In the next three years, 1TW of solar power will be added to the global grid as competition keeps driving down prices. And after years of innovation in China, Japan and Germany, the US is finally getting in the game: Last year’s Inflation Reduction Act includes ample incentives for American-made cleantech. Qcells, part of South Korean conglomerate Hanwha Solutions, announced plans in January to build a US solar supply chain from scratch in order to access significant tax credits.
But solar manufacturing has never been a particularly reliable business. So why is the US leaning into it at all? On this week’s Zero, Akshat Rathi talks to Jenny Chase, a solar analyst with clean energy research group BloombergNEF, about the industry’s boom-bust cycle, what companies like Qcells are up against and why solar's rapid growth could even make daytime electricity free. We also hear from Lindsay Cherry, policy manager at Qcells, about how the company plans to achieve its ambitious goals.
Listen to the full episode below, learn more about the podcast here, and subscribe on Apple, Spotify, and Google to stay on top of new episodes.
Our transcripts are generated by a combination of software and human editors, and may contain slight differences between the text and audio. Please confirm in audio before quoting in print.
Akshat Rathi 00:01
Welcome to Zero, I am Akshat Rathi. This week: booms, busts and bargains.
Akshat Rathi 00:21
Solar is the cheapest source of energy. Within the last two decades, it has gone from being a cool technology that rich countries should fund to being mainstream. You can see solar panels everywhere. It now contributes 4% of the world's electricity, which sounds tiny, but the extraordinary pace at which it has grown means that analysts think it could contribute as much as 50% within decades. This is partly thanks to how cheap the panels have become. The technology was created in the US but brought to massive scale in factories in Japan, Germany, and then finally China, which today is responsible for more than 80% of global supply. And that dependence is bringing disruption to the industry. Countries from India to the US want to make sure that their supply chains aren't too dependent on China. That's forcing governments to come up with policies that incentivize manufacturing solar domestically.
Jenny Chase 01:17
Solar manufacturing is a horrible business. I don't know why governments want to have it in their countries, when they could just buy really cheap modules on the global markets.
Akshat Rathi 01:26
That is Jenny Chase, Solar Power Analyst for BloombergNEF, who I think is basically the world's best expert on the business of solar. She has covered the industry for two decades and seen lots and lots of disruption. Despite the massive growth, the technology cycle of solar is so rapid that few investors are able to recoup their investments. And yet the demand for solar keeps rising, which keeps motivating new people to try. The latest attempt is thanks to the US’s climate bill, which is going to heavily subsidize the production of solar panels domestically. One of those companies is Hanwha Qcells, which is building a plant in the state of Georgia.
Lindsay Cherry 02:05
We are doing it all here, we are doing it vertically integrated, we're going big.
Akshat Rathi 02:10
That's Lindsey Cherry from Qcells, who we’ll hear from later in the episode. But first, Jenny tells me all about how solar panels are made, starting with sand, the history of solar booms and busts and how scaling this technology has needed successive governments from the US to Germany to China to spend vast sums for the benefit of all humanity.
Akshat Rathi 02:40
Jenny, welcome to Zero.
Jenny Chase 02:41
Good morning, Akshat. Nice to be here.
Akshat Rathi 02:43
So I have a book coming. It's called Climate Capitalism. And one of the chapters is focused on solar. And when I was doing the research on it, something shocked me. You know, even as a science student, I didn't know that the history of solar goes back to 1839. All the way back to a French scientist who first figured out that if you shine light on a combination of metals, you can get electricity. Now, if we take that as the moment of invention of solar, from then, until 2022, it took about 183 years to build one terawatt of solar. Now we can figure out what one terawatt is, but it's a big number. What shocked me is that according to BloombergNEF estimates, the next terawatt of solar will be built in three years. Is that right?
Jenny Chase 03:32
That is right, the growth of solar has been phenomenal. I started doing this in 2004. And if I had given a completely accurate forecast of solar growth, everyone would have thought I was crazy, they would not have listened to me, I would have got fired and we would not have been a success. I thought then that if solar was one day 1% of world electricity supply, I would be astounded. But at the time I thought, well, 1% is not nothing. I'm happy to work on this. Now I'm starting to wonder, when will it hit 50%? Will it ever be more than 50% of world electricity?
Akshat Rathi 04:04
Now before we get into the explosion of solar and the business of solar, let's just understand what a silicon photovoltaic cell is, and maybe go from its absolute starting point which is sand all the way to putting it on a roof or at the utility scale in a farm just walk us through the steps.
