The “Domestic” U. S. Solar Sector

I thought you might find this excerpt from Colm Quinn of Foreign Policy’s newsletter interesting:

On Wednesday, the International Energy Agency announced that renewable capacity is on track for record growth in 2022, with 320 gigawatts of clean energy expected to come online this year—an amount roughly equivalent to Germany’s annual energy usage.

That such growth is happening amid supply chain snags and increasing raw material prices adds only more cause for optimism.

The sunny forecast is largely driven by increases in solar capacity in China, the European Union, and Latin America. It’s a different story in the United States, where a succession of hurdles is preventing the U.S. solar energy industry from catching up with the rest of the world.

The most prominent obstacle involves a Commerce Department investigation opened after a U.S. company alleged that Chinese firms were dumping cheap panels into the U.S. market via companies in Cambodia, Malaysia, Thailand, and Vietnam.

That single probe is expected to delay imports from those key suppliers, which accounted for 99 percent of all solar panel capacity imported into the United States in 2021, as U.S. buyers stay away for fears of having to pay still unknown amounts in retroactive tariffs.

A solar industry trade group has cut its forecast for new installations by 46 percent this year as a result.

U.S. Energy Secretary Jennifer Granholm told a Senate committee last week she was “deeply concerned about being able to get to the goal of 100 percent clean electricity by 2035” if the issue was not resolved quickly.

But the U.S. solar industry’s outlook wasn’t too bright even before that roadblock, with rising commodity prices, particularly in silicon, adding to the cost of components that have recently been on a downward trend.

The failure of U.S. President Joe Biden’s Build Back Better bill has also added to doubt over the future of the industry, with solar tax credits—due to be extended in the bill—now facing an uncertain future.

Geopolitics also play a role, with U.S. solar companies blocked from importing parts from some Chinese firms after those based in Xinjiang were hit with U.S. sanctions over concerns that their products were made using forced labor—a topic FP columnist Elisabeth Braw has covered in the past.

But sourcing parts domestically has its own problems. “For many years, the U.S. has applied a stick approach towards solar manufacturing,” Marcelo Ortega, a solar analyst at energy research firm Rystad, told Foreign Policy.

“I don’t think there’s been the incentivization of domestic manufacturing. It’s just been penalizing those relying on overseas supplies.”

I see several takeaways from those observations. First, it is all but certain that Chinese manufacturers are “dumping” solar panels and components on the United States. Dumping is defined as selling below the price in the producing country sometimes even below the cost of production. It would be completely unsurprising. China has been doing that for product after product for decades but China is sufficiently large and opaque that it’s hard to prove.

Second, the degree to which we actually have domestic solar panel production is questionable. At best we have a solar panel assembly sector that is partly or completely dependent on Chinese components and/or materials. I have no opposition to subsidizing domestic production of solar panels but grave reservations about our subsidizing Chinese production of solar panels.

Third, relying solely or primarily on the “stick approach” is foolhardy. Why are we so committed to it? IMO it’s bipartisan. Conservatives don’t like government interference in the market and progressives don’t like subsidizing big corporations.

Finally, we aren’t looking at solar power in a systematic fashion but in a piecemeal fashion. How we’re going to power all the electric vehicles that proponents want built without more power from all available sources isn’t clear to me. How we’re going to move all that power from where it’s being generated to where it’s needed is even less clear.