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welcome to csis online the way we bring you events is changing but we'll still present live analysis and award-winning digital media from our drakopolis ideas lab all on your time live or on demand this is csis online hello everyone i'm nico sappo senior fellow and deputy director with the energy security and climate change program at the center for strategic international studies we're here today to talk about supply chains and it really doesn't get more timely than this yesterday the white house issued an executive order uh mandating a review of america's supply chains and one of the sectors identified in that executive order is something we'll be talking about today which is batteries used in electric vehicles so this is very timely work and we're so excited to be able to have this conversation um i am joined with two colleagues one uh sarah ladislav senior vice president senior fellow and director of the energy security and climate change program and ethan zindler who's the head of americas at bloomberg nef and also a non-resident senior associate with our program this is the first of two reports we're going to be doing on this issue of clean energy supply chains industrial policy trade frictions the question of china a lot of things are coming together and we also want to thank the climate imperative foundation for their support in this uh in this ongoing work um before i frame the discussion and get uh get going i do want to remind you uh that you can submit your questions if you go on the website where you register for the event there is a button there that allows you to submit a question fill out the form and my colleagues are going to pass those questions on to me so we're here primarily because clean energy has taken off and in particular three technologies wind solar photovoltaics and batteries using electric vehicles have gone from niche technologies you know 10 15 years ago to the mainstream they're increasingly cost competitive we're seeing more and more place around the world where solar and wind are the capacity of choice and where electric vehicles are getting very close to cost parity with internal combustion engines we are also have experienced over this period of time an enormous amount of trade frictions because these technologies have become competitive in large part because of government support and industrial action subsidies feeding tariffs local continent rules and so the story of clean energy supply change and the revolution is intimately connected to trade friction and trade barriers and trade disputes and there's also the reality of china that over time china has built a commanding position in two of those three industries solar and batteries and has a pretty substantial role also to play in the wind so there's a lot of things that are coming together our reliance on these new technologies industrial action and the trade frictions that have emerged from that industrial action and also of course the reliance on china for these technologies at a time when the us relation with china is very contested european relations with china has friction as well and so a lot of things are coming together and so what we wanted to do in this sort of first report is lay out the scene for us and talk about what is happening what has happened over the last sort of 15 years and then our second report will try to get a little bit more into some of the questions about what are you what do you do about that so let me kick off our conversation i'm going to turn to you sarah and i wanted you know i wanted you to give us the intellectual and strategic context for this project why are we doing this work what do you see out there in the public discourse and how washington and other governments are thinking about this topic that you feel is underappreciated and that we think with our work we will really fill a gap in that discourse so sauron to you thanks very much nicos and you know before i get started i just want to say a big thanks to bloomberg nef who's been a really excellent partner in this endeavor it's a lot of material for anybody who goes to the website and sees all of the sort of appendices and data that's put out there it's it's been a lot to sort of comb through to get to the report that we were able to do so so just want to say a big thanks to them and then also nico's you know your leadership on this project has been uh really really amazing as of our other colleagues i always just want to give a shout out to the other people that worked on their project but logan goldie scott uh uh lachlan carey paul losgano jane nakano and jenny chase everybody pulled together uh this is the first of a couple of these that we're going to do so there's been a lot of work going into it so just want to say a big thanks to everybody that was involved so you know you're right nico's i think we know one of the things that that brought this project to the fore for us is probably very similar to the folks at the white house thinking about a supply chain review is that a lot of very large strategic paradigms have uh have shifted right and so when you think about the way in which folks in the climate community uh circa the 1990s envisioned a pathway to a low-carbon future it was fundamentally about doing so in the context of a free and open global trading regime whereby you know countries work together to find ways to drop the cost of clean energy technologies trade them globally and thereby sort of you know transform the global energy system and we've we've moved on from that world in many ways uh you know there is a a big focus now in lots of different realms of economic policy making to to really call into question um the benefits of a globally free trade sys a global free trade system it's not to say everybody sort of skewed that that view and has dismissed it but there is a recalculation going on between what we need out of a global trade regime and what we need in our domestic economies and we are increasingly seeing not just in developed developing countries which used to be the case which the report sort of talks about in depth and i think we'll talk about a little bit later not just in developing countries but in in developed countries as well this real premium on being able to justify more aggressive climate policy by by bringing home more of the domestic economic benefits and that has real you know real implications both for thinking about how we do climate policy on a very granular level but how we interact with folks in the clean energy supply chain other countries that that similarly want to advantage manufacturing or create good green jobs and the hope is that by bringing home more more of those economic benefits you're able to to buy more political will uh more economic justification for more aggressive climate policies and so i think that's one sort of major shift that's taken place the second major shift is on china we do spend a good portion of time you know focusing on the role of china in these clean energy supply chains the um the the experience that china has been through to get to that place and we'll talk a little bit more about that later but you know our perspective in in the in the climate world uh of of china's role was you know if they're able to drop the cost of clean energy technologies