Why U.S. solar manufacturing sector can't agree on tariff policy - Marketplace

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Solar panels were invented in the United States, but the industry that makes them mostly died out in this country long ago. The U.S. fell behind for a number of reasons, and subsidized Chinese manufacturing was one of them, according to both the Trump and Biden administrations.

The U.S. imposed tariffs and offered subsidies of its own to re-create the solar supply chain here, and solar manufacturing in the U.S. has been making a comeback. But it has come at a cost, and solar manufacturers say the success they’ve had so far is at risk.

Lisa Nash, who now works in the industry, said her parents did not want her to follow in their footsteps.

“My parents were not really fond of the fact that I was interested in manufacturing,” she recalled from her office in Dalton, Georgia.

They had watched plants shut down and move abroad in the ’80s and didn’t want their daughter to go through that. But Nash got into manufacturing anyway, in textiles at first — “back when we used to make clothes in the United States” — and she, like millions of other Americans, went through exactly what her parents feared.

“My parents loved to say, ‘Hey we told you so,’ because I went through two factory closures,” she said.

Reversing the fortunes of American manufacturing has been a promise in U.S. politics for more than a decade, but in solar it is actually happening.

In her 50s, Nash took on a job as general manager for a small factory in Dalton, Georgia making solar panels. “We started out, we were gonna be around 300 people and that turned into 750 people, then now, we’re two buildings and 2,000 people. We make about 60,000 panels a day here in Dalton,” she said.

That plant exists because of trade policy.

“It was the tariffs at the time that really drove that decision,” said Marta Stoepker, senior director of corporate communications at Qcells, the firm that built this factory and one of the largest solar manufacturers in the world.

In 2018, the Trump administration imposed tariffs of up to 30% on solar equipment coming from China.

“We were like… instead of being tariffed to import our product, let’s just make our product in the United States,” Stoepker said.

A few years later, in 2022, the solar industry got another shot in the arm when President Joe Biden signed the Inflation Reduction Act, which showered clean energy manufacturing with tax credits and incentives. The following year, Qcells announced it would invest an additional $2.5 billion to expand its solar manufacturing in the U.S.

“These investments especially downstream on the supply chain, would not have been possible without the IRA for sure,” Stoepker said.

More than a dozen plants have popped up with help from the IRA. U.S. production capacity for solar panels has quintupled in two years, according to S&P Global. Most of this growth has been in the assembling of finished solar panels.

But for everything leading up to that — the pieces that go into those panels — the American supply chain has gaping holes.

“There’s no operational wafer manufacturing capacity,” said Michelle Davis, head of solar research at energy data analytics firm Wood Mackenzie.

Wafers are purplish-blue slices of silicon about the thickness of two human hairs. They get turned into solar cells, which then go into solar panels. Wafers and cells take more energy, time and capital to produce than finished panels.

Many factories to make them have been announced, with plans to come online by 2027. Few will actually materialize in that timeframe, Davis said. “There have been a lot of cell manufacturing facilities and wafer manufacturing facilities that have either been cancelled entirely or put on hold.”

The reason, Davis and manufacturers have said, is that global prices for these parts have crashed over the past year, so investing in making them doesn’t make as much business sense.

“Those investments are being undermined, largely by Chinese-owned and Chinese-controlled companies who are shipping here at dumped and subsidized prices and crushing the market,” said Tim Brightbill, a partner at Wiley Rein and lead counsel for the American Alliance for Solar Manufacturing Trade Committee, which represents a group of solar manufacturers in the U.S. China has gotten around tariffs by exporting from other countries, he said. “It’s a whack-a-mole problem where we address China. We win a case, we achieve tariffs, and the Chinese-owned companies move to other countries, like Vietnam, like Cambodia and Thailand.”

The solar manufacturers that Brightbill represents filed cases with the Commerce Department and International Trade Commission arguing the need for additional tariffs targeting solar exporters in these countries.

The Department of Commerce agreed — this month, it announced tariffs of up to nearly 300%, and those are only the beginning.

These tariffs, like those before them, are paid by U.S. importers. And that has highlighted a rift in the American solar industry.

“Prices have certainly increased as the tariffs have been put into place,” said Scott Wiater, CEO of Standard Solar, which builds and operates large solar energy farms for businesses and governments.

“We’re paying much more, well over double what other regions outside the United States are paying for panels with the tariffs. So, at the end of the day, it’s really the end customer that’s getting penalized the most,” he said.

Wiater siad there just isn’t enough production of solar panel parts in the U.S. to meet demand, and there won’t be for years. “We’re looking forward to when it does get built up, but that’s the bottom line.”

This has led to different parts of the U.S. solar industry competing for different trade policies.

While one group asks for more tariffs and retroactive tariffs, others have asked for tariff waivers, and larger import quotas to which tariffs don’t apply.

“We are not particularly convinced that tariffs move the needle on incenting domestic manufacturing,” said Abigail Ross Hopper, president of the Solar Energy Industries Association. “We’ve had tariffs from 2012 to 2022 and domestic capacity went down.” It wasn’t until passage of the Inflation Reduction Act, she said, that solar manufacturing began to take off.

On the other side of the solar industry, manufacturers argue the price shocks in global markets overpower the effects from those tax credits and incentives — that the benefits provided by tax credits and incentives would be wiped out by cheap imports. “We are at a critically important point,” said Tim Brightbill, for the future of the U.S. solar manufacturing industry.

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