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In Episode 2 of the "Factor This!" podcast, which publishes on Monday, May 23, Lightsource bp Americas CEO Kevin Smith describes how one of the world's largest solar developers is approaching the Auxin Solar tariff petition and the threat of additional tariffs on imported modules.

Also in this episode, American Clean Power Association CEO Heather Zichal, a former Obama administration climate and energy official, explains why she is taking the lead in a multi-million-dollar campaign to oppose the Biden Administration on tariffs.

The episode is the second in a 4-part series on the Auxin Solar petition. Subscribe wherever you get your podcasts.

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Amid the threat of additional tariffs on imported solar modules from Asia, Lightsource bp, one of the world's largest solar developers, is weighing the political risk of U.S. investments. That risk is increasingly real as evidenced by a multi-million-dollar public relations campaign by clean energy advocates to oppose a Biden Administration investigation related to alleged solar module dumping by more than a dozen Chinese manufacturers.

Kevin Smith, Americas CEO for the business unit of the London-based oil major, met in April with senior leadership of the energy company to analyze the impact of the Auxin Solar tariff petition, which has upended utility-scale development in the U.S.

Smith was a guest on the Factor This! podcast for the second episode of a four-part series on the Auxin Solar tariff petition, airing on Monday, May 23. If you missed our exclusive interview with Auxin Solar CEO Mamun Rashid, listen here.

During his interview, Smith said that during the 1990s and early 2000s he was building power projects around the world, including southern Africa, Asia, and Latin America. When he came back home, colleagues would ask him about political risk in those markets. "And, you know," he said, "the areas where I've had the most political risk have actually been in the U.S."

With the recent tariff issues roiling domestic solar markets, "once again, the U.S. is delivering with political risk."

Smith said he joined Lightsource bp in part due to the financial backing of oil giant bp. He said the thought that with that kind of support, he could make the biggest impact in building renewable energy projects and addressing the threat of climate change.

Now, however, Lightsource bp -- the 50/50 venture between solar developer Lightsource and bp -- is reassessing "the best place to direct our investments," Smith said. "We'll end up investing less money in the U.S. in 2022. We'll see what happens in 2023."

Three-quarters of solar companies responding to a Solar Energy Industries Association (SEIA) survey reportedly said that panel deliveries have been canceled or delayed in the days since the U.S. Commerce Department agreed in late March to open a circumvention case against imported solar modules from Cambodia, Malaysia, Thailand, and Vietnam.

With the potential for retroactive duties imposed on solar modules imported after April 1, Lightsource bp was notified by suppliers in southeast Asia on April 2 that they wouldn't be shipping orders.

"Suppliers aren't going to take the risk of 50-250% tariffs, and owners/developers can't take that risk, either," Smith said. "You can't build a 100 MW, $100 million project with $50 million worth of panel supply, and then six months or a year later, they show up and say, oh, you owe us another $100 million for tariffs."

Lightsource bp may be better insulated than other developers from the trade squabble. That's because the company placed a 5.4 GW order with First Solar for solar modules at the end of 2021, the largest order ever for the U.S. solar module manufacturer.

Still, Lightsource bp said that the order won't be enough to meet all of its project development needs. The company's order with First Solar represents a chunk of the roughly 8 GW of manufacturing capacity currently available in the U.S. Smith estimated that solar development targets could drop by one-half if additional tariffs are implemented, and that ramping up domestic manufacturing to meet demand would take years.

Smith said Lightsource bp supports incentives for domestic manufacturing as opposed to import tariffs. Incentives for domestic manufacturing and the U.S. solar supply chain are the subjects of Episode 3 of the Factor This! podcast.

The solar tariff issue has political as well as business consequences and has put Heather Zichal in a tricky spot.

She's the CEO of the American Clean Power Association, a leading trade group for solar, wind, energy storage, and transmission companies. And she is fiercely fighting the Biden administration over the Commerce Department's investigation of the Auxin Solar petition.

And she's also a former Obama administration energy and climate official and knows President Joe Biden well. Maybe no one in clean energy is closer to the current occupants of the White House.

"I've been working to deploy solar for two decades," Zichal told Renewable Energy World's John Engel. "And I never thought that I'd be having to raise money to run a campaign against the Biden administration."

Zichal is helping to lead a $5 million joint campaign on behalf of ACPA, the Solar Energy Industries Association, and other solar industry trade groups which aims to apply pressure on the Biden administration for allowing the investigation to proceed, although the step by Commerce is required by federal law.

She believes Commerce's action could lead to the delay or cancelation of 23 GW of solar projects over the next two years and thousands of lost jobs.

"This is an existential threat to the future of solar in the United States of America," Zichal said.

Auxin Solar and others that aim to take advantage of U.S. trade laws are "bad actors" in the eyes of Zichal. ACPA, while actively trying to convince Commerce to dismiss the Auxin case, is working behind the scenes to reform U.S. trade policies to prevent this situation from happening again.