that's great that is actually quite helpful we're very accommodative of china's rise in that in that way you know only when it sort of dawned on us that there was also competitive you know negative competitive effects from very you know cheap solar pv is sort of the the main example that that that people tend to think of in this area that there were competitive disadvantages for our own sort of domestic manufacturing did we start to sort of change our perspective on this and i would say you know over the last four years in particular as the united states and other countries have started to recognize um not just competition with china in in new ways and sort of decide to confront china in those competitive realms in different ways but also um the the the need to to be to to look at you know supply chains on a strategic level and figure out where there is you know too much reliance on one country or there are vulnerabilities those types of things you know china falls into that basket of concern that we're in sort of a new new realm with them and then finally you know the last thing i would say is we we recognize that you know as you said nicos clean energy is in a new spot right it's not a niche market this is not something that kind of like happens over on the side you know that some new startup company called bloomberg to energy finance tracks on the side it's a major global enterprise and and we in this report are just looking at the the more established technologies like think about you know what this is going to mean when when entire countries have to change out their industrial base if we're going to meet these you know 2050 you know net zero targets this is going to be hands down the most competitive economic sector in in the world and so to think that we won't have sort of conflicts or trade conflicts or security conflicts that arise from that i think is you know is is is uh not learning lessons of history and so what we wanted to do with this work and the work that will come subsequently is to start to map out what that competition looks like to start to map out what some of the the security or trade vulnerabilities in clean energy supply chains will be and this first report does what you know i think any good analysis you know needs to start with which is like sort of learning where we've come from right learning how these supply chains have grown over time and then learning about you know what we we know about how countries have sort of engaged or grappled with their own industrial strategies in light of that thank you sir and i think you know that's a great cue for turning to ethan and because at the end of the day we are trying to sort of tell that story in that chronicle so let me turn to you ethan uh for a little bit of that and i think one of the things that i really appreciated doing this work with with you all was you know we we lump them together uh because it's convenient as you know clean energy supply chains uh but we talk about very different markets we've talked about very different technologies we'll talk about very different supply chains so i wanted to ask you not just to tell the story overall but also to highlight for us and for the audience some of the differences in thinking about wind versus battery versus solar and what are the real commonalities in how these supply chains have developed and where they are but also some of the important differences so we shouldn't just lump them all together because they're all falling under the banner of quote-unquote clean energy so ethan onto you yeah so first thanks and sarah um thanks for your comments i think this is a that's a great setup um and of course thanks to you guys for it's been a lot of fun to work on this project the timing's been um really interesting of course um i mean um we as you know we've been we've been at this for several months now and so really uh interesting that it it's that it's today and this week that we put this report out um and and frankly we're happy to send this particularly what we've had said about batteries happy to send it straight to the administration if they'd like to have a read because we really have tried to think pretty carefully about these issues also just thanks to my colleagues paul and logan for really all the hard work that they did in putting this this all together for us um as you noted yeah this is this is not um alternative energy this is not uh this is this is this is mainstream energy now and uh 500 billion dollars is how much we tracked last year going into what we call entered the energy transition and that a variety of different technologies this is very much the middle of things the vast majority of what got built in terms of new power generating capacity in the united states last year was wind and solar not other technologies so um so this is really where where we're now going and so from a strategic point of view you're absolutely right um sarah that this is incredibly important it goes to your to your question though into your to your point about the the uh about this um yes uh we put it all under a giant umbrella that we call clean energy or energy transition or whatever you want to call it but these are very different um sectors and um and they're at different stages of development and i'd say the first thing to note is just in terms of their maturity uh in terms of their in terms of the level of cost sorry the level of actual deployment and also cost competitiveness um so first and most importantly we are at the point where wind and solar projects are are typically very cost competitive if not the lowest cost provider of power in many parts of the world resource dependent alternatives dependent etc but but in in in a large number of countries that's the case in large parts of the united states that's also the case so they have really arrived in many ways electric vehicles i would put in the category as of almost there we are probably just a few years maybe three years out from some form of direct cost parity for electric vehicles on a so-called sticker basis that is you'll walk into a showroom you'll look at an ev you'll look at a internal combustion engine car and the ev will simply be cheaper you won't have to run some kind of total cost of ownership lifetime assessment i think about gasoline prices uh no you'll just buy it because it's cheaper and you'll buy it because it's better and you'll do so without subsidies because right now um it is subsidies it's really um teeing off a lot of the market we're not quite there yet but we we will get there um in the next couple years the other thing that really differentiates these um these these sectors is that the value chains are really very different in terms of um the level of complexity of of each of them um and also literally the the equipment that's produced the size and the shape and the weight and the ease with which some of it can be um can be transferred across transported across international borders and and some of it cannot i've got a couple slides i'm going to breeze through real quick and if you could pull up the first one i'm going to talk first just for a second about the photovoltaic sector which uh of the three that we we looked at again solar wind and propulsion batteries this is the sector that i would say is is most uh clearly dominated at the moment um by