Can the American solar industry compete with China? A company is doing it
WALBRIDGE, Ohio — Any program aimed at fighting climate change must incorporate solar panels. Yet the United States makes few, as state-subsidized Chinese manufacturers dominate the market.
First Solar is trying to change things. This company has just committed to building a new $680 million solar panel factory in Ohio. One of her main motivations is the belief that she will have the support of Washington.
After years of decline, the fragile sector of the American solar industry is hoping for a turnaround underpinned by President Biden's plan to completely decarbonize the American electricity grid by 2035, and by his desire to obtain a made in America transition that will would create jobs and support sectors considered essential.
As part of its desire to relocate industrial production that has gone abroad, the Biden administration is focusing above all on four sectors to be supported with great support from tax credits or other public aid. The first is the pharmaceutical industry, whose importance the pandemic has shown. The other three—semiconductors, new battery technologies, and minerals critical to the electronics industry—are important for the next generation of renewable energy. Many projects would need Congressional approval.
The Biden administration is already endorsing the idea of expanding tax credits for the purchase of solar panels and is exploring the possibility of approving tax cuts that would boost U.S. solar panel makers and disadvantage imports
Solar energy is not currently part of the administration's priorities, but its players are lobbying for support, either in the form of the introduction of customs duties or through tax regulations, starting that she, too, will play a crucial role in America's future. The Biden administration is already endorsing the idea of expanding tax credits for the purchase of solar panels and is exploring the possibility of approving tax cuts that would boost U.S. solar panel makers and disadvantage imports . She also plans to ask federal contractors to buy a large number of solar panels from American suppliers. Tax code changes require congressional approval, but administrative measures do not.
Mark Widmar, CEO of First Solar, spoke to senior officials: “We had discussions (at the ministerial level) and they said, 'You're kicking open doors. We are totally with you.” »
A White House spokeswoman declined to comment on the exchanges but said the administration would "invest to diversify our domestic energy sources, including solar power." »
The situation in the solar panel sector illustrates some of the challenges facing relocation ambitions in general, including divisions and conflicting interests within each sector.
Manufacturers of solar energy equipment that, like First Solar, want to start from scratch in the United States, favor tariffs in order to fight against cheap imported products. But rising solar panel prices as a result of tariffs tend to slow the adoption of solar technology and the recruitment of installers, which is why many other players in the sector, such as panel importers and the companies that install them, are opposed to these taxes. And different factions are pushing for different kinds of tax changes.
Customs tariffs "have had a detrimental impact on the solar market", explains Abigail Ross Hopper, president of the Solar Energy Industries Association (SEIA), a group of companies which has many importers and installers among its members. “You can look our membership up and down and across, but it all shows that (tariffs) didn't work. »
“China heavily subsidizes whatever strategic industries it chooses to focus on. How could an American company compete? »
Relocating the solar industry is likely to be particularly costly. That would require a mix of heavy subsidies through tax cuts and tariffs to curb cheap imports, say economists and industry experts who say even so the game is not won.
“China heavily subsidizes whatever strategic industries it chooses to focus on. How could an American company compete? asks Mr. Widmar of First Solar.
It would be very difficult for the United States to compete with the Chinese from a cost perspective, says Kelly Sims Gallagher, an energy professor at the Fletcher School of Tufts University who has studied Chinese energy policy. renewable. However, she adds: “We surely have our chance in the ring. The global market is gigantic. »
Some economists argue that government should not support commercial enterprises. In particular because this approach will inevitably lead to a wave of lobbying on the part of companies wishing to be supported by the State, too.
Already, the textile industry (protective equipment) and the bicycle industry (clean transport) argue that they too produce essential goods and deserve state aid.
"As soon as you show that you are very open to the possibility of satisfying grant requests, you end up with a slew of requests that do not deserve to be supported by the State", explains Pol Antras, an economist at Harvard.
Some of the first cells capable of turning sunlight into electricity were invented at Bell Laboratories in New Jersey in 1954 and used to power satellites. Their use then spread and by 2000, Japan and Germany were vying to take the lead in an industry that had gone global. China was not yet playing in the same court.