On top of the impact on solar developers, EPC, and workers, Zichal said she has met with utility executives who are reconsidering their solar plans.

Zichal said these utilities have plans to retire coal-fired or natural gas power plants but say "because of this decision we're not in a position where we're able to do that."

While she adamantly opposes the Commerce Department's investigation of the AD/CVD case, Zichal and ACPA are supportive of incentives for domestic solar manufacturing. There isn't an "easy off-ramp" for this issue, though, and scaling domestic manufacturing will take time. She also acknowledges that the solar industry did not prioritize domestic manufacturing in the way that it is beginning to now.

The highest levels of the U.S. government are working on the Auxin Solar petition, and the impact on the solar industry, Zichal said. She remains confident that the Biden administration will "make the right decision" when they're confronted with unfinished projects and lost jobs.

Factor This! Episode 2 transcript

Kevin Smith, Lightsource bp Americas CEO  00:01

I'm in our headquarters this week actually trying to address this issue, you know, do we put more investment into the US? Or is there better investments of other parts of the world because we don't have to deal with the political risk?

Host: John Engel  00:12

When you think about political risk developing countries and emerging markets probably come to mind; where instability threatens social and market institutions. That's where the US has always had a leg up. The business community craves the security, consistency, and incentives that mitigate risk and propel profits. The same goes for solar energy developers, these projects take years and millions of dollars to come together. So certainty is pretty important. But political risk is now directly tied to the US, at least in the eyes of a global solar developer, in part due to the Auxin Solar tariff petition. So much so that Lightsource bp Americas is questioning whether it even makes sense to continue doing business here. My conversation with Lightsource bp Americas CEO Kevin Smith is next on Factor This!

Plus...

Heather Zichal, American Clean Power Association CEO

I'm talking to (utility) CEOs today that are making decisions that 'Well, we were going to retire a coal-fired power plant or we were going to power down our natural gas and use solar, but because of this decision we're not in a position where we're able to do that."

Host: John Engel

American Clean Power Association CEO Heather Zichal on the solar industry's $5 million campaign against the Auxin Solar petition, and how the former Obama White House staffer is working to rewrite American trade policy to prevent a standoff like this from ever happening again.

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Host: John Engel

I'm John Engel from Renewable Energy World you're listening to Factor This!, a podcast designed specifically for solar industry leaders. If you haven't subscribed yet, please do. It's a huge help as we're getting this podcast off the ground. This podcast is the second in a four-part series on the Auxin Solar tariff petition.

If you haven't listened to Episode 1, and our exclusive interview with Auxin Solar CEO, Moon Rashid, I would definitely start there. It's the company's first extensive interviews since filing the petition and answers some major questions about their motives.

But this episode brings you a totally different perspective. That's the goal of the Factor This! podcast. And that brings us to Kevin Smith, CEO of Lightsource bp Americas.

Lightsource bp is a 50/50 venture between solar developer Lightsource and oil major bp, which is now one of the largest solar developers in the world. So, the company has a lot of choices when it comes to investing in solar projects. And Smith says the case for the US is getting a whole lot more complicated with the possibility of additional tariffs on imported modules.

For an inside look at how a global developer weighing the impact of solar is the most divisive issue. Here's Kevin Smith.

Kevin Smith, Lightsource bp Americas CEO 

My name is Kevin Smith, I'm CEO of the Americas for Lightsource BP. And I head up our utility-scale solar development activities in the US and Latin America.

Host: John Engel 

Kevin, your experience goes back 30 years before joining Lightsource bp. Tell us what you were doing.

Kevin Smith, Lightsource bp Americas CEO 

I took over the US and Latin American activities just around three and a half years ago here for Lightsource bp. So I've been in the energy industry for more than 30 years. We won't say how much more than 30 years but I started out in engineering at Purdue University.

And, you know, went right into an architectural engineering firm in Chicago, Sargent Lundy, and was working on power plants kind of right out of the box, right out of college. So nuclear, conventional energy, was well before renewable energy. So kind of the first... usually I say the first half of my career was conventional energy, oil-fired natural gas, nuclear.

And then in 2004, I moved into renewables headed up development for a group called Invenergy out of Chicago, on the wind side, was when they were just starting to look at the wind industry. And so that's pretty much when I transitioned from, I'll say, conventional energy to renewables moved into solar in 2008. And have been in solar since then.

So, I pretty much built just about any kind of power project you can think of, you know, wind, solar, natural gas, oil, you know, bark, nuclear, haven't done any hydro is and geothermal is about the only thing I haven't done.

Host: John Engel 

So, then share with us what it's like as a leader in solar, especially utility-scale solar, going through the various rounds of tariffs and trade issues from the Obama administration to the Trump administration. Now the Biden administration, what's that like on your end?

