California Dreaming: Dr. Torsten Brammer speaks with Howard Wenger in The Solar Journey podcast

Great to be here. Thank you, Thoron.

Okay, so I grew up in Southern California, and there were a lot of smog alerts there. Sometimes we would be in school and we'd have to go inside because there was so much air pollution in the Los Angeles area, Southern California. I think that was the beginning for me. I became conscious of the environment. There were gasoline shortages in the 1970s, so I'm dating myself, but I graduated from high school in 1977. I was in a line waiting for gas because of the oil embargo by OPEC, right? So there was a shortage of gas. I was about to go to college and wondering what I would study. It was in one of these gas lines that I actually thought about alternative energy, not necessarily solar, but the need for energy independence. Then the final trigger moment was in 1982. I studied Environmental Studies. I tried to get a job in solar in 1981 after my graduation from college. There were four photovoltaic companies in the United States. I could not get a job because I had a non-science background, and in those days it was all about research and development. So I went to the World's Fair in Tennessee, and there I saw a photovoltaic panel powering a telephone booth. I just fell in love with photovoltaics. Then I got a graduate degree so I could get a job in photovoltaics.

That's right.

Well, the first thing I did was become an engineer. I was not an engineer, but I got a master's degree in engineering. It took me almost five years to get a master's in engineering because I had to take all the courses. That's when I learned programming in Fortran. I call it Fortran Rex, like a dinosaur of programming languages. For my master's thesis, I created this photovoltaic simulation program for large-scale photovoltaic systems. The first program I wrote was around 1984. That's when I got my first job in photovoltaics. So I was really an engineer and a researcher for my first 10 years in photovoltaics. Then I got into the policy and business side after that.

Well, nobody in my family or my friends understood what I was doing. They thought I was off wandering like in the hillsides or something, like Howard's a lost soul pursuing the solar dream. Because photovoltaics, the cost of the systems were very small, mainly off-grid. They cost $15 to $20 per watt back then, which is probably about $40 to $45 per watt today in today's dollars. So we were in search of cost-effective applications of photovoltaics. We had to focus first on off-grid, then distributed generation because you could sell it at the retail level and get that retail price of energy, and then pursuing utility scale after that. It's been this progression over 40 years. Now our company, we just celebrated shipping 100 gigawatts. Nextracker was founded in 2013, so we have shipped cumulative in 11 years 100 gigawatts, which is just an amazing feat for any company to do. It's been very exciting.

It's a great question. We saw the rationalization of this. We had our own projections. There was a company called Strategies Unlimited, a consulting company that followed the solar industry back in the 90s, and they discovered a learning curve for solar. They discovered that with every doubling of shipments, the price was coming down 18%. Cumulative shipments. So we would take that in our curves and we projected out that probably by 2010, 2015, we would be about $2 per watt for a system installed. We've blown through those projections. For me, that was the dream. We thought at $2 per watt we could proliferate solar everywhere. That was the magic number. Now systems are going in for as low as 50 US cents per watt, including a substation, in places like the Middle East. It's astonishing.

Oh, so many lessons, and so many victories and many challenges inform everyone's journey. Being here at the Intersolar event in Munich, Germany, I think there are over 50,000 people here. Everybody has their own personal journey. For me, I've always focused on trying to create value. How can I personally add value to whatever it is I'm doing, to the team, to the company, to the organization, to the industry? Always, what could I add personally? That has guided me throughout my career. It guided me to go into policy because the industry really needed to change things like how energy is metered. I actually ended up co-authoring net metering legislation and driving it in the United States. I got involved in the first rebate program for solar in the United States, $4.50 per watt rebate in California in 1996. It's always guided me in helping lead companies.

I've never experienced that. The gaps have always been so interesting because everything, first of all, you either are captivated by photovoltaics or you're not. For me, I'm captivated every time I look at a solar cell. You see that it's the thickness of a human hair or less, and light comes in and power comes out for decades with no pollution and no moving parts. You're like, okay, this is the ultimate energy generation technology. If that creates a spark in you, which it has in me, I'm obsessed by that. Dan Shugar, who's the founder of Nextracker, he and I have worked together for 35 years. We have this thing where if you cut us, silicon pours out of our veins, not blood. We're just obsessed by this technology. If you have that feeling, then any gap that you jump into is worthwhile, whether it's technical, whether it's growing a business, or if it's creating policy, or just communicating like what you do for a living, which is very important.

