The End of Solar & Battery Manufacturing in America?

The U.S. was finally catching up.

After decades of watching solar manufacturing develop overseas, mostly in China, the Inflation Reduction Act gave domestic producers a fighting chance. Texas responded in a big way. New factories broke ground. OCI and its sister company, Mission Solar, prepared to launch a full supply chain operation in San Antonio, including the rare addition of cell manufacturing, one of the most critical (and missing) links in our solar economy.

Now? All of it hangs in the balance.

I sat down with Sabah Bayatli, President of OCI Energy, for one of the most urgent and clarifying conversations we’ve had on this podcast. If Congress moves forward with budget as it passed the House, it could wipe out hard-won progress in U.S. energy independence and kill manufacturing momentum.

This is not only an energy and economic issue, but also a national security issue.

We covered:

What the IRA Actually Did for Solar Manufacturing

Before the Inflation Reduction Act (IRA), manufacturers in the U.S. were forced to make short-term bets, never knowing if tax credits would last. That’s a terrible way to plan billion-dollar infrastructure investments. The IRA changed that. By giving developers and manufacturers a 10-year time horizon, it triggered a surge in U.S. supply chain planning.

Sabah put it simply: You can’t invest in manufacturing without a longer time horizon.

* The 45X tax credit provided per-unit production incentives.

* Developers got extra credit for using U.S. made solar panels, creating demand.

* Factories started popping up, especially in Texas, where low power prices make large-scale manufacturing viable.

Now, that long-term signal is under threat.

What’s in the “Big Beautiful Bill” That Could Undo It All

Sabah broke it down for us: the current House version of the bill would eliminate developer tax credits by 2028, with an abrupt cliff 60 days after enactment.

And while the latest Senate version is slightly better, it’s still a cliff:

* Full credit in 2025

* Drops to 60% in 2026

* 20% in 2027

* Zero by 2028

The manufacturing credit technically stays, but if developers lose the adders for domestic content, American manufacturers lose their market.

DC’s Math Doesn’t Add Up

Everyone agrees: the deficit matters. But what’s often missing in DC is that you can’t shrink your way out of the deficit, you have to grow out of it.

Growth means:

* Domestic manufacturing jobs

* Local tax bases

* Energy independence

* Lower-cost power

I covered that in much greater depth here:

Energy Capital is produced by ClarityForge Studios.

Timestamps

* 00:00 – Introduction & opening context

* 01:45 – What is OCI Energy?

* 03:30 – OCI’s origin story in San Antonio

* 5:00 – The elephant in the room: the impact of the not-so-beautiful bill

* 10:00 – Investment signals leading to solar module and solar cell manufacturing

* 13:00 – Manufacturing tax credits (45X)

* 15:00 – The need for low cost power to spur economic growth to lower the debt

* 20:00 – Lost cost power in ERCOT is attracting manufacturing of all kinds

* 23:00 – Supply chain issues across the power sector

* 25:30 – The need for moderate, durable policymaking, gradual ramp of incentives

* 31:00 – The retention of the manufacturing tax credit won’t necessarily help

* 34:00 – Where panels used in America are manufactured (hint: not China)

* 38:00 – The need to communicate national security implications

* 41:00 – To grow our economy, and reduce our debt, we need a lot more power (see chart discussed in this segment in Resources section below)

* 44:45 – How to design Foreign Entities of Concern (FEOC) provisions well

* 52:00 – Texas policy and the recently concluded legislative session

* 54:45 – Is there a future for solar and battery manufacturing in America?

* 58:30 – What could the Senate do to grow American manufacturing

* 1:00:30 – Final thoughts, closing remarks

Resources

Information about Sabah and OCI

* OCI Energy

* Mission Solar

* The chart Sabah sent me after he read Energy Submission:

Discussed in the Episode:

‘City of San Antonio Solar Development Plan. April 2012.

H.R. 1, One Big Beautiful Bill Act (Dynamic Estimate). Congressional Budget Office (CBO).

Transcript

Doug Lewin (00:05.426)

The solar manufacturing renaissance in America, and particularly in Texas, is very much at risk as Congress considers a budget bill that would end solar incentives and clean energy manufacturing incentives. Welcome to the Energy Capital Podcast. I'm your host, Doug Lewin. My guest this week was Sabah Bayatli. He's the president of OCI Energy. OCI Energy is both an IP and a project developer throughout the U.S. installing solar and storage, but also a manufacturer through their sister company, Mission Solar. And Sabah told me that that manufacturing plant, which currently produces modules and was getting ready to expand to cell production with 800 Texas jobs, is at risk and will not proceed if the bill in Washington passes in its current form.

