Podcast Transcript: Solar Supply Chain Issues with Brian Lynch, VP of Sales at ADT Solar

Intro (00:04):

Welcome to another episode of the Solar Podcast. Today David is talking to Brian Lynch, a veteran in the solar industry who is currently senior VP of sales at ADT Solar. Brian gives us insight into what it's like going from the manufacturing side of things to residential, the recent supply chain difficulties, and what the future of residential solar looks like. Let's get right into it on the Solar Podcast.

Dave Anderson (00:32):

Well I'd like to welcome Brian Lynch to the Solar Podcast for this episode. We're thrilled to have him on the podcast, he's definitely an industry expert. I'm Dave Anderson. My experience in solar first of all came from residential sales on the home security side, so I actually have a little bit of experience working with ADT long before I had ever worked in solar. And then for the last 12 years I've worked as an executive in solar as one of the founders of Complete Solar. Brian, you and I have actually crossed paths over the years, either at industry events or actually sitting down at a luncheon. I can remember a specific event sitting down with you, I think it was at SPI talking, that was during your time at LG. But I'd love for our listeners to get to know you a little bit better, certainly they could look at your LinkedIn profile but it'd be great to get an introduction from you.

Brian Lynch (01:19):

Yeah, Dave, I appreciate it. Thanks for having me on and thanks for allowing me to talk solar because my wife is sick of hearing me talk about solar. So the more I can share my solar industry thoughts the less she has to hear about it.

Dave Anderson (01:31):

Our wives share that same misery.

Brian Lynch (01:34):

So if you're looking me up on LinkedIn that's where I'm active most. As we were talking about prior to hitting record, there's actually two Brian Lynches in solar. So if you don't like anything I say hit up the Brian Lynch that's based in California, I'm the Brian Lynch in New York. And he will hear that and certainly send me a message. But I've been in solar since mid 2000s, actually started on the policy side of the industry working for a company called Shot Solar, so if you're a solar OG you might remember Shot as having the first 300 watt module. It was like 100 pounds, it was a behemoth. And in 2008 they opened up a factory in Albuquerque, New Mexico that I was actually just watching some Breaking Bad episodes and it's made a cameo or two in Breaking Bad and Better Call Saul. Unfortunately that closed like so many domestic manufacturing facilities back in 20, I think '11 or '12.

Brian Lynch (02:23):

From there I went to a company called SolarWorld. Again, if you're a solar OG you have a knowledge of SolarWorld. Great products, big factory up in Oregon, but they were also one of the big trade antagonists. And so whether you loved them or hated them they're certainly known for that. That factory in Oregon was acquired by SunPower, but prior to that happening, and I was leading the development EPC team at SolarWorld, so manufacturing experience but now also construction experience. I left to join an energy storage startup that ended up losing funding after a year. At which point I joined LG, had been with LG for, it was just under four years and then they of course announced their market exit recently. And I used that moment to move over to the B2C and residential side and joined ADT Solar leading all revenue generating activities for their solar business, which has been quite a ride, it's a lot of fun.

Dave Anderson (03:16):

Yeah, so would you say that your time now ADT is a deviation from what you'd kind of previously been doing working more with some of those manufacturers?

Brian Lynch (03:25):

Absolutely. So at LG we predominantly supported the residential sector, and actually Sunpro which was the predecessor company that ADT acquired to form ADT Solar, had become our largest customer at LG. And so I was getting very involved in this idea of the solar supply chain to support residential installations and the residential market. But it's a big difference working for a manufacturer that is supporting a residential installer base to actually working for an installer themselves and leading a sales org of over 1,000 people that are actually calling on homeowners and literally sitting at their kitchen tables hundreds of times every day.

Dave Anderson (04:00):

Yeah, it's kind of funny to talk about solar OGs going back to 2004, 2012, but those really were early days of solar, for sure. I started in 2010 in solar, and it was obviously a fraction of the size it is today. So it's been a huge evolution. So for you being back all the way back from 2004, it's pretty rare to find a person that's been in solar as long as you have, to say the least.

Brian Lynch (04:26):

I don't know if that's an insult or an accolade. I think my receding hairline, my wife calls my hairline my solar panels. But yeah, I feel old when you go back to the mid 2000s you realize that actually was over 15 years ago. But it's been so much fun to watch this industry blossom. And there was a famous, I think it was an IEA report that showed this incredible hockey stick for solar that was going to happen in like 2020, and back in 2007, 2008 you looked at that and you said ah, it's a hockey stick chart, that'll never happen. But it did happen, it has happened. And it's incredible to have been a part of this ride in some small way making my contribution. I love what I do, I love the people I work with, and I love the fact that I can look my kids in the eyes and provide them a very comfortable, great life, and do it in a way that's improving their lives when they're adults hopefully in some small way.

