To grasp the probabilities that the US will succeed, MIT Expertise Evaluate spoke to Shawn Qu. Because the founder and chairman of Canadian Photo voltaic, one of many largest and longest-standing photo voltaic manufacturing firms on this planet, Qu has noticed cycle after cycle of adjusting demand for photo voltaic panels over the past 28 years.
CANADIAN SOLAR
After a long time of principally manufacturing in Asia, Canadian Photo voltaic is pivoting again to the US as a result of it sees an actual likelihood for a photo voltaic business revival, principally because of the Inflation Discount Act (IRA) handed in 2022. The incentives offered within the invoice are simply sufficient to offset the upper manufacturing prices within the US, Qu says. He believes that US photo voltaic manufacturing capability might develop considerably in two to 3 years, if the commercial coverage seems to be steady sufficient to maintain bringing firms in.
How tariffs pressured manufacturing capability to maneuver out of China
There are a number of vital steps to creating a photo voltaic panel. First silicon is purified; then the ensuing polysilicon is formed and sliced into wafers. Wafers are handled with methods like etching and coating to turn into photo voltaic cells, and finally these cells are related and assembled into photo voltaic modules.
For the previous decade, China has dominated virtually all of those steps, for a number of causes: low labor prices, ample provide of proficient staff, and easy accessibility to the mandatory uncooked supplies. All these components make made-in-China photo voltaic modules extraordinarily price-competitive. By the top of 2024, a US-made photo voltaic panel will nonetheless price virtually 3 times as a lot as one produced in China, in line with researchers at BloombergNEF.
The query for the US, then, is methods to compete. One software the federal government has used since 2012 is tariffs. If a photo voltaic module containing cells made in China is imported to the US, it’s topic to as a lot as a 250% tariff. To keep away from these tariffs, many firms, together with Canadian Photo voltaic, have moved photo voltaic cell manufacturing and the downstream provide chain to Southeast Asia. Labor prices and the supply of labor forces are “the primary purpose” for that transfer, Qu says.
When Canadian Photo voltaic was based in 2001, it made all its photo voltaic merchandise in China. By early 2023, the corporate had factories in 4 international locations: China, Thailand, Vietnam, and Canada. (Qu says it used to fabricate in Brazil and Taiwan too, however later scaled again manufacturing in response to contracting native demand.)
However that equilibrium is altering once more as additional tariffs imposed by the US authorities purpose to pressure provide chains to maneuver out of China. Beginning in June 2024, firms importing silicon wafers from China to make cells exterior the nation can even be topic to tariffs. The most certainly answer for photo voltaic firms could be to “arrange wafer capability or arrange partnerships with wafer makers in Southeast Asia,” says Jenny Chase, the lead photo voltaic analyst at BloombergNEF.
Qu says he’s assured the corporate will meet the brand new necessities for tariff exemption after June. “They gave the business about two years to adapt, so I imagine many of the firms, a minimum of the tier-one firms, will be capable of adapt,” he says.