chinese players um and um there there's a lot going on in the solar industry and the rate of growth has just been spectacular in the last particularly last five years but one thing to note about pv modules a typical panel that you might see on a roof someplace is they have largely become commoditized that is there isn't an enormous amount of technological difference between one manufacturer's product and another's and what that has meant is a really ferocious battle among manufacturers to keep a lid on costs and that has also met a great deal of bankruptcies and thinning of the herd repeatedly within the solar manufacturing sector and to be clear there have been a lot of western companies that have lost out but there's been also been plenty of chinese companies that have have lost out as well but what i'm showing you guys here is just um a very simple chart that i would notice is in in one of the deep dive reports that you can download specific to solar and one of the basic points that we just want to make here is that um even when you get a a so-called us-made pv module one that gets assembled in a plant uh somewhere in the united states about sixty percent of the value of that module is still essentially accruing to china as you'll see in that left-hand uh chart if you buy one um that is officially imported from southeast asia even that also most of the value accrues to china because those plants in turn are buying upstream equipment from plants back in china so to a large degree the pv industry and the the lowest cost manufacturing the highest volume manufacturing most automated manufacturi g is happening in china and or southeast asia and even in southeast asia many of those plants are owned by chinese firms that is essentially where we're at today the wind sector and if you would the next slide please the wind sector is a good deal more heterogeneous and there are manufacturing hubs in many countries around the world um and manufacturing hubs that produce the different parts of the of the turbine whether it's the nacelle the gearbox or the the support tower or the blades which are really the main components that you'll find there are essentially large national incumbents in the united states it would be general electic general electric in europe it's vestas and siemens mesa and they have enjoyed you know for some time strong positions in the market the other thing to note about um so i would argue about wind is that the equipment i i would argue has not become commoditized that is these are highly specialized pieces of equipment and so as a result uh while there is certainly a fight on cost always um performance really really matters and particularly as they've been making these turbines larger and larger so anyway the the the the one chart i'm showing here again is from the deep dive that we that we we published and that you i welcome folks to download and it just demonstrates that for a typical u.s installed wind turbine you're seeing that about 60 percent of the value accrues to the us that is manufacturing dollars that come into and and go to u.s based companies i wouldn't say we're at a sort of steady state as as far as as wind is is concerned and there's going to be a lot more growth particularly in the offshore wind sector but this is now a pretty large and pretty well established industry with a bunch of different hubs in different places it's also costly to ramp up manufacturing and then finally and maybe most interestingly i do want to talk about batteries for electric vehicles and that's the last slide if you don't mind this to some degree i would argue is is the one where there is arguably the most to play for um you know electric vehicles were really only about two or three percent of us vehicle sales last year we sold about 325 000 of them in the united states first first about 15 million total internal combustion engine cars that were sold um but but the the growth is is definitely underway and um you can see it um in certainly in the announcements from large um uh auto automakers and the pledges that they've made to phase out their their ice vehicles and to to turn to evs we at bnf have been saying for a while now that we think that the majority of sales by 2040 will be electric vehicles it could frankly happen faster it really depends on a bunch of different factors but this market is is growing um very very quickly there are now 10 million evs on the road uh worldwide uh it's really it's really grown from almost virtually nothing 10 years ago to that number so there's a lot to play for the the the the difference i would say and there are a bunch of differences in terms of the the battery value chain without going to too much detail but just to say is that what we have seen i could say so far is that uh typically as a demand market for evs starts to emerge in the short run the the industry will import batteries and battery components into that market or the for the completed vehicles to serve the market but once a market starts to reach some kind of critical mass there is a grouping and a clustering that goes on around manufacturing for this equipment and we've definitely seen that in china which is by by the way not just the largest supplier of these batteries but by far the largest demand market for these batteries but now we're also starting to see it in europe as well as some of the requirements around efficiency of vehicles there have been rising and ev sales there have been rising and so we're seeing more battery plants being developed there just to touch on this slide but and then i'll stop but is just to say that we at bloomberg nef do an annual survey around battery pricing every year and we ask um suppliers and buyers what they're what they're what they're buying at um you can see two prices here and these two pinwheels that are that are actually the same and that's because we actually anonymize the pricing we don't give it out for specific um for specific manufacturers but i guess the point i'm just trying to make here is if we we took a look at two sort of typical um or not typical but two manufacturing plants uh in the u.s to try to figure out how much of the value accrues locally uh and again the story is complicated like it is in the other sectors you look at the tesla plant and about 45 acres to the us about 45 acres to japan and of course that's due to the partnership of a tesla panasonic partnership if you look at a at a plant that's owned by a korean manufacturer like an lg um again you still get about a third of the accrued value in the us if it's a us-based plant but you're getting the majority of it from overseas inevitably so there's no simple answer it's a world of integrated supply chains you you just because you build a plant in one country doesn't mean that all the value ends up in that country there's a lot of complications associated with this um but nonetheless i i do think this is a good starting point as you as you sarah you and nico's have mentioned in terms of thinking about kind of where we are at the moment where we go next is really the really interesting question which i know that we'll come on to in the next study but um but it is worth noting it's a very heterogeneous marketplace out there at the moment thank you ethan and i do want to put an additional plug i mean ethan extracted one graphic out of a