Dave Anderson (05:23):

Yeah, it's certainly been hockey stick growth looking back to the 2010, maybe even 2004 time period. But I think in 10 years when we're looking back at this the magnitude of where solar will be relative to where it is today, we're going to be talking about the explosive growth that happens over the next handful of years being much more dramatic I think than even what's happened since 2010. I think, and I'd be curious now working at ADT, the juggernaut in home security, obviously making a big splash with its announcement of purchasing Sunpro, which I'm sure you're going to be happy to explain and talk about. That's a big deal for the industry and I think it signals kind of where solar is going in terms of reach and in terms of hopeful, explosive growth. But the figure that I hear most is somewhere between 3% and maybe as high as 6%, but 3% market penetration depending on how you define what the available market size is. So maybe you can kind of go into this a little bit for us, actually if it's okay I'd like to go back one quick step. So Shot Solar, you said 100 pound module, what was the power class panel that Shot was building at the time when you first joined them?

Brian Lynch (06:39):

Yeah, it was a 300 watt module but it wasn't a 300 watt module like we think about that was around four or five years ago, these were four inch cells. I mean the technology, Dave, that was around in 2006, 2007 is lightyears different than what's being manufactured today. There's a trick in modules where there's a constant progression up. Historically the industry had standardized on these 60 and 72 cell module formats and form factors, and so they were relatively interchangeable, it made design and balance of system super easy. And in the last couple years we've now seen the proliferation of things like half cell modules or half cut cell modules and these wonky form factors that I've essentially dubbed BAMs, or big honking modules, you can change the A acronym if you'd like to what it actually is.

Brian Lynch (07:31):

And it is kind of a slide of hand, a 600 watt module isn't necessarily more efficient than a 400 watt module if it's just that much larger. And now you have to really dive into the spec sheets, and we as an industry we kind of have to now flex our technical muscles a little bit and say, what is the cell architecture? What is the efficiency? What's the degradation curves? It's not always bigger is better, because especially in like utility scale applications, that 600 watt module might not be compatible with your single access tracker, or if it is it's going to maybe stress out the purlins or cause some sort of wind loading issue that maybe hadn't been a consideration when you were using a smaller form factor module.

Dave Anderson (08:09):

Yeah. And so you went from Shot 300 watt power class module to SolarWorld, which usually pushed to being a higher efficiency module relative to other modules that existed in the marketplace. And then obviously to LG, which was considered a premium product and certainly a more efficient product than other products that were in the market. And I'm curious, how did you decide to go from Shot to SolarWorld and then SolarWorld to LG? Obviously I understand why you left each of those places, but what caused you to want to go from the one to the next to the next?

Brian Lynch (08:45):

Yeah, I think like anything in my life every day is brought to me by the question of days prior. And so Shot, I actually kind of fell backwards into that role. I was working for the corporate parent of Shot Solar, which was the Shot Company, or Shot AG, doing policy work. And solar was my biggest internal client, and so then I moved full time in the solar business. When Shot exited I had been working closely with the executive team at SolarWorld as they were doing some of their trade stuff. And by the way, you go back in OG world, SolarWorld was even, like I think it was the secret six, Shot was not one of members of the secret six. I can say that now 10 years later.

Brian Lynch (09:28):

But we were watching when they were doing on the policy side, and I know when you talk policy and trade with solar there are very legitimate and very vocal opponents to those trade actions. And I certainly respect those, but I also saw the other side of, hey, companies were violating trade laws, they were cheating. And you either wanted to accept that and accept the risk that comes with that, or you wanted to stand against it. And so I didn't join SolarWorld specifically because of their trade actions, I just had a very high comfort level with that executive team. And so I was hired by the president at the time, and he then left actually pretty shortly after I started, and that enabled me to stand up their development EPC team.

Brian Lynch (10:13):

Then going to LG it was actually through just kind of my network. I wasn't really looking to join LG at the time, but someone who had left SolarWorld then joined LG and wanted to bring me in because they saw an opportunity for me there. And so it wasn't this deliberate path to say I was always going to work for the biggest brand or the highest efficiency product, it was simply I know that customer base, I know how to sell a non commoditized product in a commoditized space, and that's a very tricky thing to do. And so that's kind of how that career arc happened.

Brian Lynch (10:43):

And I would say as LG was announcing its exit my desire to leave was simply I've suffered enough brain damage in manufacturing, I personally just don't want to work for a Chinese company. I have nothing wrong with Chinese people or Chinese companies, but I just, I didn't want to do it. And I looked at the other manufacturers and had a great respect for Qcells, and REC, and Mission Solar but I just, I couldn't do it to myself again. And so learning this side of the industry has been a phenomenal experience to deflect my kind of cognitive capacity, humble myself that this is a very important side of the industry, and it's making me smarter as I become a more complete solar professional, no pun intended, Dave.

