Author: Diana DiGang Published: 3/14/2024 Utility Dive
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Dive Brief:
- The U.S. solar industry and domestic manufacturing have been bolstered considerably by the Inflation Reduction Act, but “there is great risk that the largest beneficiary of the IRA’s solar energy tax credits may be China,” First Solar CEO Mark Widmar told the Senate Finance Committee in a Tuesday hearing.
- Widmar said the “relentlessness of the Chinese subsidization and dumping strategy” has led to a steep drop in solar cell and module prices globally, leading to a U.S. oversupply of “30 to 40 GW” in modules at the end of 2023.
- He urged the senators to advocate for alterations to the tax code that would restrict the ability of Chinese solar companies to benefit from IRA incentives like the 45X advanced manufacturing tax credit.
Dive Insight:
In his prepared remarks, Widmar said that “industrial-sized scaling of the solar industry in America remains at risk without guardrails applied to the tax code.” He highlighted China’s strategy of completing the initial stages of solar panel manufacturing domestically, then completing final assembly overseas in “‘Belt and Road’ member countries, primarily in Southeast Asia.”
This strategy was the subject of a U.S. Department of Commerce investigation, which found last summer that a number of companies had been using four Southeast Asian countries to circumvent U.S. tariffs on Chinese-made solar components. Beginning in June, import duties will be imposed on solar modules and cells from those countries.
Currently in front of the Senate Finance Committee is legislation that would prevent some countries, including China, Russia, North Korea and Iran from benefiting from the 45X credit. The legislation, called the Protecting American Advanced Manufacturing Act and introduced in the House by Rep. Carol Miller, R-W. Va., and in the Senate by Sen. Marco Rubio, R-Fla., was referred to the ways and means and finance committees, respectively, in December.
Widmar said he opposes China benefiting from the 45X credit due to a concern that the U.S. is at risk of “adding Ohio, Texas, Arizona, and other …. states to the list of locations that host China’s overseas final assembly facilities, in many cases set to use imported components to assemble into modules in potentially temporary, leased facilities.”
“It’s not unrealistic that these facilities, and their associated jobs, will disappear once the 45X tax credits expire and American taxpayer dollars are extracted,” he said.
Sen. Debbie Stabenow, D-Mich., said the U.S. has a “lot of catching up to do” as a global leader in solar manufacturing, as Chinese-headquartered companies currently produce 99% of the world’s solar wafers and 80% of its polysilicon.
“But we also are in a position to be able to take that back,” she said. To that end, Stabenow and other senators sent a letter to the U.S. Department of the Treasury and the IRS last month, asking that future regulations and guidance for the domestic content bonus tax credit “properly incentivize” U.S. wafer and polysilicon production.
Widmar said the IRA has been a significant catalyst for solar growth in the U.S., but strategic implementation is “absolutely critical” to the legislation’s success.
“The other challenge is certainty,” he said. “With the onslaught of collapse in global pricing for solar modules right now, with the excess supply that China has dumped into the international markets that have been heavily subsidized by their domestic industry …. it is creating some concern right now, in terms of the ability to deliver on the vision that a lot of people have set out to accomplish.”
Anna Fendley, director of regulatory and state policy for United Steelworkers, urged the committee to prioritize demand-side drivers that minimize the financial risk of producing certain products, and provide certainty to industry — such as the IRA’s bonus credit for clean energy projects that use domestic content like American-made steel and iron.
She referred to 2021 testimony from USW member Joe Wrona “about the $35 million investments that his employer, Ferroglobe, planned to make in their Niagara Falls plant in 2009 to increase production of metal silicate, largely for polysilicon production for solar panels.”
“They expected strong demand from the solar manufacturing industry that never materialized because the growth of China’s industry undercut global prices and ultimately harmed workers, like Joe and his colleagues,” Fendley said. “The solutions to these problems require a range of policy actions under the Senate Finance Committee’s jurisdiction, from improved trade enforcement to manufacturing tax credits.”