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Can the US Solar Industry Compete with Chinese Suppliers Who Account for 60% of the World’s Solar Panels?

published: 2021-07-14 9:30

China has been a manufacturing leader of solar panels thanks to the substantial degree of subsidies provided by the Chinese government, which has resulted in the inability of the other overseas suppliers to compete; this includes suppliers from countries like the US, which has actually produced an insignificant level of solar panels despite the increasing demand for the product.

The US solar industry is currently relying on President Joe Biden to stipulate a series of development plans to rescue their trailing progress. Biden expects to achieve the target of zero carbon emission for power grids in the US by 2035, and is adhering to the policy of using US made products to invigorate certain industries. However, solar power has yet to be incorporated by the Biden administration as one of the priorities, which explains why the solar industry is currently urging the government to impose tariffs on other imported products in order to defend against cheap and imported solar panels.

This could lead to a problem, however. An increase in solar panel prices due to the tariff may affect the penetration rate of solar technology and the employment opportunities of installation personnel. It is because of this that the solar panel importers and installation companies are rejecting the idea of heavy tariffs.

In addition, economists believe that a reflux of the solar industry may consume a sizeable amount of cost, since it requires a reduction on the tax and tariff, as well as a large sum of subsidy, to mitigate the impact introduced by cheap and imported solar panels. No one knows if such implementation would actually rejuvenate the solar industry.

How Do US Companies Compete with the Large Subsidization Given to Each Critical Industry By China?

Kelly Sims Gallagher, a Professor at the Fletcher School of Tufts University, who studies renewable energy in China, believes that US costs are uncompetitive when compared with China, but thinks that it is still worth a try to compete with them in the enormous global market.

Solar panels were first invented from a laboratory in New Jersey, and became a major product of Japan and Germany in 2000, when China was still an “outsider” to this industry. Since then, the Chinese government has been aggressively supporting local solar businesses by providing low-cost funding and other support, which brought about the rise of Chinese solar businesses.

Solar products are dropping significantly in prices due to their excess supply; as a result of the increased supply, the Chinese manufacturers have started to export their excessive products through the kinds of low prices that overseas solar panel suppliers are unable to compete with. By 2011, Chinese solar panel manufacturers accounted for approximately 60% of the total global sales, which forced the US to impose relevant tariffs in order to constrain further development in China.

However, the reduction in solar panel prices has helped with the popularization of the product. The cost of solar power generation was twice that of natural gas in 2012, but in 2020, the two were pretty much the same.

As the data indicates, US solar is able to satisfy 4.3% of the power demand in the entire country; although additional growth is expected, US suppliers are not expected to generate any profits.

The tariff imposed by the US has triggered a major battle between the US and China. China, to avoid the tariff, has transferred the assembly and production line of solar panels to Taiwan, before once again relocating them to Southeast Asia in 2015 as the US extended its tariff to Taiwan. The US began imposing tariffs on solar panels imported from everywhere in the country starting in 2018, instead of only China and Taiwan.

Human Rights Issues in Xinjiang Expected to Revitalize US Solar Industry

The policies imposed by the US have somewhat encouraged overseas manufacturers to invest in the country. Chinese businesses are currently establishing solar panel plants in Florida, and South Korean businesses are constructing factories in Georgia. The tariff measures implemented by the US government have also provided huge incentives for the largest solar panel manufacturer in the US, First Solar.

First Solar had once surpassed General Motors in market value during 2008. However, in 2011, its business was negatively impacted by the arrival of the Chinese suppliers; not only was First Solar forced to shut down its plant in Germany, but it was also forced to terminate its factory expansions in Vietnam and France. It also had to suspend its factory construction in Arizona.

In spite of the numerous setbacks, First Solar is still trying to fight back against its Chinese solar rivals. It recently invested US$680 million in a new factory in Walbridge, Ohio, where it is expected to hire 500 employees. First Solar is also planning to purchase an additional land to construct its third factory, though the exemption of tariff for numerous imported solar panels granted by the Trump administration in 2019 forced the company to terminate all plans.

First Solar is now planning to reinitiate its third solar cell plant in Ohio, and hopes to receive the help from the US government.

Mark Widmar, the CEO of First Solar, commented that the issue of human rights has recently been tied in with the production of solar panels; Chinese manufacturers rely heavily on the technology of silicon materials which are often excavated and processed in Xinjiang, where there is known to be human rights violations. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) has called for a ban on the import of solar products from Xinjiang, and the US Congress is also thinking of stipulating relevant laws, where relevant legislation is expected to boost the production of solar panels in the US.

The solar panels of First Solar are adopted with a layer of cadmium and telluride coating instead of modules produced by silicon that is processed in China. Widmar commented that he had obtained a US$150 million contract from buyers who had initially decided to adopt silicon panels from China before finding out about the human rights issues in Xinjiang. He believes that these problems are only going to force more buyers to start considering other options in the supply chain.

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