Jenny Chase 04:23
So by weight most of a solar module is glass and aluminum. But the active ingredient is the actual cell. And the active ingredient in that is a silicon wafer. That silicon wafer is made of ultra pure, refined polysilicon that has been crystallized in a very particular structure and doped in a particular way. To make polysilicon, you start with sand which is silicon dioxide, and you heat it up with carbon. So a pretty clean coal or a charcoal. You can do that in your garage if you want. And then what you have is metallurgical grade silicone which is about 98% silicone.
Akshat Rathi 4:59
And what's the 2% in there?
Jenny Chase 5:00
It's carbon, boron, a bit of phosphorus. Stuff that would mess up the electrical properties of a silicon wafer. Most of that is actually used for smelting steel. It's a traded commodity, it costs about $2 a kilogram, it's dirty, silicon. To make that into polysilicon that is pure enough to be useful electrically in a solar cell, you need to do a very Capex and very expertise-intensive process.
Akshat Rathi 05:24
Yeah, Capex being just that the building of this plant would be really expensive up front.
Jenny Chase 05:29
Building a polysilicon factory is very expensive, and it uses a lot of electricity to run. And when I started in this industry in 2004, there were really only five companies worldwide who knew how to do it, and they were doing it for the semiconductor industry. So you've got this metallurgical-grade silicon, and you react it with acid to make it into a gas. And then you have to set a seed of really pure silicon and the gas swirls around the chamber and you're heating some parts of the chamber and cooling different parts of the chamber. And this gas sort of dissociates and crystallizes on the seed. And so you get a rod of really pure silicon coming out. And you've got all kinds of nasty gasses, you've got a silicon tetrachloride as a byproduct, which, if you're a good polysilicon manufacturer you then recycle, and get that silicon back out, and also that hydrochloric acid back out. It’s hugely energy intensive, because you're heating and cooling different parts of the same reactor. It's called a Siemens reactor. And sweet talking a Siemens reactor into making polysilicon is actually really difficult, which is why it took years for Chinese companies to get the hang of it after 2004.
Akshat Rathi 06:36
I had no idea that it was actually vapor deposition. That is extremely energy intensive, especially when we are talking metal. What temperatures are we talking here?
Jenny Chase 06:48
It's over 1000 degrees Celsius, 1100 degrees Celsius or so. So what you get out of a Siemens reactor is a long rod, of what we call polycrystalline silicon, it's not electrically very useful, because it's a lot of little crystals.
Akshat Rathi 7:05
So wait, there's one more step?
Jenny Chase 7:06
There is one more step. So you've got your rod of polycrystalline silicon, and you smash it up with a hammer. And you put it in little sacks, and you ship it to usually another company which makes ingots out of it. So to make an ingot, you melt down that polycrystalline silicon into a melt and then you're getting it to crystallize into larger crystals that are more electrically useful. Until 2018, the dominant technology was multicrystalline silicon, so you let it crystallize for multiple points at once. And you got some fairly big crystals that you could then use for solar. And even then, there was another technology that existed, monocrystalline silicon, where the whole ingot was one crystal.
Akshat Rathi 07:47
Wow. So as a chemist, I actually grew crystals in the lab. And I did many things as a chemist, but the hardest thing I've done is crystallography. Trying to grow a crystal the way you want, is so hard. It's sort of art rather than science.
Jenny Chase 08:01
It's so hard and you're trying to make something that's 12 feet long and a foot wide into a single crystal, when you're making a monocrystalline silicon ingot, you have to be so careful. And it's taken companies quite a long time to perfect it. And so monocrystalline silicon, it makes a more efficient cell than multi, but it is much more expensive and much more difficult.
Akshat Rathi 08:24
And the efficiency comes from the fact that a monocrystalline cell will have fewer defects, which is to say, how electrons travel across the surface would be easier, simpler. And that is why it becomes more efficient?
Jenny Chase 08:37
Precisely. The grain boundaries are less of a problem, because there aren't any grain boundaries in mono solar, but it was much more expensive. So it took a long time to become the dominant tech.
Akshat Rathi 08:47
And then there is a fun step after this, which is to cut it into wafers, which are then made into silicon PV cells. And the cutting of the wafers itself is quite complex.
Jenny Chase 08:58
It's quite difficult because they are really, really thin.
Akshat Rathi 09:01
How thin are we talking?
Jenny Chase 09:02
So we're talking today, it's about 180 microns for a typical wafer.
Akshat Rathi 09:05
Wow, 180 microns. That's roughly the width of a human hair?
Jenny Chase 09:11
I think it’s twice the width of a human hair. They're very, very thin, you have to be very careful not to break them when you're working with them.
