Deep Insights and Predictions on Solar and Energy Storage Technology and Quality Trends
Episode Summary
In this episode of Solar Maverick, Benoy talks with Andy Klump of Clean Energy Associates about how the rising demand for solar power has also created a rising need for greater quality assurance within the solar industry. Andy discusses what quality assurance in solar means, what sets CEA apart from their competitors, and what he sees as key trends in the solar and energy storage supply chain. As an American company based in China, Andy shares how COVID-19 specifically affected their operations and how it disrupted business overall.
Insights from this episode:
Details on starting Clean Energy Associates and the services they provide, what quality assurance is, and how they enhance the solar supply chain.
Benefits of overseeing the whole solar process including being able to better identify trends in solar power and storage.
Difficulties of incorporating different technologies and software into energy storage.
How to help clients incorporate software capability when acting as a technical advisor of solar assets.
Strategies China is employing to push its solar and storage agenda forward and how the automotive industry is helping that agenda.
Details on what key trends are happening in the solar market including cost reduction and higher output modules.
Difficulties Clean Energy Associates faced in China in the early days of COVID-19, how they are still being impacted, and how it caused them to evolve as a company.
Suggestions Andy has for solar entrepreneurs to create a successful company with a great culture.
Podcast Transcript
Benoy Thanjan:
Hi, this is Benoy your host of the Solar Maverick Podcast. I'm excited to interview in this episode of the podcast, Andy Klump, he is the CEO and founder of Clean Energy Associates, which is a north American owned solar PV and battery storage, quality assurance, supply chain management and engineering services firm founded in 2008. He discusses a lot of interesting topics on the podcast. For example, how working with them leads to much higher output of your solar system. And it potentially translates to 2% more production, which translates to a lot of revenue, obviously for their clients. How COVID-19 impacted the global supply chain and technology prediction that he has for solar panels in the next three years. Thank you for listening to this episode of the podcast.
Benoy Thanjan:
Hi, this is Benoy your host, the Solar Maverick podcast. I would like to thank Solar Energy Systems SES for sponsoring this episode, the podcast, they are solar energy photo tech design, both from headquartered in Brooklyn, New York, and serving the Northeast USA. And you'll hear more about them during the podcast. Thank you again to SES for sponsoring.
Andy Klump:
The reality is that the overall Asian supply chain, particularly in China as a dominant path to cost reduction. And that's where you've seen these dramatic 50, 70% cost reductions over the last handful of years. And that's, what's going to allow the industry to grow.
Benoy Thanjan:
Hello, welcome to the Solar Maverick podcast, where solar meets entrepreneurship and experience. I'm your host Benoy Thanjan so let's get into it.
Benoy Thanjan:
Hi, this is Benoy, your host. So the solar Maverick Podcast, I'm really excited to have Andy Klump. He's the CEO and founder of Clean Energy Associates. And Andy, I'm excited to have you, because you're going to bring such a unique perspective on the podcast that we haven't had before and your expertise and quality assurance, independent engineer and supply chain. I think is going to be a great perspective and also obviously being an American company based in China. So thank you, Andy, for being on the podcast.
Andy Klump:
Absolutely. Thanks for having me. And, you know, we live in very interesting time now, but I'm very excited to talk about all those topics.
Overview of Clean Energy Associates (CEA)
Benoy Thanjan:
Definitely. Well, we gave in the beginning of the podcast, a brief description of Clean Energy Associates, can you go into more detail about your company?
Andy Klump:
Sure, absolutely. So Clean Energy Associates is a global technical advisory company that provides comprehensive engineering solutions for the solar and storage industries. So if I have to break it down specifically, you know, we help people buy things. We have a team called supply chain management, which focuses on procurement. We then helped a lot of folks check the quality in the factory. So even upstream team doing QA, QC and factories, really around the world, across all the solar value chain, not just modules, but also inverters racking, VOS and also storage components. Then finally, we have a team that is working on engineering services, which includes independent engineering and owners engineering at the site. We have a 30 person team in the US most of which are engineers or performing that work, or we do independent engineering and owners engineering in the US you know, north America, as well as within Europe and a few other countries. So those are the three core facets of our business. And then finally, we also have a business intelligence platform where once again, as a company we've completed over 55 gigawatts of engagements. And so we basically taken all the defect data of the 30 plus gigawatts of QA QC engagements and all of our downstream data and all of our procurement data. And we really put that into a platform that allows folks to be able to make intelligent decisions into their supply chain needs.
Benoy Thanjan:
Oh, that's pretty amazing. Can you talk about that because isn't that more of a database that you are basically pulling all this information to then help your clients make better decisions when it comes to pick your mic and you go into that?
Andy Klump:
Yes, absolutely. So I'd say it's going to be aggregating and collected data for really from day one, but I would say it was the last five to six years. We really had a more sophisticated approach. We have a technology and quality team and a business intelligence team that really has come together and kind of been able to create this platform of data. But look, anyone can plug into our platform, apply for a license and they get aggregate data of all the different manufacturers we've seen around the world. In a lot of ways, this is a database that's not well known and documented because very few folks have access to upstream data. There's a lot of O&M companies and other downstream asset managers who see the operating data in the field. But we actually know some of the secret sauce about what happens in the factory, some of the different components that actually go into the core modules, as well as some of the sub components of the BOS. We actually know that data so we can kind of plug that in. It's a perfect compliment to anyone who's an asset manager or an owner of solar and storage assets.
CEA’s Quality Assurance Program
Benoy Thanjan:
Definitely. That's amazing. I mean, I don't think there is like really proprietary data like that out there. So that's a kudos to what you guys are doing at CEA can you talk about more in detail about quality assurance? I mean, not everyone's familiar with it, but can you talk about just high level of quality assurance is and how does that apply to the supply chain?
