US solar manufacturers in ‘dire situation’ as imports soar
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A flood of Chinese-produced solar panels is driving prices to record lows in the US, a boon for renewable energy developers but a threat to solar manufacturers trying to create a domestic supply chain for the country’s fastest-growing source of electricity generation.
China, the dominant solar equipment supplier, doubled production capacity last year to more than 1tn watts and now produces nearly three times more panels than global demand, according to the International Energy Agency and Wood Mackenzie. Global prices for panels have fallen 50 per cent in the past year to as low as 10 cents a watt.
The supply glut has enticed US power companies to favour imports over more expensive domestic panels as they build new solar generating complexes. In response, North American manufacturers say they are pulling back on expansion plans despite lucrative incentives available under the Inflation Reduction Act, the landmark US climate law.
“The market is crap,” said Martin Pochtaruk, president of Heliene, a Canadian solar-panel maker. He said his company delayed plans to add a 500-megawatt assembly line to its solar panel factory in Minnesota. “We don’t want to bite something we cannot chew.”
Last month CubicPV, a Bill Gates-backed manufacturer of wafers for solar panels, scrapped plans to build a 10GW US factory announced in December 2022, citing a “dramatic collapse” in prices.
Mark Widmar, chief executive of First Solar, the largest US solar manufacturer, warned at a Senate finance committee hearing on Tuesday of the country becoming a “de facto extension of China’s Belt and Road Initiative”.
After the IRA’s passage, First Solar announced new factories in Alabama and Louisiana. “[China] does not want the US to have its own domestic industry . . . It’s a pretty dire situation,” Widmar told the Financial Times.
The US puts a 14 per cent tariff on solar component imports from most countries. A separate 25 per cent applies to goods made from China, which Washington imposed citing Beijing’s “discriminatory” trade practices, along with anti-dumping and countervailing duties on Chinese solar panels that exceed 200 per cent.
Solar shipments from south-east Asia were also subject to anti-dumping and countervailing duties after the US commerce department last summer found that five Chinese solar companies were setting up factories in the region to circumvent US tariffs. But the Biden administration issued a moratorium on the duties to last until June.
The US imports the bulk of its solar panels from south-east Asia, whose exports remain far cheaper than US-made counterparts even accounting for tariffs and IRA subsidies, according to a report by BloombergNEF. The clean-energy research group said the US imported 50 gigawatts of panels between January and November 2023, a record high.
The “writing is on the wall” for US solar manufacturers, said Pol Lezcano, senior analyst at BloombergNEF. He anticipates cancellations and delays to solar manufacturing commitments which have totalled more than 115GW since President Joe Biden signed the IRA.
BloombergNEF estimated that by the end of 2024, US-made solar cells and modules will cost 18.5 cents a watt, compared with 15.6 cents for a product from south-east Asia.
“The IRA subsidies are hugely lucrative, but they’re still not enough to compete against cheap imports,” Lezcano said, adding that a “new protectionist measure” would be necessary to make American manufacturing competitive.
Manufacturers, including First Solar and Heliene, have called for stricter enforcement of tariffs, including striking an exemption for the two-sided type of solar panels that make up the bulk of imports. They have also called for bringing forward the end of the moratorium on duties against south-east Asian imports.
Cheap panel prices have provided a tailwind for US solar deployment, which in turn has boosted the zero-carbon power source’s presence on the electric grid. The US Energy Information Administration expects 36GW in new solar this year, the biggest source of capacity growth on the electric grid.
Abigail Ross Hopper, president of the Solar Energy Industries Association, which represents US solar developers and manufacturers, told the FT that the US will “always” source a mix of imported and domestically made panels. The industry group does not support an early expiration of the moratorium nor the removal of the tariff exemption for two-sided panels.
“While we move towards a more domestic supply chain, we want to be making rapid progress towards our climate goals,” Hopper said.
The concerns come as the Biden administration becomes increasingly worried about the possibility of China dumping solar panels in the US because of the industrial overcapacity problem it faces in its domestic market.
Senior Treasury officials told the FT recently that a delegation had made clear to Chinese officials during a visit to Beijing that the US and its allies would take action if China dumped goods on international markets. One official said the US was most concerned about solar panels, electric vehicles and lithium-ion batteries.
China produces three-quarters of the world’s solar panels and an even higher share of inputs, including polysilicon, cells and wafers. Its grip on solar manufacturing is expected to remain largely unchallenged through the end of the decade.
Republican threats to repeal or water down the IRA have also cast uncertainty over US manufacturing ambitions. Former officials from the Donald Trump administration have told the FT that the ex-president would gut the climate law if he wins the general election in November.
While First Solar does not expect the IRA to disappear under a Republican administration, the company warned that the loss of subsidies and insufficient tariffs risked the US turning into Europe, where Chinese panels have overwhelmed the market and crippled domestic suppliers.
Meyer Burger, a Swiss solar manufacturer, announced in January it was shutting down its plant in Germany and focusing efforts to boost manufacturing in Colorado and Arizona, supported by the IRA. “Europeans are losing this strategic industry,” chief executive Gunter Erfurt told the FT.
Widmar said: “If we become Europe, where we just open up the floodgates and China just overwhelms this industry, it’s going to be devastating.”
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