Akshat Rathi 09:17
And what do you have to do to get that kind of thickness?
Jenny Chase 09:21
Well, of course, we've been working on this. In 2004 wafers were much thicker than they are today. And back then you would be using about 10 grams of silicon per watt of modules. And I know we haven't talked about what a watt is, but for comparison, today, the average is about 2.6 grams per watt. They were much thicker in those days, because it's really difficult to slice up things that thinly and originally the technology was a slurry-based wire saw. So literally, it was like an abrasive wire that you poured liquid sandpaper over and sawed this into.
Akshat Rathi 9:58
And what is it now?
Jenny Chase 10:00
So in 2018 I went off to have a baby. And when I came back four months later, the whole market had moved to diamond wire saws, where you don't use this slurry-based abrasive material at all, you just use diamond as a wire, it's so cool. It's a really thin wire with chips of diamond. And you just literally saw through these wafers. Once those had happened, diamond wire saw and monocrystalline, silicon just swept the market. And I mean, really, it felt like I went left to have a baby and I came back and the dominant technology was a little bit different.
Akshat Rathi 10:31
That kind of explains to you just how explosive the industry is both in the tech advancing as quickly as it is. Now, after that, once you have the wafer, you have to turn the wafer into a working solar panel. What are the steps involved there?
Jenny Chase 10:46
They're complicated. And I have to admit that as an analyst, I seldom have to understand them very well. But the steps are, you dope the wafer with boron or phosphorus, so that it will set up an electric potential, when sunlight falls on it. And when the sunlight knocks the electrons free, they will flow. Then you have to use a silver paste to make electrical contacts to get the electrons off the cell. And then you wire them up into modules and connect them to your inverter and feed it into the grid.
Akshat Rathi 11:17
So what you've described, obviously, is a pretty sophisticated piece of technology today. But in principle, it's kind of the same solar cell that was invented in Bell Labs in 1954. Right?
Jenny Chase 11:30
It absolutely is, it's probably three or four times as efficient. But it is the same silicon based technology, as was invented by Bell Labs, we've just got better at making it as we've made more and more of these things. That's the great thing about humans, we get better at things when we do more of it.
Akshat Rathi 11:46
But why is it that the explosion in the industry has only really happened in your period, working as a solar analyst sort of 2004 onward.
Jenny Chase 11:55
I think on some level, it was an explosion that was waiting to happen. But what has really driven it over the years has been government policy to get companies manufacturing these things and developing the technologies to do this manufacturing, at scale and cheaply and well.
Akshat Rathi 12:09
And in green technologies, solar is sort of the poster child because invented in the US there was a little bit of an industry there when the US government was funding solar development through installation of solar on satellites. But really, when it came to consumers, it was Japan first, then Germany, then Spain, right? These are the governments that came in with support and what kind of support?
Jenny Chase 12:33
So the way the solar industry works is you tend to get government policy in different places driving the global market at different times. And it was definitely the US that funded a lot of the R&D in the 70s and 80s. And weirdly enough, ExxonMobil, which is not really famous for its environmental credentials, I would say, did a lot of the early research into photovoltaics and actually sold a panel quite early on. Japan has a very long running program to build solar on roofs, which supported companies like Sharp and Mitsubishi. And that certainly developed the industry and the technology.
Akshat Rathi 13:06
And that made sense for Japan, given it's a resource-poor country that has little access to fossil fuels. So Japan on one side built a lot of nuclear power plants. But on the other side also tried to develop solar as a technology.
Jenny Chase 13:20
It did. Japan invested strategically in developing a solar industry. I'm not quite sure you can say it made sense. Because even then it was wildly expensive electricity. And to be honest, Japan doesn't have many companies anymore that are big in solar. But it certainly contributed to the development of a successful industry.
Akshat Rathi 13:37
But does it make more sense that Germany was the next country that came out with a huge–
Jenny Chase 13:42
No, that makes no sense whatsoever. Germany is a really bad country to do solar, it's not particularly sunny. It's not particularly windy for wind either. But Germany did decide in the year 2000, to do this Energiewende, the energy turnaround, they were going to get off nuclear, which was maybe the side I agree with less, and replace it with renewables. So there were some early programs to build more solar in Germany. And then in 2004, Germany came crashing in with what they call the “feed in tariff.” Feed in tariff is a really weird word. It's a direct translation from the German Einspeisevergütung, which is… it doesn't sound better than German, but it literally just means feed in tariff because you feed your electricity into the grid. And you got paid a lot for it. You've got paid over 400 euros a megawatt hour for it.