Andy Klump:
Absolutely. And I really have to define kind of what is differentiated Clean Energy Associates is the fact that we really do have deeper insights, the supply chain, that a lot of other companies. And so prior to establishing a Clean Energy Associates in 2008, I was the vice president of business development at Trina solar. And so I was responsible for the supply chain efforts and a lot of their procurement activities. And so I learned a lot by living and breathing in the factory in Sean Joe or tree's headquarters was for two plus years. But one of the things I saw is that the traditional model a little bit broken one would have a technical advisor, maybe engaged by a project sponsor, and they may fly to China, have a little bit of jet lag. They'd go in and walk around the factory a little bit in the morning, they'd have a nice long lunch kind of get treated. You know, the red carpet would be rolled out for them. Their time in the factory was somewhat minimized and they had a nice dinner the next day. And then the second day, they went a little bit light on some of their checks. And I just said that there's no way that this can be a really comprehensive view of quality.
The CEA Quality Assurance Difference
So what I conceived of, and once again, CEA really is a market maker. And this is that we created this comprehensive onsite quality assurance program that really starts with a factory audit with a rigorous team and rigorous methodology and a thousand point checklist. And then upon the start of an engagement where we actually know the amount of product that's being manufactured. And once again, this could be, if you're talking about on the module side, it could be anywhere from a two to five megawatts, small engagements for a CNI customer, or it could be 2 to 500 megawatts for a very large utility skill client, but we're effectively there from module one, starting on the line until that final module, whatever a hundred thousand that is. And so we're going through and completing the pre-production audit, looking at all the sub-components and all the balances systems components going into the product. We then look at it during the inline production monitoring and actually measure it, look at the calibration, all the equipment, see all the components as they come together. And then finally we go through and do a pre shipment inspection of a certain sampling size and that sampling size then determines the confidence level the client wants to have on their quality. And we follow statistical process models have been in the manufacturing industry for decades, and then we deliver these reports on a daily basis to clients. And then the final step is really container loading to make sure that all the products that we've checked and validated are then going to clients in different markets. And once again, I kind of described a little bit more on the module step, but all a lot of the reference modules in that, but really the lot of the core production process still applies. Whether one's talking about inverters, you're looking at storage components, PCs cells, and the like, so we can do various levels of sub-component checks as well as other aspects of the balances systems.
The Thousand Point Checklist of CEA’s Quality Assurance Program
Benoy Thanjan:
That's pretty amazing. I mean, it's really comprehensive. I didn't realize that you started from the beginning all the way to actually it being basically shipped pretty much. And that's pretty amazing. What do you guys are doing in a thousand point check as well?
Andy Klump:
It's quite comprehensive. And once again, we also have folks who come to us with different scopes or different budgets. And so we can modify our program and adjust it to what's needed. But one thing is very clear is with an 85 plus first and inspection and engineering team, we can really touch factories really around the world. And so that's where our teams have been in hundreds of factories throughout the whole solar and storage supply chain and dozens of countries. So there's various scopes of work that require very expertise. And so we built and scaled this capability over the last 12 years, I guess, just as a brief case study, I'll introduce is that we had a client who actually engaged, we've been working with for seven plus years, but they actually did a test and they actually bought some product from a manufacturing facility that was QC. And then they actually bought a product from that exact same manufacturer at the OEM brand of the original manufacturer. And they put it into the same actual operating environment and they actually found there was a 2% Delta in output. Now, if I could go to my clients and say, Hey, if you use us for QA, we guarantee you another 2% output, I'd be retired right now. So we can't make that guarantee. But what we found is that quite often there is a much higher output. And even if it's forget 1%, even it's a half percent that has millions of dollars, if not tens of millions of dollars of impact on the end, owner's profitability and ROI or the lifetime of a 25 plus year project. And the other point I'd also highlight is that when we talk about that 2% Delta, the original manufacturer's data, they were actually in compliance with their stated nameplate capacity. So the one thing is we like to call this the halo effect or the angel effect, just having someone on the factory who's ingrained, who can speak the language of the operator, but as acting independently of the supplier, they actually helping our clients get a better output for the life of the system. So that's where the work we do is is really dynamic. And I think that really helps our clients get a better ROI. And that's where we have a lot of long term operating clients where you've had 10 year relationships, five plus year relationships and folks keep continuing to come back to it.
CEA’s Solar and Energy Storage Services and Target Customers
Benoy Thanjan:
Definitely. That's pretty amazing. I mean, it's amazing how much value that you're adding to your clients when it comes to that. Can you talk about like, what types of companies are your clients? I know you kind of mentioned it a little bit, but it would be helpful like the types of companies that normally, and I know you offer a broad range of services as well, that would be helpful.
Andy Klump:
Our customer is the end owner of solar and storage assets who cares about consistent, reliable, and optimized performance. And they see value in having a wow customer experience. So quite often that is the end owner of the assets. So once again, the IPP, the integrated developer, in some cases, we're seeing the industry migrate once again towards a lower cost of capital. So we even see pension funds, insurance companies, or directly entering the sector, and they're actually directly investing in development arms and building those capabilities. So it's really someone who sees us in the life cycle of the project. So they engage us early on before the project is still in development. They're helping to make procurement decisions. We're helping them with that advice. We then have our team performing the quality assurance in the factory. And then finally we then help owners engineering oversight to make sure that the work that's happening in the field, whether it's by an EPC or an outsource contractor, who's actually building it, making sure they're following standard practices. So that's where I think CEA's very differentiated is that because we have such a strong upstream team and a deep knowledge of the supply chain, which often happens in Asia and we have teams in 12 countries, we really do provide that end to end solution. I think that's very different from a lot of our competition.
Battery and Energy Storage
Benoy Thanjan:
Yeah, definitely. That is. And I know we were focusing a lot on PV. Can you talk about like the type of work that you're doing for energy storage? Obviously everyone's talking about energy storage and the cost of energy storage as well, the duration of the batteries, and then coupling it with solar. Can you talk about more, what CEA's doing with energy storage?
