Female Speaker:  This episode of EnergyCents is brought to you by S&P Global’s Financial and Capital Markets Energy Advisory Groups. Our team experts provide the investment community with actionable insight and integrated by that leadership that identify the trends and trend makers of Global Energy Markets.  Solutions cover the full energy and natural resources sector from traditionally fossil fuel to emerging clean tech ideas and supply chains, and are available via recurring reports, webinars, robust data sets and personal engagements with experts.

Breanne Dougherty:  Welcome everybody to this episode of EnergyCents, the S&P Global podcast where we discussed all things at the intersection of energy and finance.  As always, I’ve got Hill Vaden with me today.  How are you doing, Hill?

Hill Vaden:  I’m doing well Breanne.  How are you?

Breanne Dougherty:  I’m pretty good.  So, on our last podcast, we talked about the -- at that point it was the upcoming Super Bowl and I -- me having nothing to watch and that this is just something I was going through and, okay.  So, couple things that came out of that totally, none of it, worse.  I think it was the lowest watch Super Bowl, I think it’s what the stats came out afterwards.  And the whole thing about this advertises pulled, you know, not true.

Hill Vaden:  Yes.

Breanne Dougherty:  I saw Budweiser ads, so I’m not quite sure.  And then Pepsi said it wasn’t, but weren’t -- didn’t they do the whole half time show because it wasn’t a [overlapping conversation] [00:01:18], yes, the whole Pepsi, so I’m not quite sure what that was all about.  It was clearly misleading from their statement reviewing to the Super Bowl about how they weren’t going to be investing all the money into the marketing.  Maybe the marketing dollar spent is slightly less, but I would say the brands were still very much represented at the Super Bowl.

Hill Vaden:  Yes.  I agree.  And just drop the name of Pepsi in our podcast without spending any money with us either.  So, I think they got the publicity that they were looking for.  It seems to me almost, like remember the George Costanza episode of Seinfeld where he did the opposite of what he thought he was supposed to do for the entire episode?

Breanne Dougherty:  Yes.

Hill Vaden:  It was almost weird way to not advertise.  We’re going to advertise by not advertising.  Since that was, I went to bed at half time, so it’s why I thought the -- I was so disappointed in the game then I turned it off, got to bed and read.

Breanne Dougherty:  Well…

Raoul LeBlanc:  It’s a game, you can only play once or twice though the advertise by not advertise.

Breanne Dougherty:  Very true.  And, you know, I just thought it was, I don’t know.  I feel like if you’re going to put out something that really make the stands, this is where you’re committing to.  They didn’t even try to make it looked like it they were never – it was pretty, pretty much out there, so anyways.  So there was  not [overlapping conversation] [00:02:42].

Raoul LeBlanc:  It reminds me of noodling, you guys know what noodling is?

Hill Vaden:  With the catfish?

Raoul LeBlanc:  Yes, that’s right.  So, this is a fishing technique or, I don’t know.  Some game that where you go to river and you look for catfish holes that you cannot see by putting your finger in the murky water and noodling your your finger.

Hill Vaden:  Your arm?

Raoul LeBlanc: Well, your arm but you wiggly your finger, that’s the noodle until the fish bites your finger and then you grab the fish which biting your finger and pull it out.  And they have some people with amazing large catfish, and of course the -- my first thing upon hearing that, my question was, is this a game you can play more than ten times?  Like, because, I don’t see how you can but…

Hill Vaden:  Well, I guess first so that’s the voice of Raoul LeBlanc who felt to introduce but both Raoul LeBlanc and Cormac Gilligan [Phonetics] who are on the podcast today.  But there’s a whole documentary on noodling which is one of these great -- there’s two kind of great, what I would call it backwards documentary, one on noodling where you see these guys were literally sticking their arm into the mud and then pulling out like a 15 ton catfish sucking all on their arm up to the elbow.  And there’s another one about, I’m going to lose it.  But I can’t remember, the dancing outlaw [indiscernible] [00:04:05,] it’s the name of the guy.  And he’s some meth addict in the backwoods of, I think Kentucky, who’s an incredible tap dancer.

Breanne Dougherty:  What?

Hill Vader:  Yes.  So,-

Breanne Dougherty:  First of all, what documentary feed, like what is your -- are these your preferences that you’ve -- or these documentaries that are being pushed to you based off the other viewing preferences?  This is my number one question because I’m concern about what you are watching.

Raoul LeBlanc: Their probably based on his musical preferences, okay, that’s all I can saying.  But, you know, hold on, I can make the link back to the Super Bowl, which is, there’s another documentary that’s the length to, called Growing Broke which is fabulous, it’s on ESPN which is about how all of these professional athlete’s, particularly football players have manage their finances.  Yes, it’s fascinating, which because it’s back to finance.  Which, I guess is a good kick off to like this whole podcasting thing.

