Good news: the “Green New Deal” will not be made entirely in China.
American solar panel manufacturing is spending more to make more domestically. This is positive. The last thing the U.S. needs is to reduce fossil fuel use (which we have in abundance) and replace it with wind and solar (where we rely heavily on China). Domestic solar manufacturers have Section 201 tariffs to thank for increased investment in domestic solar manufacturing.
Burlington, Washington-based solar panel manufacturer, Silfab, announced on August 30 that last year’s investment designed to increase solar panel production led to a doubling of its output this year.
Government support also helped Silfab make its 2020 $4 million investment decision in a largely automated solar panel assembly line. Washington’s State Commerce Department provide a $250,000 economic development grant to the Port of Bellingham to assist the expansion. The factory is nearby. Some 20 to 40 new high-quality jobs were created, according to Silfab.
They are not the only ones expanding.
In a world where policymakers are talking up climate change risks and building a post-carbon future, one would think American solar would be an obvious investment. The U.S. is the second-largest market for solar, after China.
Solar investment is surely on the upswing in China and throughout Asia, driven mainly by Chinese multinationals. But only when tariffs were enacted did domestic solar companies see it worth their while to point money to work in the U.S. Prior to anti-dumping charges against China, and the Section 201 tariffs, China was the OPEC of sun power.
We are seeing a shift in strategy to cater to U.S. demand.
In July, Philadelphia Solar (headquartered in Jordan) said it planned to build 1 gigawatts of solar capacity here in the U.S. The company said its planned investment aims to serve local market growth expected as a result of what it called the Biden administration’s “extensive support” to the U.S. solar industry and manufacturing. The new facility is projected to create 150 to 250 jobs and is expected to begin operations in the third quarter of 2022.
In February, Convalt Energy, a global solar manufacturer owned by New York City-based ACO Investment Group, said it would be building a solar panel facility in Watertown, New York and make that their corporate headquarters. Watertown is a small town of around 25,000 people.
Next year, Convalt would have fully acquired SunPower’s solar manufacturing lines in Hillsboro, Oregon, a company that was killed by China dumping, among other things.
Convalt’s team includes Stephen Shea, one of the PhD pioneers in solar technology, and counts former Senator Dick Gephardt as a Convalt Energy shareholder and advisor to ACO Investment Group.
In August, Canadian solar panel manufacturer, Heliene, said it will open its second U.S. factory in Florida this month to produce a new solar product line for residential customers. Some 60 new hires are expected at their Riviera Beach, Florida facility.
There is still room for solar importers, though they scoff constantly at the protectionist measures that were put in place to save American solar from Chinese mercantilism.
Domestic Solar Was Saved by Tariffs
Innovation is one thing, but innovation costs money. The U.S. can still innovate and then make their goods elsewhere, as often happens. But if we want them to innovate and manufacture here, the government has to step in. Solar is a prime example of this.
The domestic solar industry, created back in the 1970s when President Jimmy Carter was putting solar panels on the roof of the White House, was on its last legs because of China.
SolarWorld fought them but didn’t live long enough to take a victory lap. They launched an anti-dumping case against China starting in 2010. To petition the International Trade Commission (ITC) to investigate dumping charges, a company has to prove harm. By that time, they are already losing so much market share that future investment is futile. Companies stagnate. Those with leverage, fold.
Duties were imposed by the ITC in 2014.
SolarWorld filed for Chapter 7 bankruptcy, total liquidation, in August 2016. Its solar module factory in Oregon was sold to SunPower and its solar cell manufacturing business closed two years later. It ceased making solar panels in May of this year.
Maxeon took over SolarPower assets in 2020 outside of the U.S., with factories in Malaysia and Mexico. It has said it’s looking for a new U.S. location for manufacturing.
By 2017, despite a drop off in imports from mainland China and Taiwan, the U.S. industry kept declining as Chinese multinationals either shipped their solar modules (aka solar panels) through Southeast Asia, or set up shop there instead as a way around anti-dumping tariffs and countervailing duties.
In the ensuing solar industry blackout, Suniva, the other ITC petitioner, was forced to turn to China for funding. When that didn’t work, it declared bankruptcy in 2017. Shortly after, one of their creditors offered the Chinese Chamber of Commerce that it would get Suniva to withdraw the lawsuit in return for a payment of $55 million. This controversial but legal maneuver failed and the lawsuit continued.