Andy Klump:
Absolutely. So a storage is a, is an area that's fascinated me for almost a decade. I remember my first walk-through of the early stage facility back in 2011, it was a simple facility, but one I kind of was looking at studying and there was really around 2014 where we first had some of our solar clients start to call us and say, can you help us look into batteries and just check out that space a little bit. So really starting in 2015, we hired our director, George Lucas, who looks after our technology and quality team and really with his guidance to kind of start to build out an energy storage practice but the head of our quality assurance team in China, he actually has a 19 years of experience in the industry and spent 10 years overseeing production at Panasonic. So we have a very accomplished team, both upstream in Asia, as well as in the US but effectively the last two to three years, we just seen as business really blossom. And so we do a lot of the same core upstream supply chain and quality assurance work that I just mentioned, but we're also doing work that's in the field. So we actually just had an inquiry to do broad set of projects to do commissioning support on behalf of the developer that was sourcing from a less well-known manufacturer in Asia. And one of the trends we've seen, you know, it was certainly, you know, once again, integrators add a lot of value at this stage of the industry. And I think they play an important role, but we've seen more and more developers who've kind of made the shift to say, we're going to start to do a little more work integration work in house. They need to really work with external technical advisors, like CEA that have a strong supply chain and Asian upstream capabilities. But we also have a strong team of folks made up of some of which have left big integrators, like NEC they're here based in the US and their broader technical team that's spread out across 10 states. So we can really help the deployment of many storage installations and provide a lot of that same work around owner's engineering, commissioning support, construction oversight, and there's a broad set of services that really fall within that broader bucket that we're now executing on right now.
Lithium Ion Battery Technology
Benoy Thanjan:
Definitely. That's really helpful to understand. And then are you primarily seeing lithium ion? Is that the technology that most integrators and asset owners are comfortable? Are you seeing other technologies or what you're in a unique perspective to see more than most people? Like what's the trend on that as far as technology?
Andy Klump:
Yes. I'll definitely say that lithium ion technology, and whether you're looking at NMC chemistry or, you know, LFP, there's a variety of folks trying to innovate in this sector. And I think it's important also to reflect on the supply base, because historically it was really LG, Samsung and Tesla who had a dominant share of 70 plus percent and everyone just bought from them. But what you're seeing is that there's a large proliferation of lithium-ion battery manufacturers out of China that are now growing and scaling. They've been a number of support for the electric vehicle space and really energy storage was kind of just seen as the nat on the back of an elephant within that sector. But the reality is that as these manufacturers grow and expand, they're looking at various ways of doing some of the integration, you know, offering pieces of the software stack and supporting different developers as they're getting more deployments in the ground. And so the challenge with energy storage is once again about the bankability and the financiability of a lot of these systems, because they don't have a 20 year PPA or very long projected operating life, that developers have to be a lot more flexible. They're looking for ways to lower the CAPEX upfront. So there's absolutely a ways for them to incorporate different types of chemistries and different technologies in, but what's going to you, we're also familiar with flow batteries, compressed air and other types of flywheel type storage, but I'll say the large deployment is around lithium-ion technologies. I'll just add one other comment is just, there's been a lot of concern about the May 1st executive order around bulk power systems being impacted and would that include batteries? And there still is a lot of news that's yet to be released in terms of what that executive order really does mean, but our knowledge and experience in Asia and particularly in China, just tells us that, look, if you separate the control systems, which can be done easily by working with an international player or North American face control systems provider, there really is no cause of concern to where your actual battery cells come from. But the reality is that the overall Asian supply chain, particularly in China has a dominant path to cost reduction. And that's where you've seen these dramatic 50, 70% cost reductions over the last handful of years. And that's, what's going to allow the industry to grow. We certainly advocate that every developer should look very closely at their provider, but they have to focus on high technology and low cost platforms. We think at CEA we can play a key role in supporting the adoption of those technologies.
Battery Storage Software Services
Benoy Thanjan:
Yeah, definitely. That's huge. Especially, you know, it's still very early in energy storage and a lot of developers are still getting up to speed. So I think you've made a lot of great points. And you also mentioned actually software, which I think is a very big part of the energy storage piece is how do you deploy the battery efficiently and economically to take advantage of different cashflow streams, whether it's ancillary services, battery backup. Do you look into software as well, or is that part of what CEA is doing?
Andy Klump:
Absolutely, we do have a strong team of software, or I should say engineers who are understand the software. They help to evaluate various types of software. And we're actually doing more coding and development with our own in house technology team to provide better capabilities to the market. But we do a lot of work around energy modeling and really trying to understand different use cases and help folks analyze the applications that will allow them to monetize these projects. And I think as you alluded to, if you look what's happened a few years ago with PJM, you know, changing the signal can have a dramatic impact on the ROI of a project. So developers need to be very flexible into deciding how to design and transform a system into different use cases and to be able to migrate that in different environments. So that software know-how and capability is obviously one that we do pride ourselves on. But once again, we're not a software provider, whereas a technical adviser really trying to help advise the end owners of these solar and storage assets, how to work with different types of technology and software applications to allow them to be successful. So that's where we're always playing that independent third party role.
Demand and Supply Trends in Energy Storage
Benoy Thanjan:
Definitely. And that's huge. I mean, taking that, and then obviously once you combine storage with solar and the balance of system, you really adding a lot of value to your clients, your asset owners. So that's amazing to hear, can you discuss the energy storage market in China? It's been interesting to kind of see how China has invested a lot in energy storage. Can you talk about, obviously your company is based in China, you've been to factories in China would be great to get your perspective on the growing industry that seems to be growing exponentially. I know you mentioned like the price decreases.
Andy Klump:
Absolutely I'll split that into two parts of what's going to supply side and then the demand side. Absolutely. And the supply side, huge dramatic increase and manufacturing capacity, but it's really once again, driven by the electric vehicle sector. And so that's where a lot of electric vehicle manufacturers have gone. You know, I'd say the international electric vehicle manufacturers have chosen to source their cells from China and done that successfully. And so many of these core battery manufacturers, the bulk of their business is just geared towards automotive sector and they have extremely rigid protocols and QA guidelines to follow and they send international inspectors quite regularly. And so there's a very big and robust industry around feeding the electric vehicle industry. However what's happened is that some of these manufacturers have woken up and said, Hey, storage actually has a potential business application that we hadn't really thought about before, but they're more or less taking a lot of the products that weren't necessarily approved by the automotive spectrum and now allocating them to storage.
