Watch: Barron’s Senior Energy Writer Laura Sanicola and OPIS Senior Editor of US Solar Colt Shaw discuss what’s ahead for energy this week.

Transcript:

LAURA SANICOLA: Hi, everyone. I’m Laura Santacola, author of Barron’s Energy Insider. And this week, I’m here with my colleague, Colt Shaw, senior editor of US Solar at OPIS. Colt, I figured this would be a good week to talk about new solar tariffs since the Biden administration is slapping another fifty percent tariff on imported Chinese solar wafers. And this is on top of fifty percent tariffs for solar cells and modules. Can you tell us what’s the administration trying to do here?

COLT SHAW: Sure. Well, in their own words, the US Trade Representatives’ tariff hikes are aimed at making domestic producers more competitive and maintaining leverage over China to make the country, quote, eliminate its harmful acts, policies, and practices.

Those have been the aims of every new tariff, aimed at Chinese solar industries, going back to president Obama. From the perspective of American panel purchasers, though, I would say they’ve mainly just succeeded in raising prices.

Twenty-eight cents for imports to the US compared to eight cents for customers in other countries.

But the tariffs have undoubtedly also changed the shape of the global supply chain, if not the ownership.

I think if you can look at the tariff hikes as both a kind of parting shot at China’s continued solar supply chain domination, as well as kind of a last-ditch effort at spurring US production of polysilicon and solar wafers, on his way out the door.

Those two components have not responded to the Inflation Reduction Act’s manufacturing tax credits the way cells and modules have. And so they’ve kind of increasingly taken a kind of tariff heavy approach.

Just for context polysilicon is formed into ingots, which are it’s a semiconductor which is then formed into ingots, which are sliced into wafers Wafers are then treated chemically to make cells, which are assembled into modules, which the kind of colloquial name for them is solar panels.

President Biden doubled section three zero one tariffs, that were first established under Trump on Chinese cells and modules to fifty percent this year. But the previous twenty five percent duty on cells established under Trump was enough to force companies, in recent years to move factories to Southeast Asia in order to keep selling into the US, and the US no longer buys modules from China directly in any significant way.

And while the Uyghur forced labor protection act, has resulted in major polysilicon producers moving their plants outside of Xinjiang province, the vast majority of polysilicon and wafers still come from the country, including those in solar modules shipped to the US from Southeast Asia.

And so, yeah, the the US last year hit many of these firms with new tariffs after determining they were circumventing existing tariffs, by finishing their products outside of China.

And in recent weeks, the Department of Commerce announced new ADCBD tariffs on imports from companies in those countries. And already those companies have begun moving factories to Laos, Indonesia, and elsewhere, and the game of tariff whack a mole continues.

SANICOLA: I like the way you put that. Have these tariffs resulted in actual increase in solar manufacturing here in the US? And if so, which companies are involved in benefiting from these new tariffs?

SHAW: Sure. I mean, there has been an explosion of new module assembly plants in the US in recent years, and a significant amount of new cell plants announced. But these are mainly, I would say, thanks to manufacturing tax credits and the Inflation Reduction Act.

Tariffs have, however, closed the gap between the price of imports and domestic products.

American modules assembled with foreign cells are, as of recently, often quoted at only a few cents more than imports.

But American modules with American cells are more costly between forty and fifty cents, but they’re necessary to claim the ITC domestic content bonus. So significant cell production has been announced and will come online in the next year or two.

But polysilicon and wafers are a whole different story. They’re much costlier, more complex undertakings, than module and cell factories. And there’s really only been a few announcements of new plants following the IRA, in 2022. And already this year, a few of those handful of new wafer plan announcements have been walked back.

So that means module assemblers will still be relying on imported cells, for the near future, and new cell plants will be relying on imported wafers when they do come online.

So whether a fifty percent tariff is enough to change that, I’m not sure. But oversupply crashed prices this year, and OPIS currently assesses the cost of polysilicon produced outside of China as four times more expensive than polysilicon produced in China.

But if it does spark new investment, it’s also not clear that there’s enough supply of either outside of China for American manufacturers to source from while they’re waiting for new American capacity to come online.

I would say not everyone’s exposed. First Solar’s thin film module tech doesn’t require polysilicon, so their entire supply chain avoids China, which has allowed the company to expand manufacturing in the US pretty quickly, and demand a slight premium for its product. Companies like Helene, who inked a deal for output from Norsuns, planned Ingot and Wafer Factory in Oklahoma are well positioned going forward, as is Q Cells, which has locked up American polysilicon and is close to unveiling a fully American supply chain probably, within the month here.

SANICOLA: And, remind me, Cole, that you said this is one of the Biden administration’s parting, parting shots before the Trump administration takes effect in January. Is Trump likely to keep these tariffs, extend them? Is there any way we can tell, based on his rhetoric or past tariffs?

SHAW: Yeah. I’d say, you know, going off of both, I’d say it’s pretty likely he’s going to keep these tariffs. It’s tariffs, especially over solar and and energy as well as kinda clean tech, which semiconductors like polysilicon fall under. They’ve been in kind of rare agreement on that, especially as Trump has given every indication he continues to stoke trade wars on every front and has called for across the board, tariff hikes. I’d also say Trump has not been as negative on solar as he has been on wind, and a lot of the new solar manufacturers that benefit from these tariff hikes are in red states. So I think it’s likely he’s gonna keep the pressure up, especially given that China is the other party here.

SANICOLA: Alright. Thanks so much, Cole, and I’ll see everybody next week.