Kevin Smith, Lightsource bp Americas CEO 

I mean, I remember when (President) Carter put solar modules on the White House and Reagan took them off. So which is, which I'll say is a bit of a, you know, the story of our policy on renewable energy and solar for that matter.

So, the vast majority of the technology was invented here in the US and the PV solar industry was kind of coming of age in the early 2000s, through the mid-2000s. Prices were very high, prices started to eek down a bit but still were very high compared to conventional energy. The US was doing manufacturing, but it wasn't a massive industry.  Really what changed the whole industry was the Chinese decided, hey, we think this is the wave of the future. And the Chinese started to support this was back in, you know, probably 2000-7, 8, 9, 10 started to massively support industries in China that could manufacture PV modules.

That, number one, brought pricing way down. So solar started to become more competitive in that kind of post-2012, 2014 timeframe. And they started to capture kind of most of the solar PV manufacturing activities.

What was disappointing is that the US government kind of watched it happen, you know, even though in 2012, when the first I'll say 301 tariffs, the high tariffs that still exist today on Chinese modules came into place. President Obama was in charge, we just couldn't muster enough support to really keep our manufacturing at the forefront of that. We could have, we had the example that what China was doing and, you know, we were too much looking at free markets and thought that markets would rule and, you know, if the Chinese want to manufacture a cheaper PV module, then great, well buy it.

And that's really put us invest forward kind of a decade or more of the same... Asian manufacturers, not just China, but Southeast Asia, have identified this market as a huge growth market. And it's a trillion-dollar industry, the solar markets, you know, headed for a trillion-dollar industry. And Chinese in the Southeast Asian economies recognize that this was a huge opportunity. And they're doing it and other things as well.

I mean, wind, battery production, et cetera, et cetera. And we're still kind of watching in amazement that as manufacturing kind of goes to these other markets. And we could put in place various types of structures that could keep manufacturing and incentivize manufacturing, tariffs aren't the way to do it.

You know, tariffs historically really haven't worked very well, not just in solar, but in all kinds of industries. We need to incentivize investment in US manufacturing activities.

Host: John Engel 

So, you were talking about this period, where the US basically fell asleep and knew what China was doing when it came to solar manufacturing and, and just accepted it at least for a number of years, you know, beginning around 2009 2010. Does that kind of line up with the same time the clean energy advocates identify around 2012 being the point where the Obama administration and a Democratic Congress really missed on passing meaningful clean energy legislation? We hear it brought up a lot during these conversations about Build Back Batter in the current administration and Congress.

Kevin Smith, Lightsource bp Americas CEO 

I would put it well before Obama. I mean, the, you know, in the Bush administration, they put in place the Department of Energy Loan Guarantee Program, but they never utilized it. Okay, so that program was put in place under Bush, but, you know, none of it hardly any of it was used. At least Obama of saw that program and said, let's utilize that program to at least incentivize the construction of utility-scale facilities in the US.

And that did a lot to at least accelerate the solar industry in the US, not necessarily manufacturing, but certainly accelerated the solar industry. So, I think the Obama administration did a good job at kickstarting the renewable energy industry. Where they fell short was the focus on the manufacturing sector, you know, that really wasn't a priority for them or they couldn't garner enough support, you know, bipartisan support to get manufacturing support done in Congress. The solar industry took off under Obama, which was great, but the manufacturing continued to languish.

Host: John Engel 

So, when then did the US solar industry just become addicted to those lower prices that were coming out of Asia?

Kevin Smith, Lightsource bp Americas CEO 

Really, it became a, you know, the demand of the end-users. So the buyers, you know, and a lot of utilities go on least-cost plans. So you know, they have to buy, the least cost electricity generation, regardless of the source, for years and years. Now, there's been a lot of incentives put in place to encourage utilities to buy renewable energy.

Now, it just so happens that renewable energy is the cheapest form and a whole lot of places in most places. But it really was the kind of US economy to really set up on buying the cheapest source of goods, and whether that's us made or Chinese made, I mean, look at all kinds of industries, you know, clothing and semiconductors and you know, shoes and all kinds of things that, you know, were really driven by bringing in low-cost suppliers into the market. I think the US only, in the semiconductor markets, I think the US only manufactures like 10, or 12%. And 75% of its coming from China and Southeast Asia, as well.

So, it's not that dissimilar from the solar panel markets. It's just that this year, all of a sudden, the government decides overnight, that they want to change the market.

Host: John Engel 

So, what's the immediate impact then to utility-scale developers like yourself and Lightsource bp?

Kevin Smith, Lightsource bp Americas CEO 

The issue is really on projects that are starting construction or have started construction that are waiting, that have contracted modules that are not yet in the country. The petition, and the evaluation that's being done by Commerce now, they would likely make it retroactive to April 1, 2022. So, it's really for projects that have that are in construction right now and projects that we expect to see in the future.