Quality Assurance in Energy Storage
So, yeah, I was in a discussion just to give you a little anecdote with the CTO of one of the top five companies. He just flat out said in front of myself, my team and my clients actually stated that yes, you know, they know there's an, A grade and a B grade product and they give the B grade product to the folks who don't check. And those are the guys in the energy storage. So the reality is there's a very clear argument and validation for engaging us because we have deep expertise on the QA of these specific batteries. And it's nothing against the manufacturers, but just once again, it's a normal distribution. And sometimes on that lower end of the tail, there are some lower grade products and whether they choose to refine or upgrade them, or even if they can, it's a different grade of a product and they're not going to throw it away. So they're going to give it to someone who's not checking, but to answer your question. So there's been a dramatic buildup of literally over 50 X capacity growth in less than the last decade. But if one also looks at the demand side, there are more and more energy storage applications, which are going in the ground in China to date, there have been more of these kind of pilot range installations that are happening, but we're going to see more and more large scale deployment of energy storage in the future. But still, I think the primary focus has really been on the manufacturing side and that's where China has significant scale advantages. And that obviously is we all very familiar with folks like BYD and CATL, and we track dozens of other companies that are like them that are kind of up and coming and really looking to become more advanced on the manufacturing side.
Electric Vehicles in China
Benoy Thanjan:
I heard you mentioned another podcast that China has the goal of 2030 being all electric vehicles. Is that correct?
Andy Klump:
Absolutely. There's a massive shift towards electric vehicle adoption. We've already seen buses throughout all the major cities in China, deploy to electric vehicles already, and there's even shifts within the passenger sector. But look, there are a number of major automotive manufacturers that in the west we don't even know about that are growing and expanding. BYD is obviously one that's well-known and documented with the investment from a very famous Warren Buffet that we all know that there are many other manufacturers that are like that. And they're growing and scaling. They're having more sophisticated products with better design capabilities. Yeah. Look at someone like Neo, I met their CEO on one occasion, you know, talk about the fact that they're going to start to internationalize and globalize. So in many of the Western car manufacturers are also shifting all of their R&D dollars towards electric vehicles. So China is obviously leading the charge. They're interested in having as many homegrown manufacturers, but I think just in general, you're going to see a massive shift of electric vehicle adoption and in a market like China, they can flip the switch just like that and make that change. So I think by 2030, we'll see a total electric vehicle market just dominated by China.
Benoy Thanjan:
Yeah. Yeah, definitely. I thought it was interesting as well that, you know, Tesla is obviously open manufacturing as well in China. I'm assuming to take advantage of obviously the huge amount of people and the electrification of the fleet. So it's interesting to see American company as well.
Andy Klump:
Well, and once again, foreign brands within China have a very strong reputation what's can Teslas you certainly one of the leaders in that space. So yes, there are a lot of Teslas that around China, even before manufacturing started, there's a lot of adoptions, a lot of folks importing Teslas, even at very huge price points because of import tariffs, but Tesla definitely wants to access that market. They're going to manufacture more and more products there. And I think you'll see ongoing innovation in this space and more interest in accessing the China market from an EVs standpoint.
Benoy Thanjan:
Hi, this is Benoit your host of the Solar Maverick podcast. I would like to thank Solar Energy Systems, SES, for sponsoring this episode of the podcast. The company is a solar energy photo tech design bill firm headquartered in Brooklyn, New York and serving the Northeast U S founded in 1998. The company designs builds and maintains solar photovoltaic PV systems with the public and private domain. I interviewed David Buckner, who's the founder and CEO of SES on episode 65 of the podcast. And it was one of the 10 most downloaded podcasts. So definitely check it out. The title is 20 year solar veteran and entrepreneur provides perspective on the solar market. To learn more about solar energy, check out their website, which is solaresystems.com, Email ses@infoatsolareastsystems.com or call at (718) 389-1545. We'll also have in the notes of the podcast information on solar energy systems. Thank you again for sponsoring this episode of the podcast.
Forecast in Solar and Energy Storage Trends
Benoy Thanjan:
I have a question about trends in solar and storage. Obviously we've talked about some trends. It would be great to get more of your perspective because you have a unique view of the market than most people being, you know, that you're upstream and involved in, obviously all the components down to the system, PV and storage, it would be great to kind of get your perspective of what the key trends that you're seeing in the market.
Andy Klump:
So obviously there's an ongoing knowledge that everyone has about ongoing cost reduction. And there's been a lot of rumor pricing in the international market, which is true that pricing has now dropped below 20 cents a watt. In the US due to the tariffs that are in place. We don't get the benefit of that low of a price point, but once again, the underlying cost structure of the solar supply chain has continued to just overwhelm the industry. Just shocked many folks, including myself. Who've been in the sector for 14 plus years to see cost levels comes a level that they're at.
New Technology Adoption Impact on Pricing
If I had to make one bold prediction, it's really more on the technology adoption side. And I see module power classes continue to make leapfrog steps forward. If you look at even what was deployed as recently as like a few quarters ago, we saw modules that were in the three 93 95 range sub 400 watt product now jumped to mid four hundreds and deployments, I think in 2021. And this is product that's being manufactured in Southeast Asia, which has already been validated within China where a lot of the core R&D exists. And so the rollout of technologies to Southeast Asia and then coming to the US, it's often six or 12 months trailing the market, but already we see manufacturers producing 500 watt product and actually our technology and quality team actually just attended a launch ceremony with one of the top manufacturers and they announced a 600 watt module. If I was to make one bold prediction. We will see a single module at a thousand Watts. So effectively a one kilowatt module within the next three years. Now, I would say that product could be manufactured today, but the form factor is just too dramatically different and challenging. We've already seen the PCs who used to have one man installer, be able to lift up a module and do a lot of the work around that. They've now shifted two workers for module.