Akshat Rathi 14:29
And if you compare it to today, the sort of record in solar is–
Jenny Chase 14:32
I would say that solar in Germany today costs about 80 euros a megawatt hour. It has cost less in the past, but that's a complication we shouldn't go into. So solar has cost as little as 50 euros a megawatt hour in Germany.
Akshat Rathi 14:44
But when we talk about solar today, it's mostly a China story. So how does China come into this picture?
Jenny Chase 14:49
When Germany started buying solar panels to put them on German fields and German roofs, Chinese companies said, you know what, we can make these things, maybe we can't make the polysilicon immediately, but we can slice stuff into wafers, we can make them into cells, we can make modules. And so the Chinese government did provide some strategic support. And technology came in from Australia, from the US, a lot of R&D from other places came to China to do the manufacturing. And so you've got companies like Suntech and Solarfun and YingLi and Trina, and what is called Canadian Solar, but is also significantly associated with China. And so the companies came and deployed the technologies developed elsewhere in large factories in China, larger factories and had ever been seen before. And they brought the costs down.
Akshat Rathi 15:38
In each of these transitions from country to country, there were sort of national champions, companies that were formed, that was supportive of a domestic industry. So Japan had Kyocera, for example, Germany had Qcells, then China got all these companies. But most of the time those companies were first reaching out for a domestic market, because the country was supporting some sort of policy. But China was the first to only focus on exports, right?
Jenny Chase 16:05
Absolutely. I mean, from China's point of view, the Germans want to buy solar modules, so China would sell them.
Akshat Rathi 16:10
And yet today, China is the largest installer of solar. So what happened for it to go from being so export focused to installing so much renewables domestically?
Jenny Chase 16:21
Well, first of all, what you have to understand is that solar is not expensive anymore. Now it's probably the cheapest source of bulk electricity in most sunny countries in the world. I'm carefully saying bulk electricity because solar does not generate at night, and we know this. But one major reason China has started building solar is that China likes cheap electricity. But the point when China started supporting its domestic installation industry, was the point when the European market went into a bust situation. So Germany had its feed in tariffs that started in 2004. They were wildly successful from a deployment perspective, because they were license to print money. Spain, decided this is a great idea and launched a similar feed in tariff.
Akshat Rathi 17:12
And what year we talking?
Jenny Chase 17:15
A couple of years after 2004. Spain launched its own feed in tariffs, which was a little bit like the German one, but probably even more generous because Spain is sunnier than Germany. So they set the level similarly, but a solar panel that you put in Spain generates a lot more electricity. And Spain intended to get about 400 megawatts of solar through that program, which was a lot at the time. The rule was, when the Spanish market had got most of the way to its 400 megawatts solar installation target, the government would give the companies a grace period of 12 months to finish up, really. And that would be how they'd get about 400 megawatts. It turns out, you can build a lot of solar in 12 months, an unbelievable amount of solar at the time. And so the country ended up with about 2.7 gigawatts, so like 2700 megawatts of solar from that program that was meant to build 400 megawatts. And then they had to pay for all that to get subsidies.
Akshat Rathi 18:07
And this is the period when the financial crisis was about to hit.
Jenny Chase 18:11
Yes. And then at the same time, it was actually the last day of September 2008 was the end of the solar boom. And that was more or less when the financial crisis kicked off.
Akshat Rathi 18:20
And so you get a bunch of bankruptcies in the solar industry following that period in Europe. And that's when the Chinese companies go, oh, but we've invested all this to try and export solar, what do we do now?
Jenny Chase 18:34
Exactly. So basically, when the sun set on the last day of September 2008, the solar market flipped from under supply and all the modules in the world going to Spain and Germany with this big sucking sound to oversupply. There were new factories built, there were loads of polysilicon to make more modules now. The price started crashing. And of course, that meant that the solar manufacturers went bankrupt. And the first to go bankrupt were the German manufacturers. They had generally the oldest factories to make cells and modules. And they were often locked into polysilicon contracts at $80, $90 $100, a kilogram when the price of polysilicon was crashing towards $40, $30, $20 per kilogram. They say that when the tide goes out, you see who's swimming naked, and the Germans were swimming naked. Whereas the Chinese – new factories, more efficient, not generally locked into polysilicon contracts, [though] some of them were, they went bankrupt. And so the Chinese companies survive better. So the fallout from the European market not growing as fast and in fact contracting was that solar modules were much, much cheaper. And the companies were having a hard time. So the Chinese government came in and said, We want to provide strategic support for our domestic industry. Plus, we're not uninterested in this whole clean energy thing ourselves. And China started building massive amounts of solar, and China has been the largest market for solar panels since about 2010.
