The Green Insider - Ep 123 - Andy Klump

In this Green Insider podcast episode, host Fred Davis speaks to Andy Klump, CEO and Founder of Clean Energy Associates. Andy discusses the relationship between the US and China; working as an American in China and the cultural differences; the effect the tariffs and investigation into solar panels by the Biden Admin is having and how Clean Energy Associates is adjusting.

Podcast Transcript

Fred Davis:
Welcome to the Green Insider podcast powered by eRENEWABLE. I am your host, Fred Davis, episode 123 of the program happening right now and another great Follower Friday type of vibe going down today is welcome to the program. Long time solar pioneer, a veteran in the industry who I like to say was doing solar way back when, before it was the cool thing to do, Mr. Andy Klump, CEO and founder of Clean Energy Associates at CEA, for those of you scoring at home talking all things solar tariffs. He's based over in China has been for the last 20 years. Fascinating insight from a gentleman who, from the Heartland like myself and Mr. Nemer, gives a full insight as to what it's like to do business in China as an American and kind of what the, the feelings are right now.

Andy Klump’s Bio

Fred Davis:
All right, let's get right down to Mr. Andy Klump, 20-year veteran of the solar industry. Been over in China for that time as well. Got his business over there, wife and four beautiful daughters, will hear from him in just a little bit talking all things. What is the investigation that's going on right now into Southeast Asia? As far as solar panels are concerned. I know there's a lot of concern here in the United States rightfully so considering the number of panels and the percentage of panels that we get from Southeast Asia.

Congress is investigating that right now. We're going to ask Andy exactly what does that mean to both his business, as well as to the solar industry as a whole. We're going to get into what are tensions and feelings like right now between the United States and China. We know we hear the, the Western point of view. How does it feel to be a boot on the ground over in China? What does the energy transition mean to China? And then of course, we'll ask him what is on the docket for CEA, Mr. Andy Klump and the solar industry for the rest of 2022, without further ado here is Mr. Andy Klump.

Doing business in China as an American and how American approach is different

Andy Klump:
My 20 years in China, I definitely will say, it's a more tense point right now than it has been in the past. There are a ton of folks in ways where I'd say it, you really don't, doesn't matter from an American businessman perspective because, you know, once again, whatever you do in China, I'd say Chinese don't have angst against individual Americans. There's a lot of like kind of macro government related topics that they don't really participate in. So, I'll say to do business in China, you need to have knowledge of the language. I think it's absolute requirement, I think versus where I was 20 years ago, language wasn't as crucial. But when I first went to China, I realized I am in committing myself to learn the language. So that's absolutely essential. The second piece is that it’s culture, really knowing how the Chinese think and operate, I think is extremely important.

And then third is really having a value proposition that, that resonates and works in China. If you could nail those three things, I think, you know, anyone can go and do business in China, but it does take a lot to really understand number two, as tough as you might think it is to learn Mandarin. And that took me two plus years. That was the biggest obstacle, really understanding the mindset of the Chinese and understanding how they think and operate, that is extremely important. And I think that's a skill that you could take anywhere because the Chinese diaspora is in many different parts of the world, but then, to the third point as I was saying, having a value proposition that really resonates in doing something that's different, that's one of the reasons that I've been fortunate to be successful, but to the broader question about geopolitics, I mean, it is, it's obviously it's a very different system, very different culture.

China's much more capitalistic than what folks realize they think of communism. And it is not the communism of 30 or 40 years ago in the cold war. That is not the case whatsoever. You know, Chinese leaders are very innovative. I'd say one of the things that's interesting. If you look at the political systems, a lot of US politicians have a legal or political science type background. All the Chinese politicians are either scientists or engineers, so they know how to build things. So, infrastructure is very, very strong in China and they've built out incredible infrastructure throughout their whole country. But, you know, I'd say once again, things are a bit more tense. And so, I think at the macro level what's happening between, China and the US, you know, both sides realize they're looking at things a little differently. So, it does create for interesting dynamics at times.

Fred Davis:
You mentioned that the second part being, understanding the culture and kind of getting into the mind of how they operate and what have you, and the way Chinese business folks operate. How is that different than how we do things here in the United States? Or what is the biggest things you've noticed in your time there?