Inverter, Racking, and Wafer Technology Advancements
So once again, when you talk about even larger form factors, that's the big dramatic game-changer that just one has to balance when the market, when the, all the B.OS components, whether the it's the inverters or the racking manufacturers, everyone has to adapt their system to these larger form factors. But fundamentally, you know, from my time in the industry, I was just entering the sector. When you saw the shift from five inches to six inch effectively at 156 millimeter wafer, and effectively, that was the standard from 2007 or eight all the way through 2018, 2019, but then in the last year or two, there's just a proliferation of so many different technology changes and innovations that shift of wafer size went from one 56 to one 58.75 into to one 61. And we see a number of folks who've migrated around this 166 standard. Now we're seeing the next shift up even going to eight inch effectively, two 10 millimeter length wafers, which is a dramatic shift. And so all these innovations are happening in a short period of time, in addition to cell technology advances. And once again, we're also seeing a shift from in tight to B type. We've seen modules go from model facial now to buy facial. So there's a confluence of different technology shifts, which we've been tracking and checking very closely the last dozen years. But I'd say particularly in the last year or two, the number of innovations and the timing of them have happened in such rapid succession, that it creates a lot of complexity. And that's where I will say there's more awareness of these changes in the market, and there's more demand for our teams. And that's why once again, CEA, we've grown at 60 plus percent each the last two years just responding to the market demand and trying to keep up with all the work that's needed on the upstream side. And I threw a lot at you, but the many different kind of trends within that. But I would say the rapid adoption of new technologies by far is the theme that we're tracking. And one last point I'd make is that really, since our inception, I kept good relationships with Trina CTO, got to know the CTOs of all the major players, but over the last five plus years, we've actually been meeting with the technology teams of each of the major manufacturers and really tracking where they stand on their technology adoption and success or failure. And so we've seen all these different innovations. And so we now have a significant amount of data and insights related to technology adoption. And that's why we find what's happening the last two years. So it's such a game changer within the broader industry.
Benoy Thanjan:
Yeah, that's really exciting. I mean, these are bold predictions and it's interesting because I always feel like people have predictions and then we end up actually getting further the predictions and everyone thing. So it's interesting. And then obviously price and cost. And what do you guys do, especially with the technology as it gets more and more complicated as you mentioned, I mean, CEA is really key in helping your clients understand, and obviously you're the expert in it. They're just trying to obviously get the most efficient system that produces.
Technology Risk in Forecasting Solar Trends
Andy Klump:
And I think one of the key points that you have to reflect on is that we have to look at all these changes in the context of what are the major project financiers concerned about, and everyone wants to avoid risk. And that's where we're fully aligned with the interest of the industry. You know, what's going on. We've had a very successful deployment of, or a hundred gigawatts of solar this last couple of years, but we want to continue to see the industry thrive. So we have to work with the financiers of the system, you know, in the US as the tax equity providers, everyone who is involved in providing the lowest cost of capital possible, to allow these projects to pencil out. They have to get comfortable with the amount of technology risk. I think there's a sequencing of technology. And typically we would see a new product be launched, whether it's on the inverter side or on the module side and have a five-year operating life. Now, we're seeing that condense down to two years and even sometimes 18 months before that next innovation happens. So that's why in addition to knowing what's happening in the upstream, that's where you have to have the strong downstream engineering team to be able to walk into a field installation, be able to see, and acknowledge the different issues and be able to make recommendations to the land owners about what type of technology makes sense in terms of deployment and that planning. Because once again, these are projects that are now approaching 500 megawatts or a gigawatt plus, and this is going to take a year, year and a half, sometimes even a two year building cycle. So you have to have advanced views into the R& D platform as suppliers understand where the technology is going to come up and make sure you do all of that planning two years in advance. And I think that's really where our downstream engineering services team is able to help draw out a lot of those insights.
Benoy Thanjan:
Sure. That is really interesting because everything keeps getting re-engineered because the technology changes. So if you're able to know what's going to happen in the future and to design for it in the beginning, I think that's a huge advantage to the asset owner. So that's a huge value that CEA is offering and really interesting. I didn't know that you did that. So the other thing I was going to ask it was interesting. You mentioned the past two years have been great success for Clean Energy Associates, and then now we're going through COVID. Can you talk about how business has been since COVID started back in March?
COVOD-19 Impacts on CEA’s Operations
Andy Klump:
Well, I would actually highlight this happened well before March. And I'd say once again, because our teams were in a number of different countries, but, you know, with our China base, we saw a lot of things develop as early as late December. And I'll admit, I fully understand and comprehend what was going on. Even early January. We had teams flying every year. We get together as a company with teams flying over from almost a dozen countries to meet in our annual strategy conference. And I probably would have called that off. And I know that there was a risk, but literally about a week or so after that was really the start of Chinese new year. And that's when my family actually were traveling in Southeast Asia and we saw the news and the escalation of cases.
Global Impact on CEA’s Operations
So even in early January, we were well aware of the seriousness of COVID-19 and really keeping track of all of our team and monitoring where they were because during Chinese new year, everyone typically goes back to their hometown. So three of our team members were actually in the Hubei province, which is where Wuhan is located. Fortunately, they were all about an hour outside of the city and more rural areas. So they were all quarantined for three months, couldn't leave their house. So we were observing and watching this, we were tracking where everyone was traveling to, and we had a good portion of our team. We had over a dozen folks that were actually in Vietnam doing inspections at various manufacturing facilities. They couldn't get back. It wasn't really until just this last week, after five plus months in different facilities, that some of these folks were able to go back to China, but just the disruption of the global transportation really happened in March. And that impacted the US and the COVID cases started to become more widespread. That's where I think it really became more of a global pandemic that was in awareness of everyone of the global community, but we're really tracking this back in January.
Safety Precautions in Global Solar Manufacturers
So if I had to track and talk about the supply chain trends first, and then I can reflect on our own personal team, we saw dramatic shutdown of factories, you know, during Chinese new year and a number of folks who kept some of those facilities operating. But, you know, once again, post Chinese new year, there was a week or two where we saw utilization sometimes still at zero. Sometimes at 20%, a few folks were operating at 50%, but within China, there was a massive contraction of supply chain within a month or so after some of the protocols around COVID-19 were put in place, the protective measures PPE, we saw those factories start to go up. And our teams were also a victim of being kept out of certain manufacturing facilities, because we were seen as an outsider but we had to go through a lot of protocols to improve our internal operations during the month of February, but really by mid to late February, the supply chain had more or less corrected itself. But we saw further disruption within Southeast Asia, where a lot of the products are being manufactured for the US market. And some of these manufacturers had say a variety of responses, the larger ones with more domestic driven supply chains, they survived and were able to do okay, but they also had hiccups. So certain markets like Malaysia were very restrictive about who could open up and operate. So some of those facilities were operating at 50 or 60% of capacity. And then it was not just the crystalline players, but also some of the thin-film players like for solar, but slowly over time, they started to open up a bit more, but they went through a couple of different hiccups and cycles with the government as they were still very much restricting the flow of the supply chain components and also carefully watching who is allowed to operate. So once again, I think post that initial January, February period, where China was mostly impacted, and then it normalized, then we saw this impact other supply chains around the world. And once again, that that same trend happened. And also in, in other facets, whether that be on the fracking side or inverters, you have some storage components just certainly Korea was impacted Spain and Italy were absolutely impacted. I think it hit other sectors like wind, probably a little more severely than solar, but we saw those sub-components that did have an impact on the global supply chain and really play that out.