Breanne Dougherty:  Well, you’re just going to have to start scripting us someday because you’ve got this whole thing worked out.  I like it.  And you’re right.  First of all, that Growing Broke documentary, it is outstanding.  I cried through most of it, as well Raoul, as well side note.  I’m a really sucker for these exploitations of young athletes and also young singer aka Britney Spears documentary that just came out.  So, we’ll get that one out there as well.  But yes, it’s Growing Broke strongly recommend for all those who have watched it.

As I would strongly recommend actually any of the 30 for 30s as well in case you’re interested.  But you’re right.  Okay.  We’re actually here to talk about other things, although it sounds [overlapping conversation] [00:05:38].  So, that is the target of our EnergyCents Podcast obviously is to give ideas so you don’t go broke.  And today we’re actually talking about something really interesting.

We’ve got as we mentioned Raoul LeBlanc who many of you probably recognize the voice even before we gave the name, as he’s joins us on many occasions, and he’s the VP of onshore US or US upstream research here.  And we have Cormac Gilligan with us as well, who is an associate director on the clean tech team that we have, that is a growing aspect of our S&P Global coverage obviously, and he has a specialty in solar which is particularly interesting.

So, it sounds I think maybe to the listener who’s not maybe reading between the lines here is to what we possibly could be talking about between Raoul and Cormac.  But it’s really interesting because the way we’ve -- and some of the work that it’s been done here is there’s been a lot of parallels that have been coming to the forefront with solar and shale in particular with their idea that they’re both appearing as global disruptors and this concept of being global disruptors to their separate energy sectors.

But, so, that’s actually only want to talk to you about today about is this idea of shale and solar and where they in their life cycle and how are they actually disrupting the global energy systems.  So, I guess that’s probably where I’ll start off and I know where I will -- you’ve looked at this quite a bit.  So, how about I put it to you first and where do you think -- where are we in the shale disruptor to global oil at this point?

Raoul LeBlanc:  Well, you know one of things to kick this off was I was asked, I don’t know about a year and a half, two years ago to give a talk at a conference on disruption.  And I was just the one lone energy speaker, right?  So, it was pretty small.  But in the process of reviewing that I made a graph which was -- it showed the proportion of shale or shale as a proportion of global oil production, and wind and solar as a proportion of global power production.

And I just found it fascinating the curves laid right on top of each other.  I did not even have to torture the data, I’m not against torturing data but I didn’t have to do it.  They laid right on top of each other and showed both of them making severe inroads up to about, you know, 9% of global supply.  And that got me thinking about that, and first of all, I would argue that the story of the modern era is the story of energy disruption.

And if you look at it historically, that is what led to, frankly, the Industrial Revolution as the prime enabler, it led to population growth, it led to all sorts of spatial patterns.  So, we’re -- we have another one of those in an ongoing series in which humans are able to marshal the forces of stored or other forms of energy whether it’s stored solar energy and oil or direct solar energy or water.  And it’s fascinating history.

So, I look at this and I started to say to myself, okay, let’s think about this step back for a second and think about disruption in general.  We hear so much about this, right?  I mean, you know, it’s trendy when every click bait or every article has click bait at the bottom that says these two sisters are disrupting a $45 billion industry or, you know, this guy in his garage is ready to disrupt the multibillion dollar industry here.  So, I find it interesting and I’m looking at this and I’m saying shale went through a phase where it was an emerging technology.

That emerging technology got cheaper and cheaper and cheaper.  And we had a large resource which took on frankly a very entrenched relatively slow growing mature market and started to gain market share.  And at some point, the investors started to say, well, two things happened.  Number one was -- and this is critical, Shale was big enough that it actually disrupted the price of the commodity and destabilized the commodity, not just once but two or three times.  That was really important because it undermined its own success, okay.

And we still lived in a world where or is a $100, I have no doubt that Joe [phonetics] would still be going strong.  But in doing so, it also led people to start to question the returns, and that’s where we are right now is the world disbelieves in the Shale.  It’s gone through that process, and let me just say here while on the, on the mic.  To me when I think about, like, not whether it’s in solar or Shale or whatever, I think about disruptive technologies and I see a bit of a pattern going on here, right which is early stage day or characterized by growth, growth, growth.

And eventually if it’s not profitable, investors eventually start to say, I see you can grow.  I believe you can grow, but is it valueless growth?  And I actually think, you know, here’s an industry that had an emerging technology.  It started to grow.  It continued getting bigger and bigger and bigger.  It said it was disruptive, it was revolutionary, it was going to change everything.  And eventually people said I think your growth cost too much and you’re not making enough money, you know?

And the industry I’m talking, or the company I’m talking about actually is Uber.  And so, I view this as a bit of that chasm, if you think back to chasm in a business school, that chasm between immature growth phase and making money phase.  And that’s definitely where Shale is.  I’ll leave it to Cormac and others to talk about where they think kind of show as to why it might be different or the same.

Hill Vaden:  Yes, let’s, you know, so if I think what Raoul sets us up there that we grew from less than 1% to 9 or 10% or 8 or 9%, you know, on a, you know, correlated basis in the sense between these two technologies, three with wind.  Where does solar sit relative to the world that, Raoul just described, with Shale.  And I want to come back to the Uber thing as well.  But let’s first talk about solar.