Andy Klump:
Yeah, I think it, within China, I think there's, there's definitely a sense of how are things, how do things work as a whole, as opposed to a typical American approach of “Hey, I want to be the individual that stands out, I want to do something the best and create a different path”. Forging a different path is not always the best way to operate in China and to give a perspective, you know, I first showed up in 2003 working for Dell computer. And so, I was just trying to think out of the box, what are ways I could grow my sales team and, or grow my sales. And so, I was trying to figure out, okay, how do I build a network? How do I connect with others? And the council that one of the sales guys told me was “Don't rock the vote. Don't do something that we've not done before. It's better to just follow the protocol 20 meetings a week, just go accept the right meetings, just follow what you can and just, you know, keep the piece." Whereas I was thinking “Hey, I'm a foreigner in China, I've never had a sales quota before. I need to find ways to do this. So, I said maybe I find ways to connect to the American Chamber of Commerce. I try to connect with, you know, a senior level executive in the Siemens, which is one of my accounts. I said, let me try to find something through the German Chamber and make a connection that way. And what ended up happening is there was a rumor that I was, you know, I was posturing myself as the head of Dell China, and that's why I met with some certain business unit leads through the German Chamber of Commerce through some kind of joint AmCham event, American Chamber of Commerce event.

And then it ended up like that. That rumor that I did that, that was kind of a nail in the coffin. It made it very, very tough for me to recover because it made it look like I was going above my superiors. The truth was never, you know, was obviously not that I passed on my business card and said, this is development manager. And that's what I was, but I made those contacts, was able to bring in some business in different ways than what would typically would've been done. But I think in that cultural context, I was never a great fit. And I'll tell you, it was not my career job as the self commodity products at Chinese, but I learned a lot. I took the job because I wanted to learn the language, but more importantly, learn the culture.

And so, I guess the key takeaway for me over time is, you know, definitely respect the chain of command respect that there is a certain harmony in terms of how you do business and really respect relationships. And it's better to work through relationships, to try to get to someone as opposed to necessarily trying to stand out. And I see that in education system as well. Once again, the function of having four daughters, I interact with the schools a fair amount, and I see the Western education system and the Chinese education system having different principles in place. So, it makes for some interesting stories.

Andy’s experience at Trina Solar

Fred Davis:
And then I know, you know, you’re foray into the, to the solar side of things, and you worked with the company, Trina Solar, if I'm not mistaken, and you started with the founder of Trina. If  from what I believe I heard on the podcast and you kind of became his right hand man. How much did learning from him kind of propel you and give you kind of like that, you know, take what you already knew from, you know,  going alone at it and learning the hard way, and then being his right hand man, and then getting kind of that rapid fire influx into the culture.

Andy Klump:
Yeah so when I joined Trina in 2006, I directly reported to Mr. Jifan Gao, who is the CEO and founder of Trina Solar and Mr. Gao was a fantastic individual at the time I met him in 2006. He didn't know any English. My mandarin was, you know, after three years was decent. I was functioning fluent from a business standpoint, but I never, was ever, never tested myself right at a proper translation certificate. But I did a lot of translation for him as we traveled internationally, but I saw the classic China entrepreneur, hard charging, you know, the desire to win and be number one, the desire to have an impact. I fully respected his vision and perspective. And I would say how he championed resources and built, you know, Trina to be such an amazing company.

I was super, super impressed, but he was very open and very Western in his ideas, even though he didn't speak any, uh, any English and he never lived in the US, he definitely embraced a lot of Western ideals about collaboration and bringing different folks on. But I will definitely say, I learned a lot about how hardworking the Chinese are, how committed they are to the cause and how passionate they are. So once again, a lot of, similarities with me, you know, Western or us, entrepreneurs but I will definitely say one of my key takeaways was, let's again, take my first point to the second is there's also process about how you build aggressively within harmony. But what I was able to do at Trina, which was very unique is that I was able to take all my knowledge, education and background from the west, apply it within the framework of their organization, but really help Trina become much more international.

And so that's where, Trina effectively went through at 10 X growth. In those two years, I was there from 500 employees to roughly 5,000. I was on the IPO deal team that listed the company in New York Stock Exchange. There's a long process of dealing with investors and communicating the value proposition and also joining and participating on earnings calls and a lot of other industry forums. But I learned a tremendous amount of Mr. Gao I have a ton of respect for him, but I definitely learned the context of how quickly the Chinese mobilized. And I’d say, that’s something I carried into my business at CEA was just understanding the supply chain. And a lot of people thought, “Oh well, the Chinese just got it. The advantage of the solar industry because of low cost of labor.” That’s not it at all.

Labor was less than 2% of the cost of your typical solar module, but they created a supply chain infrastructure and plan around how do you build a vision? How do you get suppliers? Sub-component suppliers to buy in your vision, and you really can helped you convince those suppliers to co-locate next to Trina’s facilities. So, part of my role as Vice President of Business Development was creating the Changzhou supplier co-location program. So, I learned a ton about the supply chain, how to get those suppliers, sub-component suppliers, all aligned with that vision and then to do it rapidly. In China just the speed of business is at such a different pace. Those are some of the key takeaways I had from that experience with Trina.