Then, local Chinese governments started helping their entrepreneurs with small grants and other forms of support, in an attempt to capitalize on a growing industry. As Chinese manufacturers multiplied, prices plummeted as a result of excess supply. Chinese companies then exported their surpluses at prices that non-Chinese solar panel manufacturers could not compete with.
The central Chinese government eventually stepped in to put some order into it. It has pushed some solar companies out of business, but kept others alive through government funding and other subsidies. In 2011, Chinese manufacturers dominated the solar panel sector with about 60% of global sales, which resulted in the imposition of tariffs by the United States to halt China's progress.
Declining prices have accelerated technology adoption. If, in 2012, solar was twice as expensive as natural gas to generate electricity, in 2020, the two energies had become comparable.
The number of US solar installations of all kinds has increased 20-fold in a decade, to 19.2 gigawatts last year, according to research and consultancy Wood Mackenzie. That's enough to power 3.7 million homes and provide 4.3% of the country's energy needs.
Growth should continue in the sector. But there are few American manufacturers left to take advantage of it.
About half of the world's solar panel companies threw in the towel in 2015 as price pressure mounted, according to researchers from the Wharton School at the University of Pennsylvania and the French management school INSEAD .
Despite the tripling of American production of solar panels since the imposition of heavy tariffs in 2018, imports account for 85% of sales in the United States, according to Wood Mackenzie. Even First Solar now only manufactures 40% of its solar panels sold on US soil locally, but plans to raise that level to 60% with its new factory and plans to go even further in the future.
The increase in U.S. production that followed the 2018 widening of the imposition of tariffs resulted in the creation of less than 1,000 additional U.S. manufacturing jobs before the pandemic hit. Today, solar panel installation companies — mostly on construction sites — employ five times as many workers in the U.S. as manufacturing
First Solar's new plant will be located in Walbridge, Ohio. It should employ 500 people and help revitalize the region around Toledo. “Solar is an attractive sector. It enjoys an aura of respect in the business community and among millennials,” explains John Gibney, member of the development group Regional Growth Partnership.
Yet even though the number of solar panel manufacturers is growing in the United States, the process is now far too automated to produce the wealth of well-paying jobs that proponents of relocating the White House and the Congress.
The increase in U.S. production that followed the broadening of the 2018 tariff imposition resulted in the creation of less than 1,000 additional U.S. manufacturing jobs before the pandemic hit, according to SEIA. Today, solar panel installation companies — mostly on construction sites — employ five times as many workers in the United States as manufacturing.
First Solar has had its ups and downs. After going public in 2006, the company saw its share price increase eightfold. To the point that in 2008, its valuation was a time higher than that of General Motors.
At that time, First Solar's solar panels produced cheaper electricity per megawatt than Chinese companies that used a different technology, says Mamun Rashid, a former IC designer who helped start a rival company, Auxin Solar. .
Chinese subsidies got the better of tariff advantages, and by 2011 First Solar was losing money. The company closed a factory in Germany, scrapped projects in Vietnam and France, and canceled the creation of a structure in Arizona for which it had already built the buildings.
First Solar, based in Tempe, Arizona, remains the largest U.S. solar panel maker with revenue of $2.71 billion last year, down slightly from 2011. It has suffered five years of losses in the past decade.
In 2012, an American competitor, the local subsidiary of the German group Solar World AG, had tried to fight against Chinese competition through customs duties and had succeeded in obtaining the support of the Obama administration for the application of heavy taxes on Chinese solar imports.
The tariff war started a cat-and-mouse game that did little to help American industry. To dodge customs tariffs, Chinese companies have moved the assembly of solar panels to Taiwan for the United States. When Washington extended Chinese tariffs to Taiwan in 2015, Chinese manufacturers did the same thing again, this time in Southeast Asia.
Imports to the United States from Chinese factories in Malaysia and Vietnam compensated for the decline in China's share. And even with tariff protections, U.S. solar hardware production barely increased at first.
The Trump administration has doubled down on tariffs. In 2018, it imposed taxes on solar panels from all sources, not just China or Taiwan.
These steps have encouraged certain investments in the United States. A Chinese company has built a solar panel factory in Florida, and a Korean one in Georgia. The tariffs also helped convince First Solar, which built its first major solar panel factory in the Toledo area in 2000, to start work on building a second giant factory in the same location in 2018.