Cormac Gilligan:  Yes, thanks Hill.  And I think solar at this moment, I was just thinking about prior to this conversation, you know, the story of how it started off pretty small and it’s kind of where the history began was, in some ways, when the market kind of took off in 2010 in Europe.  And then, it moved and expanded to the United States and then to Asia.  And then certainly with Asia, we’ve seen, you know, really the, the huge scale now that we’re starting to see is emanating from particularly there in terms of the manufacturing base.

And of course, we’re seeing a lot of the future technology and a lot of cutting edge still standing within, you know, at States and in other parts of Europe.  But we’re now, I think, at a stage where solar, obviously, that the big story is how quickly the costs have declined.  That’s certainly added to its quite, very quickly, like growing.  In line with that, I think it’s somewhere in the, kind of the adolescent stage.  It’s kind of beyond that kind of, that early growth spurt, and now it’s reaching where almost -- most markets now are ready starting to open up, starting to become comfortable with it.

It still remains true that the major markets of China, the United States and India are still keeping their place in the top three.  But we’re starting to see that even being disrupted, for example, last year we actually saw Vietnam jumping in to the top three solar markets.  And if you’d asked that maybe a few years ago, most people would have thought you’re pretty crazy.

Hill Vaden:  That was in...

Cormac Gilligan:  So this…

Hill Vaden:  That was in response to the tariffs on China, right?  It makes some sense.

Cormac Gilligan:  If there was, there was market drivers within Vietnam that, that drove us.  China itself, you know, it continues to be, you know, in any one year in the last, let’s say, five to maybe 10 years.  It continues to be about a third of solar installations globally.  So, it’s a huge important market not only in terms of manufacturing base but also in terms of active installations.  But they’re certainly exporting that, that technology and that know how into neighboring countries and these countries are now obviously becoming very comfortable with us.

And I think now to kind of -- what Raoul is saying is that it is kind of part of it.  There’s a lot of buzz about it in line with obviously a lot of renewables for kind of the post pandemic build back better scenario and de-carbonization, energy transition movement that is obviously underway.  But then I think also part of it, you know, one of the secrets of success of solar is its lead time for construction is quite short, maybe compared to even wind.  When we talk about, you know, everyone is very excited obviously about the opportunities for offshore winds.

But certainly with solar the speed that we saw, solar even installed last year, in the second half of the year, when, you know, even the team and ourselves were, you know, maybe let’s say a little bit cautious at the beginning of a pandemic.  The market came back very quickly and actually turned out to be a growth year when maybe, initially we’re thinking it may not be.  So, I think the solar has been, a, the speed of which the cost declines have occurred, b, the amount of markets now that it is penetrating and expanding into.  And this is not only -- I think often people think of maybe either one of two things, I suppose, either a. large utility scale farms that they see when they drive by places.  Or b, when their neighborhoods, probably in California, Hawaii.  They’ll see it on rooftops.

But it is even transcending that, and I think we might touch on it a little bit later, is that the new bucket of customers that it’s being opened up would be the corporate, the corporate PPAs, Power Purchase Agreements or even being installers are purchasing it themselves to make me put it on their rooftops so, commercial and industrial.  So in essence, I think across all, what we would describe as all system types, solar is in that, I guess, I would describe it like middle phase of that kind of high growth phase and where there’s a lot of interest.

Breanne Dougherty:  So Cormac, if we think about Shale oil, Shale gas for instance, I would say the technological code was cracked, we’re not really expecting some sort technology advancement role, correct me if I’m wrong on this, that’s going to launch a second level of disruption.  Do you know that that’s kind of, in the past from the Shale perspective, do we think on a solar perspective, that there still -- is there still a technological component that there could be improvement on or, something that, you know, like once that’s hit, that it’s going to be another launch forward for solar?  Is -- or are we kind of past that already as well?

Cormac Gilligan:  So that’s was two things.  The first point is that most people when they look at the cost curve for solar photovoltaic, they look at the solar module of the panel and they look at how quickly the cost have come down there.  And it’s safe to say today they’re at extremely low levels or price points.  And the, let’s say, the margins that the manufacturers are working on can be quite small because there’s even -- there are shocks in the system.  So, availability of poly silicon as the raw material that goes into them, even other parts like glass, last year, for example, there’s a shock to the market.

Now, so far the suppliers have been able to ride through these shocks and there are only courtly disturbances.  And it causes a lot of headache for developers and EPCs, the engineering companies.  But typically, it doesn’t stop us.  Some people in the industry would view that at the moment, what’s happening end up where about there may be limits to the pace at which pricing has declined.

It’s starting to maybe hit that point.  But one of the things we’re doing is certainly we’re moving towards larger wafers.  So, these are one of the next steps when you go to construct a module, and this will allow larger modules.  So before, we maybe had 250 watts, we’re now approaching 500 watts or 600 watts.  And on a dollar per watt basis, this is helping to help with the price point and economics and the level cost of electricity.