ton of information on the website and i know i learned a lot uh sort of during these past few months as we work through that material so i urge you to go and get on a deeper dive on our website uh sarah let me turn back to you because i think there's sort of two things that came from ethan's slides and and intervention that i wanted to get your thoughts on one you just see that those big sort of china chunks right in most of the donuts uh you know a big chunk of the value accruing to china so i i definitely wanted to you alluded to china in your opening remarks but maybe dig a little bit deeper how much of this is really about those you know big red chunks that of value that china has dominated so that's one but the second one is you also saw that there's no sort of uniform color these are global supply chains um and our trading system hasn't uh hasn't digested hasn't processed these global supply chains uh very well we've had a lot of friction we've had a lot of trade disputes even from the start of when government started to support these industries uh we've had governments going to the wto launching complaints against each other so i wanted uh i wanted you to elaborate on those sort of two elements of this work and how you're thinking about china on the one hand and how much of this is about our anxiety towards china and secondly the world trading system and its ability to really facilitate or obstruct the development of clean energy technologies yeah thanks nikos and i think it's you know obviously um there's a there's a lot that comes out in our political or policy rhetoric about the dominance of china in clean energy supply chains and a whole bunch of different technologies right so clearly the us has sort of woken up to the fact that there's a lot of um quite frankly chinese industrial strategy that has put them in a position of being very competitive and so you know i think we mentioned in the report that as the evolution of these technologies and these supply chains was going on at one point we kind of just said well china will never really be able to compete at our level right and that's just not true right so so a big part of this china narrative is the self-consciousness of other countries going oh wait a minute you know we were trying to play in those spheres too some of the behavior maybe the technology transfer policies some of those things probably not not great things right definitely things that we were fighting through trade disputes and other measures to say hey listen this isn't fair but just on their ability to you know you know do very aggressive subsidies both on the supply side and on the demand side to be able to cultivate this market i actually think we're taking a look at china in a new light right now and saying what have they done that we probably should try to do and where and what have they done that we probably shouldn't try to do you know a previous report put out by our colleague scott kennedy uh on on you know their ev manufacturing uh ventures shows how deeply inefficient some of their policies was i mean if you tried to say you know hey the united states should spend as much as china has spent to grow their clean energy industry we're not likely to do that we don't have that sort of same political system so i think a lot of this is really about us taking a look at you know china's position and how it's prioritized clean energy technologies and used industrial strategy to try and go after it and quite frankly succeeded and and i think that that's probably um a healthy thing for us to be doing we can talk a little bit more about what that might mean for policymakers but i think that that's really you know at the core of a lot of this from a strategic standpoint it would be you you absolutely have to spend some time asking the question about what's the trajectory of the u.s china relationship right it is the the most important tension in global economic and political and security dynamics right and and we don't know if it's going to go well or not well right i mean the immediate response you know to the to the um supply chain executive order from yesterday from china was just to remind us you know that we're supposed to be dedicated to global supply chains and we don't want to to sort of mess that up you know there's so much strategic time and attention going to you know how did the u.s and china maintain their position as strategic competitors and not have a race to the bottom right how do we make sure that this doesn't go in the direction we're just everybody's paying more and everybody's security concerned and we have to think about decoupling versus like how do we accommodate space for each other given our different uh sort of you know domestic political needs and in our commitment to you know trying to make sure that you know internationally we still get you know the benefits of some of these public goods so i think a huge part of that is is is also sort of really just not knowing what direction the us china relationship is going to go we we have to you know recognize that under the last administration you know there were there were um uh uh you know real strategic reviews going on and and in the past in trade disputes we've had you know uh national security concerns over where china is invested into the u.s um electric power system that might come back again right that could be a very legitimate area of concern as we can probably talk about a little bit later we've got human rights concerns in the solar pv uh uh supply chain that have arisen that could be very disruptive and so i think i think as much as so what we realize that those types of threats and concerns exist we haven't done is take those clean energy supply chains as seriously as you know from an energy security standpoint as we've taken um you know things like oil supply security right i mean we've spent a huge amount of time making sure that there's diversity and thinking about the vulnerability in that system we've not spent nearly that amount of time in the clean energy space and and i know a lot of people like to think of you know clean energy as being fundamentally different right sort of devoid of these geopolitical concerns it is absolutely not going to be the case i don't believe that for a minute so i think that you know looking at these supply chains and saying do we have short term acute vulnerabilities do we have long-term strategic vulnerabilities what does that mean how should we prepare for those should we have diversity in these supply chains what is the uh the the appropriate u.s role in that what's the appropriate role for europe like we we just haven't really treated clean energy in that space and so you know the dominance of china in that supply chain yes it's about china yes it's about all of those geopolitical concerns yes it's about the the tariff disputes in the past but fundamentally it's also about starting to treat clean energy supply chains as you know strategically important and thinking about where we've got vulnerabilities thank you siren and let me just say for the audience you can take the last two minutes that sarah did there as the trailer for the second report that we're going to put out right because it's really about trying to think through those questions and in particular as sarah said you know we've had decades of experience