Biden is dealing with a surge that may make the US a inexperienced manufacturing energy – S&P International

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A worker inspects solar panels at a factory in Argentina.
Source: alvarez / E + via Getty Images

SunPower Corp.The recent decision to shut down the only solar factory in the US underscores the challenges President-elect Joe Biden will face in trying to increase domestic production of clean energy technology, a cornerstone of the new administration's economic and climate strategy.

SunPower announced on Jan. 7 that it was planning to shut down a solar module factory in Oregon, less than three years after purchasing the facility and months after spinning off SunPower's international manufacturing business into a new Singapore-based company called Maxeon Solar Technologies Ltd .

The exits come as solar production consolidates around a handful of the biggest players in the industry, most of whom are headquartered in China. Maxeon, previously a unit of SunPower, said the new company's location in Asia would reduce costs and increase competitiveness.

“There is no rational need for the US to manufacture solar panels or inverters domestically – this is best done in low-cost regions,” said Pavel Molchanov, equity analyst with the energy group of Raymond James & Associates, in an email.

US politicians disagree. The Trump administration imposed tariffs in 2018 to encourage solar cell and panel manufacturers to open factories in America. The tariffs, which have supported a relatively small proportion of new domestic production, followed similar efforts by the Obama administration.

As the Biden government prepares to take power on Jan. 20, it is formulating its own plan to make the US a world leader in the invention, manufacture and export of clean energy technologies, according to a policy document. The Biden transition team did not respond to a message seeking comment.

“I am very optimistic that under the new administration, we will continue to see policies that lead to the localization of technology, manufacturing and workplaces,” said Paul Wormser, vice president of technology at Clean Energy Associates Ltd. Chain manager and engineering office. “The most recent practice in the past has been to hope that this would happen through the imposition of import tariffs. I think under the new administration the tariffs will not go away, but … we will see some new carrots.”

SunPower did not respond to a message seeking comment. The company bought the Oregon facility in 2018 as part of a deal that was partly motivated by the Trump administration's import duties. SunPower Chairman and CEO Tom Werner told the U.S. International Trade Commission in 2019 that the country lacks the incentives to lure manufacturers to Asia.

Confront China

Alleged human rights violations by Uyghurs and other Muslim minorities in the Xinjiang Autonomous Region in China could provide further impetus for attempts to relocate the production and supply chains for clean energy from China to the USA

Horizon Advisory, a consulting firm, recently said there was evidence of forced labor companies in Xinjiang that make polysilicon, a key raw material for solar panels. The company released its study after S&P Global Market Intelligence reported that America's leading solar trading group, Solar Energy Industries Association, is urging companies to relocate their supply chains from Xinjiang, which supplies around a third of the world's polysilicon last year to solar panels do.

Beijing denies violating human rights. Despite this, Washington is continuing its efforts to confront China over the allegations. In September 2020, the US House of Representatives passed law banning goods made “in whole or in part” in Xinjiang unless the manufacturers can be shown to have not performed forced labor. A Biden spokesman previously said the then presidential candidate believed the Chinese government had committed “genocide” of Uighur Muslims in Xinjiang.

Wormser said it was a “foregone conclusion” that US lawmakers will soon pass a law targeting alleged abuse of workers in Xinjiang.

In the meantime, U.S. Customs and Border Protection continue to seize imports from the region. On January 13, the agency announced that it would withhold all cotton and tomato products from Xinjiang. “CBP will not tolerate the Chinese government's exploitation of modern slavery to import goods into the US below fair market value,” CBP acting commissioner Mark A. Morgan said in a statement.

“Top-down, this is an integral part of the awakening we have had in the US and the West about the indirect and latent costs of doing business with the Chinese Communist Party,” said Nathan Picarsic, co-founder of Horizon Consulting said in an interview. “For efficiency or short-term profit, we exchange long-term positioning and adherence to … our traditional values ​​and norms.”

“If you continue on the China Path,” Picarsic added, “you will continue to build on rotten ground.”

Hard realities

However, apart from labor issues, it would be costly to set up factories and supply chains for clean energy equipment outside of China's orbit.

“Expect governments to pale and hide at the expense of domestic manufacturing support,” wrote Paula Mints, chief analyst at SPV Market Research, in a December 2020 report. “[As] Large cell and module manufacturers in China are ramping up capacity, the playing field for manufacturers outside of China is getting tougher as they have to meet China's price. “

According to Mints, China shipped 62% of the world's solar cells and panels in 2020. Including the capacities that Chinese manufacturers have relocated to other parts of Asia, the country's share of global deliveries increases to over 80%. In comparison, the United States accounted for only 1% of global shipments last year.

However, Wormser from Clean Energy Associates remains optimistic.

“This is a competitiveness problem and it requires many flavors,” said Wormser. “Competitive means that I can show you that I am not using forced labor. Competitive means that I can show you that I have a more resilient supply chain that is less likely to be disrupted by pandemics. Competitive means my costs are competitive and mine Price is therefore competitive. My product quality is competitive. “


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