We talked about that and a whole lot of other things both related to the bill, but also talked about Texas policy, solar in general, what it means for the economy and growth. This was a great discussion and extremely timely. And I thank you for listening and we'll ask one more thing of you: if you can give us a review wherever you listen or particularly leave a five-star review, that is super helpful for our small but fast-growing podcast so that other people can find it. And I greatly appreciate it. You can find all the episodes of the Energy Capital podcast, become a subscriber to the podcast and to the Texas Energy and Power newsletter at douglewin.com. With that, please enjoy the show. Thanks for listening.

Sabah, Bayatli, welcome to the Energy Capital Podcast. Great to have you.

Sabah Bayatli (01:41.426)

Thank you, Doug. It's wonderful to be here.

Doug Lewin (01:43.896)

So can we just start with a very brief little background? Folks may not have heard of OCI Energy. Tell us a little bit about OCI and Mission Solar.

Sabah Bayatli (01:52.536) Quick background: OCI Energy is a developer and IPP for utility scale solar and battery energy storage systems in the U.S. We have been operating since 2012. We are headquartered in San Antonio, Texas. OCI Energy is a subsidiary of OCI Holding, a South Korean conglomerate based in Seoul. They have multiple businesses worldwide. I would say one of their core businesses is polysilicon manufacturing.

For the audience, people who are not familiar with polysilicon, you can think about it as the raw material basically to the solar panel. It sits very, very upstream. In fact, I think they are the second largest polysilicon provider in the world if you take the Chinese manufacturers out of the list. That's a fact about OCI Holdings' operation on the polysilicon business.

In the U.S., they have OCI Enterprises. You can think about it as a sub-holding company basically to the U.S. market. Under OCI Enterprises, there are multiple operating companies. One of them is OCI Energy, the developer and IPP for utility-scale solar and battery energy storage. We also have a sister company here in San Antonio as well called Mission Solar Energy. They are a manufacturer for solar panels. They also started business in 2012, 2013. In fact, when they started, they were producing cells in the early days as well. Today, they are producing solar panels. And we can talk more about them in the next few minutes.

Doug Lewin (03:20.268) Yeah, it's interesting. A long, long time ago, I was involved in a lot of discussions in San Antonio in that kind of 2009, 10, 11 period when they were looking at how to develop a clean energy economy in San Antonio. I have not super sharp memories of that period, but some, and it's really gratifying and neat to see you guys there as such a big part of San Antonio and of that ecosystem.

Sabah Bayatli (03:46.862) It brought us actually to town in 2012. What brought OCI Company to San Antonio and brought all these manufacturing jobs and basically development jobs to San Antonio. Today we are headquartered in San Antonio. We basically service all the U.S. on the development side as well as on the manufacturing side. But if you go to the story, actually the way OCI Energy, the OCI Company actually penetrated the energy market in the U.S., it was through an economic development agreement with the city of San Antonio. Yes, through CPS Energy, the utility.

This is our public information. So in 2012, there was an economic development agreement entered into. With that, we had a commitment basically to develop up to 500 megawatts of solar projects. In 2012, it was a huge deal, right? So, and we did develop them, and in exchange, we got offtake agreements basically with CPS. And what we gave was we gave an overhead commitment to the city of San Antonio.

So we had to bring manufacturing, we had to assemble the factories here. OCI Energy was assembled at that time. It was called OCI Solar Power. We actually brought inverter manufacturing to San Antonio as well. We brought a big EPC from Minnesota called Northern Central to open a branch in San Antonio too. That was a huge commitment actually by OCI Company to the city. It ended in 2020-22. But to your point, I think you can see the fruit today. The company's still operating in San Antonio. We are creating a lot of jobs basically for San Antonio and Texas, and this is a new technology and this is a new industry.

Doug Lewin (05:17.868) Yeah. So I think we need to jump into kind of addressing the elephant in the room here, Sabah, which is right, you guys are a manufacturer in the United States, right there in San Antonio, here in Texas. And that had a first mover from some city initiatives, but over the last couple years at the federal level, congressional bills, particularly the Inflation Reduction Act, but also the Bipartisan Infrastructure Law put in place a lot of incentives for manufacturers.

Can you talk a little bit about what is going on right now with the officially named "big, beautiful bill" that would reduce some of those and how those impact you as a solar manufacturer? And I'm hoping Sabah, in that answer, you can kind of get into also some of the components of the different parts of solar that are being produced in America and how this bill affects those. Because it's not all the same. There's the different parts of the supply chain and you guys get into several of those.

Sabah Bayatli (06:15.262)

It is truly the elephant in the room these days and has been for the last few weeks now. Everybody's trying to understand how this will play out for the energy industry. I mean, I guess for the audience to understand, the "beautiful bill" we are talking about is more than 1,000 pages, right? So what we could cover here in this podcast is more related to certain sections inside the beautiful bill, which is related to tax credits within an act called the Inflation Reduction Act, people call it the IRA, that was passed in 2022.