dealing with oil supply shocks and strategic petroleum reserves and the iaea creation and all these structures that we've created and so i think we have to spend some time thinking about what does that security world look like it's not going to be the same but we've learned a lot over decades doing this work what we apply from that experience to this new energy world that we are living in so um ethan let me turn to you you on the first question i asked you to summarize the three papers you have another three papers on on our website um and what we wanted to do is do some sort of case study deep dives uh so we looked at china we looked at india and we looked at germany and so i wanted to ask you to give us sort of some of the main highlights of what we found in these deeper dives about how these countries navigated the development of markets the development of manufacturing how they used or didn't use trade policy and sort of walk us through uh in just like a few minutes some of the main things that that we should take out uh when we read these three uh three case study reports so so thanks uh nicholson um i would say the um i wish i could say that we studied we we looked at these three countries they delivered very clear answers on exactly what the u.s should do and now here here you go um the the the conclusions are are not surprisingly that it was complicated and um and that and that each in each case there were some interesting strategic objectives achieved and plenty that that we're not and um and so it's something to certainly just keep in mind um in terms of managing expectations as you know the world moves fast in clean energy things change technologies develop costs decline there's there is only we in the in the here in the washington world like to think that the the world can revolve entirely around policymaking and policy can influence events but but nonetheless there are a lot of other things that you know at play in these industries overall so uh i'll talk through a couple of them though and yes i as you note um on the website please do download these because i'm not going to do these stories really justice um but there are three uh essentially three little snapshots that we put together looking at india germany and china and and specific aspects of what uh what each country tried to to achieve i'm not going to go too deep into each of these because i definitely want to give us more time to talk about other stuff and also to take questions but um but but in in a couple minutes i'll just say that in india um we looked at the national solar mission um which was a plan launched back in 2009 with a goal of getting 20 gigawatts of solar capacity online by 2022 and basically what they they did in india was they sought to mandate that if you wanted to win a contract to deliver power to one of the state-run utilities you essentially had to have a certain percentage of your equipment be made domestically 30 specifically uh without going into a great number of details there were loopholes in the rule um which which frankly um didn't film solar company for solar with the backing of u.s funding was able to exploit um th n india sought to clamp down uh on on the rules then the u.s complained to the world trade organization and then three years later the world trade organization essentially ruled in the us's favor um but it's worth noting that three years is an eternity in the age of um of clean energy and maybe more specifically in the in the in the era of of solar where things move super fast in terms of you know did it work uh india today um has well over 40 gigawatts of online capacity they had aimed for 20 by 2022 so they can check that box uh originally there they certainly have higher targets now there is some manufacturing downstream of solar um in um in in india but but the country is still importing from china which is the country that you arguably they they would least want to import equipment from so it's it's been a mixed bag it's certainly spurred the growth of a market demand market but it has not necessarily spurred quite as big a supply as they would have liked i'll talk for just a second about germany so germany as you'll see in the report we we look back at their renewable energy law uh from 2004 and i think we made the point that we think this is the most important um piece of legislation or arguably ever in terms of um sparking the market for solar um basically the germans sought primarily for environmental reasons to scale up a solar market by offering very generous feeding tariffs as they're called uh to to to subsidize the the demand for solar they also offered cut rate financing through development banks to make it cheaper for people to actually do solar and at one point back way back when in 2004 and five germany was two-thirds of the world's demand for solar and was supplying about a quarter of the world's photovoltaic cells um uh but i would argue much more importantly germany was the one that sounded the signal um to the rest of the world that this market could scale up and could scale up fast it was the indicator that got frankly uh i would argue got china's attention that there was a real export market there for solar and it um and it triggered a wave of of pv manufacturing investment and scale up which which really reduced prices for the rest of the world and that was good for us in the rest of the world it was not great news for the manufacturers in germany um and these days germany um other than uh very far upstream um with uh with one particular firm um is not a major supplier of pv equipment however um china i'm sorry germany in the process did develop a lot of expertise on installing solar and that's something that they've been able to use domestically but also abroad in terms of building projects in other countries uh around the world but it's not been a clean-cut win for the manufacturing side by any means in germany and then i realized i've only given myself a short amount of time to talk about china but we can come back on this but um but but one of the things that what we did um portray in the report um both in the main return and in the in the snapshot is looking at china's commitment around electric vehicles and its strategic decision in about 2012 to declare that it was going to really push to have a lot more evs on the road the goal was really twofold it was to to to to clean up the existing vehicle fleet in china but also ultimately to become a major export player um they did this um by uh by offering um rebates in some cities in china you simply couldn't get a license plate for a car unless it was an electric vehicle there's also been a tremendous amount of financing and funding made available to battery makers and others in the ev supply chain just to finish i would say that you know today china as i mentioned earlier is by far the largest uh national market for electric vehicles with about half uh of the 10 million vehicles that are on the road uh today in china uh there were 1.3 million of them sold in 2020 um alone it's funny for all the you know the the super bowl ad with gm and focusing on norway and the percentage of sales yes norway has had a very high percentage of ev sales but on a on a unit basis no one comes comes close to china at least so far um so they have been very successful in building a demand