Earth Protect Blog

Surge of cheap exports from China upending U.S. clean energy sector

By Alan Rappeport

The New York Times

WASHINGTON>> Less than a year ago, CubicPV, which manufactures components for solar panels, announced that it had secured more than $100 million in financing to build a $1.4 billion factory in the United States. The company planned to produce silicon wafers, a critical part of the technology that allows solar panels to turn sunlight into electrical energy.

The Massachusetts-based company called the investment a “direct result of the long-term industrial policy contained within the Inflation Reduction Act,” the 2022 law that directed billions of dollars to develop America’s domestic clean energy sectors. CubicPV was considering locations in Texas, where it would employ about 1,000 workers.

But a surge of cheap solar panels from China upended that project. In February, CubicPV canceled its plans to build the factory over concerns it would no longer be financially viable thanks to a flood of Chinese exports. As CubicPV was gearing up to make wafers in the United States, prices of those components were dropping by 70%.

The setback underscores the concerns rippling across the U.S. solar industry and within the Biden administration about whether President Joe Biden’s industrial policy agenda can succeed. Top administration officials have begun warning that efforts to finance a domestic clean energy industry are being undermined by a surge of cheaper Chinese exports that are driving down prices and putting the United States at a competitive disadvantage.

The fate of the CubicPV factory is the type of outcome that Treasury Secretary Janet Yellen has warned is likely if China does not stop dumping heavily subsidized green energy products into global markets at rock bottom prices. She took that message to China last week, warning that its industrial strategy was warping supply chains and threatening American workers.

China appeared to dismiss those concerns. After Yellen’s meeting with Chinese Premier Li Qiang, his office said, “The development of China’s new energy industry will make an important contribution to the worldwide green and low-carbon transition.”

Chinese overcapacity has been a central topic this week at the spring meetings of the International Monetary Fund and the World Bank. Before talks with Chinese officials at the Treasury Department on Tuesday, Yellen said that China was not operating on a “level playing field” and warned that by producing more green energy products than the world can absorb, it was putting American firms and workers at risk.

“In the area of clean energy products where we’re very concerned about overcapacity, we are highly reliant — the entire globe is — on China,” Yellen said at a news conference. “They are the dominant source of supply in a number of areas, including batteries, solar panels and the like.”

Worries about whether the United States solar industry can actually compete with China has echoes of past efforts to supercharge that sector. In the early 2000s, the United States used a mix of tax incentives and federal loans to invest in the industry. But as China began to churn out its own solar components, prices fell, and startups like Solyndra filed for bankruptcy. China ultimately became the world’s leading manufacturer of solar components and panels, fueled by a combination of cheap labor and robust government investments.

The stakes are higher this time around, given the huge sums of taxpayer money that are being funneled into clean energy industries in an attempt to make the United States less reliant on China for solar panels, electric vehicle batteries and other products.

On Wednesday, Biden called for tripling tariffs on Chinese steel and aluminum imports, and the Office of the United States Trade Representative said it would begin an investigation into China’s shipbuilding practices.

The new sense of urgency follows years of deliberations within the Biden administration about how to handle Chinese tariffs, particularly those on solar products.

In 2022, the administration announced a two-year delay on solar tariffs that were poised to take effect to allow for greater adoption of the technology in the United States.

Last year, Biden vetoed legislation that would have reinstated the tariffs despite concern from Democrats and Republicans that the administration was not holding China accountable for its unfair trade practices.

Those tariffs will be reinstated in June. And an exemption that has allowed two-sided, or bifacial, solar panels to avoid existing import duties is expected to be reversed in the coming days.

For America’s solar industry, the hope is that those trade barriers will arrive before it is too late and that the Biden administration will open new investigations to ensure that China cannot exploit loopholes.

“These products are just flooding into the U.S. market, they’re willing to take any price, and they’re just losing money on it,” Mike Carr, executive director of industry group Solar Energy Manufacturers for America, said of Chinese solar exports. “It’s like a bankruptcy sale.”

Carr expressed hope that the Biden administration would protect the industry, saying “they are not without recourse to avert this.”

Nick Iacovella, senior vice president of the Coalition for a Prosperous America, which promotes protectionist policies, said the White House bears some blame for the solar industry’s struggles.

“Poor trade policy decisions by the Biden administration, like the two-year solar tariff moratorium, have allowed China to severely undermine the law and continue to cement its dominance in the renewable space, and particularly in the solar industry,” Iacovella said.

Solar panel imports surged by 82% over the last two years, according to S&P Global, with most of the shipments coming from Chinese manufacturers operating in Southeast Asia. During that time, prices for solar panels have declined by about 50%, according to SEMA, the industry group.

While Republicans unanimously opposed the Inflation Reduction Act, which authorized billions of dollars in funding for the clean energy industry, they have been critical of Biden for allowing Chinese companies to trample over American industries.

During a House Ways and Means Committee hearing this week, Rep. Carol Miller, R-W.Va., told the U.S. trade representative that the Biden administration’s trade agenda toward China has been “feckless.”

The Biden administration’s clean energy tax credits and subsidies are estimated to be worth $600 billion to $1.2 trillion over a decade. However, industry officials have complained that money has been slow to get out the door and that some of the tax credit rules are too loose, allowing solar companies to claim credits even if they import components and assemble the panels in the U.S.

The CubicPV factory was expected to produce silicon wafers, a key component of solar panels that are currently made almost entirely in China. But the climate law does not reward companies for making solar panels that are constructed with American made wafers. So when the price for solar wafers fell, the economic case for the plant unraveled.