Furthermore, there are things that are hitting the market in a big way and starting even in the United States.  So they’re use -- starting to use bifacial module technology.  And this simply means that you can earn or generate electricity on the underneath of the solar panels or the module and earn extra immense of energy.  And then the last point I would say is, there is a hope and there are currently in, at laboratory stage or just coming out of universities, their technology is called PERCs guides [sp?].  And there are a few startups and there’s a lot of interest in this technology.  And typically, it’s a layer that you add on top of the module to increase the efficiency of modules from, let’s say, 20%, or the high-low 20s to maybe 30% and beyond.  But they -- at the moment…

Breanne Dougherty:  Because they’re just able to trap more rays?  Is that?

Cormac Gilligan:  Yes, able to trap and convert more rays.

Breanne Dougherty:  Okay.

Cormac Gilligan:  But the timeline for kind of commercialization, realistically is somewhere in the next five years.  And they’re starting to be spun out of universities and doing pilots.  But they’re still a little bit away.  So in essence, yes, and there probably are technologies, you know, that Raoul and I don’t even know at the moment.  But this is what we can see in the short term future and particularly with respect to, and the module technology.

Breanne Dougherty:  And I’m going to ask you a question that’s probably going to speak to my lack of knowledge of this.  What is the life span of a solar panel?  Are we talk -- is it like a furnace?  You got 15 years?  Do we have 50 years?  [Overlapping conversation] [00:19:43].

Cormac Gilligan:  Well, you got it pretty close.  It’s -- typically when the industry started, it was around 20 years.  And right now, a lot of the warranties are up to about 30 years.

Breanne Dougherty:  Oh, wow.  Okay.

Cormac Gilligan:  But the developers are looking at modeling in their modules 35 or even up to 40 years even in some…

Breanne Dougherty:  Oh, okay.  So, more than, probably more than a -- when you think of like a homeowner, for instance, more than potentially the expected life of being in a house, you don’t like that.  That’s interesting to me that it’s not, you don’t have to do a replacement cycle within year.

Cormac Gilligan:  No.  But I still see the only caveat to that would be the technology even in the space of 10 years has improved so quickly.  It’s -- I don’t know, we could use the analogy of the smart phone almost, that you may consider replacing it with a new spec module or some of the other component tree, because it can produce more energy or electricity or because it can work more seamlessly with your E V charging, and another business models that may be coming down the road as you upgrade to a smart home, for example.

Breanne Dougherty:  All right.  Okay.

Hill Vaden:  So Raoul, Cormac described solar is being somewhat in adolescent phase, and I know you’ve got, you know, for all the other listeners out there, Raoul also has another chart where he maps shale on a maturity level from, I think infancy and adolescence to old, so I’m not.

Breanne Dougherty:  [Overlapping conversation] [00:21:09] has describe?

Raoul LeBlanc:  A second career, as we like to call.

Hill Vaden:  A second career?  Where would you put if Solar’s on in adolescence with on that curve shale?  I know each play is different but where would we put kind of in aggregate?  I’m sensing it more towards the top, toward that retirement.

Raoul LeBlanc:  No.  I absolutely, you know, so to use that analogy, you’re right.  First of all, every play is different than what you have to figure out each play.  But increasingly is we figured out playing number six, seven, eight, nine, ten, it becomes clear that there’s a bunch of the tools to figure it out become much better and it happens much faster and it takes fewer wells.

Nevertheless, if I would say collectively, kind of where are we?  I would say that, you know, we went through the early stage what we call the proving stage where, you know, you’re not making any money.  And then there was an optimization stage.  And in my mind the optimization stage for any play, two things happen.  Number one, you figure out where is good and where is bad?  Remember shale was like real estate, okay.  And either you’re in a good spot or you’re not in a good spot and you only find out sort of by getting in there and drilling some wells.

And the other thing is you figure out how to drill and complete, and that’s what a lot of what I was talking about.  How do I drill it?  How do I frack it?  How do I produce it?  Getting that recipe down, that happens in this optimization phase.  And that border between the optimization and what we call the next phase which is called standardization.  It is like graduating from university.

Okay.  Hey it’s been 22 years and we put a ton of money into you.  Now your job is to go out, okay?  And for the next 40 years you’re going to go ahead and, you know, turn it on, okay, and start making money.  And we’re out of the optimization phase.  We’re in that standardization phase, we’ve begun our career and we’ve probably been at it, you know?  So we’re kind of like a early 30s.  I got a lot of work left ahead of me.  Most of the growth, a lot of the growth and learning has happened.  But I got a lot of work to do that actually makes the money.  So to use a sort of very simplistic, you know, professional now.

Now, the interesting thing to me also is, is there a second career?  Pretty soon -- I’m just talking to somebody about this yesterday.  Pretty soon they’re going to be 100,000 well bores.  Now remember for those of you that may not know that all the oil that’s in place, a typical oilfield will get somewhere between 35% and 40%, 45%.  In some cases, you get as high as 55 or 60, in some cases as low as 20.  In all the shale plays a typical for oil were only getting about 9% or 10%.  So, we’re leaving 90% down there.  That’s a big prize at somewhat lower cost because it’s dearest and there’s already infrastructure.

