The Department of Energy is protesting a Massachusetts solar company's request for an exemption to U.S. import tariffs, arguing that the company's plan to build a factory in Asia appears to violate agreements to manufacture its breakthrough technology in the United States.
1366 Technologies of Bedford, Mass., which developed technology that could slash the cost of solar cells, told DOE in January that it would withdraw its application for a $150 million DOE loan guarantee tied to a U.S.-based production plant. The government guarantee had been in the works since 2011.
The plan to build a U.S. production plant made headway in October 2015, when 1366 and New York state officials announced with fanfare that the first full-scale factory would be built in upstate New York. In January, however, the company reversed course and said it would begin production at a still-undisclosed location in Asia.
The concern, 1366 CEO Frank van Mierlo said, was that the process of reapplying for the loan guarantee under the Trump administration had dragged on for too long, and the outcome remained uncertain. The technology was ready to be commercialized, and it couldn't wait any longer (Energywire, March 5).
DOE under Energy Secretary Rick Perry has fired back.
John Lucas, DOE acting general counsel, wrote to the U.S. Trade Representative's office April 16, stating that the company "made U.S. manufacturing commitments to DOE as part of millions of dollars in funding agreements with 1366. Constructing and operating the Southeast Asia facility is likely contrary to 1366's U.S. manufacturing commitments to DOE."
The concern is also financial support to 1366 from DOE's Office of Energy Efficiency and Renewable Energy (EERE) and the Advanced Research Projects Agency-Energy (ARPA-E), DOE officials said. Those programs require that the manufacturing of inventions funded by the agency happen in the United States, the agency said.
Lucas asked the trade office to give "appropriate weight" to the issue in determining whether to exempt solar cells made abroad with 1366's process from the initial 30 percent tariff on imported photovoltaic solar panels that President Trump announced in January.
In its appeal to USTR for an exclusion from the 30 percent tariff, 1366 said that in addition to the Asian plant now under construction, it "also plans to build a commercial factory in the United States" during the next four years.
South Korea's Hanwha Corp.'s global solar panel manufacturer, Hanwha Q Cells Co. Ltd., had agreed to buy a majority of the company's U.S. output. That would be built from silicon purified by Germany's Wacker Chemie AG at a plant in Charleston, Tenn.
Another issue that has 1366 and DOE at loggerheads is intellectual property rights. According to a DOE official who did not want to be named, DOE officials believe the United States has a possible claim on 1366 technology tied to grants DOE had given the company over the past eight years. In a review of the 1366 product exclusion petition under the solar tariff, DOE said "it came to light" that the company also had patents not reported as part of its DOE funding process.
DOE and 1366 would not provide documents describing in detail the conditions attached to DOE's grants.
"The department takes seriously its responsibility to protect its intellectual property rights and the parties' obligations under funding agreements," said department press secretary Shaylyn Hynes.
1366 said it was reviewing the letter to USTR but could not comment until consultation with DOE.
Race for solar supremacy
The Obama administration had heaped praise on 1366 as a clean energy success story. Now it's a target under President Trump.
The tension between one company and Trump's DOE has meant the loss of a planned high-tech manufacturing site in upstate New York, where employment was projected to grow to 1,000 workers eventually. It also could mean a loss for the United States in the 21st-century race to be the leader in emerging energy technology. The potential of 1366's patented process to slash the costs of silicon wafers — the platforms for photovoltaic solar power cells — could vault the United States ahead of China if production took root in this country, according to 1366.
In the dominant manufacturing process used in China and elsewhere, ultra-thin silicon wafers are sliced from ingots, resulting in the loss of half the raw material where the diamond-saw blade makes its cuts. Instead, the 1366 "Direct Wafer" proprietary method lifts a thin, chilled square of silicon from a molten vat of the material. 1366 says the process results in substantial energy savings and reduced waste over the conventional approach.
The development of the process took a major leap forward in 2013, when 1366 raised funding to build a pilot manufacturing line in Bedford that would build full-sized silicon wafers. From there, they could be turned into commercial-grade solar modules for real-world testing.
The company has attracted private-sector investments from Boston venture capitalists, General Electric Co., Hanwha, Wacker Chemie and Tokuyama Corp., Japan's largest wafer-quality silicon producer. Total public and private backing is around $90 million as of November, according to company and news reports.
Government grants were by far the smaller share. Still, 1366 gratefully acknowledged the impact of DOE's financial support, including nearly $4 million from ARPA-E and $7 million from EERE's SunShot program in 2011 that followed an initial grant in 2008.
Adam Lorenz, 1366's chief technology officer, wrote to DOE in February 2016, "The [EERE] program made it possible for 1366 to build its demonstration factory, a key and critical step in the Company's evolution.
"The demonstration factory allowed 1366 to build every step of the process flow at production size, eliminating potential risk and ensuring the success of the Company's subsequent scaling for a 1-GW [gigawatt] factory to be constructed in Western New York in 2016 and 2017."
Then DOE changed hands in January 2017, and discussions between the department and the company over a renewed loan guarantee bogged down, a 1366 official said.
In November of last year, 1366 disclosed in a blog post that it had received $9 million in new funding from an unnamed partner. It told the Boston Business Journal that month that it "is exploring the possibility of building its first factory abroad due to the commercial interest its technology has received internationally." The next month, 1366 told DOE it was headed to Asia.
1366 CEO Frank van Mierlo said in March that door remained open to a future plant in this country. "A U.S. factory remains in our strategic plan and we're pursuing that opportunity with a more efficient financing structure," he said in a statement.
"We have always had a positive relationship with the DOE and are working to consult with the agency to gain additional clarity," 1366 spokeswoman Laureen Sanderson said last week.
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