Fred Davis:
So, the first thing that jumps to my mind where you're telling me this is what was that conversation like? Mr. Gao, you said.

Andy Klump:
Yes. Correct

Fred Davis:
What was that conversation like with him? When you decided you were going to leave Trina and start your own company?

Andy Klump:
At the time he refused to accept my resignation. He said, look, Andy, you've been here two years, but I passed a piece of paper over to him. He said, I'm not taking this. I put it back. And he refused to take it. And I went for an hour trying to convince him to let me leave. And he still said no. And he said, I want you to go back. I want you to tell me exactly what you want. We can help make, we can make some, you know, some changes. My fundamental issue. I had the good fortune to have met my wife when I was in Beijing prior to moving to Shanghai in 2006. I, then started at Trina Solar, but I wisely proposed to her right before I started. And so, we had our, our wedding in 2007 after year one of the company.

But after two years it was clear. I either had to relocate to this factory town, because he had promised me that they were going to sit up their headquarters in Shanghai. That was going to be the center of decision making. But all the decisions were where he was in Changzhou two and a half hours away. And I just said, I just can't be commuting Monday through Friday ad nauseum and then still traveling internationally. So, I was away from my wife 90% of the time. So, he was willing to make a lot of exceptions change a lot of things. They set up for Shanghai office but it was about a month process for him to finally accept my resignation. And then I set up CEA because I respected the work he did at Trina and I had a non-compete. I chose to honor that.
And so I said, if I'm not going to work for any of the manufacturer, which I had many other manufacturers that wanted to hire me, and I met a lot of C-level executives over the course of my two years at Trina. They all gave offers for me to join their companies because I was bilingual. I had knowledge in the solar sector which 2008 was still fairly early on, but I said, I don't want to work for a competitor and do the same thing. I want to forge my own path. And I'd rather find ways where I could work with many of the Trina clients who I met in different markets and said, I want to help add value and really help them in different ways where, where the business actually ended up was very dramatically different than I thought in 2008, but that's a separate story. But I absolutely was very committed to setting my own path and trying the path of an entrepreneur in 2008.

The Start and Expansion of CEA

Fred Davis:
What was that reception like from the rest of your cohorts? Here's a, you know, as I've heard you say before, big, tall white dude from St. Louis, Missouri here in China. Speaks the language working with a guy very well respected in the Chinese business world. What was that like when you made that jump to CEA and what were those first couple years like?

Andy Klump:
Well, I'll say it was a dramatic shock to all of a sudden be on my own and just rely on my own skills and expertise rather being paid. I never set up a company before officially. So, I was a first-time entrepreneur and with the exception of what I did in high school, which is set up a landscaping business just that was just to pay for my high school tuition. So, I did that for seven years, but that was kind of more of a side passion than anything else. But look, when I set up CEA it was absolutely a massive struggle because the global financial crisis had just happened. So, I literally set out, stepped out of CEA in 2008, with the intention of setting up business around, you know, doing high level kind of corporate strategy related to solar and doing corporate development and trying to help put different deals together.

I was going to have different ideas about polysilicon, what I was going to do. And the reality was the financial crisis just hit in a massive way. The subsidies in Spain just came off. The pricing in the industry was in a free fall. Everything was completely chaotic. And so, I just had to say, I'm putting all those kind of consulting plans aside, let me figure out how do I make money? I had this great business plan, all drafted, and I just had to scrap it in day one. And I just was responding to what customer's concerns were, which at the end of the day, folks were really all, they were all asking questions about supply chain. So, I said, well, look, I thought that supply chain piece was the easy part. And it was something everyone could figure out, but I realized that's the part that's really challenging.

So, I really established CEA at the start with something completely different of mine, but I quickly pivoted in late 2008 to just focus on supply chain and then quality assurance because that was the second piece of it. I was helping companies to draft contracts, make introductions to the suppliers, but these are Western companies that didn't have someone on the ground in China to really act in their best interest in making sure the contracts were executed. We found the contracts were often, you know, the volume was then shifted the next day after a contract was signed without even being tried because the supplier got a different price somewhere else. And that was more palatable. And I said, well, let me make sure that these contracts get executed. And then as I went to the factories to make sure that it happened, then I saw the dramatic difference in factory level quality between many different manufacturers.

