The U.S.’s Struggle to Wean Itself From Chinese Solar Power
By Phred Dvorak, Nov. 15, 2022, WSJ

Solar accounts for about 4% of U.S. power generation. Biden and other advocates of green energy are trying to boost that number significantly.

To make that happen, though, the U.S. would need to build a supply chain almost from scratch.

At the moment, the U.S. has little or no manufacturing for almost any component needed to produce solar energy. China, which can produce solar components less expensively, controls more than 80% of the supply chain, dominating the manufacture of solar
panels and other vital equipment. In recent years, China has spent almost 10 times as much on solar manufacturing as the U.S. and Europe combined.

In a bid to boost U.S. solar production, Biden in August signed into law the bill dubbed the Inflation Reduction Act, which provides bonus tax credits to renewable-power projects that use American-made equipment, as well as incentives for manufacturing
solar panels, wind turbine blades and other components in the U.S. The Energy Dept forecasts solar will need to grow to at least 37% of the U.S. power mix by 2035 to hit the Biden administration’s clean-energy targets.

With vast deposits of oil and gas, the U.S. has largely avoided the energy shortages Europe now faces in the wake of the war in Ukraine and Russia’s restrictions on fuel exports. The U.S. government and green energy advocates, however, want to boost
energy production from sources that emit less greenhouse gas.

The administration has framed investments in green energy partly as a bid for greater energy security. At the United Nations climate-change conference in Egypt last week, U.S. climate envoy John Kerry called green-energy technologies such as solar panels
a matter of national security.

If the U.S. becomes more reliant on solar power, depending on China for equipment could present a security risk, politicians and energy executives said. Bottlenecks in the manufacture and shipping of solar components during the pandemic, along with
deteriorating U.S.-China relations, have exacerbated supply-chain concerns.

Spurred by the incentives outlined in the Inflation Reduction Act, some green energy companies say they are increasing investments in U.S. manufacturing. First Solar, the biggest solar-panel maker in the U.S., said in August it would spend up to $1.2
billion to increase its U.S. manufacturing capacity by 75%, citing the tax credits as a primary reason.

Hanwha Solutions Corp., a member of South Korean conglomerate Hanwha Group, said it would invest billions of dollars in building its own solar supply chain in the U.S., and plans to apply for tax credits. Its Qcells unit is assessing sites in Texas,
Georgia and South Carolina for facilities to make solar components, according to documents the company filed in Texas in July.

More than 40 gigawatts of new solar-panel plants are in various stages of planning in the U.S., almost five times what the U.S. has now, said Andy Klump, chief executive of Clean Energy Associates, a consulting firm that helps renewable-energy companies
with supply chains.

For now, though, domestic manufacturers are still largely dependent on components and processes available only overseas, industry executives said.

“How do we as the West manage to re-shore entire industries?” asked Moritz Borgmann, chief commercial officer of Meyer Burger Technology AG, a Swiss manufacturer of solar cells and panels that plans to build a factory in Arizona.

The solar supply chain starts with companies that purify silicon, the base material for most of the world’s panels. It is an expensive and energy-intensive process. Much of the manufacturing currently takes place in the western Chinese region of
Xinjiang, where electricity is cheap but the U.S. government has accused China of human-rights abuses and banned the import of products made there.

The purified silicon is shaped into ingots and sliced into thin wafers, which are cut into cells. Panel manufacturers assemble the cells in a frame and add circuitry to conduct the electricity generated.

China has invested more than $40 billion in this supply chain in the seven years through 2021, according to estimates from the Paris-based International Energy Agency.

The U.S. has only a few high-purity silicon manufacturers, which primarily sell to the semiconductor industry, and no makers of ingots, wafers or cells for solar. There are just a small number of panel makers, which the government has tried to protect
with tariffs over the past decade.

In 2012, the U.S. imposed tariffs on Chinese solar panel and cell makers. The Chinese government followed in 2014 with high duties on imports of U.S. silicon for solar components. That hit U.S. manufacturers hard because China has 97% of the ingot makers
that buy silicon for solar. The Chinese duties forced one big U.S. silicon maker to close a $1.2 billion factory before it even opened.

Another manufacturer of silicon in the U.S., Norwegian company REC Silicon ASA had almost nowhere to sell its solar products due to the U.S.-China tariff battle. In 2019 it shut down production at its plant in Moses Lake, Wash.

