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Can Tariffs Boost U.S. Solar Component Production?

adminAugust 10, 20264 Mins read0

Can Tariffs Boost U.S. Solar Component Production?

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Stacks of solar cells at the Hanwha QCells plant in White, Georgia.

Welcome back to Current Climate. The Trump administration’s haphazard use of tariffs has complicated sourcing strategies and raised prices for U.S. manufacturers, as it’s seldom easy to find domestic suppliers who can seamlessly replace those in China or elsewhere. In the case of new tariffs for imported polysilicon and derivative products, solar cells and modules announced last week, some U.S.-based producers are likely to benefit, but costs may also rise across the industry.

Domestic solar panel production is booming, though most manufacturers use polysilicon from China and other key components from Southeast Asia. Starting in December, the U.S. will impose a 15% tariff on polysilicon products and new minimum prices for imported polysilicon, polysilicon ingots and wafers, and solar cells and modules. Like steel and aluminum, the fees are being imposed under Section 232 trade guidelines, when reliance on certain imported goods is found to be a national security risk.

“The plan of action in this proclamation will, among other things, help ensure the commercial viability of United States production of polysilicon and its derivatives that is necessary to meet United States economic and national security requirements,” Trump said in announcing the plan.

There are U.S.-based producers of these materials and components, including Qcells, Corning, ES Foundry and Suniva, but they aren’t scaled up to fully replace imports. That suggests costs to build new solar power systems may rise next year. Meanwhile, imports could spike before the tariff and new pricing take effect.

“America has made terrific progress rebuilding its solar manufacturing base, but imposing tariffs and price floors on solar materials will create new challenges for American manufacturers and raise energy costs for families and businesses,” Tim Pawlenty, head of the Solar Energy Industries Association, said in a statement.

Solar is the fastest-growing source of new electricity generation in the U.S., fueled in part by insatiable demand from new data centers, and the tariffs aren’t likely to change that even if they raise costs across the board. And in the case of First Solar, which makes panels that don’t use silicon, the move is “one of the most strategically significant trade measures in decades,” CEO Mark Widmar said.

The Big Read

When The Grid Is Strained, Who Gets Power And Who Gets Shut Out?

Extreme heat is turning electricity from a household service into emergency infrastructure.

During a heat wave, air conditioners drive demand upward just as high temperatures can reduce the efficiency of power plants and transmission equipment. When wind generation falls, power plants go offline, or electricity imports become scarce, grid operators must decide which resources to activate, which customers can reduce consumption and, in the most serious emergencies, where power interruptions will occur.

Those decisions are becoming more difficult as data centers place great new demands on regional grids. Hospitals, cooling centers, water systems, communications networks and households with electricity-dependent medical equipment also require reliable power.

The central question is no longer simply whether America has enough electricity. It is who receives priority when it does not.

Hot Topic

Brook Porter, G2 Venture Partners cofounder, on how power demand is creating boom times for clean energy investing

The cleantech investment space seems to be on a big upswing. How do you see things playing out over the next six to 18 months?

When the administration took charge, and everyone was super negative, we said, “Look, we’ve been at this for a long time. We’ve been through a lot of cycles. And if you look back over Republican versus Democratic administrations, in general, under the Republican administrations, our sectors have done as well or better on an absolute growth basis. There’s a lot of logic and reasons behind that. But the truth is, and I tend to believe this, fixing market fundamentals is more valuable than adding subsidies to try to make something happen unnaturally.

If you think about what’s happening now, what matters the most? What matters the most is demand inflection. We have demand. That’s a totally different market. And now there’s actually an advantage to startups. Companies like Bloom Energy can build and deliver capacity when other conventional players can’t. They’re competing on an equal playing field in a white space. That’s actually what makes startups in the Silicon Valley ecosystem so valuable: many of the markets that are created, social media, AI, these are white spaces.

When you’re in a white space, it’s a very different way for startups to compete. Traditionally, in energy for the past 25 years, it’s been competing with incumbents. You’re trying to displace a coal plant, and that just has a totally different market dynamic. It’s slower, it’s harder. Just being a little bit cheaper isn’t good enough. You’ve got to be far more compelling. That all has changed. Now you’ve got demand inflection and it’s crazy. It’s boom times.

And so anyone that’s connected to this boom, we’ve been talking about it as a $5 trillion infrastructure investment. That might be low. It’s now already $2 trillion in the next two years from just the hyperscalers. Everybody’s upping their capex. Those returns are paying off. They’re not going to slow down. And whoever’s connected to that is going to see unprecedented growth.

We just see a lot of exciting opportunities in that space. A lot of our companies, our current companies like Crusoe, we can see it in the numbers of deals that they’re contracting. And then the whole ecosystem around them, there’s just a massive pull sucking sound for anything that can help build those things out more cost-effectively, more efficiently. There’s going to be a bunch of really cool companies built in the wake of this demand.

It is probably the most exciting time in our careers because you’ve got two sides. You’ve got the $5 trillion of infrastructure, and that’s where the action’s at. That’s the energy storage, power generation, transmission and power electronics. There’s just a whole host of technologies there. But then you also have the application side. What are we going to do with these models? Are these models going to be used for just making industrial efficiency more efficient? We see that in a lot of our portfolio companies today.