A South Korean solar panel maker’s plans to expand its U.S. footprint is highlighting current challenges for the solar industry and how American trade policies are remaking supply chains for the technology, analysts say.
The company, Hanwha Qcells, announced yesterday that it would pour $320 million into ramping up production of solar panels in the United States and increasing output of solar cells at a facility in South Korea.
Already, Hanwha operates a 1.7-gigawatt-capacity factory in Dalton, Ga. The expansion, due for the first half of 2023, will bring the company’s total U.S. capacity to over 3 GW, according to a press release. That would make it responsible for one-third of all U.S. domestic panel production, although a larger amount — around 24 GW — is imported from other countries.
In a press release, Hanwha said the new investments “aim to address growing demand for renewable energy, as ongoing energy market turbulence has sent fossil fuel prices soaring.”
“Growing uncertainties tell us that securing reliable, sustainable energy has become more important than ever before,” said Justin Lee, Hanwha’s chief executive, in a statement.
But Hanwha’s new investments may also point to a gradual shift by some solar producers to align themselves with what both Republicans and Democrats often define as a national priority — having American developers buy less solar equipment from Chinese-backed companies, say analysts.
Hanwha’s plans are “yet another example of how trade barriers reshape supply chains,” wrote Pol Lezcano, lead analyst for North American solar at BloombergNEF, in an email.
The company has already been trying to shift its supply chains away from Chinese polysilicon sources by investing in American and South Korean sources, noted Lezcano. And Hanwha’s new cell-making capacity in South Korea might let it avoid potential new U.S. tariffs on cells made in Malaysia, he said.
The prospect of those new tariffs, which would also apply to panels and cells made in Cambodia, Vietnam and Thailand, has loomed over the solar industry, sparking bitter disputes and freezing shipments. Auxin Solar, a California-based panel maker, petitioned the Commerce Department to open a review into the tariffs earlier this year, arguing they would stop Chinese companies from skirting existing tariffs.
Commerce’s decision to start a probe could have helped encourage Hanwha to go forward with its new investments, Lezcano speculated. “I can’t speak to Hanwha’s specific reasons. But there is arguably no bigger uncertainty than Auxin’s tariff petition right now,” he wrote in reference to Hanwha’s announcement, which credited “growing uncertainties” with stoking demand for renewable energy.
Spokespeople for Hanwha Qcells did not respond to a request for comment.
‘Absurd and patently false’
Auxin’s CEO, Mamun Rashid, said yesterday he was pleased to learn of Hanwha’s U.S. investments. “We’ve been saying for years that we need the entire supply chain here in America,” he said in a statement. “[I]f our petition had any impact on this business decision, I’m absolutely thrilled by that result.”
His company’s desired version of tariffs, if ultimately accepted by Commerce, would cover upward of 80 percent of the country’s solar panels, according to industry estimates.
The petition has enraged solar developers, however, who say the prospect of new costs is jeopardizing most of their planned projects. This week, for instance, the Solar Energy Industries Association (SEIA)’s president, Abby Ross Hopper, blasted the Biden administration for not immediately rejecting Auxin’s request, saying there was “clear precedent” for doing so (Energywire, May 12).
SEIA did not comment on Hanwha’s new investments. But it did lock horns yesterday with one prominent backer of Auxin’s petition, a group known as the Coalition for a Prosperous America (CPA).
That group issued a report accusing SEIA of being controlled by Chinese companies that use forced labor in their production lines. Those companies, which it said are “subsidized by and beholden to the Chinese Communist Party,” are seeking to “undermine the Commerce Department’s investigation” into new tariffs, said Nick Iacovella, CPA’s senior vice president for communications, in a statement.
“SEIA’s Chinese members are actively holding the U.S. solar industry hostage by refusing to ship to the U.S. — a coordinated effort that only underscores the need to boost domestic production and reduce our reliance on slave labor Chinese solar produced by coal,” Iacovella added.
SEIA dismissed the report’s accusations.
“The allegations of Chinese influence on SEIA are absurd and patently false,” said Dan Whitten, SEIA’s vice president of public affairs, in a statement.
“Out of SEIA’s 60 board companies, all have U.S. operations and one company has a headquarters in China. Like every board member, they have one vote,” his statement read. “SEIA represents the American solar and storage industries and American workers, full stop. Those who suggest otherwise are being fundamentally dishonest and acting in bad faith.”
Consider the wafer
Even if Commerce were to reject Auxin’s request for new tariffs, several other U.S. trade policies are aimed at chipping away at China’s status as the world’s chief power in solar manufacturing.
In addition to preserving Trump-era duties on Chinese imports, the Biden administration has banned imports linked to one Chinese province where forced-labor programs are allegedly occurring. The White House and congressional Democrats also are hoping to enact new tax credits for domestic manufacturing of solar — a policy that Hanwha said might allow it to start producing cells and wafers in the U.S., a type of production that does not currently exist.
Meanwhile, domestic panel production has begun to sprout in the years following the Trump-era solar duties, according to an analysis released this week by the National Renewable Energy Laboratory (NREL), which did not take a position on the effect of tariffs.
U.S.-based panel production reappeared in 2018 and has climbed since then, hitting a record level last year — though that was mostly due to expansions by one company, Arizona-based First Solar, the analysis found.
Hanwha has one of the biggest U.S. manufacturing footprints, particularly for distributed solar, said NREL. In 2021, Hanwha had an estimated 21 percent of the commercial market and 24 percent of the residential market in the U.S. and just 5 percent of the utility-scale market.
Yet virtually no manufacturing takes place in the U.S. of cells or their precursor, wafers. And wafer production outside of China — a crucial step in the panel production process — remains rare.
“There haven’t been yet significant announcements about diversifying [sourcing] for wafers,” said David Feldman, a senior financial analyst at NREL and an author of the solar analysis. “There’s still this question of the wafer. Where does the wafer come from?”
Correction: A previous version of this article said Hanwha’s U.S. expansion would take place at its Georgia factory. Spokespeople from Hanwha later clarified that the company has not specified where in the U.S. the expansion would take place.