So now, big picture is, look, we acknowledge at the U.S. level today, at the federal level, there is a budget issue, there's a deficit. We acknowledge it. We are business leaders. We understand that this has to end. We have to balance this budget. No question. I think what we want also the Congress to consider is designing for the system: while we're trying to balance the budget, how we can also incentivize to bring more investment to the U.S. and we bring more manufacturing to the U.S. That's really the big picture, right? So we understand it.

If you look into the solar industry, I mean, it has been probably more than 10 years. We always have this cliff of tax credit ending at some point. We had it in 2016, later I think we had it in 2022. I don't remember exactly, but you always had this cliff of like ITC is going away.

Big picture is what's really the whole purpose of giving credit to a certain technology: you're trying to give that technology to your country, you get the supply chain, you diversify your power market, you have more resources in the power market, and this way you are more diversified, more secure, more affordable. So that's really the big picture. So this cliff, it was no news for the market until 2022 and the Inflation Reduction Act passed. When it passed, basically it gave more certainty to the market.

The challenge before 2022 is we did not have a long view basically on what the credit would look like to be enough to bring manufacturing investment to the state. We had enough to develop projects and we did develop a lot of projects basically in Texas and across the U.S. But before 2022, it was not enough to convince investors to come and invest in those manufacturing facilities. Right. Because bringing manufacturing investment to the U.S. is challenging. And here is why: because you have to get approval from your own board as a business leader. Later, you need to get financing, basically approvals. Later, you need to set up the factory. And all this takes time. And after that, you start covering your investment. And we're talking about billions and billions of investments here. Those are not only $100, $200 million investment. So you really need to have a horizon. You need to see how this will look. And you want to have confidence in this market to convince everyone to come here and build the manufacturing, right?

So that happened in 2022. It was wonderful for the entire market for really the new industry to bring this industry back to the U.S. So I can probably give you the view from a development perspective, but I have good knowledge on the manufacturing side. I can share that as well. So since 2022, it passed and basically people started really thinking to bring the supply chain back to the U.S. From the development perspective, it also gave a good horizon. So we started developing more solar projects, more battery energy storage projects. From the manufacturing side, we saw more manufacturing coming to the U.S., opening module factories.

Now you have to examine the supply chain for the module factories. It's not only the module. To the audience, if you have seen the solar modules, inside the solar modules you have those small squares. We call them in our industry "cells." So basically that's another technology that we want to bring to the U.S. as well. And now people start thinking about it. As an example, our sister company Mission Solar is actually thinking about bringing cell manufacturing as well. They are producing modules and now they are thinking to bring cells as well, and that will bring 800 more jobs, right?

Doug Lewin (10:07.732)

And real quick, just want to drill down on that a little bit more because I want to make sure it's not lost on anybody in the audience what a big deal that is. We have had, correct me if I'm wrong, but very, very little cell manufacturing in the United States. We've had some module manufacturing, not a ton of that either relative to other places in the world, but cell manufacturing pre-2022, we've had very little. And now you're starting to, to your point of getting that longer term investment signal, we're starting to get a significant, I think as much as in the tens, maybe as high as like 40 or 50 gigawatts of announcements where we had in just single digits, one or two gigawatts of production before the IRA. Is that about right?

Sabah Bayatli (10:46.734)

That's actually a wonderful question. The answer is yes. Fun fact, actually, when Mission Solar, our sister company, was established in 2012, they actually had cell production as well. So cell production and module production. What happened after a couple of years, because other countries subsidized their solar manufacturing too much, U.S. manufacturers were not able actually to be sustaining in terms of manufacturing cell products.

So actually they had to close the cell manufacturing. Again, this is all public information. We are not shy about sharing. They had to close the cell manufacturing. So we were really early movers. We are talking about 2012, 2013 investment in the U.S. in San Antonio, Texas. So that cell manufacturing portion had to close actually because of that. And since that day, you really did not have a lot of module manufacturing in the United States. It was limited. I mean, size-wise, we were not able to compete.

People were shrinking, shrinking with time instead of growing, we were shrinking because there was too much subsidies going on outside the U.S. that made our manufacturers here in the U.S. not able to compete. So I'm glad you brought it. It's a really good point to highlight. So beyond module supply, beyond module manufacturing, which by the way, we did not have full manufacturing to even cover our own consumption here in the U.S., we actually did not have anything on the supply chain for the modules.

Doug Lewin (12:09.67)

Let's talk about these cycles, right? In the past, what you're talking about with the tax credits, they were usually called like "extenders," right? The tax extenders at the end of the year, typically would be December. Congress would extend the investment tax credit, the production tax credit for development, for actually putting projects on the ground. And that happened like, I think it was like 2011, 2013, 2015. Like every two years, it would be a one or two year extender.

