Первые инвестиции Solar благодаря Закону о снижении инфляции. Может ли Китай сорвать его?

There are not too many American solar manufacturers out there. China owns this market. In the U.S., First SolarFSLR
is as big as they come. Their объявление on Tuesday of a $1.2 billion expansion plan comes on the heels of the Inflation Reduction Act (WSJ rightfully called it the Climate Law), signed into law by President Biden earlier this month. It will make them even bigger. Their stock price is way overbought because of all this good news for the Ohio-based, innovative solar panel maker.

At least one other company read the tea leaves in Washington, thinking the solar incentives in that bill would eventually become law following a knee-capping of solar manufacturers here when the White House cut tariffs on Chinese solar companies in February. Korean-owned Hanwha Q Cells announced a $320 million investment plan в мае.

First Solar is the second biggest player. Hanwha is the largest of the global players in the U.S. Both of them constitute the only two non-Chinese solar companies in the top 10 of global solar manufacturers. Green energy-loving Europe is non-existent in the top 10.

First Solar and Hanwha: Trying to Reshore Renewable Energy

First Solar and Hanhwa’s investments this year are an attempt to build out American solar, which is almost entirely reliant on China supply.

For a country where at least one of the two biggest political parties wants to move to a post-fossil fuels economy, going from relative independence on oil and gas to dependence on Chinese-made solar would be an unforgivable policy error of historic proportions.

If the U.S. is going to go green, companies here have to be able to expand their footprint across the entire supply chain.

First Solar’s investments will be in solar modules, also known as solar panels. The investment is forecast to expand the company’s ability to produce modules for the U.S. solar market to over 10 gigawatts by 2025. To do this, First Solar will build its fourth solar panel factory in the U.S. with an annual capacity of 3.5 gigawatts in the Southeast. A location has yet to be determined.

Hanwha Q Cells’ $320 million investment isn’t all for the U.S. Some $170 million will go towards building a 1.4 GW solar panel facility in the U.S. in an unspecified location. Q Cells has a 1.7 GW solar panel factory in Dalton, Georgia. The new factory is not expected to be operational until next year. With Hanwha’s new capacity exceeding 3 GW and First Solar’s eventually hitting 10 GW, that would account for well over one-third of current U.S. solar module production capacity.

“The Inflation Reduction Act is leading to substantial investments in solar equipment manufacturing,” says Jeff Ferry, chief economist for the Coalition for a Prosperous America. Ferry wrote a за 2021 год about reclaiming the solar supply chain from China. The U.S. invented solar. But China owns this market like no one else.

“Hanwha Q Cells has already announced expansions in solar modules and in polysilicon manufacturing in the state of Washington,” says Ferry, adding that smaller companies are looking to expand solar panel production – such as Silicon Valley-based Auxin Solar – as well as foreign solar producers like (Swiss-based) Meyer Berger в Аризоне.

Ferry recommended in 2021 that the U.S. issue a “Made-in-USA solar tax credit” – which they got in the new climate law; strengthen Buy American policies that require the federal government to buy only U.S.-made solar equipment and power generated from solar; and ban all solar products made with Xinjiang forced labor – which also became law this summer under the Uyghur Forced Labor Prevention Act.

Can America Outspend China?

The million-dollar question is whether the U.S. can outspend China. China has a significant foothold in Southeast Asia. Most solar exports from Vietnam, Thailand and Malaysia are made by Chinese multinationals. These countries are virtually China, by default.

The Inflation Reduction Act gives solar makers production tax credits that can be deducted against corporate income tax depending on how many locally made panels they ship to buyers. These credits are significant enough to make it economical to produce in the U.S., even against Chinese subsidies and Southeast Asian dumping. Vietnam and Thailand are now some of our biggest sources of solar cells and panels in the United States. About five years ago, they barely had a solar industry.

There are tariffs on imported solar panels from China and anti-dumping duties on mainland China solar, but China has circumvented those by investing in Southeast Asia.

Supply chain problems mainly caused by China’s so-called “Zero Covid” policy, coupled with high and unpredictable shipping costs, have hampered imports over the last 12 months, which was both a blessing and a curse. Those problems led the White House to put a two-year moratorium on tariffs on Southeast Asian solar products. But it gave some companies a reason to reshore. At least one company, however, folded its solar operations due to policy uncertainty and the weakening of solar tariffs in February – LG Electronics USA shut down its solar panel facility in February.

China controls solar’s “key ingredients”.

Chinese companies have 64% of the polysilicon market, seen rising to 75% by 2023. Because of that raw material, China has a whopping 99% chokehold on ingots and wafers that are used to make solar cells. China runs about 80% of the solar cell market, with the rest coming out of Southeast Asia, Korea and Taiwan.

According to the Solar Energy Industries Association (SEIA), the U.S. has no domestic ingot, wafer or cell manufacturing capacity. All the U.S. does is make solar panels.

An estimated 100 U.S. solar companies have been put out of business because of China dumping and the obvious inability to compete against companies benefiting from high subsidies, low taxes, low labor costs and low environmental standards.

SEIA has long advocated for the types of production tax credits the Inflation Reduction Act handed its members, many of which are Chinese multinationals. Chinese solar maker LONGi Green Energy Technology will be part of SEIA’s renewable energy event next month.

But SEIA was also instrumental in convincing the White House to eliminate tariffs on utility grade, double-sided solar panels, putting the creation of that domestic market segment in the deep freeze. SEIA also advocated against a new trade investigation targeting Chinese solar companies in Southeast Asia accused of dumping and circumvention.

In the last few years, solar tariffs have contributed to companies like First Solar gaining share of their own home market.

According to the Department of Energy’s Energy Information Administration, imports comprise most of the solar module shipments to installers and utility companies. But the U.S. share of these shipments has more than doubled since the Section 201 solar tariffs were implemented during the Trump administration. The U.S. share of the domestic solar panel market rose from 7.9% in 2017 to 17.3% in 2022.

The problem is the products that go into making those solar panels. It’s a China business.

The same day First Solar came out with their investment news, the WSJ rained on their parade with a headline – “The Sun Will Keep Shining on Chinese Solar: China’s solar firms face some long-term threats from U.S. policy, but look to benefit from global energy crisis and higher U.S. spending.”

More importantly, the U.S. will never out-spend China.

“China has billions of dollars to put behind its campaign to dominate key industries like renewable energy,” says Ferry.

As the WSJ article notes, global demand is better for China than the U.S. Whatever the U.S. doesn’t buy, the Chinese companies will just sell to energy-desperate Europe.

Europe has no serious contenders in solar. At least the U.S. has First Solar.

Today’s announcement is a good sign that domestic solar manufacturers, including multinationals, got what they wanted from the Biden climate law. It’s working. It might not work as well if China decides to double down on investment and go toe-to-toe with incentives.

“I think a combination of policies including tariffs, production tax credits, and the fact that our industry is more innovative than the Chinese industry…all means we can build up significant capacity,” Ferry says. “We may ultimately be forced to use volume restrictions, such as import quotas, if the Chinese-owned companies continue to flood the market. And we need companies to produce solar ingot, wafer, and solar cells here,” he says. “I’m optimistic we will see that in the next 2-3 years.”