It's burning very bright.

Well, we've done well. We have a value proposition that I believe is differentiated. The core thing for a strategy, every company needs a strategy. This has been another guiding principle for me, which I actually learned from Michael Porter, who's a Harvard professor. He's very famous. He's written all kinds of books on strategy and business. He teaches at Harvard Business School. I've never taken a course from him, but I followed him and looked at his videos. What he says about strategy is: strategy is how do you create in business differentiated competitive advantage that is sustained differentiated advantage. Then the steps to actuate the strategy are also very important. Nextracker has done this. How has Nextracker created a differentiated advantage? With our technology, first of all, through a lot of know-how. The founders, there are actually six founders, they're still with the company today. The executive management of the company has on average about 25 years of solar experience. We commercialized single-axis trackers back in the 90s, and they were linked row trackers. They were reliable but had a lot of constraints and issues. We have taken lessons learned from deploying megawatts, hundreds of megawatts of different tracking technology, and we created an independent row balance tracker where every row is monitored. It has its own antenna, it's connected via wireless mesh network, so we can tell exactly what's happening every minute of every day on every tracker row in a field. It has unlocked a lot of advantages by being non-linked and self-powered, meaning it's not connected to the grid, it powers itself. We can now follow the terrain, we call it light on land, so it eliminates grading. You keep the topsoil and you can just have the tracker follow the land. That's our NX Horizon XTR extreme terrain following tracker. We can also control every tracker to maximize energy output. If you have a hill, the tilt angle needs to be different if the trackers are on different angles on a hill. We control every tracker to maximize the energy output. We also have aeronautical grade fasteners that secure our tracker, so it's a lifetime connection. We do not have bolts and nuts that you have to retorque. We have many advantages and differentiation of our product versus the competition that maximizes energy yield and minimizes the cost of energy. That's why we're selected.

It's amazing. We use brushless motors versus a brushed motor that some of our other tracker providers use. We use certain components like lithium-ion batteries versus a lead-acid battery, which is lower upfront cost. But our lithium-ion batteries last, you might have to replace them one time during the life of the project. We have done things to minimize the O&M cost to be the lowest O&M provider of trackers in the world. That's our belief, and it's been validated by third parties. It's true that trackers have moving parts, but when you think about it, most of the time they're just rotating a little bit, super slow throughout the day. There really aren't that many parts that will wear out or have an issue. We've proven that the little bit additional cost versus a fixed tilt, but you can have up to 25% or even 30% more annual energy, it makes sense. It does require more land, so there are trade-offs. Trackers aren't the only solution. Fixed tilt is a very good solution for certain applications.

Sure. We recently reported, we're a public company, all of our financials are available online at nextracker.com. Last fiscal year, which ended March 31, we had about $2.5 billion in US revenue, global revenue. About two-thirds of that revenue is in the US, one-third outside the US. We have over 1,000 employees now in the company. We have offices around the world. Our headquarters is in California in the San Francisco Bay Area, but we have offices in Nashville, Tennessee, and in India. We have over 300 people in India. We have a big center in Brazil. In Europe, we have over 60 people. Our main offices are in Madrid. We're all over the world. Australia, we have a great presence there. We've been growing historically about 30% per year for the last six or seven years, so we've been growing quite fast.

Well, I do believe in the inverted organization chart where I'm at the bottom and the rest of the company is above me. Dan Shugar is the CEO. We partner and we sort of divide and conquer. He's not at this show, he's at another event in the US. My focus is on R&D, product development, marketing, and sales, and getting those products to market. That's my focus. We have a team including Alex, who's our Chief Technical Officer, driving innovation in the company. Managing that to a real product, getting it out in the field, and then sales and marketing and making sure those assets are managed well in the field, that's what I tend to focus on. I'm also on the board of the company and helping with general management and decision making.