And in 2022, it changes and you get this 10 year, right? It's either like, I think it was like a 75% reduction in emissions or 10 years. Nobody really expects 75% reduction in emissions. So it's basically a 10 year and it was whichever goes longer. So it basically gives a guarantee of 10 years of runway. And there's the 45X, right? Which I assume was very big to your company. Can you talk a little bit about the manufacturing tax credits particularly?

Sabah Bayatli (13:00.494)

Again, just to clarify also to the audience, 45X is so under the IRA, there are multiple credits for different stages of the supply chain. You have credits for the project level. So if you are a developer, you are developing solar projects, you have certain credits. If you are a manufacturer for solar panels, as an example, you have certain credits. So 45X is more related to the manufacturing tax credit that was passed by the IRA. So 45X basically gave more as well as the credit that the developer is able to use.

So it basically incentivized manufacturing to come back to the state and people to start investing back to the state. And here is why, because exactly what you mentioned, it gave 10 years of horizon. You can see there is 10 years of certainty here. Now you can bring investment. And the way it worked basically, it helped manufacturers to claim credits when they produce solar panels. It gave them certain credits. And it also helped the developer who will buy those solar panels.

If they are able to achieve domestic content, this is a definition, right? If you are able to meet the domestic content requirement with this purchase of your domestic solar panel and many other equipment, then basically it helps the developer to claim additional tax credit. So for a developer, base case was like 30%. And if you are able to use domestic content, then you can get an extra 10% of tax credit on your project. So that basically incentivized manufacturing to come back to the U.S. on two different levels, at project level, as well as at manufacturing level. So I think that's what we had inside the 2022 act, the Inflation Reduction Act. Now things are changing, basically, as we see with the beautiful bill in D.C.

Doug Lewin (14:44.206)

So I want to come back to what's in the bill and some of the discussions you've been having around that. I actually, I want to come back to something you said earlier, because I think it's really important, Sabah, is that you acknowledged, and I think this is important, that deficits do matter, that we do actually need deficit reduction. And I think what is often missing from these discussions, I've tried to inject some of this. I wrote this article called "Energy Submission" the other day that really sort of dives deep into this topic.

That in order to reduce the deficit, you have to have economic growth, right? So you need manufacturing in the United States. You need to actually make things, but you also need low cost power in order to have manufacturing, not just of solar cells and modules, though that low cost power is important for that too, but for anything else you're making, right? Whether it be steel or you're refining oil or you're having a data center or like semiconductors and chips, like whatever it is that you're manufacturing, you need that low cost power. And I think this is part of what's missing from the conversations in D.C. And I'm wondering what you're hearing as you're having conversations in D.C., how could you possibly get out of the deficit unless you have really robust economic growth? And how could you have really robust economic growth if you don't have low cost power? So it feels like we're caught in this little trap that I'm not sure how to get out of.

Sabah Bayatli (16:07.598)

We truly are. I mean, I was in D.C. yesterday. My feeling is people are really under a lot of pressure on both sides of the aisle, House and Senate, to make things work. I think to your point, Doug, is you have to consider what this investment will bring. And I will give you an example from that additional cell factory that our sister company, Mission Solar, was trying to bring. So that will create 800 jobs. So basically, you are immediately creating 800 jobs for your community.

And think about the ancillary jobs that you will be creating for that community, right? We're talking about restaurants, hospitality, hotels, residential, property taxes, everything, right? So, and the question is now how are you able to index this. I think what's happening in this, now I take you back to D.C., you have the finance committee on the Senate side, you have the Ways and Means on the House side, people are trying to put numbers on these investments, right? So the question is like how are we indexing this, how are we putting a good forecast for what this could bring, right? Is it purely just the capital investment, what are we missing, or are we exactly including all this consideration, what type of economic value this will bring over the long term, which will create obviously more revenue for the U.S. government. And therefore, it basically goes to a point that probably will help us to reduce deficit down the road. So the question is like how is the math working today, how are the assumptions made. That's really a big part of the formula today in what's happening in D.C. It's an amazing point. It's an amazing point.

Doug Lewin (17:37.924)

We're recording on June 18th. Yesterday, June 17th, there was a new analysis out from CBO. They did some dynamic scoring, right? Dynamic scoring, right? I think most of our listeners will know this, but in case you don't, it basically is like, okay, you have one amount of money that you're reducing the deficit by, but then there's these other things, like you said, there's sort of knock-on effects of new jobs created and all that kind of thing. So dynamic scoring takes all that into account. The bill, as it passed the House, actually worsens the debt when dynamic scoring is taken into place. And again, I think this is what people are missing. Like if we can really have this longer term signal for manufacturing, you will not only get that manufacturing base, which in and of itself would be good, but you have all these second order effects of a domestic supply chain for low cost sources of power, which then can enable us to do things like AI and robotics and all of these kinds of things. So we've talked about this a lot. If you want to say more about that, I've got other questions I could move to. But if you want to say anything more, I'll let you.