You know, I should note that Lightsource bp, I'll say with a bit of foresight, not necessarily on this petition, but on just the general market, we did the largest contract with the US supplier for PV modules with First Solar. So, last fall, we completed an agreement with First Solar to supply, not only some of our '21 and '22 projects worked, which were already under contract but are '23 '24, and '25. The total of all those deals was well in excess of 10 million solar panels.

Now, that doesn't supply all of our needs. And like I said, it was the biggest contract that First Solar to had ever done. But we're still short on what we want to do with our expansion plans in the US. So we're in a bit better shape, I'll say, then probably the vast majority of the market because of that contract that we have with First Solar, but we're still in a position where we're gonna, we're lowering our targets because of the lack of module supply.

I have, you know, colleagues in the industry who, you know, for whatever reasons didn't have the opportunity to buy First Solar modules, and First Solar is pretty much sold out into 2024, or so they told us. So, you have other potentially other developers that, you know, potentially 100% of their fleet is important modules now 100% of that fleet is now delayed for their future projects. So, we're going to see a very big downturn in the US market, potentially, you know, more than a 50% decrease in projects being built and 10s of 1000s of jobs lost on the construction and operation side.

Host: John Engel 

So, you mentioned that the decision to go with First Solar for some of the sourcing of Lightsource bp projects came even before this Auxin Solar tariff petition. Take me behind the scenes in how you as a company came to the decision that you were going to source from an American supplier. And when did that all come together?

Kevin Smith, Lightsource bp Americas CEO 

The first projects that we built with First Solar were actually back in 2020. And, you know, we had a number of projects that we were building, we wanted to have a bit of a more diversified supply. And, you know, we had had some difficulties with some of our Southeast Asian suppliers.

So, we thought we would utilize First Solar on a couple of projects that we built in Texas back in 2020. And we had, you know, good luck with them or, you know, good delivery, by First Solar on those projects. So we increased our supply and our contract with them for some projects we were building in 2021. And then really, you know, approached them with a much larger purchase option; you know, that 5.4-gigawatt contract that was signed with them at the end of 2021. And it had to do with diversification of supply. It also had to do with the, I'll say the growing expectation that you know, we were seeing, you know, really kind of, you know, kind of bipartisan views on imports from China and Southeast Asia, you know...

Host: John Engel 

From buyers or from policymakers?

Kevin Smith, Lightsource bp Americas CEO 

Policymakers really. And, like I said, we had really good luck with our contracts with First Solar, it was much more enjoyable doing business with a company that was standing by its contracts, you know, more fervently than maybe some of our other suppliers. So, you know, we had a good experience with them. We decided to go much bigger with First Solar.

In retrospect, obviously, it was a very good decision by Lightsource bp. It was not an easy decision to make to put that much into a single supplier, but we felt comfortable in First Solar's capabilities to deliver. It's worked out well for us. But like I said, it still doesn't meet our needs going forward. And, you know, with this petition, we've got projects that are now delayed

Host: John Engel 

A 5.4-gigawatt order is a lot and a good chunk of the manufacturing capacity that we have for solar in the US what kind of certainty does that give to a domestic manufacturer to ramp up? And how can utility-scale developers provide that certainty?

Kevin Smith, Lightsource bp Americas CEO 

An order like that helps them, you know, to keep their manufacturing activities in the US. Obviously, they import manufacturing from overseas as well. So a good portion of their panel supply is manufactured overseas. They have manufacturing, I think their largest facilities in Ohio, they're looking at adding another facility in Ohio. But they've got to get to, I'll say, number one critical mass on forward sales.

And, secondly, they really need they're really looking for policy support as well. I mean, I don't want to put words in their mouth, but from my view, tariffs help them create a US market, okay, but it doesn't help a US supplier compete internationally.

By the US government focusing on tariffs, we're kind of missing the bigger picture, which is we should be creating industries in the US that can compete around the world. Like I said, solar markets are going to be shortly are going to be trillion-dollar markets, and we need manufacturers in the US that can compete worldwide. You don't do that by protecting your own market, you do that by supporting manufacturing, with tax credits and incentives to build manufacturing facilities in the US that can compete in other parts of the world, not just sell to the domestic market.

So I think that's the part that's missing is really long-term incentives and tax credits for manufacturing to build manufacturing facilities in the US. And the difficulty with tariffs is they can be added, they can be taken off, they can be increased, they can be decreased; it doesn't really provide much long-term certainty for people to build a manufacturing facility that may take a decade to pay off.

Host: John Engel 

How, in your opinion, then will we fill that gap between what the US can produce in terms of solar modules? And how long will it take?

Kevin Smith, Lightsource bp Americas CEO 

You know, to really ramp up manufacturing in the US to fill that gap is, is two to three years minimum. There are other suppliers that potentially can supply into the US market... you know, we're looking at suppliers in Turkey and India and Mexico and others, but those in Turkey and India, for example, their main focus is their domestic markets, because they're trying to ramp up their own solar programs, and they have limited manufacturing in their own countries. So we're trying to convince them to sell some of their valuable production into the US market.

