By Mark Widmar
November 8, 2021 at 5:00 am ET
In September of this year, five of China’s — and the world’s — largest solar panel manufacturers issued a joint statement warning about a “crisis” that could endanger the “sustainable development of the industry.” According to a news report, the manufacturers said that orders for solar panels they had already signed would lead to “serious losses” due to the rising cost of materials and called on developers of large solar projects to delay their timelines.
While the letter points to increases in prices for solar glass and adhesive film, China’s solar industry has also been struggling to deal with skyrocketing polysilicon prices due to the country’s coal shortages. Polysilicon forms the basis for crystalline silicon solar panels. With electricity representing the single largest component of the cost of its production — accounting for more than 30 percent of costs — China’s polysilicon industry is heavily reliant on cheap coal electricity to keep its costs down. When coal prices in China hit record highs, so too did polysilicon, which is estimated to have risen by 300 percent since August. Meanwhile, the prices of crystalline silicon solar panels are reported to have gone up by almost 50 percent.
Furthermore, as China’s solar manufacturers operate at reduced capacity, their supply of solar panels may be prioritized for domestic use quite simply because the largest investors in utility-scale solar projects are the country’s politically powerful state-owned enterprises. Such a pivot to focus primarily on domestic consumption, however temporary, would allow these manufacturers to avoid volatile freight costs and international scrutiny of their supply chains, potentially reducing supply to the United States.
These are simply the latest in a litany of risks associated with China’s solar industry. This includes the apparent violation of the World Trade Organization’s rules on subsidies and fair trade and the consequent imposition of tariffs, reported human rights abuses that have led to import restrictions and the continued use of coal to power polysilicon production. For the solar industry — and by association, the fight against climate change — these risks potentially translate into supply uncertainty and renegotiated contracts. Critically, they are expected to delay an estimated 56 percent of the climate-critical utility-scale solar power plants that were slated to come online in 2023.
At its heart, China’s domination of solar supply chains places the country’s interests first and has allowed it to accumulate enough power to determine the timeline of the clean-energy transition. This reality is what makes the reliance on Chinese solar such a risky proposition as the United States works to deliver as much as 45 percent of its electricity from solar by 2050.
It is against this backdrop that Congress incorporated the Solar Energy Manufacturing for America Act into the budget reconciliation bill. SEMA is an effective and durable solar manufacturing supply chain tax credit designed to attract and sustain solar manufacturing, secure our clean energy future, grow stable middle-class manufacturing jobs and, crucially, encourage the development of disruptive future technologies. It also represents what may be our final opportunity to de-risk America’s transition to a sustainable energy future.
This legislation directly addresses the solar industry’s China-dependency risks by spurring the new investment needed at every step of the solar supply chain in the United States to ensure that material, logistical, production and pricing volatility do not slow down our march to a net-zero emissions economy by 2050. It also mitigates the risk to innovation caused by the subsidy-fueled dominance of a single semiconductor platform by providing the support needed to develop and ramp up disruptive solar technologies here at home, including those that could decouple American solar manufacturing from Chinese supply chains.
A frequent question we get asked is, “How fast can you scale?” Well, our company, First Solar, is doubling its manufacturing capacity in Ohio, with no dependencies on Chinese crystalline silicon supply chains, to 6 gigawatts per year by 2023. That’s 3.3 gigawatts of fully integrated, new American solar manufacturing capacity added in 18 months.
Given the right policies, First Solar sees a path to get to 10 gigawatts of annual production in the United States within the next few years, and we know that we’re not alone in being in a position to continue expanding American solar here at home. We believe that SEMA could enable as much as 30 gigawatts of annual domestic solar panel production by 2025, creating the self-sufficiencies needed to achieve net-zero by 2050. It may take a bit longer to completely separate the U.S. solar supply chain from China, but we have to start now.
By incentivizing manufacturing directly and across every step of the domestic supply chain, we can continue to drive down solar deployment costs, add good-paying middle-class jobs across the country and reduce the risks faced by the U.S. solar industry.
Mark Widmar is the chief executive officer of First Solar, the only U.S. company among the world’s largest solar manufacturers.
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