Sabah Bayatli (18:40.55)

Yeah, no, I mean, maybe just for the audience to understand the beautiful bill, I would say in my own mind has three revisions so far and who knows what's next. But there was the original revision or the original version of the beautiful bill that was introduced by the Ways and Means by the House. And later there was the revision that was passed the House. And finally, we have the revision that was just shared through the finance committee in the Senate on June 16th. So there are too many things changing actually from revision to revision as we speak now and things are getting baked in D.C. as we speak.

Doug Lewin (19:15.274)

And so talking today with the latest version that has come out, the Senate bill, and it sounds like you were just in D.C., so you're probably pretty familiar with this. You could speak to the Senate version or frankly, you could speak to the House version if you want. And I know you can't get into too much specifics, but this has to majorly hurt the economics of manufacturing. I know you probably can't say specifically like we would or would not continue with our stuff, but can you just talk a little bit about what that would actually mean for the prospects of manufacturing in San Antonio and broader throughout the state of Texas.

Sabah Bayatli (19:48.27)

I think for the manufacturing, frankly speaking, I mean, I'm speaking on behalf of my sister company, and we are not shy about saying it. We said it yesterday. I was there with the president of Mission Solar, my colleague, Sam Martin. If this basically passes as is, then basically this disincentivizes manufacturing to come to the state. That's super simple. Because the way basically it's written today, we don't see the horizon. We don't see basically a good long term that will help manufacturing investment back to the state.

And there is a lot of manufacturing today actually selected Texas to come. If you look into where is the module manufacturing coming back today, almost everything is coming back to Texas. And here is simply why, because the energy pricing is affordable in Texas. And now it's like, if we ask ourselves why the energy pricing is affordable in Texas today, it's actually because of a simple reason. We have a good penetration of solar and wind in the state of Texas.

That's actually helping the pricing to be affordable in Texas. And that's actually triggering, it goes back to your earlier point, that's basically attracting more investment to come. I mean, there's a fact today, if you zoom out to the U.S. market, and if you try to find out what is the lowest pricing of the energy power market, it's basically ERCOT, it's the state of Texas. Specifically ERCOT has the lowest energy pricing in the U.S. In fact, I think globally ERCOT is the lowest energy pricing.

So if you are a foreign company and you want to open manufacturing back in the state, even if you are really inside the state and you want to bring manufacturing back, what's your choice? Simply is Texas. And again, this is driven by the fact we are not an over-regulated state, which is really helping, right? And also our energy pricing is very, very affordable.

Doug Lewin (21:37.814)

Yeah, and then if this passes, we're going to see prices go up because, and look, I mean, this is an assertion a lot of people make, but it just sort of follows logic, right? You would be taking away the tax credits that's adding a 30% cost. And then a lot of people say, well, we'll just build more gas. But as has been well documented, it is very, very hard to get a gas turbine. Even if you can get a gas turbine, the cost of gas longer term is going up because of increased LNG exports.

So it's very interesting, Sabah, and later in this conversation, I do want to talk about the Texas legislature, but one of the things we saw during this session and even the previous session in 2023 was folks that in the past have been, I wouldn't say necessarily oppositional, but sometimes oppositional, certainly less supportive of renewable energy, like the Manufacturers Association really supporting renewables. And it's for exactly what you say. Like they want more manufacturing in Texas and low cost power is absolutely a key part of that equation. Not the only part. You've got to have other things working for sure. But low cost power is fundamental. Without it, you don't get a lot of manufacturing. It's basic, right?

Sabah Bayatli (22:43.854)

That's very true. And Doug, I would like to highlight your point on the gas. I should clarify we are an energy company. We are not shy about exploring any technology to develop that could make sense for our country and our state. But people tend to think that gas can come online in the next year or two. I think it's important for the audience to know gas has as complicated, probably more complicated supply chain than the solar or the wind industry today.

Second, it has limited supply chain as well. And that's why we are seeing the lead time. I mean, if you are a company and you want to buy a turbine today from the main suppliers, then basically you are talking about five, six years delivery lead time. You're talking about 2031, 2032 at your best case, right? And people also tend to think that they will scale manufacturing. Well, actually it's not easy. It's really not easy to scale manufacturing. We have seen it in the high voltage equipment.

