Escalating US-China solar rift threatens Biden's green goals

Solar panels already cost about 40 per cent more in the US than the rest of the world, and expanded tariffs could lift prices further. PHOTO: AFP

WASHINGTON (BLOOMBERG) - The first big test of US President Joe Biden's lofty clean-power ambitions may not be sweeping climate legislation that needs congressional approval, but how his administration manages a solar supply chain that's being shaken by the seizure of imported Chinese panels.

Multiple companies have now had solar components detained at US ports in the aftermath of a Biden administration ban on equipment that may have used raw materials originally from Hoshine Silicon Industry Co, according to people familiar with the situation who asked for anonymity while discussing sensitive trade issues.

The seizures come amid a new push by some US solar manufacturers to extend tariffs to China-linked factories in Vietnam, Malaysia and Thailand, the US's largest panel suppliers.

Together the developments threaten to disrupt the US solar market, potentially jeopardising Mr Biden's goal of a carbon-free power sector by 2035.

"The disruptive and harmful impact of new trade petitions and Customs and Border Protection enforcement action cannot be understated," Solar Energy Industries Association President Abigail Ross Hopper said in an e-mail to members hours after the petitions were filed.

"The disruption to the US solar market could be severe."

Solar developers now are scrambling to prove incoming goods - some of which may have been ordered months before the Biden ban - are free of Hoshine material.

A major solar panel maker warned this week that all imports from China risk being detained by US Customs and Border Protection.

Hoshine is the world's largest manufacturer of metallurgical silicon, which is refined into polysilicon, the key material in solar panels. The material is so many steps removed from completed panels that just about any module coming to the US can't yet prove it doesn't contain Hoshine material, Mr Philip Shen, an analyst at Roth Capital Partners, said in a research note.

Domestic manufacturing

In some respects, there has never been a brighter moment for solar power in the US. Installations are booming. Mr Biden appeared poised to deliver the most progressive climate presidency in history - and on the heels of an administration steadfast on boosting fossil fuels, no less.

And yet, the industry's supply chain has been battered by higher costs, including for modules and freight.

Solar panels already cost about 40 per cent more in the US than the rest of the world, and expanded tariffs could lift prices further, according to Ms Jenny Chase, BloombergNEF's head of global solar research.

"US companies that develop and build projects would certainly suffer in the short term as US module prices would go even higher," she said.

While developers may be hurt, any moves that make imports more expensive would help level the playing field for companies that want to manufacture solar equipment on US soil. That would be a boost to another part of Mr Biden's agenda - union jobs.

"Trade actions against imported solar products may counter President Biden's climate agenda," Mr Timothy Fox, a vice-president of ClearView Energy Partners, said in an interview.

"But they also could further his union and domestic manufacturing agenda."

A spokesman for the White House didn't immediately respond to a request for comment on the matter.

Seizure costs

Canadian Solar Inc said that four of its sample modules shipped from China to its US office were held last week by officials due to a sourcing issue, and that all Chinese shipments were at risk of being stopped at the border.

Other companies have also been affected, with multiple containers seized at different ports, according to people familiar with the actions.

The cost of having products detained at US Customs facilities is prohibitive, making other companies question whether it's worth the risk of trying to import to the US, one of the people said.

The American Clean Power Association, which represents renewable power developers, said it is firmly against any forced labour practices, but warned that "responsible enforcement" is critical for meeting climate targets, as developers pursue a 40-gigawatt pipeline of solar power projects.

"Recent enforcement actions and international trade petitions go beyond the intended goal and risk significantly impacting US solar deployment," chief executive Heather Zichal said by e-mail.

Commerce petitions

Amid the seizures, a group called the American Solar Manufacturers Against Chinese Circumvention on Monday (Aug 16) filed petitions with the Commerce Department seeking to extend Chinese tariffs to factories run by Chinese firms out of the three South-east Asian countries.

The group hasn't identified its members, and First Solar Inc, the largest US-based manufacturer, declined to say whether it's part of the consortium.

The filings come at a time when some domestic solar manufacturers are seeking an extension of former President Donald Trump's solar tariffs - and as Democrats advance a US$3.5 trillion (S$4.76 trillion) tax-and-spending plan that could benefit both solar developers and clean-energy manufacturers.

While a surge of inexpensive imported panels could make it cheaper to deploy solar power in the US - and help meet Mr Biden's clean energy targets - it could also come at the expense of organised labour and working families. And Mr Biden's renewable goals don't automatically trump those concerns.

"It is not and never has been as simple as to say 'Biden wants renewable energy,'" Height Capital Markets analyst Benjamin Salisbury said.

"The Biden agenda is not to reduce domestic union employment and increase Chinese production."

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