For people, first of all, for employees of companies, find your passion. Find something that you're truly passionate about because that's the number one thing that drives you. Then find something that you can personally add value to the team. Act with what I call TRE, which is trust, respect, and empathy for your fellow employee. Trust them, your partner, have respect for them, and treat them with empathy. For someone starting a business, it goes back to what is your strategy? What can you uniquely add? We don't need another photovoltaic panel. There are lots of people making photovoltaic panels. But if you're going to start a photovoltaic cell or panel company, maybe you have an invention that's unique, that's interesting. For people who are starting businesses, I think it's very important to have the whole industry in mind. How can you pull the whole industry forward?

I'm quite religious about plan versus actual. You have a plan, execute to your plan, whether you're in product development or in sales, in bookings or in revenue. Execute to your plan. That's served us well. We're doing that in Nextracker. We've had five earnings calls and we're executing to plan. As a result, we're doing well for our shareholders, our employees, and our customers. Always put the customer first. We walk over broken glass for our customers. Our customers are really the most important partner you can have because not only do they write the checks, they give you amazing insights on whether it's product, sales process, fulfillment, warranty. Listen to your customers. I tell people to have two ears and one mouth. There's a reason for that. That's the ratio. Two-thirds of the time when you're with a customer, listen. It should be two eyes, two ears, and one mouth, which is 80% of the time listen to your customers.

That's exactly the critical interface. It's something that we, it's a challenge for us because you can become quite defocused. There are so many great ideas out there. There's agrivoltaics. Should we jump on that? There's floating systems. The weather has become more extreme, so now you have these hail missiles coming from the sky, these hail balls that are the size of a grapefruit. How do we protect those systems? We are listening to our customers. This area of dealing with the environment in a more volatile environment is something we're paying a lot of attention to. We announced last year a new product that now stows at 75 degrees so that it's more hail resistant, for example. Ultimately, you have to try to be data driven but go with your gut. At the end of the day, that's a balance. So far, we're doing okay in this regard. We have a lot of parallel efforts.

In the end, I think it's 50/50. Ultimately, you have to go with your gut because there's only so much data. There's always going to be uncertainty. Do you ski? Sometimes the light can be very flat, the sun is obscured by fog and clouds, you can't really see the terrain. You have to leap off the mountain and trust that you'll make your way down. That's where the gut comes in. You have to make a decision and leap in because you won't have all the answers through data.

The energy is amazing. The amount of activity is still really strong. I was here last year. Comparing last year to this year, it's the same, if anything there's more activity. Tempering this exuberance, there are new markets that are evolving, like Romania is a surprise market that's quite interesting. Tempering that is the solar industry can be like a field of locusts that can strip all the crops and move very fast because it's very distributed. There are so many developers, so many companies. The technology is actually quite simple, it's not that technical. It's not like building a gas plant or a coal plant or a nuclear plant. A single company on one site can build 10 megawatts in a week, or more. It's astonishing how fast these power plants can now rise up. We were talking to a company that was literally installing, they hit 10 megawatts in a day. It's remarkable. Getting to the tempering part, we can create excess energy quickly with solar. It's very important that other technologies come along, like battery storage and other things, so that we can provide more of a 24/7 product with solar, wind, storage, and other renewables. That's important.

Trackers are still the core. We view the tracker as the spinal cord, the skeleton of the system, and the neural system of the power plant. That's still the core. But yes, we're looking at potentially doing more. Our customers would like us to do more, which is interesting. When you look at the evolution of the industry, companies going back 20 years had a tendency to do more than just make panels. In our case at SunPower, we ended up vertically integrating because we wanted to make sure the factories were loaded. As the industry scaled, companies became more specialized. I never thought I would see more than 10 tracker companies at a show, just doing trackers. That's quite surprising. But I think we might see in the future a reintegration to a more form or complete solution again.

Yes, like a pendulum.