So one of the big issues in the interconnection today, where you have everything set, you signed your interconnection agreement, it's actually how long it takes you to get high voltage equipment, transformer, breakers, things of that nature. Those are not a new technology. Those are very old technology. And we are still like really before COVID, just to give the context to the audience, we used to get transformer, main power transformer. Those are for high voltage lines, 138 thousand volt, 345 thousand volt, we used to get those in eight, nine months. Today you are talking about three to four years delivery. You would think that the supply chain will respond immediately and they will grow to help this market. The answer is no. And here's why: because if you are a manufacturer for high voltage equipment, you actually think about the horizon as well. How does this look over the next five to ten years? And if you think okay, the decision today based on what could pass today by the bill, but the next session probably will have a Democratic Congress with a blue Congress. They will change the dynamics and now the things will switch back. And therefore that investment that I thought about today, it's probably not necessary to be true in two years, three years down the road. So that's actually creating a problem for the supply chain. So people are not able to scale up their manufacturing.

And again, I just give you the example on the gas side, similar really concern here. Because if you think about it in 2022, when you passed a major act that gave you a direction for the 10 years, you basically what you did after 2022 as a business leader, you went back to your board and you told them, look, we can do more investment here. We can bring more manufacturing here, right? Because we have this time horizon. It will take you at least a year, six months to get your own board approval. Later you get the financing to the table that will take you another year. Later you will get the contractor to put the buildings for you, I give the machines. It's year 2025, Doug. And now you hear the Senate and the House basically are discussing the fundamental of your thesis in 2022, which could pull the rug from under you, right? So that just happened to the solar industry today, but the same is true on the LNG and the gas as well. So it's big picture. This is, I mean, I'm saying this in every single podcast now. Guys, I think we should stay away from polarized decisions. I think we should make it as centric as possible because we just cannot undo each other. We just cannot make a decision today and undo it in two years from today, three years from today. Super harmful to the investment world. Super harmful. Yeah.

Doug Lewin (26:25.27)

I wonder, and this is probably way too optimistic or Pollyanna or whatever, but if there's not some ability in the Senate to pull some group of Republicans and Democrats together and to say, could we make some deal that if and when Democrats had control, you wouldn't undo what's done right now? And maybe, I'm curious, this is controversial. I have no idea what you think about this, obviously, but like phasing them out, but having a very gradual, I know there's some phase out in the Senate version, but it goes from like 60 to 20 to zero. So like, what about like a 90, 80, 70, like just 10% reduction every year, phasing it out 10 years? And maybe there's some ability, at least for those provisions, Democrats aren't gonna vote for the whole thing, because of the Medicare and the questions about, you know, tax rates on the rich and all that kind of stuff. But at least on those provisions, maybe if there was more of a tapered, smooth reduction, there might be some agreement from Democrats that we won't undo this. We would vote against undoing it as long as it is a very slow and predictable reduction. How would you feel about something like that as a manufacturer and developer?

Sabah Bayatli (27:39.214)

I'd like to believe we have really reasonable lawmakers in DC will make reasonable decisions in the end of the day. Yes, we have to end of this far left, far right, but I like to believe people will come to agreement. This is not about party. This is really about our country. Like what is the best decision that we can make today that we will not undo a few years down the road. I love to believe this will happen. Now things are evolving as we speak. We are really monitoring it.

But exactly what you mentioned, look from the developer perspective, even the manufacturer perspective, people are not looking to subsidize this business forever. We are not looking for those incentive to stay forever. We're just making sure to your point, when we phase out, we really understand from the industry how we are phasing out. And this way we are not harming the industry because we're trying, if we truly trying to bring manufacturing, then we need to hear from the industry what's needed, how much time is needed. And therefore, like phases down systematically and this way we are not harming. In fact, we are bringing more jobs to the US. We are bringing the manufacturing. Those are like high tech jobs in the solar as well as on the battery side, by the way.

So I like to believe people will reach out to that conclusion. The first draft from the Ways and Means Committee in the house, I think that was probably more reasonable than the version that passed the house. So I can tell, yes, there was certain House representatives dug their heel and they wanted to see their language. Very last minute. I mean, it passed by a narrow majority. We are talking about a single vote. Right. And now it's moved back to the Senate. I can tell you from Monday revision and we are digesting it as we speak. I love that they have my whiteboard, have a lot of numbers on it. We're trying to understand what's the implication, but I can tell you it's improvement. I can tell you there is a reasonable people on the finance side who trying to understand.