Akshat Rathi 20:00
And the numbers in China are stunning. This year, BloombergNEF estimates that 150 gigawatts of solar is going to be built in China. Now, just to put that in perspective, Europe, which was on sort of steroids to try and build renewables last year, after Russia attacked Ukraine, and Europe wanted to free itself of Russian energy imports, it built about 40 gigawatts of solar. And China, just as usual, is building about 150 gigawatts.
Jenny Chase 20:30
That's right. China is a big country. And when the Chinese government decides to do something, it does it.
Akshat Rathi 20:36
But the discussion now in the solar industry, especially here in Europe, and in America, is to try and build a domestic market, which is to try and free itself off the Chinese supply chain, given what had happened with Russia and trying not to depend on other countries for crucial energy technologies. And that brings us to the Inflation Reduction Act. As a climate bill, it has some really big solar incentives. What are they and would they work?
Jenny Chase 21:06
So I've seen a lot of solar booms and busts. And the IRA looks to me like something that's going to kick off a massive boom, which will inevitably be followed by a bust, and will probably result in some somewhat counterintuitive behavior. I feel like China's strategic support for its solar industry is the reason the solar industry is not a cottage industry anymore. It's the entire reason why solar is now the largest source of new installed capacity every year.
Akshat Rathi 21:33
And when we're talking strategic support, it's really subsidies tax benefits, creation of demand domestically?
Jenny Chase 21:40
It's a little less transparent in China, but its mandates from above, its support for domestic installation, it's telling the local utilities and companies what to do, it's sometimes free land, it's sometimes debt support for expansion. Now, the IRA, you can actually read, unlike the Chinese policies, which were never in a single document or even a single set of legislation. But the IRA offers makers of wafer cells and modules about 16 cents per watt in tax credits--
Akshat Rathi 22:13
And just put that in context of current prices.
Jenny Chase 22:16
So right now you can buy a module for 17.8 cents a watt.
Akshat Rathi 22:16
So it's essentially paying for the price of...
Jenny Chase 22:20
It pays for almost all the price of a module by a best in class company in China.
Akshat Rathi 22:26
Of course, if you make it in America it’s going to be more expensive.
Jenny Chase 22:29
It's going to be more expensive because America is a very difficult business environment.
Akshat Rathi 22:32
Why is that?
Jenny Chase 22:33
Well, for one thing, these are all tax credits, so you have to hire an army of tax lawyers to get them. Secondly, it's pretty difficult to negotiate locations for factories, electricity is often relatively expensive compared with China, there's not necessarily a trained workforce the way there is in Jiangsu. So in Jiangsu you have a lot of high tech and manufacturing industries next to each other. So you have a workforce of people who can come and work at the new factory and have done this sort of thing before. So there's competition for workers in Jiangsu, but they're there. The US doesn't really have any of that. And also, China has the manufacturing for all the supporting industries. So they make that silver paste there, they make the glass there, they make the encapsulant, which holds the back of the module together. And it's, it is just much more convenient to get all the components in one region.
Akshat Rathi 23:22
So when there is a boom in solar manufacturing in the US, it will still rely on supply for certain steps from other countries, right? What are those steps and which countries will rely on?
Jenny Chase 23:35
So I'm not really that interested in the US. So I haven't looked at their manufacturing capacity for junction boxes and glass, et cetera.
Akshat Rathi 23:44
And you're not interested because the US is a small market?
Jenny Chase 23:47
Well, the US has about 30-35 gigawatts of installations a year.
Akshat Rathi 23:52
Which is about 10% of demand today?
Jenny Chase 23:55
It's actually less than that. To be honest, I'm more interested in the Polish solar market than the US solar market. But obviously the US is very interesting to Americans. And from a climate perspective, we’d all like Americans to sort their carbon emissions out. That is very important. And the Inflation Reduction Act is probably for that reason, the most important piece of climate legislation globally for the last 10 years.
Akshat Rathi 24:19
So because of the IRA, there are going to be a lot of people trying to manufacture solar in the US. One of the companies is Qcells. Why is Hanwha Qcells interesting?
Jenny Chase 24:28
As you say, there are a lot of companies that are planning to set up factories in the US, including a lot of Chinese companies considering it. But most of them are only planning to do the last step, the module assembly, in the US. Or at most, modules and cells. Now, module assembly is relatively low tech, you can assemble modules in your garage. They wouldn't be very good modules because you're probably not very good at it, but you could do it. So what that is, is dipping a toe tentatively in the water of investing in the US. Whereas what Hanwha Qcells has done is come crashing in with, we're going to build a factory in Georgia which makes ingots and wafers and cells and modules and that is a big investment. It's a big chunk of the value chain. It's betting that they can do this whole thing well enough to make it pay with the Inflation Reduction Act.
