Key Takeaways
Biden’s big plans for solar as part of his climate campaign are coming up short as U.S. manufacturers are finding they cannot compete with China, which dominates world production.
China uses slave labor and low-cost energy to make solar panels, which have been cornering the market for decades while the United States and other Western countries are demanding their deployment.
China lacks the conventional energy wealth of the United States and sees UN climate policies as favoring its country.
U.S. panel makers are now asking for more favorable treatment than they received in Biden’s lavish Inflation Reduction Act.
The United States is rich in abundant energy, which could be used for lowering peoples’ expenses and strengthening American industry, but because of Biden’s climate policies, it is turning its back on those while welcoming energy sources made most in China.
The lucrative incentives in the Inflation Reduction Act are not sufficient for the U.S. solar industry to compete against China’s solar industry, so it is begging for more federal government support. China has been gearing up for the West’s energy transition for decades, commandeering the technologies and the critical mineral processing needed for it to dominate the market. China dominates the production of polysilicon, wafers, and solar cells and modules on which the U.S. solar industry depends. China cannot compete with the United States in traditional fuels such as oil, natural gas and coal, where the United States has abundant resources, so it is doing the next best thing, which is helping the West turn away from their own fuels and dominating the supply chains of the alternatives. And, the United States is allowing China to have its way with Biden’s anti-fossil fuel policies and his climate agenda. The winner is clearly China.
Now that the Obama and Biden administrations have pushed intermittent and weather-driven renewables on the electric grid, coal and nuclear plants have shuttered, electricity prices have soared and power outages have increased. Industries are closing, especially those that need low cost and reliable electricity, as they cannot compete with China, which uses low-cost coal power to make polysilicon needed in solar panel manufacture. The United States has lost about 60 percent of its coal-fired generation since Obama took office and more coal plants will shutter because of Biden’s proposed power plant rule. In the past four years alone, about 50 gigawatts of coal-fired capacity have shuttered.
Solar Industry’s Plea for Additional Government Support
The Solar Energy Manufacturers for America Coalition commissioned Guidehouse Insights to conduct an analysis of the domestic supply chain for solar energy components. The report concluded that existing federal subsidies and trade policies are not enough for U.S. producers to succeed and that urgent government action is required to support the factories needed to compete with China. Even though the Inflation Reduction Act unleashed billions of dollars in clean energy subsidies, the report recommends more coordinated federal support for domestic solar factories as dozens of factories announced since passage of the climate change law in 2022 may be uneconomical because global panel prices have collapsed due to a wave of new Asian production capacity, much of it made by Chinese companies. While China chases world market share, U.S. companies chase taxpayer subsidies and other federal support.
Report Recommendations
Recommendations include tougher standards for project developers to qualify for a 10 percent bonus tax credit for using American-made components. Currently, projects can claim the credit even if the cells assembled into their panels are made from Chinese materials. That means companies lack any incentive to build domestic sources for materials including silicon wafers and solar-grade polysilicon, leaving the industry dependent on overseas products.
The report also calls on the Biden administration to step up enforcement of duties on panels imported from Southeast Asia, mostly made by Chinese companies. Biden paused those tariffs nearly two years ago as project developers complained that they would increase costs and harm growth of a key “clean” energy technology. Project developers can make more money and deploy more solar power using cut-rate Chinese panels.
The report also recommends stiffer enforcement of a U.S. law that bans goods made with forced labor, saying the government should require federal solar projects to use only panels made with American-made components. China dominates the supply chain for polysilicon that is made with cheap coal-power and Uyghur labor.
The report also warns that policies related to domestic manufacturing must be structured in a way that allows sufficient time for U.S. manufacturing facilities to ramp up production capacity. Biden’s climate agenda, however, pushes “clean” technology deployment regardless of where the products come from, which is the reason that the tariffs were paused.
Solar’s Situation Is Reminiscent of Offshore Wind
As offshore wind project costs have risen steeply due to supply chain challenges, inflation and high interest rates characterized as “Bidenomics,” several offshore wind developers in the Atlantic have sought to exit and renegotiate power purchase agreements. On average, offshore wind developers were seeking a 48 percent increase in their contract prices originally agree upon. The cost increase would result in increased energy bills of between 2.3 percent and 6.7 percent for residential customers, and between 2.5 percent and 10.5 percent for commercial customers, which is on top of already high costs for offshore wind power in the original contracts. Without the adjustments, the companies indicated that the projects were unviable, despite the companies having already sunk huge amounts of money into the projects. In most cases, offshore wind developers paid fines to get out of existing power purchase agreements. Once states initiated new auctions, many of the developers that opted out of existing contracts rebid and were able to receive higher prices from state governments. But the result is that offshore wind at best will reach just half of the Biden goal for 2030 of 30 gigawatts, and it will be even more expensive.
Conclusion
The U.S. solar industry is finding it difficult to compete against solar panels and other components made by Chinese firms. Guidehouse Insights was commissioned to perform an analysis and provide recommendations to improve the U.S. solar industry’s marketability. The solar industry is asking for federal support through tax incentives and loans, and enforcement of U.S. laws to counteract foreign subsidies and prevent products made with forced labor from entering the country. The solar industry received lucrative incentives from Biden’s Inflation Reduction Act, but those incentives are not sufficient as solar companies are still importing panels and components from China or elsewhere in Asia that are primarily manufactured by Chinese firms. Biden does not really care that he is helping China as long as his “clean” energy and climate goals are met.
