t be myopic in your view on this relationship or that relationship where it concerns 2022, in particular, supply chain. And if you’re having trouble with that supply, you certainly can reach out to me, and I know Andy probably gets these calls on the regular. Like you mentioned, how do I get 1.8 MW? Our friend Yan who has his buying group, I know they’re doing a lot at trying to help folks get product across the borders and into warehouses. There’s lot of resources available. Feel free to reach out and if you’re not connected with Andy, I’d be happy to help you make that a reality.

Andy, if folks want to connect with you, how do you like to be found? What’s the best place they can find you?

Andy Klump:

LinkedIn is the best place to reach me. It is by far the channel that I look at the most, so reach out to me anytime.

Nico Johnson:

Fantastic. Well Andy, thank you for taking time to help us sift the wheat from the chaff here, as we try to understand what’s happening in the global supply chain new world order. And we’ll look to have you back if the AD/CVD does fall into place, against Southeast Asia to try to figure out what next. Hopefully it won’t win, when will we hear from that?

Andy Klump:

It could be at any point in the next month, but it’s likely by early December.

Nico Johnson:

Early December, okay. I’ll be reaching out to you hopefully after you’ve quarantined in China. And enjoy the time back in your home. In the meantime, I wish you safe travels, thank you for stopping by Suncast headquarters. And we’ll be seeing you again pretty soon.

Andy Klump:

Absolutely, Nico. It’s always great to be here.