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2024

Forbes: Can Solar Manufacturing Succeed In The U.S. And Compete Against China?

Forbes: Can Solar Manufacturing Succeed In The U.S. And Compete Against China?

 

Can Solar Manufacturing Succeed In The U.S. And Compete Against China?

By Ken Silverstein, Senior Contributor (

China dominates global solar construction, primarily due to inexpensive labor and government subsidies — something that has driven down the cost of production by 85% since 2010. However, the United States now provides incentives to create modules domestically. Will the policies make a dent in China’s dominance?

It’s a touchy subject, with some solar panel companies saying that China has built the economies of scale responsible for the massive solar rollout of 33,000 megawatts domestically in 2023. However, U.S.-based solar makers argue that Chinese subsidies distort markets, necessitating tariffs. Others maintain that homegrown solar panel manufacturing will be competitive because of newly enacted tax credits.

“We need to make solar modules in the United States. Think of the overall cost,” says Michael Gray, chief operating officer of Origami Solar, during a panel discussion at the San Diego Intersolar Solar and Energy Storage North America conference. That includes the cost of tariffs and shipping. “If we are going to drive the cheapest solution, this is it. There is a lower carbon footprint, and there are incalculable benefits. The Inflation Reduction Act is brilliant, challenging us to make products in the U.S. Tariffs cannot do that.”

Last year’s U.S. solar installations topped those of 2022, which were 21,000 megawatts, according to the Solar Energy Industries Association and Wood Mackenzie. Indeed, solar comprised 48% of all new electric generating capacity additions during the first three quarters of 2023. It now provides 161,000 megawatts, which will hit 377,000 megawatts by 2028. By 2050, they expect solar to be the largest source of generating capacity on the U.S. grid.

In 2017, Donald Trump imposed a 30% tariff on Chinese solar panels to “save” American solar panel makers — 5% of the global production market. The solar association and U.S. utilities oppose tariffs, arguing they raise the price of solar panels and hurt buyers.

While President Biden, temporarily lifted those levies, the White House now plans to reinstate them in June 2024. The U.S. Department of Commerce found that some companies — divisions of Chinese solar makers — were doing an end-around U.S. tariff law by routing their products through Cambodia, Malaysia, Thailand, and Vietnam. The agency listed BYD Hong Kong, New East Solar, Trina Solar, Vina Solar, and Canadian Solar as the offenders.

Biden’s Balancing Act

It presents a Catch-22 for the Biden Administration, which aims to drastically cut heat-trapping emissions by increasing the amount of renewable energy. At the same time, the White House seeks to build the U.S. manufacturing base through the Inflation Reduction Act’s tax credits — specifically those devoted to building solar panels, wind turbines, and electric vehicle batteries.

“The Act will impact prices and lower costs to the market, providing more profit potential for manufacturers,” says Sean Burke, chief executive of Enteligent. “Assembling solar panels in the United States means a lower potential price, making solar more affordable and increasing adoption.”

Specifically, solar panel users get a 30% tax credit if they buy in the United States, called the residential clean energy credit. While lawmakers could extend it, the credit winds down in 2035. Customers can also get an extra 10% credit if they buy solar panels built in this country. First Solar FSLR +0.6%, Mission Solar, and Qcells are among the solar companies producing panels in the United States.

According to Environment Entrepreneurs — E2 — the private sector has announced at least 210 significant new green energy and clean vehicle projects across the country since the passage of the Inflation Reduction Act. That will create 74,181 jobs and attract $86.3 billion if they come to fruition. That includes a lot of electric vehicle and battery manufacturers in addition to wind and solar plants. Thirty-eight states will share in the benefits — both Red and Blue.

Take Kansas. Panasonic is building a $4 billion electric vehicle battery plant to supply Tesla TSLA +1.5%, creating 4,000 jobs. And that’s just a start for the manufacturer — if the electric vehicle industry continues to make inroads. Meantime, Georgia attracted a $2.5 billion investment from the Korean solar company Hanwha Qcell.

But can domestic manufacturers produce quality goods? Enrico Ladendorf, chief executive of Battalion Energy, told the audience that buyers must work with their partners to create monitoring and adaptive controls. Moreover, companies must ensure everything is third-party tested.

The aim is to make U.S. domestic manufacturing facilities bankable, reducing the cost of capital and building economies of scale. To that end, Asia now makes and exports most solar modules. However, those modules are glass and steel frames, while the solar cells comprise a tiny amount.

“We are using boats to ship glass long distances,” Chris Case, chief technology officer for Oxford PV, told me. At a minimum, we should construct modules near where customers use the electricity. He maintains that energy security is at risk if the U.S. cannot scale up solar manufacturing.

Some may argue that the Biden Administration can’t build up the nation’s renewable energy base while enacting tariffs against Chinese solar panels — a move that raises costs and potentially hurts deployment. The IRA’s tax credits aim to offset the higher prices and establish a permanent solar industry here. And Kansas and Georgia are precursors of what will come if those policies work.

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Ken Silverstein

Since the late 1990s, I’ve covered energy, beginning with the rise and fall of Enron — first as a magazine writer before becoming a columnist and editor. For 12 years, I’ve been a columnist for Forbes. My focus has shifted from the ‘old energy economy’ to the ‘green energy economy.’ My stories, which cover the globe, have appeared in, and have been cited by, dozens of publications and broadcasts. I’m also the editor-at-large for the Coalition for Rainforest Nations, which represents 65 rainforest countries worldwide. My job is to research and write about these countries, helping them get to net zero to fulfill their Paris pledges. My features and my columns have won several national awards. Twitter: @Ken_Silverstein. Email: ken@silversteineditorial.com

 

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