Covid-19 Impact on Solar Supply Chain
Finally, I had to look at our business once again, independent of the supply chain. I should also mention we've been providing our clients with the weekly report and all the supply chain impacts. And there still are some slight surprises that may happen. You might not think about it, but even things related to the recent polysilicon shut down or GCL due to some silent explosions, there are various supply chain disruptions that happen at various points in time, independent of COVID. We continue to track and update our clients on those. But going to the second part of my statement is really about the company and how we've evolved. I'll happily say that once again, Q1 was a little bit rougher than we thought due to some of the factory shutdowns and slower business, but we actually saw an expansion of our business in Q2 because all of our clients have really stuck with us. They saw the need for a strong technical advisor, and because we have 125 professionals in 12 countries, we actually do have a global view about what's going on. So we actually really gave a lot of helpful advice to our clients during this period. So it actually gave us more business in Q2. We also saw a lot of projects that already been kicked off and were in deployment. So the production still happened the various hiccups in Southeast Asia, but our teams were actively involved and highly utilized during this period. And we're going to put a hiring freeze in place, but just kind of pause briefly. And we realized our demand was so strong. We just had to keep hiring. So we're actually looking to add to our teams right now in the US and in China. So it's kind of been a scratch my head to make sure to make the right decisions, but we've always sat on a lot of cash. So we've never had any bank loans and been in a strong stable position.
CEA’s Global Safety Precautions for Solar Manufacturer Inspections
So we've actually used this opportunity of a hiccup with COVID-19 to really further invest in digital marketing. Obviously we're taking high degree of measures to ensure the safety and well being of our team. We've ordered thousands and thousands of masks. I think we just distributed about 8,000 masks globally, some on a non-profit pro bono basis to hospitals in the Midwest, as well as the east coast, but we've also given teams in India, Philippines, different markets as they were short, obviously the US. And so with the right PPE and the right guidelines, we really try to work with our teams because we unfortunately do still need to visit different job sites and different factories. And so solar being a part of the energy industry in certain locations, it's still seen as an essential sector. We did put a pause, I think in more, in those site inspections in March and February and parts of May, but we've really seen a ramp up of activity. So we're actually growing that team quite a bit. Unfortunately, there's a massive unemployment problem in the U S and other markets, but we're actually a net contributor to positive economic growth and hiring. So that's where we're happy to be part of hopefully what is going to be a recovery, but we feel very bullish on the solar and storage sector and see that there's going to be an ongoing expansion going forward.
Benoy Thanjan:
Yeah, that's amazing to hear the growth during a difficult time, and I appreciate you walking through COVID and how you realized in January, and then obviously to where you are now and doing more site inspections. And then it's amazing to hear how you donated PPE. So that's great to hear all over the world.
CEA’s Company Culture and Operating Model
Andy Klump:
I like the highlight, you know, I think it's partially our culture and our operating model. That's been very unique while we were criticized or had a problems with hiring in the past. We were much smaller. Like our philosophy around HR was always the higher, the best in class talent, no matter where they were located. And we said, look, you want to live in Oregon. You want to live in a rural location and we're in Colorado. We're completely fine with that. So even though our engineering team is headquartered in Denver, we really only have a handful of our 30 folks that are actually based there. So we've worked remotely very well as a team, as a company, the last decade plus, but as we've grown to expand the last several years, that's been our philosophy. So we have a very rigid communication platform. All my executives are in the U S and so we have daily huddles of 15 minutes each, we have weekly huddles, and then we have all hands meetings on a monthly basis. So constantly, and I split that up into two sections because we typically put our Asian international folks in one bucket and then north American and European teams in another time zone. So each month you'll have those two separate meetings of an hour plus. I'm going to give updates what they're doing and really share and celebrate the culture and values of the company. But I think during COVID, we've been forced to shelter in place and, you know, be inside of work from home a bit more, but we've actually adjusted seamlessly. And so the various ways that we have promoting our culture and encouraging onboarding of right talents. So that's, what's allowed us to survive and thrive really in COVID-19.
Benoy Thanjan:
Oh, that's interesting as well, because now other companies are probably going to do the same because we're used to virtual work environment. So not focusing on the location, but getting the best candidate. Can you go into more about Clean Energy Associates, culture, and values? I know you talked a little bit about hiring the huddles that you have. Can you go into that a little bit more? Because I know when we talked in the pre-interview, you know, it was just kind of amazing to hear how you're really focused on the culture and then the values I was reading the values on your website that you have. So it'd be great, Andy, to get a better understanding,
Background on CEA’s Culture and Values
Andy Klump:
I'll fully admit, I'm a recovering entrepreneur who had no clue what I was doing. So I still I'm studying and learning as much as I can to try to improve as a leader, but the early days in CEA's history, you know, I had the unfortunate timing of setting up the company in the middle of the financial crisis. And I had a grandiose vision about helping companies with various strategic consulting engagements, and, you know, some things aligned with my background prior to moving to China. And I threw all that out the window in 2008 when the global financial crisis hit. And so I was confronted with the fact that my business plan didn't matter at all. And I had to figure out how to survive. And so my first thought was not about how do I set up my company culture and build our core values. And so I put a lot of that on hold and it wasn't until several years later after we started to get some traction and figure out our model that an intern came to me and said, Andy, where's the vision of the company? Where are you going? Or what are your values? And I said, I don't know, but it sounds like a great internship project. So they took that on as a side project and we got the six or eight person team together and really started to build a bit more of an understanding of our values and where we're going as a company. But I'll admit at that point, we didn't do anything with it. We set aside five or six values, and then they just sat on the shelf and collected dust. It wasn't really, until I went out and I sought an external coach and I realized I needed to learn how to become a better leader. And I needed to invest in, grow a team and really build a global engineering practice that I said, look, we need to invest in our culture. That is absolutely crucial.
