Insight: US solar panel manufacturing boom threatened by cheap imports

insight:-us-solar-panel-manufacturing-boom-threatened-by-cheap-imports
Insight: US solar panel manufacturing boom threatened by cheap imports

Since President Joe Biden’s climate law was enacted last year, U.S. companies have revealed plans to construct numerous solar panel factories across the country. These plans were fueled by the billions of dollars in subsidies provided by the law, with the hope that a clean energy boom would create thousands of well-paying jobs.

However, the global solar panel market has been hit hard by a surge in Asian production capacity, causing prices to plummet. This has raised concerns within the U.S. solar industry that many of the proposed factories may not be economically viable. According to interviews with industry analysts, solar companies, and trade groups conducted by RushHourDaily, as many as half of these factories may be delayed or canceled.

The solar manufacturing sector in Europe has already been negatively impacted by changing market forces. Additionally, the offshore wind industry in the U.S. has experienced significant writedowns and project cancellations in recent days.

Edurne Zoco, executive director for clean energy technology at S&P Global Commodity Insights, explained that the declining global market prices make it increasingly challenging to establish local solar manufacturing in the U.S. If the cost gap between imported and locally manufactured modules is too large, many of the announced plans may not come to fruition.

According to the U.S. International Trade Commission, solar shipments into the U.S. have more than doubled to $10 billion through August, compared to $4 billion the previous year.

The dimming outlook for the domestic solar industry could have negative implications for President Biden’s climate agenda and his reelection efforts. The president has touted solar projects as evidence that his clean energy policies can generate millions of well-paying jobs.

U.S. solar manufacturers and trade groups have emphasized the need for increased government support at the federal and state levels. Without this support, the promised jobs may not materialize, and the U.S. will continue to rely on panels made primarily with Chinese components. U.S. officials have repeatedly warned about the security risks associated with over-reliance on Chinese clean energy technology.

While a White House spokesperson did not address the recent market challenges facing domestic solar manufacturers, they highlighted the significant wave of investment generated by Biden’s policies and their positive impact on American manufacturing.

Since the passage of the Inflation Reduction Act in August 2022, companies have announced the construction of over three dozen solar factories. These projects are expected to create 17,000 jobs and attract nearly $10 billion in investment, according to the clean energy business advocacy group E2.

Industry representatives, trade groups, and researchers unanimously agree that the market conditions have worsened. Energy research firm Wood Mackenzie has projected that only 52% of the planned 112 gigawatts of solar module capacity will be operational by the target date of 2026.

Mike Carr, executive director of the Solar Energy Manufacturers for America trade group, expressed concerns that factories could face delays, prolonging the U.S.’s dependence on China. He emphasized the importance of understanding the policy opportunity to restore manufacturing competitiveness in the U.S.

Globally, the solar industry has experienced a 26% drop in panel prices this year, reaching approximately 19 cents per watt. While U.S. prices have been more resilient, spot prices are declining for those without long-term contracts.

The increase in solar imports can be attributed in part to a temporary waiver of tariffs on certain countries, including Malaysia, Thailand, Cambodia, and Vietnam. This waiver is set to expire in June 2024. Imports from India, Mexico, and other unaffected nations have also seen a significant increase.

The Inflation Reduction Act offers a decade of tax incentives equivalent to 30% of a project’s cost. However, industry consultant Brian Lynch believes that the glut of cheap panels and concerns about rising costs for labor, raw materials, and financing may outweigh these incentives.

The U.S. Commerce Department acknowledges the importance of imported panels and cells in the clean energy transition. They are committed to ensuring that foreign producers adhere to the same rules as U.S. producers.

The IRA also includes a 10% bonus credit for panel manufacturers using American-made components. This incentive is critical for domestic panels, which may have a 40% price premium compared to imported alternatives.

However, the industry faces challenges in securing this bonus due to the limited domestic production of components. So far, there have been more announcements for solar module factories than for solar cells, which are crucial components for converting sunlight into energy.

According to Danny O’Brien, president of corporate affairs at Hanwha Qcells, one of the largest investors in the domestic solar supply chain, the industry requires more government support, including tax and trade policies that build on the Inflation Reduction Act.

Meyer Burger, a company planning to build a factory in Colorado, emphasizes the need for government assistance in dealing with underpriced products from Asia.

The Solar Energy Industries Association (SEIA), a prominent solar trade group, has long opposed tariffs and is advocating for increased support for manufacturers. They caution that not every proposed factory will come to fruition.

Convalt Energy plans to open 2 gigawatts of module capacity in New York and Maine next year, followed by a facility for components in 2025. However, CEO Hari Achuthan reveals that module production lines are already behind schedule due to financiers awaiting crucial rules from the Treasury Department regarding IRA tax credits.

The success of the IRA bill will depend on the execution of its details and the support provided by the Commerce Department and other entities regarding import tariffs.

In conclusion, the U.S. solar industry is facing challenges due to the collapse of global solar panel prices and the surge in Asian production capacity. The viability of many proposed solar panel factories is in question, which could hinder President Biden’s climate agenda and his efforts to create well-paying jobs. Increased government support is needed to ensure the competitiveness of domestic solar manufacturers and reduce reliance on Chinese components.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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