This is interesting because this is also one of these pendulum things. There was a tendency to have all the manufacturing come from Asia. But before that, it was more local. We had factories in different places in the world. There was a migration to Asia. Now there's more localization happening. For Nextracker, we have over 80 manufacturing facilities around the world. We've enabled over 20 facilities in the US in a very short period of time, two and a half years. Three years ago, the company was importing just about everything. Now we can hit 100% domestic content in the United States as an example. We can achieve more than 65% local product in Europe. In Brazil, we have a very high percentage. In Australia, we have a very good percentage. In India, over 80% localization. The pendulum has come back. It makes sense in a way because the pandemic taught us that logistics can be incredibly disruptive. That actually was a catalyst for Nextracker to localize in the United States. It wasn't the Inflation Reduction Act, although that has accelerated our localization.

I have really mixed feelings about this topic. Why? Because as somebody who's worked in solar for 40 years now, wanting that cost and price curve to come down, at the end of the day we're competing against the grid and all the other energy sources coming through the grid. The only way to do that is to get costs way down the curve. The industry owes a huge debt of gratitude to the companies in China in particular that have scaled massively and driven cost out of the panel, and efficiency up with solid warranties and performance. They've done a really good job. You can argue about how the government has their role and how that's played out and the impact they've had. It's a different socioeconomic paradigm in China. I'm not going to argue that. I'm fixated on mainstreaming solar. For the industry, it's been very good. It's driven cost out, forced all the competitors to be more innovative and creative, and scale the industry. Now in the US, we have tariffs placed on this product because the federal government of the United States has decided it wants to localize solar cell and panel manufacturing in the US. I think this can work. Some of the global players in solar are coming to the United States to make this work. I think it can work. With policy, I look at it as a three-legged stool: policy, technology, and economics. They work together. I think other countries can learn from the Inflation Reduction Act of the United States, which is really fast-tracking renewables. It's not only for solar cells and panels. There are incentives for batteries, inverters, the whole value chain, trackers.

I don't think it'll slow down because other US manufacturers are scaling up their factories and providing production. It's still a competitive situation, although there are a couple of dominant US players that are benefiting from this trade policy in the interim. That will mean pricing will either be steady or increase some. But because of the way the Inflation Reduction Act is with the tax credits for the owner, it can be offset to a degree by the 30% investment tax credit and the 10% bonus tax credit, so you can get a 40% tax credit that can offset. If you have a $1 per watt increase, which is absurd, but let's just say that, 40 cents is taken away through this incentive. So it's buffered to an extent. There have been dozens and dozens of announcements for new factories in the US, and they're going in. The investment is happening.

I think it's maybe not helpful for growth, let me put it that way. It will slow it down, I agree, but it will still grow, maybe not as fast. I think the biggest governor to growth is the interconnection approvals for these projects. In the United States, it's astonishing what's happening there. The US generating capacity is about 1.3 terawatts, 1300 gigawatts of installed electric generating capacity. Half of that is gas. Solar is like 4% or 5%. Coal and nuclear together are about 30%. Wind has maybe 8% or 10%. When you add it all up, it's 1.3 terawatts. The interconnection queue, the wait line to get connected to the grid, is about 2.5 terawatts, double the existing generation capacity of the United States. The US has something like 90 nuclear power plants. This interconnection queue, 90% of that plus is renewable energy. Solar and storage is 60% of that queue. It's astonishing. How are we going to get these projects interconnected to the transmission system? That's the biggest governor to growth. But it's happening. They're getting connected. Our company is growing 30% per year. We're still growing. Projects are going through.

All of the above. It takes time to get a permit, the studies that are needed. You can call that bureaucracy. There are technical constraints. The technical constraints have not been reached, however. There's plenty of substation and transmission distribution capacity in a lot of the United States. But there does need to be more transmission installed. There can be reconductoring, which is quite easy to do, using existing towers and just putting more capacity. These things have to happen. They will happen. They're happening.

There was a bit of an issue. One of the things we did was purchase a company called BrightBox that had some AI and machine learning capability, maybe five or six years ago. Because we didn't have the technical know-how in the company, we got some help by buying a company and injecting that DNA into the company. We translated that know-how into managing every single tracker row, which is like the length of a football field, to maximize the energy yield. That's done through software, we call it TrueCapture. With the advent of panels, for example, a solar panel electrically can actually be two panels, it's split electrically. We added to the software something called Split Boost, where we allow the bottom half to be shaded at certain times of the day and allow the top half to be fully illuminated. We are optimizing every moment of every day, every row through software. That's one example of how we're using software. That came in through the company we acquired. That helped provide us some of the algorithm and know-how to make that happen. Now we have a full performance team, and they keep evolving the software and what we're doing.

