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How China Might End Up Dominating A Solar-Powered Green New Deal

September 11, 2020

By Kenneth Rapoza, CPA Industry Analyst 

Joe Biden wants a Green New Deal and that means installing around 500 million solar panels nationwide. Where will the majority of those solar panels be made? In the USA, or China?

If Joe Biden wins, solar is expected to play a large role in fossil-free energy over his term. The question becomes whether those solar panels will be made in the US or in China. If China, then our solar supply will rely on them as much as it relies on the sunshine.

Of the top 10 solar panel makers in the world, eight are Chinese owned or controlled. (see chart below) Hanwha Q Cells, is number 6 on the list.  The company is headquartered in South Korea, but has invested half a billion dollars to manufacture in Georgia. Number 8, First Solar, is headquartered here and manufactures in Ohio and other countries. Both companies are CPA members committed to rebuild a US solar supply chain.

In January 2018, President Trump put tariffs on solar cells and modules imported from China for four years, and that was a life saver for a handful of companies. Because of those measures, those companies hired, and made solar modules here, as well.

It’s a long road to compete with China. They dominate the market and are building more capacity to increase their lead.

Even Canadian Solar, which is number 5 on the list of biggest solar companies in terms of exports, is manufacturing nearly everything in China. They are essentially a holding company of Chinese solar manufacturers who make their panels throughout Asia and Brazil, not Canada. 

Top 10 Solar Panel Makers 2020

There is a global shift towards a cleaner electricity system, so wind, solar, batteries and nuclear are all beneficiaries of that trend, regardless who is in the White House next year.

But, there is a risk that US leadership is giving up on manufacturing solar, figuring there is no way to compete with China on this anymore, and instead are trying to make inroads on something else like wind (China runs the wind turbine market) or batteries (China is the rare earths leader and climbing up the battery making ladder). Surrendering global  solar manufacturing industry to China would be unfortunate, especially if a Green New Deal is seen ramping up solar demand in the years ahead.

As it is, solar is already expected to be the dominant new electricity source in the United States for the next several decades. We are now the second largest solar power user in the world, but we are dependent on China for nearly everything that goes into making it happen.

Solar accounted for 40% of all new electricity generating capacity added in the US last year and the solar installation business put up 13.3 gigawatts of solar panels, a 23% increase from 2018.

Cumulative operating capacity in the US now exceeds 76 gigawatts, up from just 1 gigawatt at the end of 2009. The US saw record-setting residential solar capacity added in 2019, years after leaving the Paris Accord, with another 2.8 gigawatts installed.

This is the manufacturing market the US government would be throwing away to China if solar power was not centered on domestic innovators and producers.

Here is what China “owns” in the global solar panel industry today:

The polysilicon materials used to make solar wafers, China dominates 95% of that supply chain. For silicon wafer slicing – that’s the stuff that eventually gets put into solar cells and modules – China runs 99% of the supply chain. The US is a significant manufacture of polysilicon. In fact, as part of the Phase One trade deal, China committed to increasing its purchases of US-made polysilicon by an undisclosed amount. Industry sources told us they have not, at least as recent as May.

In March, Chinese polysilicon maker Tongwei announced it would increase its Chinese production of polysilicon by 135,000 metric tons a year. This is more than six times the capacity of the polysilicon plant in the state of Washington that REC Silicon announced in February it planned to reopen to meet the opportunity to sell into the Chinese market presented by the Phase One deal.

China is 80% of the solar cell market. They have a commanding 75% of the high value solar module market, as well, based on 2019 data compiled in a report by Cora Dickson at the International Trade Administration’s Office of Energy and Environmental Industries in March 2020.

For at least the past 10 years, China sought to capture the solar market. They saw it as one they could easily dominate due to the commodity nature of the business and its large manufacturing base. Plus, China has the world class logistics to ship to Europe and the US.

China’s solar industry is heavily subsidized. For example, some companies are given free land near coal fired power plants for cheap energy. They got the usual subsidized loan from state and muni-banks.

When there was antidumping order on China solar modules in 2017, China moved its factories to Taiwan, Vietnam and Malaysia. That same year, SolarWorld Americas, a unit of SolarWorld of Germany, filed a Section 201 trade action to address China’s country of origin sleight of hand in order to prevent them from putting more US players out of business. At the time, Korean and German owned Hanwha Q CELLS built a factory in Dalton, Georgia to serve the US market. They now have 650 employees there thanks to those measures.

A handful of firms that were importers at the time started making their own modules in Alabama and in Oregon. There is an estimated total of 5 gigawatts of active solar module manufacturing capacity in the US, more than has ever existed before, and we can thank President Trump’s Section 201 tariffs for that domestic investment.

Section 201 of the Trade Act of 1974 permits the President to grant temporary import relief by raising tariffs or imposing nontariff barriers on imports that injure or threaten to injure domestic industries.

The Trump Administration had identified the threat the Chinese government posed with its subsidized, oversupplied solar industry on US manufacturers. China was basically forced to do something about all of its solar panels sitting in warehouses when Europe put the breaks on solar for a while after the great financial crisis of 2009. China then put those solar panels to work at home, and became the world’s leading solar power producer. Even so, despite all those solar panels, and despite being the world’s number one maker of them, solar accounts for around 5% of its energy matrix. 

In the US, it’s 1.8% of utility power generation, according to the Energy Information Administration.

That means China has two major markets to grow into: its own, and ours.

At the very least, the Section 201s should remain to help support solar panel producers, and better solar power technology here. Moreover, any government contract to install solar panels, or to subsidize solar panel installations, should be awarded to American firms installing panels from American manufacturers.

Ideally, we would also be able to source the polysilicon from the US, or from other countries as well. China is – yet again – the one stop shop. If we are finally over our dependence on foreign oil, why move to be dependent on foreign solar panels?

Trump’s argument has less to do with clean energy, and everything to do with breaking Chinese monopolies and becoming merely a retailer and assembler of foreign made products.

Biden’s argument may take numerous tacks – he says he wants to punish those who are not fighting climate change. He says he wants to help the US recovery from the pandemic by creating manufacturing jobs. Solar should hold his feet to the fire on that pledge. Solar is in the progressive’s wheel house of favorite issues: climate change, meaningful work and income.

But if we are going to install 500 million solar panels under a Biden-Sanders Unity Task Force goal, any absence of specific policies designed to incentive US manufacturing means we will end up installing more Chinese solar panels than American ones. This is a given already, as China dominates the sector. We should at least close the gap.

That the solar importers association, the Solar Energy Industries Association, is using a #RebuildBetter social media campaign to highlight solar should worry domestic producers. It’s a play on Biden’s Build Back Better campaign slogan, and is a nod to policy makers in Biden’s camp to keep importing. Worth noting, “installation” is the key word in his policy on solar.

Other that First Solar and Hanwha Q CELLS, there are smaller producers of solar panels in the US. Some of the ones still in business despite China competition include Grape Solar of Oregon, makers of portable solar panels. Most of their stuff is imported, but they do make a 190 watt and a 300 watt panel. Suniva from California is another. Many more have closed.

Let’s not rewind the clock to the days when we were dependent on foreign oil to the days where we will be dependent on foreign tech in order to make power from the sun.

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