Contributed by Scott Buckley, President, Green Lantern Solar
The last 15 years of the solar industry have been marked by numerous voices, from a myriad of companies, that Chinese solar module manufacturers are not playing fair. From SolarWorld to Auxin Solar and everything in between, the common refrain has been that Chinese solar module manufacturers are dumping cheap modules into a U.S. market starved for their products.
This anti-competitive behavior, the argument goes, prevents U.S. manufacturers from competing on a level playing field in their own backyard and is preventing a domestic solar module manufacturing industry from thriving. And to an extent, critics of the Chinese propensity for undercutting U.S. industries by selling Chinese State government-subsidized goods aren’t wrong.
The Chinese government decided more than a decade ago that it wanted to dominate the solar manufacturing space and created government subsidies to the industry to build their domestic production—and once they’d met their domestic demand, they set their sights on dominating the world market. Something we now know as the Chinese Belt and Road initiative.
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Prior to the late 2000s and early 2010s, the United States and Europe were the center of the solar manufacturing universe. Heck, the U.S. invented solar panels. Who can forget names like ARCO and Sharp, or German-based companies like SolarWorld? But starting in the mid-2010s, those venerated names in the industry began to take a backseat to companies like Trina, Jinko, and Canadian Solar (which, despite its name, is a Chinese company).
Those companies, with the help of their governmental subsidies, began to produce less expensive modules, and Western companies couldn’t compete. Instead of investing in domestic manufacturing, Western solar markets conceded module manufacturing to the Chinese and turned their focus to other parts of the supply chain. And by the way, this is no different from the manufacturing offshoring we have seen since the days of Jack Welch at GE. Milton Friedman’s declaration of shareholder primacy helped push the manufacturing ball offshore and the impact continues not only in solar, but many industries in the U.S. Take a moment to see where the clothes you’re wearing, or the computer or iPhone you are reading this on are made. Yup, the same place our panels are made. Where are the calls to place tariffs on iPhones that accrued $192B in 2021 revenue for Apple so we can manufacture them in the United States? At least with solar modules, we are trying to re-shore and invest in U.S. manufacturing, but we need time to be successful.
That’s the imbalance that the Inflation Reduction Act (IRA) has been trying to rectify by injecting billions of dollars into creating a domestic solar manufacturing base. And the trajectory of that infusion is going well. A simple glance at lists of manufacturing companies building module factories here in the United States is evidence that the IRA is working, billions in private investment are flowing into U.S. module manufacturing, and before long we’ll have the domestic solar manufacturing infrastructure with good, high-paying jobs to boot.
But we’re not there yet.
And that’s why the Department of Commerce’s decision to reimpose tariffs on certain Chinese module manufacturers starting in June 2024 is so troubling. The June 2024 timeline isn’t sufficiently far along the investment curve to allow U.S. manufacturing to catch up to module demand. I am not saying don’t have tariffs on Chinese solar panels, to be clear. I am saying let’s give the sector time, perhaps three to five years, according to the Solar Energy Industries Association (SEIA), to hit that goal. Private investments are already flowing into U.S. module manufacturing as a result of the IRA. The carrot is there. Money will continue to flow into manufacturing as long as producers see a profit possibility.
In fact, it’s working so well that a recent Wall Street Journal article notes, “European leaders say U.S. subsidies are pillaging green-energy investment from their countries.” This means we are now becoming more competitive, just like China is currently. We are doing the same thing to the EU that China is doing to us. We can look the other way when it benefits us, though. This increases long-term stability and brings manufacturing jobs to the U.S. The article goes on to say, “Yet the Chinese quickly figured out how to produce inexpensive solar panels at scale, driving down global prices by 80% between 2008 and 2013.” Why did panel prices go down that much? Because China made a strategic decision to invest in panel manufacturing through government subsidy.
Now that they are winning the supply war, the U.S. is getting on board with a similar strategic investment so we can compete. As the saying goes, the second best time to plant the tree is now. Thus, there isn’t a need to give a stick to the whole industry, and the fight against climate change, to incentivize U.S.-based module manufacturing. The carrot has worked as intended, so spare the stick until later.
A solution available to the industry is to urge President Biden to extend the moratorium beyond June 2024, allowing sufficient ramp-up time for the module manufacturers. The reason? The IRA needs time to work. Companies need time, years, in fact, to invest in new strategic manufacturing opportunities in the U.S. And it has already begun with billions in investments by First Solar, QCells, and others. This is no different than the CHIPS Act that is reshoring our silicon wafer production for computers, or the trillion-plus dollars in implicit and explicit government subsidies the fossil fuel companies receive yearly. The domestic solar module supply chain is growing quickly, and once it has reached its full potential, then we can advocate for fairer competition on the global stage.
To think of this another way, the Chinese State government is subsidizing the expansion of an entire ecosystem of U.S. clean energy jobs, helping us create a more resilient grid and fight climate change by providing subsidies to their module manufacturers. The trade-off, of course, comes at the expense of U.S. solar manufacturing jobs. The trade-off should not come at the expense of tens of thousands of U.S. solar jobs that are not in the manufacturing sector. That punishment is inconsistent with the purported crime that has actually allowed, indeed promoted, solar job growth in the United States.
That’s where we come in. As an industry, we must continue to lobby our representatives in Congress and the office of the President to impress upon them how devastating imposing tariffs would be next year not only for tens of thousands of high-paying U.S. clean energy jobs, but also for those of us who live on Planet Earth. I know SEIA is doing yeoman’s work in this area, but they can’t do it alone.
So I implore all of my fellow citizens—meet with your representatives. Send emails. Call the elected officials who work to represent your interests. Tell them how much solar is contributing to the economy in your neck of the woods (hint, it’s billions, by the way), and then do it again. If not for yourself, then do it for those around you, your families, your legacy. Until we have a Planet B we must think beyond isolationist policies that scar more than heal.