Akshat Rathi 25:16
Qccells as a brand has existed for decades, and has been present during every one of those solar eras Jenny described. It went public in the German boom, bankrupt following the 2008 financial crisis. And after an acquisition from a South Korean company is now building an American supply chain – the entire supply chain, and that's going further than any other US solar manufacturer. I wanted to hear more about this big bet directly from the source. I spoke to Lindsay Cherry, Policy Manager at Qcells about how much they stand to get from the Inflation Reduction Act.
Akshat Rathi 25:53
Lindsay, welcome to Zero.
Lindsay Cherry 25:54
Thank you so much for having me, I really appreciate it.
Akshat Rathi 25:56
Qcells is not the only company that's going to manufacture solar panels in the US. There’s FirstSolar, Enel, CubicPV, all of them have announced plans. So what is different about Qcells’ plan?
Lindsay Cherry 26:09
So, we are the only vertically integrated solar panel manufacturer that will be operating in the US. We have been very intentional that we want to do it all here. So we of course, have announced that we are doing our vertically integrated factory in Cartersville, Georgia. That will be 3.3 gigawatts of fully vertically integrated panel. So that is what makes us different, we are doing it all here, we are doing it vertically integrated, we're going big. Of the five primary manufacturing steps for a solar panel that is polysilicon, ingot, wafer, cell, and module, the US is really only home to polysilicon and module production. So ingot, wafer, and cell manufacturing have been entirely missing from the US supply chain for quite some time now. And they are heavily concentrated in China and Southeast Asia. So this is really exciting, because you know, this heavy concentration of manufacturing creates issues within the supply chain. And so having a more diversified supply chain creates a more stable solar industry. And that is something that we didn't think was possible just a couple of years ago, people, you know, thought we had a pipe dream, and then never thought it would come to fruition, but we're really starting to see these investments come through.
Akshat Rathi 27:25
And so what specific policies are enabling this boom to happen? And let's just break them down.
Lindsay Cherry 27:32
Absolutely, the primary policy that we point to is a production-based tax credit. So for the Solar Energy Manufacturing for America Act, this bill creates a production based tax credit so that manufacturers will receive credit for producing polysilicon, ingot, wafer, cell, module, and backsheet. So this is the type of long term incentive that we need to confidently be able to say, yes, we can operate in the US and we can do so efficiently and cost effectively.
Akshat Rathi 28:02
And what does it mean in dollar and how many years?
Lindsay Cherry 28:06
So, if you do so vertically integrated, this tax credit will be about 17 or 18 cents in dollars per watt. And that's against, you know, a 40 cent watt panel. So it's a very lucrative tax credit, we are very excited.
Akshat Rathi 28:24
Almost 50% of the price of the panel.
Lindsay Cherry 28:27
And you know, when we're trying to compete and stand up an industry, every little bit of policy support helps. And so we think this is the right policy solution to really provide that long term certainty for manufacturers such as Qcells to invest.
Akshat Rathi 28:42
It's not just about how you make it, but also what happens after panels are useless, which you know, for what they are, they last 25 years, which is fantastic. But what are you doing to deal with the end of life?
Lindsay Cherry 28:56
This is a really important topic that I think the industry is kind of starting to wake up on. Panels have a lifespan of about 25 to 30 years. So solar really started to pick up in the mid aughts. So hypothetically, we have another like 10 to 15 years before we start seeing solar farms reach the end of their useful life. So we need to start kind of figuring recycling out sooner rather than later. So the main issue that we currently see right now is that panels are really expensive to recycle. There isn't federal legislation that mandates solar panel recycling. And because of this, there isn't a lot of existing infrastructure, which means it's very expensive. In the US, we see panel recycling cost about $18 to $45 per panel, compared to landfilling a panel, which is about $1 per panel, which is really expensive. So if it's $18, I think, I think that would probably be about like 20% of the price of the panel. I don't want to create a doomsday scenario where we're going to be drowning in solar waste, that is not going to be the case. So the EU has mandated panel recycling for the last 10 plus years. As a result, panel recycling in the EU is as low as 70 cents per panel. So that I think is an optimistic outlook for us.
Akshat Rathi 30:22
Thank you for coming on the show.
Lindsay Cherry 30:23
Thank you so much, Akshat.
Akshat Rathi 30:27
After the break, we hear more from Jenny Chase about why solar is a horrible business.