Like how should we really allow this industry not to kill it, but to allow it to come to the US and integrate basically to the US without harming to the manufacturing jobs, without harming the all this capital investments we are trying to bring to the US. I think there is improvement. I feel there could be a better moment as to your point is like, can we phase it out slowly more? Like now the latest revision that passed from the Senate, it says basically if you start your construction 2025, then you have 100% of the credit. If you start in 2026, then you have 60% of the credit. And if you basically do 2027, then you are down to 20%, 2028 is zero. And I'm talking about solar and wind, right? So the good news, battery and a lot of other technologies they did not touch. I think kind of like stays as is from my rough reading here to the Senate bill.

I think if we can smooth it out a bit more, probably if we can suggest, keep it 100%, 2025, maybe 75%, maybe 50%, maybe 25% and go to zero. Again, I'm really not in favor. We understand the big picture, guys. We have deficit, we have to balance. We have to balance. But also we want to bring manufacturing jobs so we can create economy basically to support extra revenue for the US government, right? So we have to find that balance. And that's really the big picture. So I think if we can probably more systematically phased out. I think that could work for the industry because right now what the Senate and that's what we tried to clarify in DC yesterday again like they released while I was flying to DC all the early next morning 6 a.m. We're trying to figure out how this plays out because we are meeting a lot of people but I think what they're trying to do to a project level they are phasing out from 160 to 20, but they are keeping the manufacturing credit, which is good. It sounds good on the surface. What is really missing is the manufacturing credit is only good if you are able to sell them to a developer. Right. So if the developer lose the value of their ITC and PTC and they are not incentivized to use it anymore, then basically what value the credit will give even if you are keeping it on the papers. Right. So.

Doug Lewin (31:49.272)

So Sabah, I want to dive into that because that's really, really important, right? Because if the tax credit is gone, the whole reason to use the domestic manufacturing was to get the additional tax credit. If that goes away, why not buy Chinese goods? Yes, there's tariffs, so there would be some consideration there. Or Vietnamese or wherever else it might be made, there's no incentive to use that American-made solar panel or cell, right?

Sabah Bayatli (32:15.054)

That is correct. So as project developer, if we start the construction this year, we'll get the full credit according to the latest Senate. Again, this is Wednesday, June 18th, right? And we are referring to the Senate bill that was shared and introduced to the Senate on June 16th night. So according to that, as a developer, if I start 2025, I get the full credit. If I start in 2026, I get only 60%. If I start in 2027, I get only 20% of the base credit and 2028 forward zero credit. I'm not allowed to get any credit if I start construction, right? So which means basically as a developer, I'm also because the developer is the customer for the manufacturing. So if you are a manufacturer in this state and if you are manufacturing solar panels, you have to sell them somewhere. And the somewhere is basically the US market, right? So, and if the developer is not able to purchase them from you because the value of the credit is going so low, it's not meaningful enough.

I mean, this is a fact as well. If you produce in the US as a manufacturer, you have higher costs. Technically, your solar panel costs more than if you bring the panels from the outside of the US. So putting all these formulas and putting all these numbers inside the financial model as a developer from a developer's perspective now, at that time, you will make a decision. You will say, do I even need to buy domestic content? Yes, they have the credit as a manufacturer. But actually, that's not helping me as a developer because now the value I'm getting for this credit is very low. Therefore, developers down the road, probably just, again, this is a free market, this capitalism. You're trying to get the best, more efficient way. You want to improve your numbers, right? So you will just try to find the most affordable product available at that market today. And to your point, in the US, we are not, I mean, as a fact, we barely import anything from China today. I don't think we have anything as made in China's solar panel. It's probably very small percentage is imported from China. I'm talking about one to 2% roughly.

Because what happened in 2011, this goes back all the way to 2011, they put 301 tariffs against solar panels at that time, create the huge deal. So after 2011, we're not able to import the panels from China anymore. So what happened, solar panels manufacturing actually jumped to another countries. And now we're talking about Vietnam, Malaysia, Thailand, Cambodia, Laos, Indonesia, all these countries become a solar panel manufacturers, they actually feed only the United States because we are not able to bring it from China. So we started bringing it from other countries. So now there is available manufacturing like outside China. And the question is like how we can bring it to the US and we make sure it's sustainable. So in this way we can bring manufacturing jobs to the US.

Doug Lewin (34:59.138)

That is so fascinating. Those other countries that you just said, first of all, I didn't realize that we're like, that's really interesting. So you're talking the entire American market is only one to 2% Chinese. And yeah, yeah, but it's small. It's small would be the point, whether it's one. In those other countries, you were just mentioning Malaysia, Vietnam, et cetera. Is that module manufacturing? Are they also doing cells and ingots and all that kind of stuff in those countries as well?

Sabah Bayatli (35:26.996)

Over time, they evolved to bring more supply. So maybe to give you an idea, so solar panel, you see those small squares inside it we call themselves. That's the one step before. Before the cell, you have another product called wafer. Before the wafer, you have another product called ingot. Before the ingot, you have the polysilicon. So kind of like a rough idea on the supply chain quickly. So yes.