So, I expect if they view the US market as a long-term market, they'll start to ramp up some of their production. But there again, you know, we can get we can see a trickle coming from some of these other countries. But it's going to be kind of a two three year ramp-up before we'd see any kind of significant supply either from non-Asian countries or from the US market. If they go forward and impose additional onerous tariffs on supply, then we're going to see a, you know, a lot of destruction in the solar industry over the next few years.

Host: John Engel 

What's been the hardest part of this tariff fight for you?

Kevin Smith, Lightsource bp Americas CEO 

I mean, one of the reasons why I joined Lightsource bp, you know, was, as you know, me--as strange as it sounds, you know, BP is a large oil and gas company, now moving to be an integrated energy company. That funding that Lightsource bp has was a big incentive for me to join.

From my perspective, I wanted to make a bigger impact, build more projects, build larger projects, and make a dent in the climate change issues, through my work and the work of our team at Lightsource bp. So, we're looking to make a big impact, okay? Now, all of a sudden, you know, the US government comes along and say, well, maybe we don't want that big of an impact.

So, you know, I think what keeps our staff (up) at night is we've got projects that we can deploy, and can help create jobs, create community support, you know, provide low cost, renewable energy into markets, address climate change issues, and all of a sudden, policy issues are going to stunt that growth for really no good reason. If we want to maintain the solar markets, and we need to move away from tariffs and look at incentivizing manufacturing. And we're huge supporters of incentivizing manufacturing because we think that's the way to go.

Obviously, we're a big supporter of US manufacturing because we had First Solar's largest order ever, but tariffs aren't going to solve that problem, and what it's going to do is it's going to do... we're not going to build as much, you know. Our targets are going to be lowered, which is really depressing, that we've got projects we can deploy, but we're not going to be able to deploy them because of the lack of knowledge of supply.

Host: John Engel 

How soon after all this started, was it obvious or apparent that projects were going to be delayed, or some were going to be taken off the table altogether?

Kevin Smith, Lightsource bp Americas CEO 

You know, when the first petition was put in last fall by those five unnamed companies, you know, we made the arguments, the industry, you know, through the solar energy industry, and the American Clean Power (Association), we made the arguments to Commerce that this would have an immediate effect, especially if you're going to evaluate and make tariffs retroactive, okay? Suppliers aren't going to take the risk of 50-250% tariffs, and owners/developers can't take that risk, either. You can't build a 100 megawatt, $100 million project with $50 million worth of panel supply, and then six months or a year later, they show up and say, oh, you owe us another $100 million for tariffs. Projects can't afford that -- contraction, structure, lenders, investors, etc, can't take that kind of risk.

Host: John Engel 

Everything stops.

Kevin Smith, Lightsource bp Americas CEO 

Yeah, everything stops. So, as soon as they announced they were going to do this evaluation and potentially make those and announced that they would be retroactive to you know, at least as far back as April 1, 2022. On April 2, 2022, we got letters from our suppliers saying we can't ship unless you take 100% of the risk, and we said we can't take 100% of the risk, either. We've got contracts with our with our offtakers, our power buyers, that can't accommodate those kinds of price increases. So, essentially all the imports into the US pretty much stopped overnight.

Host: John Engel 

Well, and it's such a shock to the market, too, right? When we saw solar going to communities in areas of the country that didn't seem possible before on this model that has worked for so long and made financial sense, even more so in recent years, is no longer making sense or could not make sense in the near future. It's out of the money.

Kevin Smith, Lightsource bp Americas CEO 

Yeah, exactly. I mean, we're building projects this year in Louisiana, Alabama, Arkansas, Indiana, you know, if you'd have said five years ago that we'd be building projects in Arkansas, I just said no way, kind of okay.

But you know, we can be very cost-competitive. So, you know, these utilities, they don't have necessarily state requirements to build renewable energy or low carbon sources, but they look at the at the cost and how it fits into their generation mix, and all of a sudden, solar becomes a really viable option. There's a lot of opportunities that we're looking at in markets that you wouldn't have expected you'd see solar in, and now all of a sudden, we've got to deal with,

I'll say, from a US standpoint, kind of self-inflicted mistake that'll stunt the markets, at least until they make a decision on what they're going to do.

Host: John Engel 

Lastly, Kevin, how is Lightsource bp approaching this issue strategically and charting its course?

Kevin Smith, Lightsource bp Americas CEO 

I'm based in San Francisco, but I'm in our headquarters this week, actually trying to address this issue. What do you do with investment money? Do we put more investment into the US? Or is there better investments in other parts of the world? Because we don't have to deal with the political risk.

Host: John Engel 

So Lightsource bp right now is considering whether the US market still makes sense?