Explaining CEA’s Eight Core Values
So in five years ago, we engaged Mike Myra was an executive coach with over 15 years of executive coaching experience. And he walked us through a two day process of aligning our core values. And we had 16 folks together in a crowded room in Shanghai, but we went through and developed a set of eight core values. And eight may sound like a lot, but we reorganized them into an acronym called WHUBDROP. And so it's, we're a family have fun and any curiosity be humble, do the right thing, results matter, own it perform above and beyond. And we reinforced those values and we celebrate those values. And that's a big portion of what is allowed us to succeed is that we have clear identification of what our mission, vision, and values are. And that's really connected to our core purpose. And we believe that by helping our clients and stakeholders deploy solar and storage solutions worldwide, we are creating a better future. And that's what I stopped everyone who's running and executing on so many different projects every month. And I pause in our all hands. And I said, let's not forget where we came from where we're going. And that's exactly why I still look at our vision statement.
Future Vision and Goals for CEA
And by 2025, we want to become the leading global solar and storage engineering services firm that creates tangible impact with every customer. And that's something we set out in 2015. So back when we had 30 or 40 folks, you now we've tripled or quadrupled since then, that was our vision. It still is our vision today. And we're halfway there and I'm very confident. We're 125 professionals today, but we'll be multi hundred by that point in time in five years. And so I really do believe that the expertise and capabilities we've grown and developed the over 800 years of industry experience with both solar and storage with our collective team, that really does make a difference. And that full alignment around the culture. That's what really makes us a unique company and a leading company that many IPPs developers, APCs and investors want to work with. So that's where we've managed to be very successful. So I feel very humble. I have a much better team than myself. Once again, I'm not an engineer. I'm just trying to focus on building the right team, ensuring we have the right strategy and that we reinforced a great culture we have.
COVID-19 Impact on Solar and Storage Supply Chains
Benoy Thanjan:
Andy, I also wanted to continue with the COVID-19 conversation on specifically, how has the supply chain been been impacted by COVID?
Andy Klump:
Absolutely. And I will build on that question and say, once again, it's a unique time for different buyers of equipment for both solar and storage. And fundamentally, we see it an ongoing flight to quality where many different firms are now saying, we want to work with more reputable suppliers that have a bigger brand and better presence. And that's one choice that they have. And once again, there are resources out there like BNEF that have a tier one list, which we think is largely not as effective in selection, of course suppliers, but there are a handful of folks who are larger and have large capacity, but some of these folks don't have as much product as what some projects need.
Changes in Supply Chain Development
You know, let's say in addition to flight to quality, I'd say the other theme that we really see is that many folks are actually building their own supply chain or developing deeper capabilities in house. And so they are effectively coming to us and said, we can't work with one of the top players for a variety of reasons. Either product is not available or they're not taking the price point we want. So help us find someone who can build it more cost-effective route to ensure that the quality is there. And that's really, we're helping to give that supply chain advice to some of the largest companies in this sector. The combined market cap of all the companies we work with is over $900 billion. So we know the buyers and many of these are public traded companies, but they're effectively, we're giving them advice and helping to negotiate and identify suppliers that are going to be a successful long-term basis. And then we're deeply engaged in these engagements by making sure teams are checking the quality in the factory, and also trying to build more resilient supply chains. So are looking to the sub-components and we all understand the bill of materials. We help to identify the bomb that is going to allow for an effective high quality product to come off the line and effectively nurture those relationships. Some of which are suppliers that are newer to markets like the US but once again, that's part of our value add. And our technology differentiation is that we look at things both from a supply chain technology, and then also long-term reliability standpoint and help support the deployment of as many solar and storage projects on a cost-effective basis. So that's where COVID has caused disruption on the supply chain. And there's some folks who are more leading the charge, but even those folks that are trying to be fast followers, they're also looking for ways that they can partner with the right set of clients who are willing to off-take newer products to market and with newer technologies. And that's where I think our impact has been great, even during COVID-19. And we think ongoing post COVID-19, these will be trends that we're going to continue to watch and monitor closely.
Solar Supply Chain Quality Assurance
Benoy Thanjan:
Definitely. I think you made a really good point is Bloomberg New Energy Finance. You know, a lot of investors will say, Hey, we will only deal with tier one panels, but really like, that's just based on the balance sheet of the company. Right. Am I correct?
Andy Klump:
So if you look at the criteria of BNEF, it's actually not based on the balance sheet of the company, it's based on the number of projects they've deployed at a certain scale in a certain market. And the reality is it's a very low threshold. And once going to have a ton of respect for the new energy finance team, which became BNEF, I know Jenny Chasten and many others in the industry for more than a decade and have a lot of respect for the work they do. But if you read the fine print of that BNEF list, they will openly advocate and say, this is not a measure of quality of the product. And there are other firms like Clean Energy Associates who can validate quality. So a lot of folks just assume, oh, someone's on the BNEF tier one list. Their quality is great and that's not true. I mean, we have data, tens of gigawatts of data that disproves that claim. And once again, we have data points where tier two manufacturers have better quality as certain point in time than a tier one. And we also have some tier one or tier two manufacturers that have good quality one day, and then the next week, or next month we go back and they have poor quality and the quality varies.So the reality is that factory audit only validates quality at point in time, it does not have a long term indication of what quality standards are like. And that is exactly why one needs to be in the factory and continually watching the product and ensuring that the quality remains high. So the product that is delivered at onsite is the same as what's inspected in the factory. So once again, that BNEF tier one, tier two moniker, unfortunately gets misused and is just a topic I wish I could clarify in the industry, but it does require a little bit deeper explanation.