Earlier this year, Hanwha Solutions, the South Korean company that aims to build a U.S. solar supply chain, paid more than $200 million for a 21% stake in REC, which it plans to use as its source for high-grade silicon. Spurred by Hanwha’s investment
as well as supply shortages and U.S. concerns over Xinjiang-made silicon that sent prices soaring, REC decided to restart the plant.

REC will still be a small player in the global industry, with a production capacity that is just a fraction of what China’s biggest makers produce each year. It will have to retool its factory to produce a higher grade of silicon that is now the
industry standard. It expects that and other upgrades to cost about $150 million. The plant would also be eligible for new federal tax credits.

Trackers—racks that enable solar panels to pivot to follow the sun—are another critical component for the solar industry. Fremont, Calif.-based Nextracker is the world’s biggest manufacturer of the racks, but for years has primarily made them
overseas, taking advantage of inexpensive labor and lower material costs to produce trackers in countries such as China, Malaysia, India and Brazil.

When the Covid pandemic disrupted global supply chains in early 2020, shipping bottlenecks and international freight costs made it very difficult for Nextracker to import its trackers. Nextracker CEO Dan Shugar started thinking seriously about moving
more production to the U.S.

One Nextracker customer, Silicon Ranch, a solar-power developer based in Nashville TN, had ordered trackers for solar farms it was building in Georgia, but the racks were delayed. Silicon Ranch’s CEO Reagan Farr said he urged Mr. Shugar to do
everything he could to get the equipment to the U.S.

The two companies ended up hiring a ship. Still, the trackers arrived so late that Silicon Ranch had to double its construction crew and work through Christmas to complete the jobs, said Mr. Farr, adding that his company probably took a loss on the
projects.

In May, Silicon Ranch signed a contract with Nextracker to buy enough trackers to support at least 1.5 gigawatts of solar panels during the next two years—provided they are made in the U.S. The deal was signed before the Inflation Reduction Act, but
the developer will be able to apply for tax credits under that legislation.

In early 2021, Mr. Shugar started teaming up with steel fabricators to make racks in the U.S., including with BCI Steel Co. The two companies decided to recommission a Pittsburgh-area steel plant to make the trackers. To get the plant running as soon as
possible, Nextracker and BCI Steel shipped their entire Malaysian manufacturing line for shaping steel tubes to the U.S. on a boat.

In June, Energy Secretary Jennifer Granholm spoke at its opening, heralding federal efforts to stoke manufacturing of renewable-energy components. She said the U.S. is in a “war for our energy security” and that facilities like the new one would help
in that effort.

By June, that new line was bending and welding steel sheets into tubes. Nextracker and its steel-processing partners had spent more than $50 million to expand their U.S. manufacturing capacity by a factor of 10. Under the Inflation Reduction Act, the
companies could earn around $174 million in tax credits a year, according to calculations by The Wall Street Journal. The credits would make the price for domestic manufacturing competitive, said Mr. Shugar.

Much as Nextracker had done with trackers, D.E. Shaw Renewable Investments, or Desri, a big U.S. solar- and wind-power developer that is a unit of investment group D.E. Shaw, wanted to help bring more panel manufacturing to the U.S. It liked a panel
technology that hadn’t yet been widely adopted, which was being used by Meyer Burger, the Swiss solar company, according to Desri co-founder and executive chairman Bryan Martin.

Last year, the Swiss company proposed initially setting up a 400-megawatt factory near Phoenix. Desri urged Meyer Burger to build bigger and faster. After the Inflation Reduction Act passed, the two companies struck a deal under which Meyer Burger would
more than triple its U.S. manufacturing capacity, and Desri would buy the extra.

The incentives provided by the legislation appear to be changing the economics for others in the industry, too. In recent years, many U.S. solar developers were burned by soaring prices and slow or canceled deliveries of imported components. Now they are
signing agreements to buy domestically produced components to ensure they can get supplies when they need them. In some cases, companies say they are willing to pay more for U.S.-made panels than for Asian imports, although IRA incentives are evening out
the costs.

https://www.wsj.com/articles/solar-energy-china-supply-chain-11668525614

--- SoupGate-Win32 v1.05
* Origin: fsxNet Usenet Gateway (21:1/5)