Solar is the fastest-growing source of electricity generation, according the U.S. Energy Information Administration (EIA). In 2024, U.S. solar generation capacity is expected to expand by 36 GW, an increase of 43% according the EIA Short-Term Energy Outlook. However, the solar supply chain can either be a hinderance or a catalyst to growth. The U.S. solar industry is heavily reliant on imports across the supply chain, leading to recent challenges with the availability and price of solar photovoltaic (PV) cells.
In the manufacturing of cells and modules, polysilicon is a primary material that is melted to produce ingots that are then sliced into thin silicon wafers. China has about 72% of the global polysilicon production capacity, leading to more than 96% of the world’s ingot production capacity. It produces about 97% of the world’s silicon wafers, according to the U.S. Department of Energy. In 2022, the U.S. imported about 28.7 GW of modules and about 2.5 GW of cells. The U.S. imports 78% of cells and modules from Southeast Asian countries, including Malaysia, Thailand, Vietnam, Cambodia and South Korea. The remaining 22% comes from India, China, North America, the rest of Asia and the world according to the National Renewable Energy Laboratory.
“In 2022, manufacturers from four Southeast Asian countries—Cambodia, Malaysia, Thailand and Vietnam—came under scrutiny by the U.S. Commerce Department for side-stepping U.S. tariffs,” CFC Senior Analyst Alisha Pinto said. “These are anti-dumping and countervailing duties imposed on certain Chinese-made products imposed starting in 2012 by the Obama administration. The manufacturers under question will soon face the same duties imposed on Chinese-made products.”
The U.S. Commerce Department levied the duties on Chinese products to offset large government subsidies. However, to keep the pace of renewable energy expansion, the Biden Administration issued a waiver of the import duties under the Defense Production Act for 24 months.
“The new ruling for duties on the other Southeast Asian countries will come into effect in June 2024, increasing import costs,” Pinto said. “With the moratorium on duties, 2023 saw a sharp increase in imports, climbing to more than 42 GW, possibly in anticipation of rising prices after June.”
In addition, the Uyghur Forced Labor Prevention Act (UFLPA) was signed into law by President Joe Biden in December 2021 to prevent imports manufactured by forced labor in the Xinjiang Uyghur Autonomous Region of China. Since the law went into effect in June 2022, U.S. Customs and Border Protection has detained about 4,650 shipments of solar materials from the region at U.S. ports, affecting the renewable energy industry according to a recent Foreign Policy Magazine report.
Since enactment of the Inflation Reduction Act (IRA), domestic manufacturing has witnessed a spike thanks to a push for re-shoring and friend-shoring. The IRA’s direct-pay, clean-energy tax incentives for cooperatives include bonus credits of an additional 10% if projects meet the domestic content requirements, such as U.S.-produced steel or iron. Over the past 18 months, 42 new solar manufacturing projects have been announced, totaling an estimated $1.4 billion in investments and creating about 21,000 jobs, according E2, a clean-energy advocacy group.
“Despite the incoming investment, it will be a few years before factories are built and manufacturing capacity comes online,” Pinto said. “Investors and solar developers will have to contend with higher interest rates and higher costs of imports in the meantime.”