And I said, I need to hire an engineer or two to come with me to really get in the details. And so, uh, from those two practices as supply chain and quality assurance in 2008. We later expanded the business because I had clients who said. “Hey, I will also want to hear about. Can you help me assess product quality after the product arrives at the port or at the job site?” And so, we set up a separate team, completing engineering services work. We established a US entity later in 2013 and had folks on the ground and it really kind of built and scaled our business there. And then the fourth business unit we have is a market intelligence team. So, we effectively now have over 135 gigawatts worth of client projects and engagements. So, we gathered the data from all those projects and put it away that folks can digest it.

They can understand different defect level data that we've seen in the factories. And then we can actually help use that data information to help them complete the project better. So, that's where our business has grown and evolved.

So, with COVID and the supply chain disruption, there's a lot of interesting dynamics that are happening right now. It's very clear that, you know, once again, when I set up the business in 2006, the solar supply chain was still very early stage. But the current case, I will say, I've never seen such so many different factors coming at once. It's not just the logistics issues which have plagued the industry. We've also seen a massive spike in demand for the upstream polysilicon that led to a massive price increase of roughly three X in early 2021.

So, we've seen some, a bit of volatility as that's bumped around, but pricing still remains very high and challenged. We also have seen these recent case of regulatory issues. And so, the recent tariffs in the AD/CVD are causing a headache because they're focusing on a lot of the major markets in Southeast Asia where production happens in Cambodia, Vietnam, Malaysia, and Thailand. And so, there's a lot of stress that we get from, a lot of requests from different downstream developers, IPP, EPCs, and the light as they face these various challenges. We've seen a lot of folks wondering how do they get their access on, on supply that is cost effective? And the reality is with a lot of these inflationary pressures and just regulatory hurdles, your pricing is increasing because of all the uncertainty and that's caused some deposit and it's created challenging dynamic in the industry.

Fred Davis:
Is it harder to get information, you know, when folks are working back and forth or, you know, to get, I guess, good, solid information you haven't been on the ground for so long. I find it hard to believe that there's anybody as plugged in when it comes to what's going on solar production wise in China than Mr. Andy Klump.

Andy Klump:
We have a much bigger team these days than we did at the time when I just started. So, while in 2008, it was myself executing a lot of this work and connecting with various folks. We now have a 200-person team. And so, we have, 95 folks on the ground in China who are executing work. They're often traveling to different countries and completing work as needed in different manufacturing facilities. 200 folks globally and 95 folks that are in China, but we have separate teams focused on supply chain and market intelligence. So, I would say getting the information, isn't the challenge. I think the challenge is really converting the information that we have to making actual deals. That's the biggest challenge is really how do you amidst all this market uncertainty convince various stakeholders to take either the risk or deal with some of this regulatory uncertainty. That's what's caused a number of contracts to pause and make it very difficult. So that's more or less the major challenge we're facing right now.

What does the United States investigation on solar tariff means to the solar power industry?

Fred Davis:
So when you hear about this investigation that is going on right now, here in the United States, that I guess they initiated a potentially a one year investigation. Congress has stepped in and of course we all know getting anything bipartisan wise is an Act of God, but you got both sides coming together and saying, “Look, we need to hurry this thing up if we're going to get this thing done so that we don't totally Peter out the solar industry, what's kind of the feeling over there in China or on your end when you hear about this investigation and just what it means, because again, since you got boots on the ground on both sides, what does this mean to the solar industry in China?

Andy Klump:
So first of all, the world needs more solar. I mean, we all know there's such a high demand for renewables, and it's not just solar, it's also solar plus energy storage. So, I'm a hundred percent confident that the market will continue to grow and expand over time. And so, full stop. I think that is something that both China and the US can agree. That there is a high need for clean, affordable, renewable energy that helps power the planet so that trend is absolutely happening. So, the investigation absolutely creates uncertainty and it makes it difficult for developers or financiers to back and deploy projects. When all of a sudden one's not assertive, they're going to have a 10% tariff, or it could be as high as 250% at the higher end of the threshold.

So that completely destroys project economics. If that were to happen, what is happening is that everyone is now asking us, how do we buy modules that are no longer subject to the AD/CVD and in these four countries. And that's where CEA does have a global network of suppliers that we work with. We have worked with many companies that are leading IPPs and developers throughout the US that they rely on us, not just for our quality checks but also a lot of the supply chain insights we have. So that's where we've helped folks to understand who are the different manufacturers outside of those four countries. And so, we're really trying to help our clients get their supply needs, but certainly some products are going to be delayed and 2022 projects are some postponed to 2023 or 2024. And so, I don't see  the market demand going away, but I do see there being a push out of some of the projects that are in the pipeline.