Kevin Smith, Lightsource bp Americas CEO

Yeah, I mean, what's interesting, I mean, I spent six years with my family in London, actually, back in the late 90s, and early 2000s, building power projects around the world. And when I, you know, all kinds of places in southern Africa and in Asia and in Latin America. And when I came back and was speaking at a few conferences, they asked about political risk in those markets. And I said, you know, the areas where I've had the most political risk have actually been the US, you know, not, you know, some of these developing markets in Africa or Asia. And once again, the US is delivered with political risk.

And so, that is, that's going to decrease investment into the US solar markets because of that political risk. Lightsource bp is active in 15, 16, 17 different countries as we continue to ramp up, and we're making investment decisions on where's the best place to direct our investments and, you know, things like, you know, political risk are a big deal.

And it will, you know, we'll end up investing, you know, less money in the US in 2022. We'll see what happens in 2023 than we originally had planned because of the kind of the US government action.

Host: John Engel 

Kevin Smith, thanks for joining Factor This!

Kevin Smith, Lightsource bp Americas CEO 

Okay, thank you very much. Appreciate it. Thanks, John.

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Host: John Engel 

Thanks again to Kevin Smith, Lightsource bp Americas' CEO.

That was a unique look inside how a global solar developer is making some serious near-term decisions about its path forward in the US. And I didn't know that we were going to catch him in London for this interview as he was speaking to other company executives about that strategy. We'll see how it plays out. 

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Host: John Engel

Heather Zichal is in a tricky spot.

She's the CEO of the American Clean Power Association, a leading trade group for solar, wind, energy storage, and transmission companies. And she's fiercely condemned the Biden administration for the Commerce Department's investigation of the Auxin Solar petition.

But she's also a former Obama administration energy and climate official. She knows President Joe Biden well. Maybe no one in clean energy is closer to this White House.

Zichal joined Factor This! to give us an inside look at the policy fight taking place behind the scenes at the highest reaches of our government.

Host: John Engel 

Well, Heather, I really appreciate you taking the time to join me for this discussion because I know you're incredibly busy with this very issue. So if you can fill us in at all on what you're actively working on you and your team as we navigate this Auxin Solar petition.

Heather Zichal, ACPA CEO 

Well, obviously, it's great to join you, John. And as the CEO of the American Clean Power Association, you're absolutely right, we are spending a lot of time resources and effort on this decision that the Department of Commerce has made on Auxin Solar's petition.

We are in an enviable place of representing wind, solar storage, and transmission. So obviously, this is one of many fights that our trade association is working fearlessly on. But it is, it can not be overstated.

This is an existential threat to the future of solar in the United States of America. And the frustrating part, from my perspective is when I look back at the history of these requests for investigations, is kind of comes time and time again, it's a handful of bad actors who figured out how to manipulate US trade laws to work to their own financial benefit.

And the kind of head-scratching moment for me is the fact that the decision-makers at Commerce have already kind of asked and answered this question to a large degree for a decade. We have known where a solar cell is manufactured and that's at the point at which the silicon is transformed into a solar cell that can capture the sun's energy and turn that into electricity. So, these companies are now engaged in that type of manufacturing in Southeast Asia and are circumventing the existing order of Chinese solar cells.

So, from my perspective, it's very frustrating to watch this administration who talks a very good game on the need to deploy clean energy solutions on the benefits of creating new jobs on the climate benefits of zero-carbon energy sources. At the same time, just the actual initiation of this review has led to an immediate chilling impact on this the US solar industry.

Host: John Engel 

Yeah, and I've talked to many of those developers who are feeling the brunt of that right now. And I empathize with them. I do want to touch on the mechanism and the procedural aspect of this Commerce investigation.

I get that it's such a deeply emotional topic because of the impact on the industry and on climate goals. And all of these things that are important to us. Auxin's filing of the petition, though, in meeting the requirements triggers a review by Commerce, does it not? That is federally required, given how our trade laws are set up. It's not a subjective process. Right?

Heather Zichal, ACPA CEO 

Well, I mean, listen, I think that there is... The underlying statutes are from the 1930s, right, so we're not dealing with a new kind of authority at the Department of Commerce.

I think what is unique in this case is, as I said earlier, is this question sort of this question has been asked and answered by the Department previously. And then I think, to the second point, you can't look at this and say, oh, well, this is just an investigation. In fact, this is leading to thousands and thousands of jobs and delayed projects left and right.

You talked about the implication for corporate clients which is a very real, very important piece of the puzzle. But there are other kinds of pieces of this puzzle that aren't as obvious. For example, I'm talking to (utility) CEOs today that are making decisions that: 'Well, we were going to retire a coal-fired power plant, or we were going to power down our natural gas and use solar as the replacement electrons, but because of this decision, we're now not in a position where we're able to do that.'

