The other one that’s probably not quite as easy to understand is the ramp-up and the shakedown costs. So when we get the line up and running and it’s operating, but it’s operating in scrap rates that are higher than normal, those incremental scrap costs are considered eligible costs as well, and we get to borrow against that. So there’s ongoing eligible costs even after the line is built that we’re going to be able to submit for reimbursement as we get ramped up to full capacity.
Martin Malloy: For my follow-up, I wanted to ask about Slide 12 and the tax credit you point out the PTC. Could you maybe talk about — Section 45 tax credits and domestic content you mentioned, but maybe talk some more about that and any sharing that you might do with the customers on those?
Nathan Kroeker: So really — I mean, tax credits fall into two buckets, as you alluded to. You got the production tax credit, which it’s $45, $35 plus $10 per kilowatt hour for any projects that are built and shipped after January 1, 2023. We’ve been recording that since the first quarter of this year. That one is pretty straightforward, and I think we have enough guidance now to where we feel comfortable recording that and looking — actually starting to look at opportunities to monetize those because there’s enough clarity around that. The second piece of it is the 10% electrode active materials piece, still working through trying to get formal guidance on that and exactly how we can calculate that and how we can quantify that.
So that’s ongoing. But then flipping over to the customer side, which is what I think you’re pointing to on the ITC, customers will get to 30% credit plus the 10% for being located in the correct zones. And then the area that we’re involved in is the domestic content bonus credit or 10% bonus credit, and this is for — this is not based on production dates. This is based on placed in-service dates. And so we’re actually working through with a few customers right now on quantifying those tax credits for projects that are being placed in service in 2023. And working together with a third party going through and understanding the guidance. And as we look through even on Gen 2.3, we are far in excess of the domestic required for customers to get that bonus credit.
And so just like I said, working together with individual customers on their specific project economics to see how does this play into their overall IRRs and how much improvement do they get on it. So if Gen 2.3 is far in excess of the threshold, we’re confident needs even better. And I think it’s a significant source of value with customers. Now that conversation shifts, as you suggested, to, hey, how do we share in the revenue on this or share in the economic benefit of this, right? If our high domestic content percentage helps to push the entire project above the threshold, and it unlocks value on other components of the project that another storage provider might not be able to unlock for a customer, there’s a discussion there about how do we share in that economic benefit.
And once we have more clarity on that and we’ll be happy to talk about it in more detail, but those are the conversations that are ongoing today.
Joseph Mastrangelo: And Marty, the only thing I would add on top of what Nathan just said, what he just described is a lot of work that has been done by the team on supply chain development. So everybody talks about the line, the line, the line, when are you going to get the line from ACRO? But having a line where there’s no material, you’re not going to get a product. Having a line where there’s no trained employees, we’re not going to deliver product. A couple of key things that Nathan talked about in there is like we qualify today for the tax credit. The move that we’re making with our FFELP supply is not… It’s to get the product as close as we can to a 100% U.S. supply chain because that derisks the supply chain. And what saved the Company during COVID was the fact that we had such a high U.S. content, we’re able to continue to do developing — development on the product and manufacturing.
What we’re also doing, and I want to clarify, like as we think about the ramp and how this plays into the credits, we’re diversifying our supply base. So everything I talked about earlier in the presentation, it links in with how you get those credits, how you scale the Company and how you have material flowing and really upscaling, if you will, or getting into higher-volume suppliers to be able to deliver and having those higher-volume suppliers be in the United States. We have been dormant as it comes to manufacturing, if you will, as a country when you look at what was happening. So it’s not like you just walk into a supplier and say, “Let’s start doing this.” There’s a journey to… gain journey and working through that journey, and that’s one of the things we’re also focused on as we bring the new line into production.
Operator: And for your next question, it comes from the line of Christopher Souther from B. Riley.
Christopher Souther: So it sounds like we’re going to keep production pretty low out of the semi-automated lines to conserve cash, which makes a lot of sense. But we basically assume a similar run rate in 3Q, 4Q and 1Q, pretty minimal revenue of $10 million kind of burn per month. And I’m just curious if there’s — we should expect any increases as we start to build out and test the line from that side.
Joseph Mastrangelo: So Chris, what I would say is when you look at the production in the month of October, it’s 5.5x higher than what we were doing in September. So the line has scaled up. What our goal is around production, just to be very clear, we want to get our project out and shipped and installed in ERCOT. That’s an important project to show the use case of going back to winning orders in the market, having a scaled project that’s installed and operating helps you win orders in the market. So that’s what we’re going to be focused on here over the next three months, if you will, as we get in two months like what Nathan talked about is we’re cutting over into a lot of the cost out work that’s been going on. So building off of the comment that I made to Marty earlier.
Not only are we developing a domestic supply chain and developing and diversifying our supply base, we’re also taking significant cost out of the product. So cutting… Manufacturing, when you know you have a bill of material coming that’s going to cost less. That’s as good as capital management as anything you can do, and that’s what we’re going to be able to do. From there, we shift the focus to delivering our 47 megawatt-hour project to the large utility here in the United States, and then you’re going to be ramping up the line. And that’s kind of the cadence as you think about how you go through this, where we’ll talk about in December is what all that timing looks like and what that puts together as you start thinking about the road map to profitability for the Company.
Christopher Souther: Yes. Okay. Thanks for clarifying. I thought you were potentially pushing those projects into the fully only environment, but that makes more sense. And then just…