Akshat Rathi 30:40
So you're famous for many things, including a book, which is Solar Power Finance Without the Jargon and I understand a second edition is coming.
Jenny Chase 30:47
Second edition coming out this Autumn, so don't buy the old one.
Akshat Rathi 30:51
And while Twitter was a thing, is a thing, depends where we stand on it... you also did an annual thread of all the opinions you had about the solar industry. When's the next one coming?
Jenny Chase 31:02
Probably when my book comes out. So probably October, I try and do it around October every year.
Akshat Rathi 31:07
Now, one opinion that stuck with me, which you make every year is that solar manufacturing is bad business. Can you say why?
Jenny Chase 31:16
Solar manufacturing is a horrible business, I don't know why governments want to have it in their countries, when they could just buy really cheap modules on the global markets. So the reason is that although the basic module technology has not changed since 1954, there's this continual grind to make it better and cheaper. And that requires investment in new factories that can do it slightly better. It involves changes of technology generations. So we briefly discussed the change from multicrystalline to monocrystalline, what that meant was that a lot of the multicrystalline silicon factories were basically obsolete, and some of those were only a few years old, their companies still own debt on those, this constant grind of getting better at making a commodity product means that it's very, very hard to make money. You have a factory that's hasn't paid off its debt and already the products from it are obsolete and its operating costs are above prices. And that's why solar manufacturers keep going bust.
Akshat Rathi 32:13
But if you want to scale solar, and we expect solar to grow, right, one terawatt in three years, it has to be a sustainable business, the manufacturing also has to be profitable. If that's not the case, why do we think solar will continue to scale beyond the one terawatt?
Jenny Chase 32:33
Well, it's a bit of a self-fulfilling prophecy. If companies stopped investing in new solar factories, the ones that exist will probably make money more reliably. But I've been doing this 17 years now. And there's always investors who want to get into this new great thing – have you tried making solar panels? They mostly lose their money. But if they did stop, then we would probably have a period of relatively stable module prices. And the market would just continue to grow. Because solar is so cheap. Now you can buy a Chinese solar module for 17.8 US cents per watt. And when I started, it was over $4 a watt.
Akshat Rathi 33:12
And in a capitalistic system that shouldn't exist. If you know year after year that something is bad business, eventually, people will stop investing in it. But that's not happening with solar, just because there's so much demand for it?
Jenny Chase 33:25
I think you think capitalism is smarter than I do. The thing about capitalists is you only need a small number of them to get really excited about what they think is the next big thing. And this is actually, in this case, a positive thing, since investors losing their shirts is one of the things that powers the drive towards better and cheaper solar modules. And now, solar models are actually really great. But there is still competition between companies, between investors, to have better ones, a sustainable business, a more efficient, cheaper module to make.
Akshat Rathi 33:58
And increasingly a nationalistic turn to it to have it in your country making it?
Jenny Chase 34:03
Personally I think that's just ridiculous. I think if our goal is to decarbonize human civilization, which, that is actually my goal, it's not a race, it's a fitness program. We all want to get fit. There's no advantage to being the first to decarbonize, but there is a huge advantage if we all managed to decarbonize. But hey, people like being nationalistic, and if that makes them go and invest in clean energy. I don't have a problem with that.
Akshat Rathi 34:28
And so just going back to the start of your career, you'd sort of predicted that if solar contributed 1% of global electricity, that would be a huge achievement. And now you think we may not even stop at 50%. So what is it between now, where solar is about 4% of global electricity supply, to 50% that needs to happen for us to reach that kind of level?
Jenny Chase 34:51
So first of all, what's holding back solar at the moment is clearly not supply. The module prices are crashing, there is loads of supply on the market. It's cheap, it's probably the cheapest source of bulk electricity in so many places. What's holding it back from just building a terawatt a year today is grid connections. Historically, solar has kind of been free riding on the existing grid, putting plants in where there is a grid connection already. And we're starting to run out of those easy sites. And also, we need some really good grid planning in a lot of countries to determine where we could still put solar farms and feed power into the grid. There's also site permitting, there is not an infinite number of very suitable sites and European countries generally have the reasonable feeling that we probably shouldn't be putting solar on prime agricultural land. So put it on roofs is the obvious answer. But it does cost more to put it on roofs, you have to arrange different, smaller plants, if you put it on car parks, you've got to put them on great big poles to hold them off the ground. It's generally slower and more complicated to put solar on roofs, and there is a shortage of installation labor. So the bottlenecks to solar growth at the moment are: grid, land, and labor, and organization. I'm hoping that some of those can be solved in the next 10 years, with organization, with competition, with government action. After that the problem is going to be that solar eats itself.