Suniva creditor Lion Point Capital in New York City, bought control of Suniva shortly after. Headquartered in Georgia, 100% American-owned, and run by veteran American solar businessman named Matt Card, Suniva is now preparing to begin production again in Georgia. The U.S. solar boom has given Suniva a tailwind.
That same year, 2017, German-owned multinational SolarWorld went belly up. They closed factories in Oregon. Some said SolarWorld’s demise proved that government support was misplaced. In reality, it was largely due to Chinese dumping and China’s own, much larger, state subsidies.
On January 23, 2018, President Trump signed a proclamation that placed tariffs on both solar cells and modules for a period of four years. Could they end next year?
We don’t think so.
Moreover, China is doing its best to circumvent existing tariffs.
After roughly a decade of listening to policymakers and diplomats from Brussels to Washington warn of the need for new energy policy to reduce C02 levels in the atmosphere, Beijing will give up on the opportunity to be the Western world’s indispensable supply chain for solar, wind and EV car batteries. If climate change is the future, then count on China to position itself to be the anti-CO2 widget-maker and resource provider to the world.
Local manufacturers with skin in the game know China’s determination to rule the solar industry. Many in Washington do, as well.
An unnamed group of American solar producers has recently come together to ask the International Trade Commission to extend the anti-dumping tariffs and countervailing duties (AD/CVD) to Vietnam, Thailand, and Malaysia. Chinese companies are using them to get around AD/CVD tariffs. Circumvention is not allowed under U.S. anti-dumping laws.
CPA expects those three countries will be on the receiving end of solar AD/CVD duties next.
In 2011, the U.S. imported a mere $336,806 of solar cells and modules from Thailand. Since then, imports from Thailand have increased to over $1.4 billion in 2020. This trend has continued into 2021, with more than $532 million of imports in just the first five months of the year. Thai import value share of solar cells and modules went from a .01% in 2010 to nearly 20% in the first five months of 2021.
In 2011, Vietnam solar cell and module imports were valued at $1.3 million, based on official export statistics of the U.S. government. In 2020, Vietnamese imports rose to $1.6 billion in 2020. This year, they are already at $681 million.
Vietnam was always bigger than the Thai solar market, but it only was around 1% of the value of total U.S. solar imports in 2010. So far this year, it’s 25%.
Then there is Malaysia. Thanks to big investments from China giants like JA Solar, U.S. imports of solar cells and modules from there have surged even with the 20% tariff. In 2011, the United States imported a mere $576 million of solar cells and modules from Malaysia but it hit $2.3 billion in 2020. So far this year, Malaysian-made solar products worth roughly $900 million have landed in the U.S. Malaysian import value share of solar cells and modules went from 5.5% of total U.S. imports in 2010 to nearly 34.8% in the first five months of 2021.
All these countries are suffering from COVID-related closures and port backlogs right now, but make no mistake, without legal action they will be prominent suppliers into the U.S. once COVID problems are behind us.
The Trump administration went after these players with tariffs on imported solar cells and panels from anywhere in the world under Section 201 of the 1974 Trade Act. Those tariffs are scheduled to expire if not renewed in 2022.
Tariffs have given U.S. manufacturers breathing space and created an optimistic environment in U.S. solar manufacturing for the first time in a decade.
Despite the solar import lobby constantly warning that tariffs would kill trade, and kill demand, 2020 marked the best year ever for solar installations in the U.S., most of which were not made here. Solar module prices have continued to decline by 6%-10% a year. The booming industry has not stopped the import lobby from persuading Congress that climate change is so urgent, there is no use in waiting for the U.S. to increase supply; we must import from Asia.
As it stands, given how weak the currencies of Vietnam, Thailand, and Malaysia are compared to the dollar, the 20% Section 201 tariff is not enough. They stand ready to flood the U.S. with solar cells, and eventually, solar panels. That risks putting a lid on U.S. solar investment should that trend continue.
See CPA’s white paper titled: “Reclaiming the U.S. Solar Supply Chain from China” for more information on the market and China’s role in it.