Dave Anderson (11:25):

Yeah, of course. So the world has struggled with supply chain, but solar has particularly right now some unique struggles with supply chain. And I think actually given your experience at SolarWorld you're pretty uniquely positioned to kind of explain why we find ourselves in the situation we were. So you talked about SolarWorld being really active, they were very active in trying to legislate or push for legislation to add tariffs to solar modules that were coming specifically out of China, but all imported solar modules. So maybe if you wouldn't mind just kind of talking about that, giving an overview? So many of the listeners of this podcast are actually people that are out selling actively solar, and others of them are just people that happen upon the podcast because they're interested in solar for their own homes. Maybe you can kind of give an understanding about why we're struggling with supply chain, and a lot of its origins actually have to do with SolarWorld interestingly.

Brian Lynch (12:22):

SolarWorld and Suniva. There was a company that's actually still around and still active in the policy front even though they haven't had an operational factory and probably five or six years. Great hopes to turn it back on but have yet to do it. Yeah, and the genesis of this, and I'll try and be relatively quick, Google is your friend on this. Is I joked that every solar company in 2008 came to the same conclusion, there was insatiable demand relative to supply. And the economies of scale of manufacturing absolutely hold true to solar, if you build larger factories you can make more money. And so Shot at the time, I think had a 15 megawatt factory in Massachusetts, which today is laughable 15 megawatts, ADT Solar basically sells that much every day. And so the idea was let's build a 200 megawatt factory in Albuquerque, but the problem is every other solar company on the exact same day came to the exact same conclusion, as well as folks over in China.

Brian Lynch (13:18):

And China really published a five year plan, which is tremendous ambitions. The Chinese government said, they saw the same hockey stick charts I would assume and they said listen, we can really make this a reality if we can take the cost of solar today, which at the time resy install was $10, $12 a watt, 200 watt modules were being sold for $2 a watt, that was like my favorite period because it was super easy. And they said, if we can take cost out of this thing then we can make this a really important power generation source. And so as much as China can be faulted for some of the trade issues, they also enabled this rapid scale. And I think everyone needs to understand and respect that, including myself. But the problem is there's trade laws, and you can't do things like have unnatural support in the supply chain free land, free power, free debt. There was a joke for a while you can't kill a Chinese company because Beijing would just kind of swoop in and they would restructure it and sell it to somebody else. But from a Western economic principle you can't do that.

Brian Lynch (14:23):

And so that's why the original anti dumping and countervailing duty claim was filed because the Chinese were simply deliberately selling below cost in a game of chicken with every Western manufacturer. And at the time you had big ones, you had BP, you had Sharp, you had these brands that again, the solar OGs are going to kind of smile when they hear, but they were pushed out of the market because there's unnatural pressure. If you have a cost structure of a Shot, or a Sharp, or a BP and you're basically engaged in a game of chicken with the Chinese government, and no Western large, multinational is going to choose to engage in that battle. And so they all kind of exited one at a time. The difference with SolarWorld and Suniva is they were pure play solar companies, they couldn't fall back on TVs, or oil and gas, or anything else, they had to either file Chapter 7 and hemorrhage cash until they did that and go away, or they were going to fight back. And they chose to fight back.

Brian Lynch (15:20):

And so the original tariff scope was just on cells made in Taiwan or China. And so what started with this is a cat and mouse game. China said okay, and so they set up factories in Southeast Asia and they changed their supply chains around. And so that created a second round of [inaudible 00:15:38] tariffs again, this anti dumping countervailing duties which then closed that original loophole that was created. And then finally in 2016 Suniva was on their, I think 2015 or 2016 they were on the ropes. They just couldn't do it anymore, they were about to file bankruptcy, and that's when this 201 tariff came in. And 201 tariff, Dave, is what you're referencing that every imported module was going to be subjected to a tariff. And SolarWorld at the time originally said no to that. They said listen, our trade activities, and whether or not anyone wants to believe this is true, was that they didn't want to harm the broader market for their ability to succeed. And so they said listen, there's enough supply chain outside of China that we can put barriers for China up, but you still have market access.

Brian Lynch (16:19):

And they were just trying to levelize the playing field with this stuff. But now you're taking every imported module that was coming from Korea, or Singapore, or Germany, or anywhere, and subjecting it to this tariff which now is artificially raising the price. But at the same time SolarWorld was also in a bad spot, and so they finally consented to sign on with the Suniva petition for the 201, which is how we had that original 30% 201 tariff, and that by law steps down, and it steps down every year for four years, and it was just renewed earlier this year to go now another four years starting at 15%. But during that time there was the [inaudible 00:16:56] exclusion, there were all these loopholes that were created so it never really had a tremendous market impact.

Brian Lynch (17:01):