Now today, I think we see in a lot of these countries more basically manufacturing for the supply chain, upstream supply chain as well moving. And what's triggering it, Doug, was triggering the move to those countries is actually the US policy over the last 10 years, probably over the last 15 years, right? So 2011, you put 301 tariffs during Obama administration that kind of like technically took out China from the supply chain. And now you have to push your module to other countries.

And later what happened during the last 15 years, you have other policies coming like the tariffs, the Uyghur act, right? And there is ADCBD against certain countries, right? Anti-dumping and countervailing duties because there's certain companies from China that start like basically circumventing by going to those countries and just like assembling it and sending it to the US. But the supply chain was built in the US. So the policy got evolved over the years and become very specific actually and say, if you are importing from Vietnam today, I'm just giving example, then X percent of your product has to be manufactured outside China, as example. The devil in the details, it's complicated, it's per product, but policy became very sophisticated as well. And if you zoom out to understand what's the purpose of such policy, it's actually to help the supply chain to move from China to other countries, to diversify the supply chain, if that makes sense.

Doug Lewin (37:14.816)

It does, and I just think it's so vitally important. The reason I want to talk about this here, and this podcast, I'm going to talk about it on a lot of others, is what we're looking at in the world right now, Sabah, right? Something like 80% of everything installed at this point on power grids globally is solar in storage. So in some ways, solar in storage potentially could become as big a strategic imperative and lever as oil was in the 70s.

And if China were to be, and it's interesting to hear you say this, because that's a great historical perspective that this actually goes back to Obama through the first Trump administration. Biden kept many of those protectionist policies in place. Now in Trump too, there's this kind of continuation of we cannot let China control what is a very strategic lever.

And what I worry about is that in a very short sighted way with this budget reconciliation bill, we could end up undoing a lot of that and actually like playing right into China's hands and actually strengthening their hand on what becomes one of the most, I won't equivocate, not one of, the most important, if you put solar and storage together, the most important power source for at least the next 10 years. Maybe at some point nuclear geothermal or hydrogen or fusion or who knows what in the late 2030s. But for this foreseeable future, it's solar in storage and we're about to like, not to shoot ourselves in the foot, but like shoot ourselves in the kneecap at this point.

Sabah Bayatli (38:59.18)

I share the same concern, Doug, as well. And that's why my advice, probably to the audience of this, to the listeners, to people who operates in the solar market and battery market today, please raise your voice. Speak to your House representative. Speak to your senator. Because I think people really need to understand their perspective as well on DC. Those finance committees, ways and means, under a lot of pressure. And you are probably not in your main radar, by the way. Like, they have a bigger problems to solve. First of all, deficit, right? That's the thing, right? Right. But you have the Medicaid, you have salt, like it's becoming huge problems. You are like one of the things inside this list of one-handed, right? So, I mean, factually, people probably don't understand exactly how they will impact you.

So I think our job as industry leaders, go and communicate, really speak to them. I think people are reasonable. People try to understand. It's business perspective. This is really not about clean and renewable versus this is about energy affordability. This is more about energy security. That's truly it. So I think as a business leader, if you can indicate that your senators, your house represented, people will listen and they did. We spoke to a lot of Republicans in Texas, right? About the both senators thankful, thankful to them. They hosted us in DC yesterday. They listened to formalized, they took notes and people are responding.

So it's our job really to clarify how this will hit the industry, right? So that's our recommendation. I share the exact concern with you, you have to understand the finance committee under a lot of pressure. They have a lot of things to solve and you are like few items on their list.

Doug Lewin (40:35.18) Well, and this is where I think we need to help connect dots because whatever your concern is, as the senator or representative, obviously a lot of senators were on the Democratic side, though there's certainly some Republicans too, think about climate change a lot, but I think more so they're going to think about national security. They're going to think about American competitiveness, these would be China. They're going to think about the national debt. And whatever of those things is your concern, having a robust solar and storage manufacturing supply chain in the United States is a solution to that problem. On the debt piece, right? Stimulating that economic growth. Because really, I mean, at 38 trillion and counting with the interest rates going up on every bond deal that we're doing at this point, because countries are worried about our ability to actually pay back that debt, like without growth, we're screwed. And again, no growth without low cost power. So.

Sabah Bayatli (41:29.966) One hundred percent, and I don't know if you had a chance—I shared with you over the email a couple days ago that energy consumption growth rate in certain countries, so it compares between China, yes, us, Europe, Japan and I think there was one more country there. So if you look at the curves for the US and European and Japanese, it's literally flat and probably shrinking toward the end, especially in Europe, slightly in the US. Just for the sake of the audience, I'm talking about how much ener