So we're actually driving more decisions that are holding on to fossil assets, which is directionally not where we want to be going. And then there's the unintended consequences. Right? So, we talked a lot about the implications for solar, the fact that 24 gigawatts of projects are at risk of cancellation or delay across 2022, and 2023. But what we also have to remember is half of those projects are directly linked to storage, which is a technology that we really, really need for clean energy, for a resilient grid for, you know, jobs, you name, the benefit, it's there.

So, it's not just knocking out jobs in the solar sector, we're also actually seeing jobs being knocked out in storage as well. So, I think we need to be really clear-eyed about the diversity of challenges that we are that the administration has created by saying, look, we need to go forward with this investigation.

Host: John Engel 

Should the anger though be directed toward our policymakers that didn't take action sooner? I know that you're supportive of incentives for domestic manufacturing kind of spoke on that several times. But we knew that this trend was occurring in the market of solar module production for the better part of the last decade. So, are we frustrated that an Auxin Solar can use the system to result in an investigation like this? Or is the bigger picture issue here that we didn't address the supply chain inadequacies that we've had and known about for some time now?

Heather Zichal, ACPA CEO 

Well, I mean, frustrated is one word. I might be a little more aggressive because we're talking about 38,000, American jobs lost, over $30 billion of lost economic investment. And I don't even want to talk about the climate implications, right? So frustrated is me on a good day.

I would say it's just like a gut punch coming from this administration, especially because, you know, I've worked with the president. I know the president. I know that he cares about these issues. And you know, the fact that this decision has been made, and there's not an off-ramp or an easy fix and unfortunately, this decision is just going to lead to, you know, a lot of pain for a lot of American families at a point in time when we should be looking at every single energy source that we can, especially when you have sources as affordable and reliable as solar.

On your question about the broader process at the Commerce Department, as an industry, we are part of a global supply chain. We got here for a reason, right? China decided a decade ago that they wanted to ... the future was solar, they wanted to own the manufacturing capacity. So they had a very, very well defined plan that said, look, we're going to own this supply chain, we're going to invest in it, we're going to subsidize it, and then ultimately dumped a lot of over subsidized panels on the global market, in order to own this part of the market.

In the United States, we not only failed to have a manufacturing policy, we failed to have an economy-wide climate policy. You can't just point to the fact like, oh, shucks, it's too bad these guys in the solar industry didn't realize and think through their global supply chain. This supply chain exists for a reason because people go where there's certainty and predictability.

If you look at the US market over the last decade, I mean, like, rewind to last administration, not a lot, you know, not a lot of clarity there you go back further. I mean, we're we were still as an industry trying to deal with solar integration on the grid and deal with the technology and deal with the cost curve. So, now we're this mature industry. And we look back and a lot of people are looking at us saying, well, why didn't... why weren't you more mindful of your global supply chain?

I mean, I could ask the same thing of about, I don't know, 80% of the products that I use on a daily basis.

Host: John Engel 

And that was my question, not an indictment on the people trying to source the panels because I speak to those developers who say I would love to buy more domestic modules. They don't exist. And so my point more is that it's strange to me that there's not more anger toward the people who write our laws and can establish these incentives and marketplaces. And could have years ago. You worked on this stuff in the Obama White House, you know, you know how this works. That seems to be the real crux here that isn't making it into the messaging. Am I wrong?

Heather Zichal, ACPA CEO 

No. No. I think you're 100% spot-on, John. I think we today are now having that enlightened discussion about what does this just transition look like? How do we make sure that we're bringing, you know, those left behind in this energy transition, we're creating new opportunities for them? That's a really important part of the equation that, just candidly, hadn't been part of previous discussions. I think it's spot on.

And that's also why as an industry, we have been so forward-leaning when it comes to supporting reconciliation packages and climate packages that include language like the (Sen. John Ossoff) bill that provides manufacturing credits so that we can have a level playing field with these manufacturing credits to build out more and more of the supply chain for clean energy domestically. And obviously, that's something near and dear to President Biden's heart as well.

Host: John Engel 

Yeah. So this must be kind of a tricky position for you because you're obviously an advocate now for the industry. But you also do have ties to this administration, this White House. You know the president. You know the people working on climate policy, if anyone is close to this White House, it's you. So what conversations are happening? Are you at all frustrated, given that you have well-established relationships with this administration? To see it playing out the way it is?

Heather Zichal, ACPA CEO 

Let me start by saying the decision that was made by this administration was incredibly disappointing. It was disappointing for climate advocates. It was disappointing for, you know, clean energy CEOs around the country, and it's disappointing for the men and women that have been laid off and or furloughed because of, you know, as a result of these decisions.

So that's thing one. In terms of--I mean, I'm not in a position to divulge conversations that we're having with the administration--I will say a couple of things.

One, I am very confident that this is on the radar of the highest levels of government: exactly where it needs to be and should be. And two, as an industry, we have united together in a way that we have never, as an industry, done before. We've raised over $5 million. We are focused on a well-funded campaign to affect the outcome, you know, and that includes ads, polling, all the typical things, you would expect an industry whose back is against the wall to do.