Solar Entreprenurship Advice
Benoy Thanjan:
Our podcast is about solar and entrepreneurship. And obviously you're an entrepreneur and you were talking about starting the company back in 2008 during a financial crisis and kind of like a throwing out everything in the window and focusing on making money. I'm sure. What suggestions would you give to entrepreneurs and from what you experienced the last 12 years of having your own company, I'm sure there's been a lot of ups and downs and things that you've had to go through to get to the next level. It would be great to hear your unique perspective on that.
Importance of Strong Company Culture
Andy Klump:
Certainly highlights the, once again, the comments I just made about culture. My mistake was not defining the culture early on. So whether you define a culture, not a culture exists. And we had a very work hard culture at CEA always from the get-go, but because we didn't really have a clear vision or direction, I think for awhile, we really meandered. And I'll admit just as an early stage entrepreneur we've not set up businesses like this. It was a struggle as the first couple of years, as we try to figure out our way. So my advice to any new entrepreneurs, I have a clear vision about what you're trying to accomplish and give direction to early team members really make sure you have a rigorous hiring program.
CEA’s Hiring Process for Company Culture Success
We've implemented a program called topgrading, built out from a Brad smart and a book called who is a great guy point to kind of start that process. But I personally still get involved with every single one of our hires with exception of project operation teams. So I spent a lot of time interviewing, especially as we're growing and scaling our storage practices or US team and even interviewing folks in inside sales, who someone would, may ask me, like, why even bother with someone at that level? I said, because anyone who's touching the customer, anyone who's executing projects, they're extremely important. They need to have this same alignment of culture. And that's why there's a famous saying from Jack Welsh, A's hire A's, B's hire B's and C's put you out of business and we fully acknowledged no one can be an, a player when they come on board CEA, but there are potentially, and the alignment is around the culture. And so if we get it charted on the Y axis cultural alignments on the X axis performance, I would say the cultural alignment by far is the most important thing. We want someone who has a track record of performance, but they can't be successful on day one at CEA they need to know our team, our systems or processes, and it will take a little bit of time, but that's where we've innovated around our onboarding process. And a lot of our training to get folks up to speed as quickly as possible. So those potential A's turn into A players, and that's why we have five core priorities in the company every year. And the number one priority for 2020 is to have the fully engaged team with 70% A players, because we're constantly hiring. That gives us a team member, net promoter score of 35 plus, and that we have 90% retention of those eight players. And that's where we measure a lot of things that CEA but we measure the satisfaction of our team. And we're constantly trying to improve on that. Every week. I talk with one person in the company, my executives also do this every week. So over the course of a year, 50 plus weeks, we're interacting with nearly everyone in the company and asking them feedback. We're trying to get feedback on culture. How can we improve? What are new ideas we can innovate with? And that's part of the unending curiosity we have, but it's really about measuring the satisfaction informally through sessions like 30 minutes once a week, but it's also the net promoter score because we allow our teams anonymously, give us feedback and say how we're doing. And we do the same thing with our clients, so that weekly calls with clients. I still do. I'm still very engaged with many client projects, but I also am very focused on what are clients saying about our work. And so our net promoter score our goal for the year is over 60. And we're actually well over 70 right now. And that's with 41% response rates. So I'm very proud of feedback. Our team has gotten, and we execute on many projects seamlessly across multiple geographies. So there's a lot that goes into culture, building and company building.
Benoy Thanjan:
Definitely. What was interesting too, is you were talking about feedback, really trying to improve and getting feedback from everyone, both your employees and clients you were done, but then it was interesting because you have mentioned as well, that you felt that you could be a better leader, and then you actually was working with an executive coach. And I think that's key too, is like we all could improve and be better and to take steps to do that and listen to the feedback and try to incorporate it. So that's really interesting.
The CEA Difference in Company Culture
Andy Klump:
I think in the interview process, you know, once again, as I talked about our values of be humble, but humility is extremely important, especially at the executive level and especially for myself. And so that's where I feel very fortunate to be surrounded by such great talented CEA, but we really try to weed out folks who are not humble if you don't exercise or exude humility you're gonna have a hard time at CEA and you're going to be weeded out. So that's when we go through a very exhaustive recruiting process and it is painstaking detail, but it's really around finding the right cultural alignment. For some folks they just don't care about culture or want to go through the process. So, and that's fine. We wish them the best of luck. We want them to be successful. We want them to grow this industry, but they're not a culture fit for CEA so I had to learn a lot of this myself the hard way, but that's where I've been humble and constantly creating, learning, and looking for ways to improve and grow as a business.
Benoy Thanjan:
Yeah. And that's huge humility. So that's a great point. Well, this has been a great podcast interview, Andy, if our listeners, so we call Mavericks wants to learn more about Clean Energy Associates. What's the best way for them to learn about the company or to get in touch with you?
Andy Klump:
Yeah. Direct them to our website, a CEA3.com or Clean Energy Associates, both work also going through LinkedIn, my profiles out on LinkedIn, and we also have a company LinkedIn profile. So that's our biggest social media outlet. You know, once again, we have 125 folks globally. So if your listeners are in any geography, we're very willing to interact and understand how we can work with them. So very happy to receive those inquiries. And I respond quite regularly to a lot of cold inquiries via LinkedIn email is generally not the best way to reach me because I'm so inundated, but I'm a bit more responsive on LinkedIn and make sure to check that at least once or twice a day, definitely.
Benoy Thanjan:
And you guys are hiring as well. So, you know, obviously, you know, they could go on your website or the company LinkedIn page, which we'll have in the notes of the podcast as well so that'll be easy for people to find, to find Clean Energy Associates and your LinkedIn profile as well. Well, great, Andy, I appreciate you being on the podcast. I think you provided a lot of great insights and thank you for your time today.
Andy Klump:
Absolutely. Thanks so much for the time. And I look forward for the dialogue in the future. Definitely.
Benoy Thanjan:
Thanks for listening to the Solar Maverick podcast. The Solar Maverick podcast is brought to you by Renew Energy. We're a solar development and consulting firm. If you believe that this podcast is adding value to you, please give us a five star review and share with those that you think could benefit from this information. Please email all questions, suggestions, and feedback to info@renewenergy.com. The Solar Maverick podcast is produced by podcast laundry and executive produced by Benoit Thanjan and Kevin Y. Brown.