The trade dispute dividing the US solar sector

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Donald Trump swept through Texas yesterday seeking to shore up support from deep-pocketed oil and gas executives in a scramble to close the fundraising gap with Joe Biden. One event attended by the former president was hosted by shale oil tycoon Harold Hamm of Continental Resources, alongside Occidental Petroleum chief Vicki Hollub and Energy Transfer chair Kelcy Warren. Despite the strong turnout in Houston, many oil executives have been privately sceptical of Trump, whose volatility and vows to ratchet up tariffs could undercut oil demand.

In Norway, pressure is mounting from trade and campaign groups on the country’s $1.7tn oil fund to divest from Israel, writes our Nordic correspondent Richard Milne. The world’s largest sovereign wealth fund has holdings in 76 Israeli companies, accounting for just 0.1 per cent of its assets and $1.5bn in investment.

Norway, which was one of the three European countries yesterday to recognise Palestine as a state, has been insistent that its fund is not a foreign policy tool but merely a financial investor.

Today’s newsletter takes a look at a US trade dispute that has divided the solar sector and put billions in announced manufacturing investments from Joe Biden’s Inflation Reduction Act up in the air.

Thanks for reading,

Amanda

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The battle over the US solar sector

A fierce trade dispute is brewing in the US solar sector, dividing the biggest names in the industry and putting billions of manufacturing dollars and the pace of US solar power deployment at risk.

Last week, the US Department of Commerce launched a probe in response to complaints filed by the two largest solar panel manufacturers in the US, First Solar and Hanwha QCells, along with five other companies, into the alleged dumping by Chinese producers of cheap solar cells through their operations in south-east Asia. New tariffs for dumping could range from 70 per cent to 271 per cent depending on the country, and 15 per cent to 50 per cent for co-operating companies.

“Manufacturers like QCells are losing millions of dollars a month. Investments across the sector are at critical risk of failure,” said Hal Connolly, QCells’ head of public policy and government relations, at a US International Trade Commission hearing last week.

The investigation is the latest drama in solar trade — readers may recall the paralysing 2022 commerce department probe that found Chinese companies guilty of circumventing tariffs — and comes at an inflection point for the sector. Solar is the fastest-growing source of new electricity generation on the US grid, while Inflation Reduction Act subsidies have attracted billions in investment for new factories for panels and their inputs.

What sets this case apart is the heavyweights on both sides of the aisle. Pushing back against First Solar and Qcells are large solar companies, often Chinese, which have invested heavily in US production, along with industry groups such as the American Clean Power Association.

“We built our factory and we expected a cost profile that did not include an unjustified level of additional tariffs on imports of cells,” said Jim Murphy, president of Invenergy and board chair of Illuminate USA, Invenergy’s manufacturing venture with China’s Longi in Ohio. Murphy called the petition “anti-competitive” and said it would also delay timelines for solar project deployment.

At the heart of the dispute is the tension facing the Joe Biden administration across clean technologies as it tries to strike a compromise between breaking dependence on Chinese supply chains and decarbonising quickly.

Smaller than a piece of paper, a solar cell is responsible for converting sunlight into electricity. While a flurry of cell manufacturing announcements have been made on the back of the IRA, the US does not currently produce cells and imports the bulk of them from south-east Asia, often from Chinese companies that built factories there to serve the US market.

Wood Mackenzie estimates the US will have 5GW of cell manufacturing capacity by the end of the year, not nearly enough to meet the 38GW of projected deployment.

Elissa Pierce, solar analyst at Wood Mackenzie, said given the high costs for cell production domestically, higher tariffs could “make it more competitive to manufacture cells in the US”.

Petitioners argue that low global market prices from an oversupply of Chinese panels have made it uncompetitive to produce domestically, even with support from the IRA. Mission Solar, a US manufacturer, said it has reduced its staff and put expansion plans on hold because of “unfavourable market conditions”.

“I’m very concerned that we have a once-in-a-lifetime opportunity to make these investments in America, but we can’t do it,” Hari Achuthan, founder of Convalt Energy, told the US International Trade Commission. Convalt stopped its US factory construction in 2022 because of low prices.

Large industry groups including the Solar Energy Industries Association, the ACP and the American Council on Renewable Energy have come out against the petition, calling it a threat to manufacturing and decarbonisation plans.

BloombergNEF estimates the petition could make US panels three times more expensive than the global market price and undermine $8bn in manufacturing investments from Chinese solar companies in south-east Asia.

Companies testifying against the petition include China’s Trina Solar and Vietnam’s Boviet Solar, which make panels in the US but import cells from south-east Asia. Exempted from the petition are tariffs on cells from South Korea, the second-largest source of US imports and where petitioner QCells sources some of its cells.

“This case is an attempt by petitioners, led by Hanwha and First Solar to stifle US competition. It pits American solar manufacturer against American solar manufacturer and puts American solar manufacturing jobs and investment at risk,” said Andrew Williams, vice-president at Canadian Solar, which operates a panel factory in Texas and plans to open an $800mn cell factory in Indiana in 2025.

Tim Brightbill, lead counsel representing the petitioners, dismissed claims that new tariffs would hurt solar deployment. “What is concerning is that we have failed to enforce our own laws, allowing China to control the solar supply chain and shut down US manufacturing, which is critical to deployment,” Brightbill said in a statement to Energy Source.

Most US solar manufacturing investments have focused on solar panel assembly over cell production despite a tax credit incentive in the IRA to buy panels with US-made cells. Operating a cell factory in the US is a hard feat given long timelines for construction, slim profit margins and rapid technological advancements in Asia. Of the 27.3GW of US cell manufacturing announcements tracked by BNEF, the consultancy deems only 8.3GW with credible plans.

“The US solar industry is just one geopolitical incident away from mass disruption . . . if you’re going to bring in imports and support imports at the cost of domestic manufacturing, you’re giving up your only hedge when that black swan event happens,” said one petitioner.

Numerous tariffs already exist for solar parts. Last week, the Biden administration reinstated a Trump-era tariff on double-sided solar panels, while pledging to raise tariff quotas for cell imports, a reflection of the lack of domestic capacity. In a couple of weeks, the anti-circumvention tariffs from the 2022 Commerce probe will go into effect.

“History just provides us a lesson here that the likelihood that those tariffs pass is quite high,” said Pol Lezcano, senior solar analyst at BNEF. “What this will do is just completely put a stop to those cost declines in pricing that developers were finally able to benefit from in the US.”

The ITC will vote on June 7 to decide whether to continue with the investigation.

Job moves

• Getchell Gold appointed Michael Hobart to the US mining company’s board of directors. Hobart also serves on the board of Galleon Gold and as a partner at Fogler Rubinoff LLP.

• Nicola Hartman joins SCS Technologies, an oilfield technology provider, as chief financial officer. Hartman joins from TTL Subsea.

• ClimateRock, a special purpose acquisition company focused on clean technologies, appointed Dariusz Sliwinski to its board of directors.

• Advantage Capital, an investment firm, named Steven Lichtin as chief executive of Advantage Renewables, its development arm. Lichtin joins from Cypress Creek Renewables, where he was vice-president of development.

• Ruben Llanes will head the digital grid business at Schneider Electric, a French industrial conglomerate.

• Petrobras, Latin America’s biggest crude producer, appointed Clarice Coppetti as interim chief executive after Jean Paul Prates was ousted by the Brazilian government.

Power Points

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.