Now when people get that, I don’t know.  But that’s the big prize in my mind that could give a kind of second wind and make it, you know, very cheap, cheaper than it is now.  Because as Breanne rightfully points out almost all of your improvements to productivity and capital efficiency have largely run their course, it’s mature in that way.  Now, what is happening is slow digitization the normal kind of gains that every company gets from this.  You’re getting gains from scaling up on and fewer companies and, you know, more known processes.  So, there’s still a lot of tinkering going on but those air resulting in gains of, you know, 2% to 3% a year not 10, 12, 15% a year.

Breanne Dougherty:  But what I’m hearing from you is that there could be another technology breakthrough that gives access to that 90%?

Raoul LeBlanc:  Yes.

Breanne Dougherty:  You think?  Okay.

Raoul LeBlanc:  It gets access even to another 5%.

Breanne Dougherty:  Well, even another 5% or 10% even.  Yes, I mean.

Raoul LeBlanc:  That’s right.  And that’s what they’re doing, you know.  And so, but I got to say we’ve already been looking for it for, you know, seven years.  And, the occasionally you see articles and I tell all my clients don’t buy it yet, okay?  Because we’ll know it if it comes out on, and it hasn’t happened, it may never happen.

Breanne Dougherty:  So, I’m sorry, go ahead.

Hill Vaden:  Well, so I wanted to come back somewhat, you know, to your point role there on don’t buy it yet and you mentioned Uber earlier.  You know that the Barnett Shale which kicked all of the new shale gas and then shale oil, you know, application of, you know, why they call the 17 year overnight success.  Because you had the CW sleigh and what the CW sleigh was the first well that the, you know, pioneered the Barnett and then it took 17 years from Barnett become a household name.  Which did -- I would argue in large part because of, you know, I’ll say Aubrey McClendon as a bit of a hype man who got people excited about this new technology.

And if I think about disruptors that Uber role, you know, Travis Kalanick is a bit of a household name.  You’ve got Tesla with Elon Musk as a household name, Amazon with Jeff Bezos as a household name.  Who’s the hype man for solar?  I mean, that people know shale as almost a brand name.  And can -- you would be felt it in our pocket books with gas prices.  My power bills haven’t really gone down.  Solar seems to be -- even though everybody loves it, it seems to be a bit of a quiet disruptor.  Am I just out of the loop?

Breanne Dougherty:  Let’s call it a unsung hero, maybe.  Can we call it a unsung hero?

Hill Vaden:  You know, unsung hero?

Breanne Dougherty:  Maybe.

Hill Vaden:  That works for me.  Is there -- I mean how important is that voice or is solar thrown off so much cash that you don’t need somebody who is creating in a sense the hype that that Aubrey or Elon have done for their respective disruptors or Travis?

Cormac Gilligan:  The person -- I would still probably use Elon to a degree in that it’s kind of quieted down since he took over Solar City with some of his former partners.  But and you know, he can elevate us to some degree.  I think at the moment there’s probably not a standard one person otherwise that I can think of other than I think, I love it.  This quiet success of solar maybe the simplicity of us, in terms of deploying us, in terms of how this is reflected, in terms of electricity bills.  There certainly again a level of maturity or fairness, I think that has to be openly acknowledged.

So for example, when we look at distributed generation system so residential are a roof top applications, you know, a lot of the early adopters are the people who are installing it right now.  The people who can get the least system or a loan system or have the free cash and, you know, for example we heard a loss in the United States last year that due to grid disruptions in certain states, due to either natural weather events or in California due to with fires where there was rolling blackouts or brownouts that it now became more attractive to have maybe solar plus the battery system or maybe you just even a battery system on its own.

But that’s obviously a question of equity and fairness.  The other side of it is where, you know, the next era or utility.  For example, in Europe such as, you know, they talk about the Green energy majors now the [indiscernible] [00:28:47] theory or steady, NL’s on they look at, you know, the easy systems for them are like large scale big solar farms in Latin America, Europe, United States.  And I think it’s at the moment, yes, you could agree that it’s quite difficult to see how does this impact my electricity bill?

And actually, I might have an adder for it because, you know, there’s like a tax that is either re-circulated to help pay for whatever incentive schemes may be in place.  I think that’s the conundrum for everyone and the energy system full stop is, you know, outside of doing it yourself by fronting up the money is, how do we want this energy system to go further.  If I look a little bit into kind of the medium term or the longer term, so you know, five years at or 10 years.

I think- Hill- we kind of touched briefly on this last week was, you know, one of the hopes is that you’ll have so much distributed systems and even small scale.  So, lots of solar systems in a neighborhood or in a locality that you can aggregate them into what may be known as a virtual power plant.  And this is big business model that is being tested which on isolated cases like, HECO in Hawaii, maybe PG&E in the past in California.