Is there enough supply for the increasing solar power demand worldwide?

Fred Davis:
Are there enough other countries that have the resources or the capabilities to pick up the slack now that we know that there's this worldwide demand for more solar?

Andy Klump:
There is absolutely a supply chain in other regions, but it's not as robust as what it is in Southeast Asia. So, this is going to take some time, but if you look at what's happening, I'll just take India as an example, you look at India, they put tariffs on Chinese panels as well, and they're actually fostering a domestic Indian market. So, there's actually over 50 gigawatts of announced capacity of projects, or I'm sorry, 50 gigawatts of actual manufacturing capacity on some modules that have been announced. We know that all that's going to come to market, but even if half of it, doesn't. 25 Gigawatts is a lot of solar and the US market being what it is. I think you're going to see many different buyers shifting their attention to acquiring products from India. We've had teams on the ground there since 2015. 15-person team on the grounds off doing completely inspections and doing work. The half of our, our buyers. We have other supply chain team and account manager side. They're supporting our clients. And we actually just two US clients in India this week. So, there are other regions that have some manufacturing capacity outside of that. But once again the fact of the matter is over 80% of the modules did come from the four countries in question, so that's certainly a big challenge in question for the industry right now.

Energy Transition in China

Fred Davis:
What does the energy transition look like in China?

Andy Klump:
So China is absolutely committed to growing and expanding its renewable energy deployment. And if you look at the solar amount of solar that's been deployed in China last year in 2021 was a record high and China is the world's largest manufacturing hub, but it's also the world's largest, in terms of end installations in demand. And so, there's a tremendous support for renewables and it's not just solar, it's also wind, and energy storage is picking up in other areas like green hydrogen and overall build out of a sustainable energy transition technologies. China's fully supportive of that. So, I think, but on the flip side, the China energy demand is massive and what's going to, there's still are a lot of coal plants still been traditionally, you know, over 50% of China's energy came from coal. It was as high as seven or 80% at one point, but they are diversifying more towards renewables. So, I think they're very committed and they've also stated their goal to 2060 reaching carbon neutrality. Well, that's several decades away. They also have a track record of actually hitting their goals. So, they're very committed to the energy transition. And that's why I think once again, that is actually a commonality between the US and China is that both countries do want to deploy more, a lot more renewable. And so hopefully there's tighter collaboration and work together in the future.

What’s in the future for CEA?

Fred Davis:
We'll get you outta here with this. You've been a solar pioneer from back before. It was the cool thing to do. Tall white guy working in China and boots on the ground down there doing a tremendous job, running a company from Shanghai. What's on the docket for the rest of 2022 for Andy Klump and CEA?

Andy Klump:
Well, CEA's absolutely going to continue to grow and expand. We've been on a clip of high growth. We were at 60 plus percent growth pre COVID for several years in a row. And then it went a little sideways that year, but we have a very strong company culture and are very dynamic in terms of how we approach the market. We're looking for the right culture fit, but we have a strong team of experts and we're going to continue to grow both geographically as well as in terms of the number of services that we offer. And we're also going to continue to help our clients expand in whatever needs that they have. So, that's where we do have a 65 person team in the US. We have mostly engineers and we're helping to support our clients with solar and storage solutions in and many different states in the US, but just also countries globally.

So, just one example is we have a strong engineering services team that has actually complete a lot of rooftop inspections. So, we've actually had inspections for several hundred rooftops for two of the top Fortune 10 companies. And so, one of the things, I think it's an interesting thread is that the demand for solar and energy storage have been very strong among corporates. And so, we see a lot of our client shifts towards the corporate segment. And once again, as there's been more solar deployed, there's also a lot more quality problems. And so, a lot of what our team has done is we've responded to a lot of, thermal events. So, let's get everyone hates the thought of fire at a rooftop, but it does happen. And if you have poor workmanship or poor product quality, this can happen. So, part of our teams are just off executing inspections, both in the field and large utility scale installations, as well as on CNI rooftops. And that commercial industrial segment is growing and expanding. We also have residential clients that we work with through our large platforms, but once again, we're helping to continue to grow and enable more solar and storage development. So, we're very excited about the future and want to go back to that high growth that we've had in the past.

Fred Davis:
Thank you so much for that, Mr. Andy Klump, you can catch all of the Green Insider episodes over at Apple Podcast, Google Play, Spotify, in on the website erenewable.com. Check them out. You will be glad that you did. Shout out as always to the entire eRENEWABLE team and Mike, Roger, Al, thank you guys all so much for doing what you do. This has been the Green Insider podcast powered by eRENEWABLE. We make going green easier.