market almost all of this i mean certainly tesla is starting to sell vehicles over there but but the vast majority of the evs being sold over there are from companies like b y d b a i c s a i c g lee a bunch of other companies that frankly most americans have probably never heard of so the fact that we've not heard of them means that the chinese have not yet succeeded necessarily in creating an export market for their evs but they have been very successful in building a supply chain and demand for evs um domestically so different lessons from different markets um and we can come back on this question on supply and demand because i think that's kind of an important one to take away from this um but uh but but it's been a very it's been a very mixed story um and uh and there's clearly uh to use the cliche no silver bullet when it comes to these types of policies thank you ethan let me um i want to do a round another round to both of you then go to some of the questions in the audience we already have a lot of questions that i'm seeing some really good ones so if you have a question now is a great time to to get it in um so let me turn to you and just get you to react a little bit to some of the things that ethan said uh you know obviously you can sort of see from the executive order uh but you can also see the overall tone of the administration um we're really going to be talking about deployment and manufacturing as sort of two different spheres and sometimes they can go together sometimes they can be in tension if you do local content and the local content raises costs and all that what did you take away from these sort of three case studies i mean obviously we're studying what others are doing in the hope of maybe trying to copy good things that they did and avoid mistakes they made you know what was your takeaway from these three case studies yeah thanks i think you know and i know where we'll talk about the supply and demand piece a little bit later which i think is critically important but you know i i think when you look at what different countries have done it the the biggest takeaway message and i think it still applies today for sure is you really do have to be quite agile uh if you're going to engage in industrial strategy to promote clean energy technology and you care about where you fall on that supply chain like you you really do have to be quite in touch with where your economy and your industry can be competitive you have to have a lot tighter collaboration between the industry and the government in the sense of like keeping on top of these things right so i i i do worry that you know the the we are we can sometimes appear a little bit flat-footed right which is you know oh we could just create sort of a domestic manufacturing industry for solar pv it's like well actually let's look across all of these emerging clean energy technologies and the established ones and figure out where we actually have compare comparative advantages and i think a supply chain review sort of counter-intuitively is a really good place to start with that because there are two reasons you you you subsidize or you invest in these technologies in addition to trying to sort of decarbonize your economy but one is to sort of understand where you can be competitive and the second is to understand where you have some other strategic value in having those resources and i think this is a place where we've not talked about it a lot uh here we do have a subsequent report coming out about it um is is in critical minerals right so like people tend to think about critical minerals as oh we need access to a basic resource that's not necessarily true access to a basic resource but a long-term plan for thinking about how you know strategic and critical minerals will be embedded in the supply chain and which parts of that you know supply chain do you need to be involved in to cover all your vulnerabilities versus which ones just make sense for you to have a more diversified supply chain approach this is the kind of strategic review that you you have to do but it's not like there's going to be like sort of one set answer right it's going to be about staying on top of how these very dynamic sectors are changing and one of the things that was really clear and i think ethan you mentioned it in the solar pv cases in particular is how dynamic it was over the period of time that countries were trying to sort of protect their domestic market and their inability to sort of stay on top of that you know alongside these trade disputes really you know caused some damage and i think that that's really important for us to consider as we think about this going forward because there there is a high likelihood in these strategically you know important areas that there could be additional trade disputes that essentially just raise costs or stymie your effort to be able to you know create sort of a domestic industry and that would be a negative outcome for everybody right that's not good for your domestic economic policy that's not good for the global sort of you know decarbonization effort so i think it's really important to you know to take those lessons that we've experienced from the past and apply them to the kinds of things that we're hearing talked about you know going forward you know for example i think we're putting a lot on decarbonization policy at the very same time that we're asking it to move at lightning speed right so the other lesson from these stories is you know we as as much as we may or may not want to admit this we haven't been moving as fast as we're supposed to in terms of decarbonization efforts over the last couple of decades what we're proposing to do in these net zero by 2050 plans is to move quite a bit faster and so that means that the experience we've had it kind of looked like sort of a slow uh a version of what we're going to see going forward and i think that that's important to to sort of you know put everybody in the right posture for understanding you know what that what the pace and the potential competitive pressures could look like i think the other thing and it didn't quite came out in the in the case studies but i think it's really important when you look at particularly how supply chains sort of you know worked their way around these trade disputes right you know when uh they sort of evolved to sort of deal with the fact that there were trade disputes between country and country b um and then other countries were starting to try and say like in southeast asia in particular like how do i insert myself into this supply chain like what role do i play i think it's really important for us to be thinking about this not just as a a us exercise or a chinese exercise but really you know thinking about the way in which we need to rely on allies and partners around the world china in particular right this would be a very bad news story if people did less you know clean energy promotion as a result of of the way this goes as opposed to more and so so those conversations with allies about okay how do we really build you know a resilient clean energy space both for the existing technologies we have i think the big ticket opportunities are on some of these innovative new areas uh you know like in the hydro hydrogen economy you know what do the supply chains look like for that