And where the utilities can tap the batteries or tell the solar systems don’t export at the moment or with the battery system, we’ve got peak demand.  So, please export on the system and help us not bring online other resource that would be maybe not wanted or more expensive.  And where these new energy systems are actively participating in the grid system and providing grid services.

That’s maybe another way whereby it may not impact your monthly bill, but you might get a credit or you might get a payment sporadically and for services.  And that’s some way towards how the grid of the future it’s part of that conversation.  Solar is starting to now enter into as we add energy storage and as the system becomes a little bit more complex.

Breanne Dougherty:  One of the reasons why I am so interested in solar and you touched on a few of them is the scalability of it.  I mean the fact that individual homeowners can actually get involved in it as far as, you know, taking ownership of their energy choice and things like that.  There’s so many unique things about solar that I think really give it an interesting foundation for being a more significant disruptor than maybe what on the surface that even looks like, right, because as we said there’s hasn’t been a number that we can point to that say, yes, look there’s this disruption.  And I don’t know whether or not that number will ever present itself.

But the other thing that I think is challenging about solar when we think about it as disruptor, though is I feel like yes, Aubrey McClendon was a huge part of the messaging around Shale.  But for an investor, it was pretty simple to see how you can invest in this disruption, right?  So, this company owns X amount of acreage, all right.  I’d like that there’s, you know, there’s a percentage likelihood that there might, they might find something there so you could kind of invest in who had exposure, you know, who had the land et cetera.

You could say, all right, well services service companies, people are going to have to actually do this work so I could invest in service companies, these are the guys that have the expertise or however you wanted to play it.  Even invest in towns that were around the areas where the land was being developed, right?  So, all these types of stuffs.  What about solar?  Is it just people who are manufacturing the panels because I don’t quite know where my investable themes lie in solar as the disruptor?

Cormac Gilligan:  Yes, it’s a good question and there is a few avenues by -- for example, either you could, if there are some of those power producers or those utilities that are publicly listed obviously you could invest in them.  And we’ve seen that with next terrorist share price, for example, you could look at towards so they’re companies that are using this as a way to transition their business.

You could actually invest in the manufacturers.  It’s not only just the module players, and most of module players they’re actually listed on the Shenzhen Stock Exchange.  They’ve actually delisted from the New York Stock Exchange, but we’ve seen a few appeals occur for some of the other suppliers and manufacturers so these are the steel manufacturers so you have to put solar panels on steel infrastructure.

You have to -- you need parallel electronics.  This is probably some of the important intelligence or what we call the brains of the operations that are not often talked about because they’re as visible.  They’re kind of behind the scenes but they’re the parts that are going to be the interface and where there’s going to be suffer overlaying it and these are going to basically either convert the electricity so that it could be exported or work with the battery systems or with the other para loads in your home, in your business, air conditioning, your heating, your E V charging systems.  Your smart home loads and their available and face solar edge.

There’s lots that are on the stock markets.  And then thereafter I think it’s the back to the disruptors on the themes of virtual power plants load management software as a service, and this kind of goes back to kind arose points of -- some of these businesses are at very early stages and they have a lot of promise and a lot of hope and you can see how they could play out in the system.  But they’re maybe not generating as much cash or there may be beneath surface and there at, you know, at V C stage and there yet, to be fully commercialized in a big way.

Raoul LeBlanc:  Some of them are actually quite old, it tends to be a little bit skeptical of some of these ancillary services because of my own experience.  In 1992, I worked for an organization called the International Institute for Energy Conservation and we were all about demand side management, right?  Now you didn’t have half the tools that had now, right?

But some things have been around for a while, right?  I mean, the notion that consumers don’t really care about energy, they care about light and dishwashing and transportation and all that and you could make that you could make company by delivering those services that was the same idea that we had and it’s just it’s hard to scale up.  And consumer preferences, you know, kind of sometimes get in the way.

So, while I like that, I’m a little skeptical some of those things will ever pan out, you know, and what I do see in terms of investable, I think also you have like a lot of people are building these solar farms.  From what I see Cormac, and tell me this trip the actual manufacturing the panels has been kind of subsidized by China often and frankly happens at that much of a loss.

Well, someone’s got to get that margin, so my sense would be the people who are buying them and selling the power particularly in an early stage where there’s not a lot of solar wind out there currently, you should be able to make a bunch of money because you know all the other solar panels are coming on at the same time yours is and so is it those guys is the developers and the runners of those assets or those kinds of utility return on assets.  But they’re low risk.  How do you do that whole risk and reward profile for the people who say who are taking advantage of low panel prices are falling costs.

Cormac Gilligan:  I think you’ve summarized quite well and that you’re the solar modules and panels have become quite commoditized.  I mean, it has concentrated and there are, you know, there’s one identifiable major player, but the distinguishing factors is kind of -- it’s getting harder and harder, I think.  So, you are right that the either the assets owners or developers who some of them have a short-term horizon.

So, they have like develop it and get in and get out within five years and I kind of call them like flippers.  They just get rid of the asked quite early and they clawed back their money and then they just recycle it and then they keep moving.  And the idea is you know the market is moving so quickly in terms of the technology maybe the states or the jurisdictions where now solar is moving no longer just to set west.

