Coalition for Prosperous America (CPA) says, “Don’t Let China Take Over the U.S. Solar Industry.”

Though it has not been covered by the mainstream media, one of the major success stories of the Trump Administration can be found in U.S. solar manufacturing. Over the past three years American solar manufacturing capacity has increased nearly ten-fold, with factories opening and expanding in nearly a dozen states. This includes investment from some of the world’s leading solar companies such as Q CELLS, First Solar, LG, and SunPower.

However, this progress is now at dire risk due to massive capacity investments by the Chinese government and meddling in U.S. affairs by Chinese companies. Immediate action is necessary to prevent high-profile U.S. factory closures and to avert the U.S. from becoming one-hundred percent reliant on Chinese imports to power its rapidly growing solar industry.

The Decimation of the U.S. Solar Industry is Fifteen Years in the Making

Solar was invented in America, scaled in Europe, and stolen by China. For nearly fifteen years the Chinese government has targeted this sector, stealing intellectual property and subsidizing their domestic manufacturers with free land, low-cost loans, and cheap coal-fired electricity, all with the intent of monopolizing one of the world’s most promising growth sectors.

The U.S. first fought back with anti-dumping and countervailing duties against China in 2012, and again in 2014 when Chinese companies exploited a loophole by manufacturing solar cells in Taiwan. Chinese firms then circumvented these duties by opening factories in Southeast Asia for export to the United States and in Europe, where a minimum-import price had been set to attempt to stop Chinese dumping.

In 2018, after the U.S. solar manufacturing industry had been nearly wiped out, the Trump Administration took the boldest action yet, instituting global tariffs under Section 201 of the Trade Act of 1974. With China finally held in check, U.S. manufacturing flourished, with hundreds of millions of dollars in investment and thousands of jobs created in nearly a dozen states, including gigawatt-scale factories opened by Q CELLS in Dalton, Georgia and First Solar in Lake Township, Ohio, both manufacturing areas hard hit by globalization that are now home to two of the world’s leading technology companies.

This progress came to a rapid halt in June 2019 with the stroke of a pen.

A New Loophole, Created by and for Chinese Companies

Founded in 1974, the Solar Energy Industries Association (SEIA) has always claimed to be the trade body representing the U.S. industry, but in practice its advocacy has focused on enabling cheap, subsidized Chinese imports and extending tax credits that are then funneled overseas. Chinese firms have long been members of the Association and have direct influence on SEIA’s policy and lobbying efforts.

This was evident in 2019 when SEIA encouraged the Office of the U.S. Trade Representative (USTR) to implement an exclusion for “bifacial” solar modules, a technology they claimed to be niche even though it had been primed for massive deployment by Chinese firms through years of government subsidy. This exclusion enabled Chinese firms to simply apply a glass backsheet to standard “monofacial” solar panels, thus rendering them “bifacial” and enabling them to avoid 201 tariffs.

In a matter of weeks, Chinese firms shifted their production to bifacial products, dropped market prices by fifteen percent, began massive duty-free imports of bifacial modules, and gutted the protection offered to U.S. producers under the 201.

USTR, realizing the unintended consequences of the exclusion, announced withdrawal of the bifacial exclusion in September of 2019. However, SEIA and a few well-financed customers of the Chinese firms filed a lawsuit at the U.S. Court of International Trade, where they were able to obtain a preliminary injunction blocking the withdrawal on procedural grounds and fought tooth and nail to block the withdrawal to this very day.

The result has been a massive increase in imports and a rapid decline in prices. Combined with demand destruction from COVID-19 and unprecedented capacity expansions by Chinese companies, the American solar manufacturing sector has been driven to the very brink. Failure to remedy the situation and invest in the U.S. industry will likely result in China succeeding in its goal to monopolize, consolidate, and ultimately dominate the global solar industry.

How to Fight Back and Set the Stage for a U.S. Solar Manufacturing Renaissance

The good news is that the President has the means to immediately remedy the situation, rescue domestic manufacturers, and set the industry up for long-term growth. The recent mid-term review of the solar 201 case at the International Trade Commission (ITC) provides the President broad discretion to modify the 201 policy, and we urge him to do just that through a Presidential proclamation.

First and foremost, the President should use all means necessary to remove the bifacial exclusion and include withdrawal in his Presidential proclamation. The bifacial exclusion has been in place for over a year, having been tied up in litigation, and there appears to be no end in sight. Prompt action by President is necessary to solve this problem and plug the massive bifacial loophole once and for all.

Second, the President should act to maintain the 201 tariffs at the highest possible rate.  The tariff is scheduled to step down from 20% to 15% in 2021 but the President has the power to slow the tariff stepdown to a higher rate such as 19%.  We urge the President to do so in order to increase U.S. production and offset the damage done by the bifacial exclusion.

The President should also take the ITC’s advice and increase the 2.5-gigawatt tariff-rate quota on solar cells to 5.0 gigawatts. The 201 has resulted in a greater increase in solar module production than expected, but the four-year timeline was too short to encourage cell capacity to match. Reshoring the solar supply chain fully will require a multi-step process and increasing the tariff rate quota on cells will enable module manufacturers to increase U.S. production and build demand for future cell investment while preventing near-term cost increases on their primary component. Failure to increase the quota would greatly harm domestic producers, counter to the Administration’s intentions.

That does not mean we cannot help U.S. solar cell producers. Introduction of an earned-import allowance program that would provide duty-offsetting credits to U.S. cell producers would help to immediately bring back cell manufacturers like Suniva, the original petitioner of the 201, and provide a strong incentive for future investment in U.S. cell manufacturing, particularly if coupled with immediate efforts to extend the 201 beyond its initial four-year term.

Taking on China in the Long-Term

While the U.S. will never out-subsidize China, there are many things we can do additionally to create an environment in which we can compete against them globally.

The most obvious adjustment would be to amend the existing solar investment tax credit to reward domestic producers with a domestic content adder so that our tax dollars are used to promote U.S. manufacturing and not just funneled into the pockets of Chinese firms. This will enable U.S. producers to reach a scale and cost structure that is more competitive with Chinese competitors.

We should also continue to invest in research and development for solar technology through the Department of Energy but amend their grantmaking capabilities to ensure that more of this money goes directly to U.S. manufacturers. American products are known for their quality and performance, and this can help ensure an edge.

Next, the U.S. should strengthen the Buy American Act and similar provisions that currently have loopholes allowing the use of imported solar products.

Finally, we should work to encourage exports to our geopolitical allies. We should all be united in creating a solar sector not dependent on Chinese imports, and a smart export strategy can accomplish this.

China has spent decades stealing American technology and jobs. The U.S. solar industry is on the verge of becoming its latest victim and there are obvious options on the table to reverse the course. It is time for decisive action.

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