But this is the first time that we've, you know.... certainly, I've been working to deploy solar for two decades. And I never thought that I'd be having to raise money to run a campaign against the Biden administration.

Host: John Engel 

Strange world.

Heather Zichal, ACPA CEO 

Strange world we're in. But it's the right thing to do. Where I am confident that we are going to make the case to this administration because they're going to see projects across the country, where you've got steel in the ground with no panels where workers have been laid off. And at the end of the day, that is what is going to drive this administration to make the right decision. And we are going to make sure that this administration feels the heat because it's the right thing to do.

Host: John Engel 

So, how do we then--even beyond the political campaign--how do we get all of these parties to the table to say, this is a cataclysmic event for our industry--which I think all parties will agree--it is where regardless of which corner of the issue you're coming from. So there has to be some kind of a meeting in the middle or assembly of, of these different positions to say, we all want to fight climate change, and how do we do it while supporting domestic manufacturing while also supporting rapid deployment of technology? How do we get all these people together to say that the commerce investigation and tariffs aren't the way because we know that tariffs do not work to stabilize a domestic market?

Heather Zichal, ACPA CEO 

Again--violent agreement--tariffs are not the solution to this challenge. It's the manufacturing credits that we talked about a minute ago.

I mean, like sometimes the hardest thing in Washington is figuring out how to get people in the room. And it always takes 10 times longer than you think it will take and this is particularly complex, because you know, you've got a lot of people on (Capitol Hill) that have very strong opinions about this.

You have a number of different agencies within the White House, right. So there's obviously the Commerce Department; but because President Biden did create this all-of-government approach around climate, you have people like John Kerry and Gina McCarthy who care deeply about preserving the president's legacy on climate. And it's one of the four top big priority goals for the president.

So, and they're the people in charge of delivering, putting points on the board. And then you have the governors, right? So, I've even heard from and spoken with the California ISO, which is worried about potential rolling blackouts as a result of this. So, there are a lot of parties and I think it's going to take some time to kind of figure out collectively, what does success look like? Especially the, you know, the more people the more complicated it gets.

At the same time, I think the administration is very motivated to find a workable solution. I think that you heard even today, (Commerce Secretary Gina Raimondo) was testifying on the budget in the Senate today (April 27), and (Senator Jacky Rosen, D-NV) asked some really terrific and very pointed questions of Secretary Raimondo about the implications of this, particularly in a state like Arizona, where there are so many jobs directly linked to solar. And what we heard from Secretary Raimondo was, 'listen, I understand that certainty and predictability are key, which is why we are trying to move as quickly as possible to make a decision.'

So, I think we got to keep the pressure on the Commerce Department to make sure that they're to the extent their processes are ongoing, that it's, you know, moving in a timely manner that it doesn't get delayed, doesn't get sidetracked. So, there's the kind of like, okay, so the conveyor belt, who started this process, let's push on it and make sure it goes as quickly as humanly possible. And at the same time, let's think outside the box and try to, you know, find advocates across the administration that might be willing to be thought partners in what are some ways that we can think differently about tariffs. Because candidly, my fear is, if Auxin goes away, somebody else can file another petition two weeks down the road, right? So, we also need to think about a long-term decision here. So we don't have copycat cases. And as an industry, we cannot continue to be stuck in this do loop because the rest of the world wants access to solar panels.

It's really like if, you know, if you're an OEM, you're like, 'okay, if you don't want them, we're happy to go sell them elsewhere.' And there's plenty of places especially, you know, when you're seeing the EU and Germany make the decisions about doubling down on solar as a result of the situation in Ukraine, I want to make sure we're protecting our ability to have market share in in the US. And that doesn't happen without certainty and predictability. So, we're going to stay focused on thinking outside the box about creative solutions. And in the interim, really pushing on the Commerce Department to move in an expedited manner and quickly reach a decision upholding Commerce's long-standing precedent, and just basically stop this fundamentally flawed case from continuing any further.

Host: John Engel 

Heather Zichal. Thank you.

Heather Zichal, ACPA CEO 

You're welcome. Great to speak with you, John.

Host: John Engel

Next time on Factor This…

Rhone Resch was the head of the Solar Energy Industries Association from 2004 to 2016. He shares his reaction to the trade disput and his biggest regret from his time leading the solar trade group.

Plus, what will it take to get U.S. solar module manufacturing capacity from 8 GW per year to the 25 GW development target the Biden administration wants to achieve? We'll hear from Martin Pochtaruk, the CEO of North American solar module manufacturer Heliene.

I'm John Engel. You can find me on LinkedIn and Twitter. Factor This! is a production of Clarion Events and Renewable Energy World. Please subscribe anywhere you get your podcasts and leave a review. We're excited to see what you think.

Show notes, episode transcripts, source materials, and video interviews from Factor This! are available at RenewableEnergyWorld.com. We'll see you next time.

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