Escalating U.S.-China Solar Rift Threatens Biden Green Goals

(Bloomberg) -- The first big test of Joe Biden’s lofty clean-power ambitions may not be congressional approval of sweeping climate legislation, but managing a solar supply chain that’s being shaken by the seizure of imported Chinese panels.

Multiple companies have now had solar components detained at U.S. ports in the aftermath of a Biden administration ban on equipment using raw materials originally from Hoshine Silicon Industry Co., according to people familiar with the situation who asked for anonymity while discussing sensitive trade issues.

The seizures come amid a new push by some U.S. solar manufacturers to extend tariffs to China-linked factories in Vietnam, Malaysia and Thailand, the U.S.’s largest panel suppliers. Together the developments threaten to disrupt the U.S. solar market, potentially jeopardizing Biden’s goal of a carbon-free power sector by 2035.

“It is clear that the administration wants 40% of the nation’s electricity generation to be from solar,” Abigail Ross Hopper, president of the Solar Energy Industries Association, said in an interview Wednesday. “These kind of uncertainties and additional costs could have a material impact on the rapid deployment goals that they have.”

While the solar group isn’t aware of specific project delays, Hopper said the seizures have had a chilling effect on the industry. SEIA has heard about companies not wanting to contract for future shipments until they get more clarity on how the ban will be enforced.

Already, solar developers are scrambling to prove incoming goods -- some of which may have been ordered months before the Biden ban -- are free of Hoshine material. A major solar-panel maker warned this week that all imports from China risk being detained by U.S. Customs and Border Protection. 

Hard to Prove

Manufacturer Canadian Solar Inc. said that four of its sample modules shipped from China to its U.S. office were held last week by officials due to a sourcing issue, and that all Chinese shipments were at risk of being stopped at the border. 

Other companies have also been affected, with multiple containers seized at different ports, according to people familiar with the actions. The cost of having products detained at U.S. Customs facilities is prohibitive, making other companies question whether it’s worth the risk of trying to import to the U.S., one of the people said.

The Biden administration’s order is part of efforts to confront alleged human-rights abuses in the Xinjiang region. China denies the allegations, which it claims are an attempt to undermine successful businesses.

Solar developers and manufacturers had spent months shuffling supply chains and preparing for an administration move against polysilicon, a prime ingredient in the panels that convert the sun’s rays into electricity. But the administration’s Customs order in June instead had far broader reach by targeting products containing metallurgical-grade silicon, which is used to make polysilicon. Hoshine is the world’s biggest producer of the metal.

The material is so many steps removed from completed panels that just about any module coming to the U.S. can’t yet prove it doesn’t contain Hoshine material, Philip Shen, an analyst at Roth Capital Partners, said in a research note.

Higher Costs

U.S. solar advocates are appealing to the administration to refine its initial approach -- so it still discourages human-rights abuses in Xinjiang without ensnaring imports. Hopper suggested a focus on polysilicon, not the metal from which it is formed. And some solar supporters are asking the administration to phase in future moves so companies aren’t caught flat-footed, according to two people familiar with the matter.

A White House spokesman didn’t address messages seeking comment and a Customs spokeswoman didn’t immediately address an email seeking comment.

In some respects, there has never been a brighter moment for solar power in the U.S. Installations are booming, and Biden appeared poised to deliver the most progressive climate presidency in history -- on the heels of an administration steadfast on boosting fossil fuels. And yet, the industry’s supply chain has been battered by higher costs, including for modules and freight.

Solar panels already cost about 40% more in the U.S. than the rest of the world, and expanded tariffs could lift prices further, according to Jenny Chase, BloombergNEF’s head of global solar research.

“Recent enforcement actions and international trade petitions go beyond the intended goal and risk significantly impacting U.S. solar deployment,” said Heather Zichal, chief executive officer of the American Clean Power Association, said by email.

Commerce Petitions

Amid the seizures, a group called the American Solar Manufacturers Against Chinese Circumvention filed petitions with the Commerce Department seeking to extend tariffs to factories run by Chinese firms out of the three Southeast Asian countries.

The filings come at a time when some domestic solar manufacturers are seeking an extension of former President Donald Trump’s solar tariffs -- and as Democrats advance a $3.5 trillion tax-and-spending plan that could benefit both solar developers and clean-energy manufacturers.

But while the seizures may hurt U.S. developers, any moves that make imports more expensive could help level the playing field for companies that want to manufacture solar equipment on U.S. soil. That would be a boost to another part of Biden’s agenda -- union jobs.

“Trade actions against imported solar products may counter President Biden’s climate agenda,” Timothy Fox, a vice president of ClearView Energy Partners, said in an interview. “But they also could further his union and domestic manufacturing agenda.”

(Updates with industry group comments from fourth paragraph.)

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