It’s moving into other jurisdictions on where they kind of have an edge or it could be that you know, we’ve done a lot in the United States or in Europe and now it’s time to move into emerging markets like Latin America, like Brazil, Chile or as big population centers.  Hence, maybe a little bit why Vietnam is coming on.  And I think Hill and Breanne were curious about, you know, Africa.  They’re probably the next play where you could take a bunch of money that you’ve made in well paid markets such as the United States, Europe and where there’s a lot of people chasing it now.

So, you know, he returns probably going to lower and recycle that money in higher risk markets and take on board some of those infrastructure funds like Brookfield that this bigger these developers that have maybe a presence and an aptitude like a nail has gotten done a lot of Latin America and, you know, use some of those partners and go into those jurisdictions and that’s where the next phase of.

Breanne Dougherty:  Yes.

Raoul LeBlanc:  That very interesting because in a fact, it’s just like actually like Shale, right.  Which is you get in and you buy, you know, what looks like goat pasture, and for 500 bucks and it turns out, if it works it turns out to be worth 20.  Now you’ve added that your value there and the rest of the running the asset for the next while developing all those things in the standardization phase is not where the money is actually made.  It’s like you’re saying it’s the de-risking and so getting in there figuring out the market getting the big customers, getting a maybe a guarantee on price right and putting it in there for somebody that’s, you know, where solar is not well penetrated.

And so finding these next new markets in developing the early stage assets because you’ve got risk and because you have your pioneer then that’s where the money that’s where the margin is in some ways that’s very consistent with what we’ve seen on Shale.  One of the interesting things for Shale is that because it’s a global market with a single price, it got to be such that once the production from all these areas had sort of ruined the global market, it became impossible to go to a new area, okay, because even if there was de-risking to be had the prize was not as big.  And one of the interesting things about power markets from my experience is the regionalization right there very strong regionalization and the oversupply potentially that effects and is lowering your returns in the old market doesn’t apply to the new market so there’s constantly new fresh fields for you to go to. It’s interesting.

Breanne Dougherty:  I think what’s really interesting about it as well though is that when you think of shale and it was interesting that you used the word flipping, because that – I'm like you all.  The first thing that came to mind was that is the classic word that anyway described, the shale companies, they were land flippers, right?  And a few of them have tried to develop to be operators and producers.  But let's be honest, that's where the – you know, that hasn't necessarily been a perfect world.

So, the idea of flipping – but I think what's interesting about solar is when we think of – the issue with shale was that the technology approved it couldn't really be exported because it was also so reliant upon the resource base, right?  And then the way that – then you had to have the expertise in horizontal drilling, and there's a lot of expertise and trying to export it to other regions globally and it just didn't really work, right, for a lot of reasons?  Solar, you don't have that same or credit around here, Cormac.  You don't have those same limitations with respect to export and technology.  There should be able to be a seamless exportation of technology, right?

Raoul:  But not a regulation, right?

Breanne:  But not a…  Right.  Okay.  All right.

Raoul:  Is that the differentiator Cormac - between you know, going here and going to Vietnam and going to you know, Bangladesh and Zaire.  Well, I can't say Zaire anymore.  But, you know…

Cormac:  Yes.  Definitely that's one of the things is that…  Yes, the technology doesn't change too much per geography or jurisdiction, but you're exactly right.  The – either the access to finance, the…  Obviously, you have to – the local players have the greatest set up how you're going to export get your great connection, the regulatory framework, what are the power prices that you could guess?  And even then, within – you know, some of them are you know, the word regime like it might change quite quickly.  Like it could have been saying you're going to invest in Myanmar this year and I don't think which is going to be going on in the short term.  So, there is an element of risk associated with us.

And I think one of the other aspects and maybe that connects the kind of two is then is…  Okay, we talk about the green energy majors but then on – in parallel there's this – a lot of noise about the BPs or the shells or the [indiscernible] [00:42:13] and then moving into – or expanding into renewables, and they may become some of these off takers off these large portfolios, not only in the mature markets of Europe and North America but even in the…  Those players, those developers that are willing to you know, be early movers into Africa, Southeast Asia.

And particularly you know, we’re just high population growth you know, a young grid by way of – like that it's still growing.  And I think Hill, you touched on this, like well some of these markets, how much the grid evolves and might they be like analogous to skipping straight to smartphone and using – how might the…

Like, I kind of think about how might the energy system developing some of these.  I think that's where the intrigue is and where you know, certainly as we go look you know into the long term, without a doubt, Solar will have big opportunities in these markets, but that's not what challenges is like.  One of the holy grails is such India where there's huge opportunity.  But it's almost like state by states, these challenges and as even country challenges between neighbors that even make it hard to maybe get some of this standardized products that we kind of say it, it's easy to deploy and quick.

But you know, there's so much of a concentrated in one area by way of China that it's not as simple.  And one of the other parts and why we go back to why it's in its middle or you know, maybe adolescent stages.  It has to reach scale, and maybe there needs to be some manufacturing spread out not just only in the areas where – such as China where it's allowed tremendous cost decreases with scale but also allow us to continue to expand in the United States and in other areas as a kind of further grows.