No, but I understand it. We talk about it. They call it organic versus inorganic growth in a company. It's a trade-off. You can do it organically, hire the expertise, reroute some of your existing people, get them on a project. But there are always competing priorities. Sometimes a company has so many competing priorities that they can't really dedicate the resources needed to expand their horizons. That's when, in the companies I've been in, we say we're going to acquire a company because you really try to find a synergy. You want to find a company that's doing something you're not doing but will fit culturally together. Maybe in Germany, there's a concern or an experience that when you bring another company, the culture fit isn't there or it just doesn't work. Often it doesn't work in the United States. I think it's like marriages. I don't know the statistics, but it's like 50/50 for companies that buy other companies.

Yes, all true. I think that if you're a public company like Nextracker is, you're held to a different standard. The investors in the company, since we're publicly owned, anybody can own Nextracker. Some of the traditional financial metrics are important. The multiples we're paying for a company, we have to pay attention to that. But the more important thing for us is what is the value proposition of the company we're acquiring? Is it something that's going to truly help us be more differentiated, be a stickier platform where we engender more customer loyalty? Those are more of the will they match culturally, the employees with us, is there a leadership team that is maniacally driven like we are, will they match us in our energy and intensity? These are more the things we're looking at as a company. But we also have to adhere to these metrics. In Europe, I don't have as much experience understanding what motivates a European company versus a US company and what the differences are.

Why is that?

There's also a disproportionate number of casualties in the business world in the US versus maybe a more careful approach here. I had the fortunate experience of working with Total, the giant energy company out of France. They were a 60% owner of SunPower when I was there. They were a fantastic partner. They acquired companies while we were there. They made investments in storage, they bought a retail energy company in Belgium. I think they were very thoughtful about these companies and their prospects, holding them to deliver on their plans, but also very forward leaning in terms of where we're going for the future. That was really caused by the leadership of Total, which is still in place and driving that company to be one of the leading green energy companies in the world. That's exciting. That's what we need. We need these energy giants to move in. We're very proud to have grown our company to an $8 billion market cap. These energy companies are like 50 times our market cap. They're giant. What we earn in a year, they earn in a week. The industry needs to greatly expand. Our company needs to go 10x. When we're north of a $50 billion or $80 billion market cap, we want to drive it to a $100 billion market cap. The industry needs to become where the oil and gas industry is today, which is very difficult to make that energy transition happen.

I think it's plain and simple. They're making tremendous amounts of money selling oil and gas. They're earning huge profits this way. They did well during the pandemic, and they're doing well now. At the end of the day, shareholders in most of these energy giants, they're publicly owned companies, you have to focus on profitability. Some are investing big time. We're working with these companies. Most of the large energy companies we're working with are in solar, they're in wind. We want them to do more. Please do more. They're doing great. We highly value them and we're very happy with their progress. But we need to go 10x in renewables.

You got that right. That's the core of the mission. That's what binds these 50,000 people together at this Intersolar event.

It's going to happen with or without these energy companies coming on board. It's inevitable, unstoppable, undeniable. Look at the interconnection queue of the United States. Look at it here in different parts of Europe, in Spain and Germany. It's happening. The energy transition is going to happen with or without these. It could go faster if these other companies joined, but it's happening. It's a foregone conclusion. We need more hybrid systems. We have to solve the storage problem. Storage on-site. But with electric vehicles and lithium-ion costs coming down, did you know that California has 10 gigawatts of battery storage they've installed in four years? The grid is 50 gigawatts. There's already 10 gigawatts of storage, about 35 gigawatt-hours. It's amazing. It's happening. It's super exciting.

I really appreciate it. I think the name of your podcast, The Solar Journey, is spot on. It's been a journey. Thank you. Thanks, really appreciate it.