those types of areas there's just going to be a lot of you know places for you know for people to go and to try and engage in thinking about those so so i you know i i oftentimes feel like when we look at these these case studies we look at how they pit countries against each other but i think the lesson here is you know there there is still a lot of room for coordination and collaboration sort of both among the private sector in the public sector to think about how we you know make these durable durable supply chains going forward well thank you sir and thank you also for sort of preemptively answering about four of the questions that i see have come in there's one question about like what are things that you would emulate from china and i think you gave a good answer that people are asking about strategic minerals and so i also appreciate the plug for some forthcoming work that you'll see out of csis if i you know one of the things that really i took away from your answer but also from the work that we did there's there's kind of an element of iteration that you just kind of have to keep at it um but you you can't just keep at it randomly there's kind of like purpose and iteration right that if you just kind of every year or two years you just slap on another tariff randomly it's really hard for the private sector to sort of figure out what to do with that yeah even though as you pointed out sort of trade finds a way to to get around some of these barriers but but the one thing that you said at the end that i just wanted to make sure that to flag because i think that's really important you know we have just like a ton of new technologies that we're going to be deploying uh in the next 20 years and so it's not just about how do i try to win the last war um but how do you think about the new technologies and how do you position yourself in those new technologies and with that ethan let me turn to you um you know the interplay between sort of supply policies and demand policies you you've articulated that in the context of our three case studies but i know you also have thought a lot about this in the context of the united states and so i was wondering if you could offer some sort of reflections on what we have learned about the need to pair these policies the or or not uh to what extent should we think about you know a deployment strategy alongside the manufacturing strategy and and whether those two things should be coordinated or not i know you've thought a lot about this this topic so let me turn to you for that thanks so yes i mean i i guess um to to to to vastly oversimplify i would say that you know at least in my opinion that um that if you try to uh forge an industrial policy and growth and you only focus on one side or the other you're not likely to succeed you you need to think about both supply and demand and um and that's sort of rooted at least in what i've seen over the last 15 years which is on the um on the demand side if you um if you if you give people free money to put solar on their roof um or to buy an electric vehicle guess what they will do so um and then when you stop giving them the free money they will probably stop doing so at least in the past when these technologies weren't cost competitive that's changed and they now are but but we saw this story in germany where a market grew and then and then shrank and we saw this places like the czech republic and italy the state of georgia offered a very generous um rebate for electric vehicles on top of the federal rebate and for a while georgia was a hot ev market and then suddenly it wasn't when it was gone so you know you can you can you can make bubbles um by by making it easier for consumers to get clean energy goods and that's great but you will not necessarily make industries because you need to basically assure the market that there will be a long-term demand for that product uh before you will often get um you know equipment makers wanting to make major you know multi-billion dollar investments and on that side of things you know there's been probably less cases where um countries have sought to um just subsidize um supply but there have been some and they don't even haven't always been terribly successful or they lead to you know cases where you build either build a plant that that doesn't end up being used because there isn't enough demand or it becomes outmoded or in some cases you try you're sort of pushing on a string you provide a lot of government support but the manufacturer just doesn't want to use that tax credit say to build that plant because they don't have a long-term belief so you really need to think about both sides of the equation and one last thing i would argue i that you need to be in a market that has some degree of scale to begin with so it's all wonderful that the czech republic might want to have both supply and demand but if it's not that big a market then you know there's only so big a plant someone's going to build in the country to serve it we are the united states of the amer of america we certainly have enough scale so that if we wanted to do both sides of this that you could have a thriving industry but you will need you will need to provide assurances to to private sector players that the demand will be there longer term and not little bubbles of support um in terms of of teeing up demand so you really need to address both sides and that's uh that's obviously a very high level non-specific piece of advice but but i think it's one that i hope that people think about going forward as as i know there's a lot of policy making underway um thinking about both sides of this thank you for that ethan and if if the audience will allow me there's there's been a few questions that have been about sort of other technologies uh that we haven't really gotten into nuclear hydrogen and so if you'll allow me i would suggest that some of what ethan just said i think is a good frame framework for thinking about how do these lessons uh apply to other technologies i i don't want to get us sort of switched over to nuclear and hydrogen because each of those is his own beast but i do i would posit that some of the lessons apply there um let's talk a little bit about human rights xinjiang and china this has come up and a number of times and the questions it's come up obviously with the news reports that we've been getting out of china i wanted to turn to you ethan first for a comment on you know you guys have some of the best information in the world about what's happening where so maybe help us understand how big of a deal this is what are we talking about production-wise output capacity-wise help us sort of frame this conversation with some data and then maybe to you sarah sort of trying to think about you know one of the one of the final comments you made on your earlier questions is there is no way we will not deal with the geopolitical and human rights and governance and all these challenges when it comes to clean energy and this seems like a perfect example of what you're talking about there so maybe come to you for a thoughts or what this means at the strategic level but ethan give us some information help us understand what we're talking about here sure so i mean um the the first thing to note is that you know a substantial portion of the world's polysilicon manufacturing