Raoul LeBlanc:  One of the keys when you're thinking about – that we've had an international oil and gas is this huge risk issue.  Because once you're in a particular location and you find something and you develop it, all of a sudden, the government holds all of the card, okay?  Because what you're going to – you’re going to leave the oils there and you cannot get it out there.  Now, you could be somewhere else and then export globally.  And so, I'm…  You know, it's kind of curious t to me as we start to move into a global situation whether you're going to…  Somebody's going to go to the trouble, build solar farm, get it, get it operated, build a transmission network and maybe build batteries.

And then you know what, the government's going to come back and say, yes, we kind of want you to lower the price.  We kind of want you to subsidize this.  We kind of want you to do this is and use local content.  A lot of the same issues that have the devil – some of the oil company because you can't export your electricity to somewhere else, right?  Very well.  And in a lot of ways, your panels are where the sun is shining, right – in the country?  It's hard – it's an asset, it's hard to move unlike manufacturing, which is ah little bit lighter.  And we'll take up and we'll go somewhere else or open up another factory here.  You don’t have as much choice once you're embedded in the structure with a big asset.

Hill Vaden:  Well, so, as maybe a way to kind of wrap this up and I hope we can do this.  Again, because this has been – at least for me, a really interesting conversation.  But we've talked about adolescence and maturity and whatnot, and I'm kind of thinking of you know, that adolescents seek advice from others or should seek advice from their seniors.  Is there any advice Raoul that that if you were the voice of a mature shale and Cormac, the voice of an immature solar...  Do you have any questions?  Did you have a single question for shale as to what – what they would – you know, what's the advice to hand down and Raoul?  If unprompted, what's the advice to the young whippersnapper that you would give having learned from shale over the past you know, 10 to 20 years?

Cormac:  I actually have one.  I thought about it when you were describing at the beginning – when Raoul was saying about a little bit about the life cycle and where shale is at.  I think about it even another industries, even in Apple where they said you have to eventually cannibalize yourself.  And one of the issues that solar will face someday if it continues on this growth path is it will be like giving away maybe free electrons or it will be producing so much in one area that there'll be depressed markets for a period of time in the day, maybe not all the time.  And so, lessons from shale where it was almost – you're so successful that it's kind of your undoing.  And what would be some of the lessons you could learn from that or help prevent that risk, any thoughts Raoul?

Raoul:  Well, it’s interesting you said that because my answer was going to be right around this, is about candidly undermining your own success.  Solar has so much potential because it's still small, right?  And it ought to be enormous.  So in my mind, the key would be figuring out or focusing the effort as much on transmissibility between grids as you can and on figuring out the intermittency, I know that's a big focus already.  But that's – the deal is you have a good technology.  And frankly, it’s not making much money now.  At some point, it's also going to be too big to subsidize per unit, you know at least in a lot of place and gets a big subsidy.  But those contracts will run out and those things will happen and you'll be mature.

And you know, in my mind, the way to prevent that is to be able to go around the clock and beat you know, both coal and gas, and that's the key if we just focus on solar.  So, that integration with – for intermittency and the – a way to avoid cannibalization because I agree, people are going to get burned pretty badly if you're the 12th solar projects in there.  Right now, in West Texas, it's actually pretty bad, right?  People look at it for their oil resources, but – it's – the solar is in great abundance.  And I've talked to investors and they say it's only a tax play, right?  So, you got to figure a way to get beyond a tax play by not cannibalizing.

Hill Vaden:  All right, let’s see.  It seems like a good place to leave it.  And I have to indulge here, our last podcast we did on solar with Sam, where we talked about David Bowie at the – from the beginning.  And David Bowie's kind of career problems seemed to be that he was obsessed with this glam image of being you know, more popular than popular.  And each time he got there, he couldn't handle it and had to shrink back and then inevitably he would climb back, right?  And so that seems to be in some senses what's happening with these disruptive technologies as well, that each is becoming so disruptive that they are you know, hurting themselves.

Breanne Dougherty:  Hill, you really moon light as a music anthologist or something.  I like it.  I feel like it helps and solve all the world's problems and relate it right back to some quality music.  It's good.

Hill:  Maybe.

Breanne Dougherty:  This will be your second career.  There you go.  We’re talking about the second career for shale.  Hill, you’re never headed for a retirement home.  You've got all life cycle ahead of you.

Hill:  We’ll see.

Breanne Dougherty:  All right.  Well, thank you very much Raoul and Cormac for joining us today.  I really enjoyed it.  And as you can see by the length of this podcast, there's plenty to talk about.  So, there'll probably be a – another round of Cormac and Raoul show soon to come.  Because I think we touched on some very interesting, highly investable themes here.  So, that was great.  Thank you so much to both of you.

Raoul:  Thank you.

Cormac:  Thanks guys.

Breanne Dougherty:  Until next time listeners.

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