Akshat Rathi 36:20
What do you mean by that?
Jenny Chase 36:21
Well the thing about solar panels is they all generate at much the same time, i.e. when it's sunny, and then they don't generate at night, or even when the sun starts to get low they generate less and less.
Akshat Rathi 36:30
So you need a solution to store that electricity, which is energy storage.
Jenny Chase 36:35
Well you do but that costs money. And you need to be cycling that energy storage very frequently to make that make any kind of economic sense. So we are going to have the problem that solar is going to crash the power price in the middle of the day, every day, every sunny day, solar is going to be free between the hours of 10 and 3.
Akshat Rathi 36:53
And it’s starting to happen already in California, Germany, Spain, where there are what we call negative prices, essentially, the grid paying you to use electricity, because there is so much of it.
Jenny Chase 37:03
Absolutely. Invest in a toaster. But I mean, in 10 years, we will probably be looking at our app and going ah, power is free right now, I think I should do some washing, I think I should charge my battery, actually the battery’s probably automatic, because electricity is going to be worth almost nothing when the sun's out. But then later in the day, hopefully we'll have decommissioned some of the gas capacity and all the coal capacity. And later in the day when the sun's gone down, that power will be expensive. And that's going to fundamentally change the way we operate things.
Akshat Rathi 37:37
So three years for the next terawatt. What happens afterwards?
Jenny Chase 37:41
That's a very big question. And I get asked a lot, why my team doesn't produce more optimistic forecasts for solar. You know, we basically get asked, why don't we just put a formula into Excel and have it grow the new build grow at 40%, forever. And the reason is, first of all, that you cover the entire world with solar panels pretty quickly at that rate. Secondly, that you do start to run into issues with solar mostly generating when it's completely valueless, because it's the middle of the day. And also, because what my team is doing is putting forecasts in for 146 different countries. And I need to get the analysts who cover those countries to sign off on forecasts. And people are very, very bad at forecasting revolution. I'm sorry, we call it transition now, because revolution is too scary. But the energy transition is genuinely a completely new way of doing things. And it's very hard to model things that have never happened before. So analysts are cowards. They do not want to forecast that their country will get to 50% solar electricity mix.
Akshat Rathi 38:43
So when your boss comes to you, that's the answer you give.
Jenny Chase 38:44
Yeah, they're cowards. My analysts are cowards. And I think all analysts are cowards, because envisioning a totally different way of doing things is not so much an analytical process. It's something where you have to have a vague idea of where you're going and you've had a set off and take looking at the satnav, which is modeling and current situation and what the bottlenecks are, and hope to keep steering in the right direction.
Akshat Rathi 39:04
But I'm still going to ask you. So one terawatt built, two terawatt by 2025. When will three terawatt happen?
Jenny Chase 39:12
I think our technical forecast is 2026 or ‘27.
Akshat Rathi 39:19
Wow. So 15 months, 18 months period after that, another shrinking.
Jenny Chase 39:20
But again, we are going to come up to limits in terms of when, of how price cannibalization, in terms of not covering the entire world with solar panels. And it's difficult to forecast that.
Akshat Rathi 39:35
Now as a solar analyst you probably hate this question, but it would be useful for listeners. What would be your advice to people who want to put solar on their rooftop?
Jenny Chase 39:43
Actually, I love this question. People ask it to me at parties all the time. I'm a lot of fun at parties. A big part of the cost of putting solar on the roof is scaffolding. So if you've got a reason to put scaffolding on your roof, look into getting solar panels put up while they're up there. And secondly, a lot of solar installers are kind of cowboys. So don't believe everything they tell you. And don't necessarily rush to build solar from somebody you're getting bad vibes from.
Akshat Rathi 40:10
That was a lot of fun. Thank you, Jenny.
Jenny Chase 40:15
Thank you, Akshat.
Akshat Rathi 40:28
The growth story of solar is well known, but what's under appreciated is what Jenny calls solar eating itself. Basically, there being too much electricity when the sun shines, making solar unprofitable to build. That's a problem worth fixing, if the growth story of solar is to continue. Thanks for listening to Zero. If you like the show, please rate and review. Share it with a friend or someone who is a lot of fun at parties. Zero’s producer is Oscar Boyd and senior producer is Christine Driscoll. Our theme music is composed by Wonderly. Special thanks this week to Kira Bindrim, Brian Eckhouse, Nayeli Jaramillo-Plata, and Abraiya Ruffin. I'm Akshat Rathi, back next week.
Author: Christine Driscoll, Oscar Boyd and Akshat Rathi