capacity is based in that province um a bit over a third of the worldwide capacity and and and a number of the most modern and efficient plants so it is a place where there's a lot of output um our projection for 2021 is that you know if there is you know no major policy action you know you might see as much as half of the world's um solar grade polysilicon come out of that region um because those plants operate at high you know high capacity factors and like i said they're quite modern so this is a um this is a you know relevant issue there has certainly been um some companies that have um declared um that they would like more transparency and some manufacturers who said that they're going to provide it as well i think it's something we'll have to wait and see um i will say this which is that if if um you know and i don't want to speculate too much on this but if there were sanctions or if there was something to try to that would boost the cost of of equipment that came out of that province um there is enough manufacturing of of polysilicon around the world that you you could you wouldn't it wouldn't end the market by any means it but it could boost prices just a little bit um and it could also um it might in some cases make uh solar modules that don't use silicon give them a bit of an advantage so namely thin film modules made by companies like first solar so it's certainly something that um that i would say we're going to sort of keep an eye on and see how it develops thank you if i can if i could just add so the data geek in me feels like one of the things that we have to get better at is just the transparency of information about these markets you know capacity trade flows i mean we think about oil and gas and you can pinpoint to the field level what is produced where you have maps of pipelines port facility ships and so you know we have developed this tremendous amount of information infrastructure um and you know a lot of that is is still being developed uh by companies like bloomberg nef but you know it makes it harder to have you know good public discourse if you don't have access to that information understanding so really appreciate when when people that have uh and are collecting this information can share that because that makes it for a much better dialogue sara did you want to say something about xinjiang yeah just quickly so we can get to some other questions too i mean i think that it's the you know it's the intersection of of two things right one is we realize uh that that the the people part of energy is really important right this is uh we've always sort of recognized it but we do have a tendency to ignore it and uh and i think the sort of environmental justice movement uh full-scale just transitions initiative shows that like the the people the human rights aspects the impact of energy on people's lives and livelihoods is just going to be strategically at a different level for all firms for governments for local communities the whole shebang and it's going to take us a long time to like figure out you know how we're going to react and respond and then on a more conventional level as you you mentioned nicos you know this is what the problem is with not understanding our vulnerability in a supply chain right so so for example if you know we decided we wanted to take some sort of acute action because we didn't like the human rights treatment you know in anything whether it's this or critical minerals or whatever we all of a sudden realize oh wait a minute we're not prepared to do that right it's very similar to like where we found ourselves in the the early days of oil supply security we just haven't prepared in that way and so i i do think that it is a it's a really good example of like the the types of surprises that we don't want because it uh it sort of sets us back on a whole range of different kinds of goals thank you for that let me uh looking mindful of the clock i think we're about two and a half three minutes there have been just like a ton of questions on minerals critical minerals rare earths you know what can you diversify what can you reduce your reliance on china on what can you produce at home manufacturers so i'm blending about like seven questions together so i apologize for for that but yeah ethan i just wanted to sort of get a sense from from you of like how do you think about this topic i mean is this something that you know just kind of going to go away over time because we're going to develop new supply sources is it are we tied to geology is something we should not be as worried about is it something that we should be as worried about but maybe only for some commodities not others you know how are you guys thinking about this topic well yeah i don't know i'll make do my best shot in 30 seconds here but um it's um and and by the way there's there's rare earths and then there's also you know critical uh things like lithium and um cobalt and stuff like that and it's not just where you get it out of the ground it's where you refine it and china has a very um strong presence and refining of of um of cobalt and lithium for that matter um long story short is you know these rarest are used in the in it are really critical and electric motors and they're in there they're important also in direct drive wind turbines which are increasingly used for offshore wind turbines uh which is potentially the biggest you know one of the bigger parts of the u.s growth picture for renewables over the next 10 years so it matters um the um the only you know getting into too much you know i think that the world has some pretty high degree of confidence that demand for rare earths will grow over the next um 10 years i mean we're projecting it's at least a 50 to 100 percent growth over the next 10 years um that kind of optimism can can trigger the people to actually build the facilities and and the minds and the work that needs to be done to get them out because you can you can do this other places but you need to invest a lot of money to get to get rare earths and so maybe this will trigger that thank you for that accommodation and maybe that's a great cue for me to plug once again the deep dives that are on our website from bloomberg nef i mean if you really want to take this big topic of critical or strategic minerals and really break it down and understand what kind of products we're talking about where are they being produced where do they go for refining how did they then end up through three four or five more stages before they become a final product that information is in there and i think it's critically important that we talk about these issues with the specificity that they require um listen we are at time and we want to end on time and so i wanted to say thank you to you sarah thank you to you ethan and uh both for your presence here but also of course for your partnership and the intellectual weight that you have put behind this project as we said uh this is not a one-off uh this is something that the team at the csis energy security and climate change program will be spending a lot of time on this year in response of course to also where the administration is where this country is so stay tuned there'll be more stuff coming out and in the meantime thank you to our speakers and go read go read the reports thank you bye thank you you