First Solar had also purchased enough land for a third plant, but scrapped the project after the Trump administration eased tariffs in 2019, providing exemptions for many imported solar panels.
Its second factory uses glass from a glass factory a few miles away, which heats soda ash, sand and lime to 3,000 degrees to turn them into glass a little thinner than window glass. . This glass factory, owned by the Japanese Nippon Sheet Glass, has a furnace as big as half a football pitch. Case after case, the finished glass is packed and stored in a room so huge it looks like the secret government hangar at the end of the film Raiders of the Lost Ark.
First Solar covers this glass with a photovoltaic film which transforms the sun's rays into electricity. Each solar panel is laser etched, which divides the film into hundreds of solar cells. An assembly line more than a kilometer and a half long winds through the bowels of a building of more than 100,000 m 2 , filled with ovens, robots and computer screens.
Only 132 employees are needed for each shift. Joseph Velez, a worker on the assembly line, says that ten years ago it took half a dozen people to carve a gasket around a pane of glass and add some components to part of the conveyor . Today, it only takes two.
Eager to revive the abandoned project to create a third solar panel factory in Ohio, Mr. Widmar, the CEO of First Solar, is counting on the help of the White House and Congress, which are in the process of look at ways to help the sector.
Given the deep partisan divisions in Washington, it's a risky bet, admits the 55-year-old leader. He explains that he needs to make a decision now to be able to maintain his manufacturing plans.
The US solar industry has relied for many years on a generous investment tax credit, which today stands at 26% for purchasers of solar installations. Mr. Biden has asked Congress to extend this measure for another ten years.
But this credit makes no difference between the use of solar panels manufactured on American soil and imported equipment. Mr. Widmar is betting more on a new proposed tax credit that would be tied to US renewable energy production, an approach put forward by Senate Finance Committee Chairman Ron Wyden, an elected Democrat from Oregon .
The US solar industry has relied for many years on a generous investment tax credit, which today stands at 26% for purchasers of solar installations. Mr. Biden has asked Congress to extend this measure for another ten years.
Under this system, a company like First Solar, which produces virtually all of its US panel components locally, could benefit from the maximum credits, while companies that assemble their panels in the United States from locally produced components foreigners would only benefit from partial credits and that imported solar panels would benefit from nothing at all.
Gregory Nemet, a solar energy specialist from the University of Wisconsin, says the Chinese used the same kind of strategy successfully in the early 2000s to boost their wind energy sector, dominated at the time by European suppliers.
Mr Widmar says he is prepared to consider dropping his support for Trump's tariffs when they expire early next year, provided Congress approves the tax credit scheme instead. Thus, it would be the taxpayers rather than the purchasers of solar equipment who would pay the bill to encourage national industrial production.
“My clients feel like they're being penalized because of the impact of customs duties,” he laments.
Mr. Widmar recently added human rights to his list of arguments in favor of American production of solar panels.
Chinese rivals rely on technology that uses silicon frequently mined and processed in China's remote Xinjiang region, where Beijing's crackdown on the Uyghur Muslim minority is such that it amounts to genocide, the government says American. The American Federation of Labor-Congress of Industrial Organizations (AFL-CIO) has called for a blockade of solar product imports from Xinjiang, and Congress is considering drafting legislation to do so, a move that would help to national production.
Beijing has denied the accusation of genocide, which it describes as the “lie of the century”.
The Biden administration has begun to bring the issue to the international level. On June 13, the G7, at the initiative of the United States, issued a statement criticizing "state-sponsored forced labor of vulnerable minorities" in the agriculture, solar and textile sectors, a statement which was clearly aimed at Beijing.
First Solar's panels do not use components made from processed silicon in China. Its solar cells have a coating based on cadmium telluride. Mr. Widmar reports that he recently used this argument to win a $150 million contract with a buyer who had originally set his sights on silicon-based solar panels.
“I kinda pushed” the idea that the solar panels might have a connection to Xinjiang, he says, and prompted the buyer to reconsider their supply chain.
(Translated from the original English version by Bérengère Viennot)
By chatlivecamsex
